Cantwell Secures Provision to Increase Affordable Housing Production in COVID Relief Bill
Provision could build more than 130,000 affordable homes in the next decade; more than 6,300 additional units in Washington
WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) announced the inclusion of a key provision to increase affordable housing production in the COVID-19 relief bill. The provision establishes a permanent 4 percent floor under the Affordable Housing Tax Credit, which will help close the funding gap for affordable housing projects and provide more predictability and flexibility in Housing Credit financing. Cantwell’s provision could increase affordable housing production by at least 130,000 affordable homes over the next 10 years and build more than 6,300 additional affordable housing units in the State of Washington. This would create 170,000 jobs and inject $18.5 billion into the economy. The COVID-19 relief bill also includes a one-month eviction moratorium and $25 billion for rental assistance, of which Washington state will receive $508,706,000.
The Affordable Housing Tax Credit (also called the Low Income Housing Tax Credit, or LIHTC) is responsible for funding 90 percent of the federally-funded affordable housing construction in our country, and has financed over 3 million affordable homes, including nearly 75,000 in Washington state, since its creation in 1986. The number of affordable housing units the Affordable Housing Tax Credit has built in each Washington state county can be found here.
“Establishing the 4% floor for the Affordable Housing Tax Credit could help us build more than 6,000 additional affordable housing units in the State of Washington and more than 130,000 affordable homes across the nation in the next decade,” said Senator Cantwell. “It will help close the funding gap for affordable housing projects and provide more predictability and flexibility in Housing Credit financing, which in turn will allow developers to target more affordable rental apartments to those who need it most—including extremely-low income households. This bill is a significant step forward in the fight against the affordable housing crisis.”
When the Housing Credit was created in the Tax Reform Act of 1986, Congress set the Housing Credit rate at 4 percent for the acquisition and rehabilitation, or new development, of affordable housing financed by multifamily housing bonds. The credit rate determines how much Housing Credit equity can go into a particular project. However, the actual Housing Credit rates in the market fluctuate according to a formula related to federal borrowing rates. Cuts to federal borrowing rates have dropped interest rates to all-time lows, and as a result, the Housing Credit rates have sunk —the “4 percent” rate is now actually between 3.07 and 3.09 percent in the market.
This means that there is roughly 23 percent less equity per development than Congress originally intended, which has led to less investment in affordable housing. Providing a floor under the 4 percent Affordable Housing Tax Credit will help close the funding gap and provide more flexibility and predictability in Housing Credit financing.
More than 221,000 Washingtonian households are “extremely low-income”—meaning their incomes are at or below the poverty level or 30% of their area median income—and 72% of those households spend more than half of their incomes on housing, according to a report by the National Low Income Housing Coalition. There are only 31 available affordable rental homes for every 100 extremely low-income renter households in Washington state.
Senator Cantwell has been a longtime champion of the need for more affordable housing. In June, Cantwell introduced legislation that would preserve and expand affordable housing amid the COVID-19 pandemic and economic crisis and build more than 500,000 new affordable housing units. In 2019 she introduced the Affordable Housing Credit Improvement Act to expand and strengthen the Affordable Housing Tax Credit and better serve at-risk-and underserved communities, and she joined housing advocates around Washington state and throughout the country in a push to improve and expand the credit. And in 2018, Cantwell successfully secured a nearly $3 billion down payment toward addressing the affordable housing crisis, helping to build over 28,000 units and support an additional 32,000 jobs.
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