On September 22, Senate Finance Committee Ranking Member Ron Wyden (D-OR) released a discussion draft of legislation that would create a new tax credit program to stimulate the development of rental housing for middle-income households earning up to 100 percent of area median income (AMI). The legislation would create a new section of the tax code for the new program, which would be modeled after the Low Income Housing Tax Credit (Housing Credit) and administered by state agencies.
The proposal envisions a state middle-income credit cap of $1 per capita with a small state minimum of $1.14 million, adjusted for inflation in future years. Any middle-income credit authority unused after the first year in which it is received by the state would be carried over into the Housing Credit program for use in developing low-income rental housing.
The program would provide a 50 percent present value credit for qualified middle-income properties, with a minimum 5 percent credit rate. Federally financed properties, including those financed with multifamily Housing Bonds, would not be eligible to receive middle-income credits.
Like the Housing Credit, the middle-income credit would require a 15 year compliance period and a 15 year extended use period, for a minimum 30 year total affordability period. However, unlike the Housing Credit, in which the credit period during which investors receive tax credits is 10 years, the middle-income credit’s credit period would be 15 years, in line with the compliance period.
The draft legislation would require states to develop a separate qualified allocation plan (QAP) for the middle-income credit. States would need to give preference to projects that serve qualified tenants for the longest periods, in areas where rents are unaffordable to median income households, targeted to households with incomes ranging from 60 to 100 percent of AMI, and located near transit hubs. The selection criteria that states would need to include in the middle-income credit QAP mirror those in the Housing Credit statute, with the exception that the bill does not require states to consider public housing waiting lists as a criteria.
Senator Wyden is seeking comments on the discussion draft by December 21. In particular, he has requested feedback on whether the credit period under the middle-income credit should be set at 10 years as it is with the Housing Credit, how to coordinate the middle-income credit with the Housing Credit, whether the bill should be modified to allow the middle-income credit to be used with federal financing, whether a 50 percent present value credit is sufficient to finance middle-income housing, the proposed income targeting, and whether Congress should amend the Community Reinvestment Act to allow financial institutions to get CRA credit for investments aimed at housing persons with incomes in excess of 80 percent of AMI.
Please send your feedback on the discussion draft to NCSHA’s Jennifer Schwartz by December 1 to help inform NCSHA’s comments.