Washington, D.C. – (RealEstateRama) – Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and Senator Todd Young, R-Ind., today introduced legislation to preserve affordable housing units by closing a loophole that allows developers to exit their contracts under the Low Income Housing Tax Credit (LIHTC) 15 years early and convert affordable units into market-rate units. As a result of this loophole, nearly 50,000 affordable housing units have been lost from the program since 2002. The problem has grown exponentially worse, with 18,000 units lost in 2017 alone.
Representatives Joe Neguse, D-Colo., Don Beyer, D-Va., and Jackie Walorski, R-Ind., introduced companion legislation in the House of Representatives.
LIHTC properties are required to be in service for a minimum of 30 years: a 15-year compliance period followed by a 15-year extended-use period. However, in year 14 an owner who wants to exit the program is able to request the state housing authority find a buyer who agrees to the 15-year extended-use period at a set purchase price.
The formula to determine the purchase price, which was written 30 years ago, is now completely inadequate. The formula is intended to guarantee the owner an inflation-adjusted return on the original purchase price, but typically exceeds the fair-market value of the property. The result is the state is often unable to find a qualified buyer and the property is sold. Affordable rate units are converted to market-rate units and current residents are forced to leave their homes.
The Save Affordable Housing Act would close this loophole by repealing it for future contracts and requiring existing properties to be sold at a fair-market price.
“The lack of affordable housing is at crisis levels in communities all over America. At a time when we desperately need to build new affordable housing, we’re losing thousands of units per year to this loophole,” Senator Wyden said. “Saving existing affordable housing units is essential to any effort to address our housing crisis. This is a no-brainer.”
“I recently helped introduce legislation that will strengthen the Low-Income Housing Tax Credit (LIHTC), which empowers the private sector to increase the supply of affordable housing. Today we are taking an additional step to strengthen this program,” Senator Young said. “I look forward to working with all stakeholders to provide more safe and affordable housing options for Hoosiers.”
“Across Colorado’s 2nd district, securing affordable housing is a critical priority for many of my constituents. As our communities expand and grow, far too many are being priced out of our city limits and are being forced to live farther away from work,” Representative Neguse said. “The Save Affordable Housing Act will ensure our commitment to affordable housing are preserved for Americans across the country by shoring up existing contracts for affordable housing buildings and I’m proud to lead on this bipartisan effort in the U.S. House.”
“The point of Low Income Housing Tax Credit is to build and sustain desperately needed affordable housing for the long term,” Representative Beyer said. “The Save Affordable Housing Act would ensure that the credits do just that, and I hope that we will see this legislation advance soon.”
“The Low Income Housing Tax Credit has proven to be a critical tool for spurring investment in affordable rental housing and providing stability for low-income Americans, including veterans, seniors, and those with special needs,” Congresswoman Walorski said. “By maintaining the availability of affordable rental units, this bipartisan bill will ensure the program continues to give workers and families a better opportunity to achieve the American Dream.”
Enterprise Housing Credit Investments President and CEO Scott Hoekman said, “Enterprise strongly supports The Save Affordable Housing Act and applauds Senators Wyden and Young and Representatives Neguse, Beyer, and Walorski for their commitment to strengthening the Housing Credit program and ensuring that Housing Credit properties remain affordable for at least 30 years as Congress intended. The Housing Credit is our nation’s most successful tool for financing the production and preservation of affordable rental housing and The Save Affordable Housing Act would prevent the premature loss of critical affordable homes by closing the Qualified Contract loophole. This important proposal would strengthen how the Housing Credit serves communities nationwide in dire need of affordable housing.”
National Council of State Housing Agencies Executive Director Stockton Williams said, “The National Council of State Housing Agencies commends Senators Wyden and Young and Representatives Neguse, Beyer, and Walorski for their leadership in preventing the premature termination of Housing Credit affordability requirements. Our country is faced with a severe shortage of affordable housing, and we cannot allow developments that have received federal resources, and in exchange pledged to remain affordable for at least 30 years, to be lost before the end of their commitments.”
National Housing Trust President and CEO Priya Jayachandran said, “The National Housing Trust strongly supports the Save Affordable Housing Act, an essential piece of legislation to preserve irreplaceable affordable rental housing serving low-income families. We are thrilled that Senators Wyden and Young and Representatives Neguse, Beyer, and Walorski are introducing this bill, which will ensure that properties financed with the Low-Income Housing Tax Credit remain affordable for at least 30 years. Correcting the qualified contract price will allow mission-driven nonprofits to maintain the affordability of Housing Credit properties for the long-term as Congress intended. Preserving existing affordable housing is cost-effective and critically important given the nation’s rental housing affordability crisis.”
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