With the House Ways and Means Committee holding a March 6 hearing on infrastructure, the multifamily industry made the case that any forthcoming legislation should have a significant housing component. Any major investment in the nation’s infrastructure should recognize the important relationship between America’s growing demand for rental housing and the industry’s ability to meet it, by seeking to remove barriers to housing development and rehabilitation.
Before recommending specific proposals that the Ways and Means Committee could include in its title of infrastructure legislation, we observe that a cooperative approach to housing development and infrastructure planning maximizes community benefit and promote efficiencies in transportation, land use and public works. As policymakers consider infrastructure initiatives, we urge the inclusion of measures to support housing including the following tax measures that would:
- Expand and Enhance the Low-Income Housing Tax Credit (LIHTC): Given the nation’s shortage of affordable housing, Congress in March 2018 rightly increased LIHTC authority by 12.5 percent for 2018-2021. NMHC/NAA called on Congress to make this increase permanent , as well as further augment credit authority by 50 percent. Additionally, Congress should establish a minimum 4 percent tax credit rate, akin to current law’s minimum 9 percent credit rate, so that investors may derive its full value. Under current law, the 4 percent credit rate floats and is worth considerably less due to low interest rates.
- Enact the Middle-Income Housing Tax Credit (MIHTC): NMHC/NAA requested that the Ways and Committee strongly consider the Middle-Income Housing Tax Credit Act of 2018 that Senate Finance Committee Ranking Member Ron Wyden introduced during the 115th Congress. A worthy complement of measures to expand and improve LIHTC, MIHTC takes over where LIHTC leaves off. LIHTC is currently designed to serve populations of up to 60 percent of area median income. MIHTC is designed to benefit populations earning below 100 percent of area median income.
- Enhance Opportunity Zones to Incent Rehabilitation of Housing Units: Enacted as part of tax reform legislation in 2017, Opportunity Zones are designed to provide tax incentives for investments in distressed communities. Current law requires that an Opportunity Fund double the basis of an acquired property within 30 months to qualify for Opportunity Zone tax benefits purposes. Although the Treasury Department proposed regulations in October 2018 to exclude the basis of land from the required improvement threshold, it could still prove challenging to double the basis of the structure. To incentivize additional multifamily rehabilitation projects, NMHC/NAA urge Congress to reduce the basis increase necessary to qualify a multifamily rehabilitation project for Opportunity Zone purposes.
- Repeal Foreign Investment in Real Property Tax Act (FIRPTA): FIRPTA imposes significant costs on foreign investors in U.S. real estate, thereby serving as a significant barrier to such investment. For example, foreign investors do not have to pay capital gains taxes when they sell stocks and bonds in non-real estate U.S. companies. Foreign investors can avoid U.S. taxes and reduce their worldwide tax burden simply by investing in U.S. equities instead or in real estate outside the U.S. To address this issue, NMHC/NAA recommended that Congress repeal FIRPTA.
NMHC and NAA are working with Congress to make the case that not only should infrastructure legislation be a priority, but that multifamily housing incentives should be a key component of any effort.
- IRS Provides Tax Relief to LIHTC Projects Due to COVID-19
- NMHC Endorses Bipartisan Measure Intended to Spur Affordable Housing and Infrastructure Investment
- IRS Provides Relief to Opportunity Funds Impacted by COVID-19
- NMHC Calls on Congress to Include Opportunity Zone Provisions in Future Stimulus Legislation
- Coalition Letter to the House Urging Inclusion of Opportunity Zones in Stimulus Legislation – May 2020