POLICY POST: Senate Finance Committee Approves Amendment to ...

By Emily Cadik, Enterprise Senior Policy Analyst

The Low-Income Housing Tax Credit (Housing Credit) has leveraged over $75 billion in private investment over the past 25 years, helping to make it the nation?s most successful affordable housing production tool. But the Housing Credit?s ability to attract private investment is currently at risk.?

The most common Housing Credit is the 9 percent credit for new construction or substantial rehabilitation. But ?9 percent? is a bit of a misnomer ? the actual tax credit rate floats with the interest rate according to a formula. In the past, the rate typically hovered around 9 percent, but as interest rates dropped, so did the Housing Credit rates. Now the rate is closer to 7.36 percent (almost 20 percent less than the original rate), making Housing Credit projects less appealing to investors.?

Recognizing the necessity of keeping Housing Credit rates high, the Housing and Economic Recovery Act instituted a minimum 9 percent rate for Housing Credits in 2008.? Decoupling the credit rate from interest rates helped to reduce uncertainty and financial complexity in the housing credit program and facilitate further investment in Housing Credit projects.? However, the provision is expiring for projects placed in service after the end of 2013, and because of the amount of time it takes to complete a Housing Credit project, it?s already impacting production.?

Last week, though, the Senate made a major step towards extending the minimum 9 percent credit rate beyond 2013. On Thursday, August 2, the Senate Finance Committee held a mark-up of the Family and Business Tax Cut Certainty Act of 2012, also known as the Tax Extenders Bill.?Senators Snowe and Cantwell introduced an amendment that extends the fixed 9 percent minimum rate for the Housing Credit through 2013. While the 9 percent rate currently only applies to Housing Credit properties placed in service by the end of 2013, the Snowe-Cantwell amendment would apply the minimum rate to any allocations made for Housing Credit projects by the end of 2013 ? allowing for the project to secure the necessary financing, begin construction and be placed in service beyond 2013.

Though the 9 percent floor provision was not included in the original Chairman?s Mark, the amendment containing the provision was one of the few included in the package eventually reported out of committee. Continuing the Housing Credit?s tradition of bipartisan support, the amendment was passed by a voice vote with only one Senator voting in opposition. Though it is unclear when (or if) the full Senate or the House will take up the Tax Extenders Bill, the committee vote signals strong support for including an effort to strengthen the Housing Credit in upcoming tax bills.?

For more information on the Housing Credit-related legislative proposals and advocacy efforts, visit the Rental Housing ACTION website or contact Emily Cadik at ecadik@enterprisecommunity.org.? ??

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Source: http://enterprisecommunity.typepad.com/enterprise/2012/08/policy-post-senate-finance-committee-approves-amendment-to-strengthen-housing-credit.html

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