On May 11, 2023, the Affordable Housing Credit Improvement Act (AHCIA) was introduced in both the House and Senate by bipartisan groups of legislators.
If passed, the legislation would finance an additional 1.94 million affordable rental units over a ten-year period.
Key Elements of the Bills
- Increase the Amount of Credit: The bills would expand the 9% LIHTC by restoring the 12.5% cap increase that expired in 2021 and would increase allocations by an additional 50% over a two-year period.
- Make the Average Income Test Available to Tax-Exempt Bond Projects: This would align the tax-exempt bond and LIHTC programs and permit all three set-asides (20/50/40/60{25/60 in New York City}/Average Income).
- Simplify the Student Rule: The bills align the LIHTC and HUD student rules by essentially adopting the HUD rule for both programs. It would still ensure that households occupied entirely by full-time students under the age of 24 would be ineligible, with certain exceptions. These exceptions would be (1) single parents; (2) formerly homeless youth; (3) persons aging out of foster care; (4) victims of domestic violence and human trafficking; and (5) veterans.
- Limit the Rent for Housing Choice Vouchers to No More than the LIHTC Rent: Under current law, owners may collect the full value of a Housing Choice Voucher - even if it exceeds the LIHTC maximum rent level. The bills would limit the rent charged to the maximum permitted LIHTC rent for properties using the Average Income Set-Aside or benefitting from the basis boost for extremely low-income households (contained elsewhere in the bills).
- Increase the Credit Amount for Projects Serving Extremely Low-Income Households: The bills provide up to a 50% basis boost for sites serving extremely low-income households in at least 20% of the units. The boost would apply only to the percentage of the property reserved for extremely low-income households.
- Clarify VAWA Protections for LIHTC Properties: The bills require all LIHTC Extended Use Agreements to include VAWA protections, clarify that owners should treat victims with a bifurcated lease as an existing resident and not require requalification, and exempt domestic violence victims from the general public use provisions of Section 42.
- Prohibit Local Approval and Contribution Requirements: The bills remove the provision of the current law that requires state agencies to notify the chief executive officer of the local jurisdiction of the proposed project and specify that the selection criteria in the Qualified Allocation Plan (QAP) cannot include consideration of any support for or opposition to a development from local or elected officials or local government contributions to a development.
- Increase of Population Cap for Difficult Development Areas (DDAs): Currently, sites are eligible for up to a 30 percent basis boost if they are located in a DDA, meaning areas with high construction, land, and utility costs relative to area median gross income. No more than 20 percent of the aggregate population of the entire country may be located in census tracts that are eligible to receive the DDA designation. The bill would increase the DDA population cap from 20 to 30 percent, and, therefore, enable sites in more high-cost areas to receive additional LIHTC equity if necessary to make the property financially feasible.
- Basis Boost for Indian & Rural Areas: Most Tribal and rural areas do not currently qualify for the 30% boost. The bills would modify the definition of a DDA to automatically include properties in these areas.
Bottom Line - While it is unlikely that the AHCIA will pass as a stand-alone piece of legislation, it is hoped that many of the provisions will be included in other major housing-related bills. None of the provisions are controversial, and there is broad support for all of them. As we approach the end of 2023, there is at least a decent chance that some of the provisions will become law.