NMHC/NAA Viewpoint:The proposed Middle-Income Housing Tax Credit (MIHTC) would complement the successful Low-Income Housing Tax Credit (LIHTC). Although LIHTC should be provided with significant additional resources, middle-income households are also facing severe cost burdens that cannot be addressed without a new, dedicated resource. The MIHTC program is necessary to construct workforce housing that working households can afford.
The Middle-Income Housing Tax Credit (MIHTC) is a proposal to establish a public/private partnership that leverages federal dollars with private investment to produce rental housing affordable to our nation’s workforce.
Designed to complement the successful Low-Income Housing Tax Credit (LIHTC), the MIHTC program would enable state housing agencies to issue credit allocations to developers that would subsequently be sold to investors. Investors would receive a dollar-for-dollar reduction in their federal tax liability over a 15-year period, and developers would invest the equity raised to build apartments. The equity raised would cover 50 percent of the cost of constructing of qualifying units. A development project eligible for MIHTC would have to set aside 60 percent of units for households earning 100 percent or less of Area Median Income (AMI) and must be kept affordable for at least 15 years.
Housing affordability is a significant challenge facing many American families. The number of households renting their homes stands at an all-time high, placing significant pressure on the apartment industry to meet increased demand. In order to keep up with demand, 328,000 new apartment homes need to be built each year through 2030. However, the nation has hit that mark only three times since 1989. The shortage of available units is making it challenging for millions of households nationwide to find quality rental housing that is affordable at their income level.
Affordability challenges are not unique to households receiving federal subsidies. In fact, solidly middle-income households are facing constraints. The Joint Center for Housing Studies of Harvard University found in its America’s Rental Housing 2020 report that the median asking rent for an apartment constructed between July 2018 and June 2019 was $1,620. For a renter to afford one of those units at the 30 percent of income standard, they would need to earn at least $64,800 annually. Thus, this issue impacts those supporting the very fabric of communities nationwide, including teachers, firefighters and nurses.
The Middle-Income Housing Tax Credit would help build housing that is affordable to a wide range of income levels at a time such housing is increasingly difficult to afford.
The median asking rent for an apartment constructed between July 2018 and June 2019 was $1,620, and a renter would need to earn at least $64,800 to afford such a unit. MIHTC would make housing more affordable and available to middle-income Americans.