New Legislation Poised to Have Biggest Impact on Affordable Housing in Decades

Two key pieces of legislation under President Joe Biden could have the biggest positive impact on affordable housing of any federal law passed in several decades, according to Fitch Ratings.

The Build Back Better (BBB) Act, which earmarked $150 billion for affordable housing, and the Infrastructure Investment and Jobs Act (IIJA), which has key provisions indirectly impacting the asset class, are both poised to deliver a significant boost to the sector.  The current iteration of the BBB is “heavily front-loaded within the 10-year time horizon of the proposal,” Fitch analysts note in a new analysis, and represents an amount that’s nearly three times the annual funding of the Department of Housing and Urban Development.

“Federal aid will provide affordable housing agencies with additional resources to help increase loan programs and address maintenance backlogs as well as provide rental aid to individuals,” Fitch experts note in their analysis, adding that BBB funding includes $65 billion for public housing, $25 billion for rental assistance, and $15 billion for the national Housing Trust Fund.

The BBB rental assistance represents an increase in average annual funding of more than 50%. Meanwhile, the IIJA includes provisions for road, bridge and public transit improvements that will improve access for affordable housing communities, and a $3.5 billion weatherization funding provision can be used for energy efficiency upgrades for the sector.

Public housing funding decreased 17% from 2000 to 2019, after adjusting for inflation, and Fitch notes that the official estimate of deferred maintenance in affordable housing is around $40 billion, though that figure is likely underestimated. In New York City alone, that amount is $32 billion.

Fitch highlights key provisions within the BBB that would decrease the threshold for private activity bond financing threshold for affordable housing projects, which would only need to finance 25% with PABs instead of 50% to qualify for the 4% low-income housing tax credit.

“This would encourage private investment and free up PAB capacity for other projects, including housing,” Fitch notes in the analysis. “Affordable housing remains a significant issue with homeownership out of reach for many and too few multifamily rental units to meet the current needs. The BBB legislation would help continue the relief efforts and infuse the sector with a significant boost when compared with prior funding for affordable housing.”