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DASH Act Introduced to Ensure Housing Stability

Senate Finance Committee Chair Ron Wyden has announced the Decent, Affordable, Safe Housing for All (DASH) Act, legislation to make a generational investment to house all people experiencing homelessness, tackle the housing affordability crisis, and expand homeownership opportunities for young people by creating a new down payment tax credit for first-time homebuyers.

“Housing is a human right. Yet, millions of Americans pay more than half of their monthly take-home pay to keep a roof over their head. And more than half a million Americans don't have housing at all,” Senator Wyden said. “America is amidst a serious crisis of housing affordability, and it's a big challenge that demands big, bold solutions. As housing prices skyrocket, a generation of young people are increasingly locked out of homeownership. It’s time America’s lawmakers get with the program and enact 21st Century housing policies that adequately address 21st Century challenges.”

Zillow recently analyzed data that found affordability issues are expected to worsen by the end of the year, and are likely to leave millions newly housing cost burdened. The study found that mortgage payments as a percentage of U.S. income reached 19.4% in June, and are anticipated to surpass 2018 levels in August. Assuming home values grow in line with what Zillow economists have forecast, that percentage could rise to more than 23.1% by the end 2021, depending on where mortgage rates are heading in the coming months.

The DASH Act would make stable, safe, and decent housing available for all by:

  • Housing everyone experiencing homelessness within five years, and prioritizing children and families for placement, by issuing them a Housing Choice Voucher;
  • Expanding health, child care, financial and nutrition services for families and individuals to stay on a path to unassisted housing stability;
  • Greatly increasing the production of deeply affordable housing for families exiting homelessness and for low-income households by investing in effective, efficient existing programs and reforming the tax code to strengthen the Low-Income Housing Tax Credit (LIHTC) to weather the economic fallout from the pandemic, as well as establish a Renter's Tax Credit and Middle-Income Housing Tax Credit (MIHTC);
  • Investing in homeownership in underserved communities and for low-income Americans with new tax credits and down payment assistance, including a down payment tax credit for first-time homebuyers; and
  • Incentivizing environmentally-friendly development strategies and land usage policies.

Fannie Mae's recent Home Purchase Sentiment Index (HPSI) found that a s lack of inventory and elevated prices continue to make the prospect of home shopping and homebuying daunting for a majority of Americans. Pessimism toward homebuying conditions set an HPSI record in July, with the HPSI report, as on the buy-side, 66% of respondents felt it was a bad time to buy a home, up from 64% last month.

Tax provisions of the DASH Act include:

  • The Emergency Affordable Housing Act (EAHA) would strengthen the Low-Income Housing Tax Credit (LIHTC) to weather the economic fallout from the pandemic, by preserving and protecting current LIHTC properties, dramatically expanding production, and extending housing to those at extremely low incomes. Key provisions would expand the 9% housing credit by 50% to house more families; provide a 50% basis boost to projects that prioritize extremely low-income renters; expand the 4% credit for rural areas; reduce the tax-exempt bond financing threshold for 4% credit projects from 50% to 25% for three years; and preserve tens of thousands of affordable housing units by closing a key loophole. EAHA would produce nearly one million new affordable housing units over the next ten years.
  • With nearly 11 million low-income Americans considered rent-burdened, the Renter’s Tax Credit provides a refundable tax credit to property owners who rent to eligible tenants with incomes at or below 30% of area median income. The credit equals up to 110% of the difference between market rent and utilities and 30% of the tenant’s income. Each year, the Treasury Department will allocate renters’ credits to states through a per capita formula. States, in turn, will allocate their credits to participating property owners who have signed a binding rent reduction agreement with eligible tenants. A state’s unused credits are returned to the national pool. Participating property owners must also comply with the Fair Housing Act.
  • Increasingly, even middle-income individuals and families are unable to pay rent and still make ends meet. The DASH Act offers a new Middle Income Housing Tax Credit (MIHTC) that would continue where the very successful LIHTC program leaves off, by providing a tax credit to developers who house tenants between 60% and 100% of area median income. The credit would equal 50% of the present value of construction costs, or 5% per year on an undiscounted basis. States would administer the program, and Treasury would annually allocate the credit to states based on a $1 per capita formula with a $1.14 million small state minimum. States could also use MIHTC dollars to augment their LIHTC program.
  • The DASH Act also features the Neighborhood Homes Investment Act (NHIA), a tax credit to home builders that targets neighborhoods with poverty rates of 130% or greater than the metro or state rate; incomes that are 80% or less than area median income; and home values that are below the metro or state median value. Qualifying homeowners make less than 140% of the area median income. The credits would only be available to investors after the homes have been completed and sold to a homeowner. The maximum credit amount is the lesser of 35% of total development costs or 80% of the national median home sale price. State agencies would receive annual allocations of $6 per capita (or $8 million, if higher), and would award NHIA tax credits to project sponsors.
  • Down Payment Tax Credit for First-Time Homebuyers, a new $15,000 first-time home buyer tax credit is fully refundable and equal to 20% of the purchase price of a home. The credit phases out above 110% of conforming loan limits (about $603,000 in Oregon) and above $100,000 of income for single filers ($200,000 for joint filers). The credit can be recaptured if the taxpayer re-sells the home in under five years (with some exceptions).

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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