By Cindy Vosper Chetti, Senior Vice President, Government Affairs, NMHC
The first seven tumultuous months of this 118th divided Congress serve as a precursor to what promises to be a rocky year-end stretch as lawmakers try to reach agreement on unfinished business. When Congress returns after the August recess, there are a number of must pass bills—many of which are important to the industry including:
- a reauthorization of the National Flood Insurance Program (NFIP),
- the National Defense Authorization Bill which is important to the military housing industry
- and a critical farm bill.
But the main task for both chambers in September will be advancing their competing appropriations bills and staving off a shutdown of the government.
First Up: The Appropriations Process
When Congress reconvenes in September, they will need to pass 12 appropriations bills for FY2024. The debt ceiling legislation passed in June included a provision that requires a 1 percent cut for all appropriations bills if they are not passed by October 1. That leaves little time to resolve large differences between the House and Senate on the spending levels and content of the 12 bills.
The differences between the two chambers are clearly demonstrated when you review the specific numbers regarding the U.S. Department of Housing and Urban Development (HUD) appropriations bills. Last week, the Democratic-controlled Senate and Republican-controlled House put forward their versions of the Fiscal Year 2024 (FY24) Transportation, Housing and Urban Development (T-HUD) appropriations bills. The House version features nearly $2 billion less funding for HUD than the Senate bill. Similar differences between the Senate and House exist in each of the 12 appropriations bills being considered by the two Chambers, which could set the stage for a drawn-out reconciliation process.
If differences are not unresolved, and Congress also fails to pass a so-called continuing resolution, a government shutdown could be on the horizon.
As we know from years past, a government shutdown could severely and negatively impact several different sectors within the apartment industry—potentially putting the stability of millions of residents and a 3.4 trillion sector at risk. For example, during the long-term government shutdown of 2018/2019, HUD housing voucher programs were disrupted, FHA loan program disbursements were interrupted, NFIP policies were halted impacting financing and development deals, EPA development permits slowed and more.
With so much at stake, here are the options for averting a government shutdown:
Option 1: Compromise: The Senate departed for the August recess with the chamber’s Appropriations Committee having approved all 12 appropriations bills consistent with the Fiscal Year 2024 capped level agreed to as part of legislation that increased the debt ceiling. The House Appropriations Committee Chair Kay Granger (R-TX) is seeking to restrain spending at Fiscal Year 2022 levels by rescinding and repurposing $115 billion from previously enacted but unspent funds. But, conservative House Republicans are requesting that the $115 billion go to deficit reduction rather than reallocation. Thus far, the full House has approved 10 of 12 appropriations bills and passed one by the Full House.
Option 2: Keep Spending at Today’s Levels but Accept Sequestration: A second option would be for Congress to keep the government funded into Fiscal Year 2024 at current spending levels using a continuing resolution. However, even if lawmakers reached an agreement to do so, that would trigger a 1 percent across-the-board cut.
As mentioned previously, the Fiscal Responsibility Act, which suspended the debt limit through January 1, 2025, set appropriations caps for Fiscal Years 2024 and 2025 that would be enforced through sequestration, an across-the-board spending cut of 1 percent relative to funding for Fiscal Year 2023. Sequestration would be enforced beginning on April 30 of 2024 or 2025 if the government is funded under a continuing resolution on either January 1, 2024 or 2025, and full-year appropriations have not been enacted.
Option 3: A Government Shutdown: If a resolution cannot be reached by the House and Senate on how best to address each of the 12 appropriations bills, this would force a government shutdown beginning October 1.
NMHC remains extremely engaged on the funding measures taking care to mitigate the negative consequences of funding reductions specifically, and, in general, should there be a government shutdown. But, the appropriations process just scratches the surface of what we’re watching. We’re also laser-focused on potential tax reform actions that would have years-long effects on housing providers.
Tax Talks Are Underway—All Eyes on an End of Year Package
Congress will return to business in September with potential bipartisan interest in moving tax legislation that, if enacted, could contain provisions benefiting the multifamily industry. While a bill would likely take until December to complete, a successful package could include provisions:
- expanding the Low-Income Housing Tax Credit,
- increasing the amount of interest multifamily businesses could deduct without having to accept longer depreciation periods on buildings, and
- promoting the full expensing of qualified capital investments.
On June 13, the House Ways and Means Committee approved three tax bills on party-line votes that would, among other proposals, enable multifamily firms to deduct additional business interest without having to depreciate buildings over 30 years and allow firms to fully expense certain investments in the year of purchase.
While the full House did not act on these proposals prior to the August recess, House Ways and Means Committee Chairman Jason Smith (R-MO) could nonetheless move to open tax negotiations with his Senate counterpart, Finance Committee Chairman Ron Wyden (D-OR). Chairman Wyden could act to accept proposals regarding interest deductibility and expensing but will insist on Democratic priorities, such as an expansion of the child tax credit. Senate Democrats could also push for an expansion of the Low-Income Housing Tax Credit.
NMHC strongly supports these proposals and will also continue to advocate for other tax incentives promoting housing supply. For example, the industry continues to support Chairman Wyden’s Middle-Income Tax Credit, as well as a new tax credit that would help transform underutilized commercial buildings into multifamily housing.
Congress Should Prioritize Housing within these Debates
There’s a lot at play this September and NMHC is ever-vigilant to ensure the rental housing sector remains supported.
Every day, policymakers in Washington make decisions that impact our residents, employees and the communities in which we serve. As these debates continue to unfold, it’s critical Congress prioritize our nation’s housing needs. There simply is not enough housing to go around. We must ensure all federal agencies are fully funded so they may continue to support our current and future housing stock. In addition, any proposed tax legislation must prioritize the viability of the sector.
- Housing Industry Letter to Congress: Government Shutdown
- FHFA Issues Updated Guidance for the FHLB System
- Middle-Income Housing Tax Credit (MIHTC) Fact Sheet
- NMHC-NAA Statement for House Financial Services Subcommittee Hearing on the High Cost of Insurance for Consumers
- NMHC-NAA Statement for Senate Judiciary Subcommittee Hearing on Competition and Consumer Rights in Housing Markets