Washington, D.C–While it may seem that Congress has been focused exclusively on health care legislation, a $100 billion jobs measure that passed the Senate on Wednesday contained several provisions important to the multifamily housing industry.
Included in the bill was an extension of the Tax Credit Exchange Program (TCEP) for 2010, which allows state housing finance agencies to exchange Low Income Housing Tax Credit (LIHTC) credit allocations for grant funds to finance affordable housing construction.
Among the bill’s provisions was a placed-in-service deadline extension, which will allow developers an additional two years to use Gulf Opportunity Zone (GO Zone) Low-Income Housing Tax Credits. The legislation would shift a congressionally mandated deadline of December 2010 for completing construction by two years, providing more time for state governments, developers and investors to overcome financial challenges and enable the use of previously allocated housing credits. Due to the deep economic recession and the deadline, developers have had trouble attracting investors and closing on project financing so construction could begin.
Also included in this bill is a one-year extension of the New Markets Tax Credit (NMTC) program, which would provide $5 billion to incentivize private investment in low-income urban neighborhoods and rural communities nationwide. The program expired at the end of 2009.
The bill also extends the 9 percent LIHTC exchange program to the end of 2010.
The legislation must now be reconciled with a House bill that passed earlier.
“It’s highly likely that this bill will eventually be reconciled with the House bill,” says Gregory Brown, assistant vice president of government affairs for the National Association of Homebuilders.
While noting that the bill is likely to have bipartisan support, the House bill contains the carried interest provision as a way to generate revenue. The measure, which changes the way real estate partnerships are taxed, is opposed by the NAHB and other real estate trade organizations. The Senate is unlikely to support the carried interest provision, Brown says. However, with the vote on health care legislation looming, and Congress’ Easter recess close behind, it is likely to be weeks before the bill becomes law, Brown says.
Enterprise Community Partners applauds the passage of the bill, but is advocating that additional legislative steps be taken to re-invigorate the LIHTC program. Peter Lawrence, the organization’s senior policy director, revealed that $4.5 billion was invested in the program in 2009, down sharply from $8.9 billion in 2006. That is largely due to Fannie Mae and Freddie Mac’s exit from the LIHTC program, as the two agencies were responsible for about 40 percent of investment volume. Losses at financial institutions, which were also significant investors, has also been a factor in the drop-off.
Enterprise, and 170 other organizations, are lobbying for additional measures. First, they contend the LIHTC carry-back period should be increased to five years for new housing and qualified existing housing, which would provide greater flexibility to investors. Another step the coalition is advocating is the extension of the exchange program to cover LIHTC generated from tax-exempt bonds, which is also known as 4 percent LIHTC. The coalition says that will be a major step in preserving affordable housing. Also, Enterprise, in an effort to broaden and diversify the investor base for the program beyond financial institutions, is advocating that Subchapter S, LLCs and closely-held corporations be able to utilize LIHTC.
There has been movement on some of these initiatives. The Small Business Jobs Bill, approved by the House Ways and Means Committee last week, contains a provision to extend the 4 percent LIHTC. The bill could come up for a full vote before the House next week. And a bill introduced by Sen. Jeff Bingaman (D.-N.M) and six co-sponsors on March 18 includes the five year carryback provision.