Are there ways to make the Housing Credit even more effective? What are the three things you would change?
The recent Harvard Joint Center for Housing Studies “State of the Nation’s Housing” report underscored how desperately we need more affordable housing options. There are currently 11.5 million extremely low-income households, many of which are paying more than half of their paycheck for rent or mortgage, but only 3.2 million apartments affordable and available to them. Meanwhile the Low-Income Housing Tax Credit (Housing Credit) is stretched thinner than ever by the return to the floating credit rate and continued cuts to gap financing sources both at the federal and local levels.
While the affordable housing industry has been calling for permanent minimum credit rates for years, several other proposed changes have the potential to help us serve more families and end housing insecurity – especially those with the greatest needs.
Create a Dedicated Gap Financing Source
Cuts to the federal, state and local funds that help fill gaps in affordable housing financing are making more affordable housing deals difficult or even impossible to complete. For instance, Enterprise has used HOME funds to finance almost half of our homes. Without this funding, many critically-needed homes would not have been possible. But HOME funds have been slashed by 38 percent in the past three years, threatening the capacity of communities to address their most pressing housing needs.
In addition to restoring full funding to these essential programs, the Housing Credit would benefit tremendously from its own dedicated gap financing source or sources. Potentially funded by the National Housing Trust Fund and dedicated state/local resources, these funds could support some of the most important types of Housing Credit developments, like ones that serve extremely low-income households or people with special needs.
Support Policies to Serve Extremely Low-Income Households
For people with extremely low incomes, living in Housing Credit properties may be out of reach without additional resources to help bring rents down. Section 8 vouchers have provided that bridge for many households, but like so many housing resources, the Section 8 program is oversubscribed with waiting lists and lotteries that make it out of reach for most people.
Income averaging is one alternative that allows rental income from higher-income tenants to offset lower rents for lower-income households within a Housing Credit property. The Obama administration has included an income averaging proposal in its recent budget requests, which would allow properties to serve households up to 80 percent of area median income (AMI) so long as the average tenant income is 60 percent of AMI. Another option for consideration is allowing a 150 percent basis boost for properties that serve these households. As an industry we still need to think through the specific proposals, but the concepts are promising insofar as they could help us serve more extremely low-income people through flexibility without additional subsidies.
Work Towards a Significant Expansion of the Housing Credit
Every year, viable projects that would serve low income working families in need are turned down as a result of the scarcity of tax credits – not because of the merits of the project or a lack of need. When the Bipartisan Policy Center proposed a significant expansion of the Housing Credit, it showed that leading experts from both sides of the aisle recognize the vast and growing need for this program. While such an expansion may not be achievable in the current political climate, we fully support this proposal and will be working with our partners in the industry to continually educate policymakers about how critical the Housing Credit program is and its proven effectiveness to help us end housing insecurity in America.
Ali Solis is senior vice president at Enterprise Community Partners.