Administration Announces Progress on Housing Supply Action Plan, Release of Housing Credit Average Income Rule and Deadline Extensions

This morning the Biden-Harris Administration published a progress report on its efforts to advance the agenda items in the Housing Supply Action Plan released last May, including the announcement of today’s imminent publication of the final rule for the Housing Credit Average Income Test (AIT) minimum set-aside and Internal Revenue Service guidance extending the placed-in-service deadlines for certain Housing Credit developments, as well as other deadline extensions for which NCSHA has been advocating. NCSHA will publish blogs later today analyzing the AIT final rule and the deadline extensions.

NCSHA has played a lead role in the effort to enact and ensure ease of implementation of the AIT. The AIT allows owners of Housing Credit properties to serve households earning up to 80 percent of area median income (AMI), as long as the average unit designation in each building is no more than 60 percent of AMI, meaning that to serve higher income (but still low-income) households, owners also would need to target some units to households further down the income spectrum to achieve the average. This allows for greater income diversity and cross subsidization so that more units can be built for extremely low-income households. It also makes development in rural areas more feasible by expanding the population who could live in Housing Credit developments.

The AIT was one of the original components of the Affordable Housing Credit Improvement Act when it was first introduced in 2016 by Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT). Congress enacted the new minimum set-aside in 2018. While many HFAs began allowing owners to choose AIT as their minimum set-aside immediately upon its passage by Congress, interest in the AIT waned substantially when IRS published the AIT proposed rule in 2020. That rule included several significant obstacles to implementation, to which NCSHA and the rest of the Housing Credit community strongly objected. At the time, NCSHA led an effort to coordinate comments to the IRS pointing out the shortcomings of the proposed rule and encouraged other groups to use NCSHA’s comment letter as a guide for their own. Later, NCSHA spearheaded an effort to provide IRS with a set of consensus comments and worked with champions in Congress on a congressional sign-on letter to IRS.

As of this writing, the AIT final rule is being readied for publication, but we are told by the administration that the final rule will address the concerns NCSHA and others raised about the proposed rule and will be workable in practice and flexible for program participants.

NCSHA also played a leadership role in achieving the Housing Credit deadline extensions the White House today announced. In early July, NCSHA wrote IRS and Treasury urging them to extend and expand certain relief measures provided to the industry in response to the Covid-19 pandemic. NCSHA asked IRS/Treasury to provide extensions to placed-in-service deadlines for projects receiving Credit allocation in 2019, 2020, and 2021. NCSHA also asked for further deadline relief for existing properties that have suffered a casualty loss or required repairs to address noncompliance and/or general maintenance. Lastly, NCSHA encouraged IRS and Treasury to extend flexibility to state Housing Credit allocating agencies to waive physical inspections of properties in geographic areas where virus transmission makes such a waiver appropriate. Several other groups, including the Affordable Housing Tax Credit Coalition and the Housing Advisory Group, sent follow-up letters asking IRS to implement the deadline extension NCSHA requested. We expect the guidance IRS will release today to address all these issues.

In addition to the announcement on the AIT and Housing Credit deadline extensions, the administration’s progress report highlights other actions it is taking to meet the goals of its supply plan. Highlights include:

• Reforming Fannie Mae’s and Freddie Mac’s Forward Commitment programs to facilitate the creation of more units;
• Expanding the federal financing for transit-oriented development and affordable housing;
• The creation of a partnership between the Department of Transportation and HUD to help communities plan and develop transformative infrastructure projects;
• Ways the administration is promoting housing innovation and alternative housing types; and
• Directing a greater share of the supply of FHA, Fannie Mae, and Freddie Mac defaulted asset dispositions to owner-occupants and mission-driven entities rather than large investors.

The progress report also touches on other actions the administration has taken to advance the Housing Supply Action Plan, including Treasury’s guidance change in July that allowed the use of State and Local Fiscal Recovery Funds as long-term loans for affordable housing and HUD’s finalized agreement to restart the Federal Financing Bank’s Risk Sharing program last year.