Key Improvements to LIHTC Program Possible for 2021

An updated Affordable Housing Credit Improvement Act (AHCIA) has been introduced in the House and Senate with bipartisan support. The House and Senate bills are identical and are a continuation of an effort that began with the initial introduction of the AHCIA in 2016. With the ongoing move from a focus on COVID-19 relief to infrastructure and economic recovery, the chance of passage is greater now than at any time in the past. Adding to this is the strong support for affordable housing by the Biden Administration.

Since its initial introduction in 2016, some elements of the original AHCIA have become law. Most recently, as part of the Consolidated Appropriations Act (December 2020), a minimum 4% tax credit rate for bond-financed deals and the acquisition of existing buildings was established.

Here are some of the key provision of AHCIA that have at least a reasonable chance of passage in 2021:

  • Increase the allocation of credits by 50% – 25% in 2021 and 25% in 2022.
  • Lower the bond-financing threshold from 50% to 25% to receive a full allocation of 4% credits. This move alone could produce or preserve as many as 1.49 million additional affordable housing units from 2022 to 2031 (according to a study by the National Council of State Housing Agencies (NCSHA).
  • Modify the definition of a Difficult Development Area (DDA) to automatically include sites located in an Indian area, making these sites eligible for the 30% basis boost if needed for project feasibility.
  • Provide more relief under the “casualty loss” rules. Currently, if a LIHTC property suffers a casualty loss and is not part of a federal disaster area, the owner is required to restore the property no later than December 31 of the year of the casualty loss to avoid a reduction in credits. The AHCIA proposes that there will be no loss of credits during a restoration period for any casualty loss as long as the building is restored within a reasonable period of time, as established by the allocating agency. The timeframe will not be able to exceed 25 months from the date of the casualty. However, in the case of federal disaster areas, Housing Finance Agencies (HFAs) would be able to extend the 25-month period by an additional 12 months if reconstruction within 25 months was not practical. Any additional time beyond 25 months would be added to the project’s compliance period in these cases.
  • Align the LIHTC program with the requirements of the Violence Against Women Act (VAWA) by (1) Requiring all LIHTC Extended Use Agreements to include VAWA protections; (2) clarify that an owner should treat a tenant who has his or her lease bifurcated due to violence covered under VAWA as an existing tenant and should not recertify the tenant’s income as if he or she was a new tenant at initial occupancy; and (3) clarify that victims under VAWA qualify under the special-needs exemption to the LIHTC general public use rule.
  • Align the LIHTC student rule with the HUD student rule and provide an exception to the rule for students age 24 and older so that they may pursue educational opportunities. Students under age 24 would have to qualify under the HUD student rule. These exceptions include (1) youth who were homeless immediately before turning 18; (2) veterans; (3) students who are married; and (4) students with children. The AHCIA also provides an exception to the student rule for victims or threatened victims of domestic violence or sexual assault.

These are the changes that appear to have the best chance of passage in 2021. We will continue to track the status of the legislation and provide regular updates.