Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT) on May 19 introduced legislation to expand Low-Income Housing Tax Credit (LIHTC) allocation authority by 50 percent, enable income averaging, and set a minimum 4 percent credit for acquisitions and bond-financed developments. Two high-ranking Democrats also lent their support, including Finance Committee Ranking Member Ron Wyden (D-OR) and presumptive Democratic Leader Charles Schumer (D-NY) who are original cosponsors.
Strongly supported by NMHC/NAA, the legislation would:
- Expand LIHTC allocation authority by 50 percent. This increase would be phased in by 10 percent a year and would help develop or preserve 400,000 units over the next decade.
- Enable Income Averaging to Drive Mixed-Income Development. Program rules require owners to either rent 40 percent of their units to households earning no more than 60 percent of Area Median Income (AMI) or 20 percent to those earning no more than 50 percent of AMI. The proposal would revise program rules to allow owners to reserve 40 percent of the units for people whose average income is below 60 percent of AMI - ensuring that it is more flexible and able to could serve a wider array of households.
- Establish a Minimum 4 Percent Credit. Last December, Congress legislated a minimum 9 percent credit to replace the prior-law floating rate. Because it did not set a minimum 4 percent rate, this part of the LIHTC currently floats and is worth 3.18 percent, reducing equity that may be put into a deal by over 20 percent. The proposal would establish a minimum 4 percent rate for both acquisitions and bond-financed properties.
The prognosis for the Cantwell-Hatch legislation is uncertain at the moment because companion legislation has yet to be introduced in the House. The strong support of senior tax writers, however, could make it a viable candidate for inclusion as part of the debate over tax reform.