The $78 Billion Tax Relief Act Set to Transform LIHTC Program After 38 Years

America's affordable housing crisis continues to worsen, extending its reach across the economy. Amidst this crisis, the primary funding mechanism for affordable housing, the Low-Income Housing Tax Credit (LIHTC), faces its most significant overhaul in 38 years.

Potential Impact of Overhaul

The proposed changes within the $78 billion Tax Relief for American Families and Workers Act could significantly enhance the LIHTC's effectiveness. Projections suggest that these alterations may result in the creation of approximately 200,000 new affordable housing units nationally in the coming years.

Legislative Progress

While the measure received bipartisan support in the House of Representatives, its fate in the Senate remains uncertain. The Senate's agenda includes deliberations on various issues such as the federal budget and international conflicts, delaying hearings on the LIHTC overhaul.

Key Changes in the Bill

If passed, the bill would reintroduce a 12.5% boost for the 9% version of LIHTC and allow states to allocate more credits for affordable housing projects. Additionally, it would lower the threshold for developers to qualify for maximum credits from 50% to 30% of state and local tax-exempt bond financing.

Anticipated Benefits

Experts believe that these adjustments would significantly increase affordable housing development. For instance, in Texas alone, the lower bond threshold could result in the creation of approximately eight additional developments annually.

National Impact

The proposed changes are anticipated to constitute the most substantial increase in affordable rental housing resources since 2000, potentially adding 200,000 units to the current 2.6 million LIHTC-financed rental units nationwide.

Persisting Challenges

Despite these efforts, homelessness remains a pressing issue, with a record high reported last year. The lack of available housing affordable to the poorest renters exacerbates this problem.

Criticisms and Alternatives

Some critics, such as the National Low-Income Housing Coalition, argue that the proposed reforms do not adequately target households with the lowest incomes. They highlight that even LIHTC-financed units are often unaffordable for the neediest families.

Alternative Solutions

While the LIHTC provisions are contentious, the organization suggests that other parts of the legislation, like those concerning the Child Tax Credit program, may have a more significant impact on housing costs for low-income populations.

Outlook and Conclusion

The timing of Senate consideration for the Tax Relief for American Families and Workers Act remains uncertain. However, the inclusion of LIHTC provisions in a prominent legislative package signals potential progress in addressing the housing crisis, although challenges persist.

Expert Insights

Industry experts recognize the rarity of housing solutions included in essential legislative packages, underscoring the significance of the current proposed overhaul.

Overall, the proposed changes to the LIHTC present a pivotal moment in the ongoing battle to address America's affordable housing crisis, though challenges and criticisms persist.