Bipartisan Tax Bill Introduced to Boost Affordable Housing

Senate Finance Committee Chair Ron Wyden and House Ways and Means Committee Chair Jason Smith have jointly announced a bipartisan tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.

The Tax Relief for American Families and Workers Act of 2024 will:

• Enhance the Low-Income Housing Tax Credit
• Support working families with an enhanced Child Tax Credit
• Expand innovation and competitiveness with pro-growth economic policies like R&D expensing
• Build up Main Street by cutting red tape and rebuilding communities struck by disasters with tax relief
• Eliminate fraud and waste by ending the Employee Retention Tax Credit program

“Sixteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” said Sen. Wyden. “At a time when so many people in Oregon and all across America are getting clobbered by rising rents and home prices, the improvements this plan makes to the Low-Income Housing Tax Credit will build more than 200,000 new affordable housing units. By incentivizing R&D, this plan is also going to promote innovation and help sharpen our economic competitiveness with China and the rest of the world. My goal remains to get this passed in time for families and businesses to benefit in this upcoming tax filing season, and I’m going to pull out all the stops to get that done.”

“MBA and its members have long called for enacting tax provisions that address our nation’s housing affordability crisis and the acute shortage of homes for owning and renting,” said Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. “We support this bill, particularly for its meaningful enhancements to the Low-Income Housing Tax Credit (LIHTC) that will produce an estimated 200,000 additional rental units over the next two years.”

The affordable housing portion of the measure will seek to increase the state housing credit ceiling for the Low-Income Housing Credit (LIHTC). In calendar years 2018-2021, the 9% LIHTC ceiling was increased by 12.5%, allowing states to allocate more credits for affordable housing projects. The new provision restores the 12.5% increase for calendar years 2023-2025, and is effective for taxable years beginning after December 31, 2022.

Under current law, to receive LIHTC, a building must either receive a credit allocation from the state housing finance authority or be bond-financed. To be bond-financed, 50% or more of the aggregate basis of the building and land must be financed with bonds that are subject to a state’s private activity bond volume cap. The Tax Relief for American Families and Workers Act of 2024 lowers the bond-financing threshold to 30% for projects financed by bonds with an issue date before 2026. This section provides a transition rule for buildings that already have bonds issued by requiring that a building must have 5% or more of its aggregate basis financed by bonds with an issue date in 2024 or 2025. This provision is effective for buildings placed in service after December 31, 2023. In the case of rehabilitation expenditures, which are treated as a separate new building by the IRS, the building is considered placed in service at the end of the rehabilitation expenditures period. The 30% requirement is applied to the aggregate basis of both the existing building and the rehabilitation expenditures.

Broeksmit added, “Specifically, the increased state allocations for affordable housing projects and reduced tax-exempt bond financing requirement will help more borrowers and lenders to use the LIHTC program to construct and rehabilitate housing for low- and moderate-income households. The LIHTC program is a successful public-private partnership that has supported the production of nearly three million rental units since its inception.”

Click here for more information and a summary of the Tax Relief for American Families and Workers Act of 2024.