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Message to Housing Advocates: Don’t Panic. Push Back with Facts, Stories and Emotion

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My October 27th blog described the damage that will be done to California if the Republican House tax reform proposal eliminates tax exempt private activity bonds (PABs) including multifamily housing bonds, thereby also eliminating California’s ability to use 4% Low Income Housing Tax Credits. Unfortunately, the draft bill released by House Ways and Means Chairman Kevin Brady (R-Texas) last week as H.R.1 eliminates PABs and therefore 4% Housing Credits, which I noted would cost California $2.2 billion in federally catalyzed investments annually and lead to the loss of 20,000 affordable homes annually. Over a ten-year period assuming an average growth factor of 2.5%, this would mean the loss in California of:

  • 262,000 affordable homes
  • 296,000 jobs
  • $24.9 billion in local business income
  • $9.6 billion in federal, state and local tax revenues[1]

Since then, I have encountered a growing sense of panic in the affordable housing community triggered in part by sudden announcements of requirements to close, fund and draw down PAB/4% Credit transactions before the December 31st expiration date set in the current draft of H.R. 1. While I certainly understand the need for investors and lenders to hedge against uncertainty, especially when Congress advances proposals that would make major changes like this if approved, I think it’s important we all keep in mind two things: first the process that H.R. 1 must go through to become law, and second, our opportunities to push for change in the bill that may or may not become law.   

2017 Tax Reform Legislative Process: A Short Primer  

What’s happened so far? Chairman Brady released the first draft of H.R. 1 on Thursday, November 2nd. He then released some modest changes on Monday, November 6th.

What happens next?  Chairman Brady is currently working on additional changes to H.R. 1, which he expects to finalize Wednesday night in time for the Ways and Means Committee to make final Committee changes to the bill on Thursday, November 9th. Once the Committee is able to agree on bill language, they will vote to send it to the House floor for a vote by all members, which is expected to take place Wednesday the 15th or Thursday the 16th. Meanwhile in the Senate, Finance Committee Chairman Orrin Hatch (R-Utah) is preparing to release his first tax reform bill Thursday the 9th after Ways and Means approves its bill. Preliminary indications are that Chairman Hatch intends to retain PABs/4% Housing Credits but we won’t know until the Senate Finance Committee will meet next week beginning on the 13th with a vote of the full Senate planned for before Thanksgiving recess. Assuming both chambers pass bills, their respective leaders must then attempt to reconcile all differences and then take new votes on the final bill, which they hope to send to the President for signature by year end.

What are the risks and opportunities and my quick take on the outlooks for each?  The primary risks for affordable housing advocates is that the House does not reinstitute PAB/4% Housing Credits (probable) and the Senate also proposes to eliminate them (unclear), and both chambers are able to agree on and approve a bill that the President signs into law (unclear).

The opportunities are that strong advocacy leads to: (1) an amendment to H.R. 1 that ideally restores not only PABs and 4% Credits but also augments the value of the Housing Credit to make up for losses in value resulting from reducing the corporate rate, and leads to the incorporation of provisions from the Tiberi-Neal bill, also known as the Affordable Housing Credit Improvement Act of 2017 or H.R. 1661 (unlikely at this point); and (2) a Senate bill that not only preserves PABs and 4% Credits (likely) but also augments the value of the Housing Credit to make up for losses in value resulting from reducing the corporate rate (possible), and leads to the incorporation of provisions from the Cantwell-Hatch bill (the Affordable Housing Credit Improvement Act of 2017 or S. 548) (possible). Assuming the Senate version is more favorable, there is also an opportunity in the scenario that the House mostly adopts the Senate version (probable). 

What should we be doing?

It is critical that we make our views heard in the few remaining days before the House Ways and Means Committee mark-up on Monday, particularly those with influence with the majority party leadership, which controls everything in the House. Our asks are (with many thanks to Enterprise Community Partners and the Affordable Rental Housing ACTION Coalition):

  1. Preserve the 4% Housing Credit by retaining the tax exemption on private activity multifamily housing bonds.
  2. Offset the impact of a lower corporate tax rate on the value of Housing Credits. Detailed proposals can be found on the Novogradac April 17th blog.
  3. Strengthen the Housing Credit by adopting provisions from the Affordable Housing Credit Improvement Act of 2017 (H.R. 1661 or S. 548).

Only California members of Congress from the majority party are in the position to help make these asks directly to Congressional leaders with control over tax reform. [California’s Senator Feinstein has already registered her support for the LIHTC with Chairman Hatch and with a recent tweet.] There are two groups of majority party Representatives that we need to contact.  

Below is a list of the names of the Representatives who have not yet committed to support Tiberi-Neal (H.R. 1661) and the emails of the lead staff person handling the tax bill for them.

The best way to let these Representatives know you care is to email and call them via the Capitol Switchboard (202-224-3121) with the following message:

“The federal 4% Housing Credit is creating more than 20,000 affordable homes in California annually and is far and away the most important tool we have to address our affordable housing crisis. Please co-sponsor the Tiberi-Neal Bill (HR 1661) and contact Chairman Brady, Majority Leader McCarthy and Speaker Ryan ASAP and ask them as a top priority for your office to make the following changes to HR1: (1) retain multifamily housing bonds and 4% Housing Credits, (2) offset the impact of a lower corporate tax rate on the value of Housing Credits, and (3) include the Tiberi-Neal bill provisions (HR 1661).”

This message will be given more weight if it comes from someone in the Representative’s district or with properties in the district. So, please think of anyone you know who lives and works in these districts and forward this request to them.

We also need the active support of those majority party Representatives who have endorsed Tiberi-Neal but still need to tell their leadership about the importance of retaining PABs/4% Housig Credits. These include:

The message for the above Representatives is:

“Thank you for co-sponsoring the Tiberi-Neal Bill (HR 1661). The federal 4% Housing Credit is creating more than 20,000 affordable homes in California annually and is far and away the most important tool we have to address our affordable housing crisis. Please contact Chairman Brady, Majority Leader McCarthy and Speaker Ryan ASAP and ask them as a top priority for your office to make the following changes to HR1: (1) retain multifamily housing bonds and 4% Housing Credits, (2) offset the impact of a lower corporate tax rate on the value of Housing Credits, and (3) include the Tiberi-Neal bill provisions (HR 1661).”

To maximize the effectiveness of your emails, I suggest you download the fact sheet documenting the benefits that the Housing Credit has delivered to each Representative’s district by clicking here and selecting their names individually.

Please join me in taking 30 minutes to make this a priority today. Together, we can do this.

Matt Schwartz

President & CEO

[1] Ten-year estimates are from Novogradac and Company, which in turn used NAHB formulas.