Administration Proposals to Improve the LIHTC Program

As part of its 2014 budget, the Obama Administration has made five specific proposals relative to the LIHTC Program.

1. Allow states to convert some of their authority relating to the issuance of tax-exempt bonds into additional tax credits. (This would be a particularly useful tool to states with excess demand for tax credits and more bond issuing authority than needed);
2. Allow projects to comply with an income-averaging rule:
   1. Income limits for at least 40% of the units in a project could average no more than 60% of AMI;
   2. No tax credit unit could be occupied by a household with income above 80% of AMI;
   3. Special rules would apply to HUD or RD projects, as follows:

i.     If a tenant qualified of a HUD or RD project when they originally moved in, they will be considered LIHTC qualified as long as their income does not exceed 80% of AMI.

1. Change the formula regarding the present value calculation of the 4% and 9% credits to produce more credit that is available under the current formula;
2. Add preservation of federally assisted affordable housing to the selection criteria for a States Qualified Allocation Plan (this would be required of all states); and
3. Make the use of the LIHTC more attractive to REITs, in order to increase the demand for credits.

These are important proposals and will improve the efficient use of the credits. It is recommended that all operators of LIHTC properties encourage their Senators and Representatives to support these proposals to encourage continued development of affordable housing.