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Spending Bill Increases LIHTC and Affordable Housing Funding for FY2018

by
Matt Schwartz, President & CEO
Dear Colleagues: 
 
Below are my highlights from the FY 2018 federal spending bill that was finalized yesterday by Congressional leaders. I am pleased to report that thanks to the heroic efforts of our national advocate allies and several members of our state’s Congressional delegation, there is relatively good news to share:
 
  • The bill includes language allowing Section 202 Project Rental Assistance Contract (PRAC) properties to convert under RAD, a provision that CHPC has been working on for several years with national allies. The bill also lifts the cap on RAD conversions from 285,000 units to 455,000 units. 
  • The bill would increase funding for the HOME program by $412 million (43%) from $950 million to $1.362 billion, which is a huge victory (symbolically, at least) for a program that many of us thought would be eliminated years ago.
  • CDBG would receive $3.365 billion with formula grants receiving a 10% increase from $3 billion to $3.3 billion. 
  • The bill extends the suspension of the 24-month funding commitment deadline under the HOME program. Because of the additional requirements on project selection, underwriting standards, and developer capacity under the HOME program, many communities have struggled to meet the two-year commitment deadline, which led to funding being lost. This language removes this barrier while keeping in place other, more meaningful deadlines.
  • Funding for the Housing Opportunities for People with AIDS (HOPWA) program was increased to $375 million.
  • Choice Neighborhoods Initiative (CNI) funding increases when compared to last year’s allocation, from $138 million to $150 million.
  • Voucher renewals should be sufficient to renew all vouchers and perhaps restore a few that PHAs are authorized to use but recently lost over many years of HUD starvation budgets. PHA admin fees are increased modestly.
  • Public housing did very well relative to recent past budgets with an $800 million (42%) increase in capital funds and a more modest increase (3.4%) in operating funds.
  • Rural housing programs were surprisingly mostly flat funded and on average did not fare as well as HUD programs
For more HUD and USDA budget line items, please review this budget chart from the National Low Income Housing Coalition.
 

Low Income Housing Tax Credit Improvements Included:

The good news is that Congress included a 12.5% increase to the 9% credit allocations for each state effective for 2018. The current $2.35 per capita allocation would go up by 12.5% for 4 years to approximately $2.70 this calendar year, presumably meaning that California’s July 9% competitive round will allocate roughly 25% more credits unless the Treasurer’s office decides to do a separate 3rd round.  In other good news, Congress has authorized states to serve households up to 80% AMI as long as overall affordability averages are maintained.  The effective date for this provision is upon the bill’s signing into law. This will have a huge positive impact on all occupied acquisition rehab and recapitalization transactions.   
 

The bad news: Creating a floor of 4% for the 4% credit, which was part of the deal on the table earlier this week, is not included in the final deal. This provision would have been worth $500 million per year to California had it been enacted. The 12.5% temporary increase to the 9% credit allocations is worth about $125 million annually for the four-year term of the increase, or $500 million total over four years. Compare this to the $500 million annual loss in LIHTC market value to CA made permanent by the GOP Tax Bill. My statement to the LA Times about this: “While California affordable housing advocates should applaud Congress for the temporary increase in the per capita Housing Credit, it is not at all sufficient to undo the damage done by the GOP Tax Bill.” More needs to be done after the mid-term elections, which will be the next time any significant tax legislation is considered.

As for the next steps in the approval process, Congress may need another short Continuing Resolution beyond the Friday expiration date of the current CR to complete the vote process, which will likely happen over the weekend. The President in his usual fashion has been issuing inconsistent statements about his intentions, some threatening to veto the bill due to Congress only including token funding for the new wall instead of the $25 billion he has been demanding. Stay tuned.