As the housing crisis continues to deepen across the United States, housing advocates are turning their focus to Washington D.C., urging the House Committee on Ways and Means to take decisive action. The push is for the advancement of significant legislation that would expand the use of Private Activity Bonds (PABs) to bolster affordable housing initiatives. With calls for action encapsulated by Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition (AHTC), supporters express hope that a bipartisan legislative vehicle will emerge during the pending lame-duck session of Congress.
Private Activity Bonds offer a crucial mechanism for funding affordable housing projects by providing tax-exempt financing sources. These bonds are intended to stimulate investments in housing that meets the needs of low- and moderate-income individuals and families. The AHTC emphasizes the necessity of particular reforms to maximize the potential of PABs in this context. Specifically, they propose lowering the current bond financing threshold from 50% to 25% for qualifying for the 4% Low-Income Housing Tax Credits (LIHTC). This change, they argue, could significantly enhance the efficiency of tax-exempt bonds and enable wider access to private financing options.
More than half of U.S. states have already reached their bond volume caps, which highlights a critical limitation in current policy. By lowering the qualification threshold, advocates believe states can better leverage their bond volumes to finance additional affordable housing developments, addressing the escalating demand for such projects.
The Affordable Housing Credit Improvement Act (AHCIA) has been a focal point for discussions surrounding affordable housing legislation since its inception. Despite multiple attempts to push the bill through Congress since 2016, it has yet to gain the traction needed for successful passage. A fresh iteration of the AHCIA was introduced in the House and Senate in May 2023, reviving hopes among advocates for its eventual enactment.
However, the AHCIA currently faces significant roadblocks in the Senate, with proponents continuing to seek a viable legislative vehicle that can garner the broad-based support it needs. Given the complexities of legislative maneuvers and the time constraints of the congressional calendar, the future of the AHCIA remains uncertain. Nevertheless, with strong bipartisan interest in housing issues, advocates remain optimistic about the bill’s prospects.
In their recent outreach to the Ways and Means Committee, the AHTC is not only advocating for a lower bond threshold but is also calling for the removal of the cap on mortgage revenue bonds and multifamily housing bonds for five years. This proposed grace period is intended to provide local governments with the necessary flexibility to meet the rising demand for affordable housing.
The argument here hinges on the observation that many other private activities, such as those funding airports and hospitals, do not face similar volume caps. Advocates contend that providing unlimited bond authority for affordable housing financing should reflect the same growing urgency as these unrelated sectors.
The renewed push for reform has been further buoyed by Vice President Kamala Harris’ proactive stance on housing issues. This political backing from a national leader, particularly during an election year, may enhance the probability of legislative momentum. Supporters in both parties recognize the potential for advancing the AHCIA with bipartisan collaboration, indicating widespread agreement on the critical issue of affordable housing.
In the realm of tax legislation, there looms a significant deadline as provisions from the Tax Cuts and Jobs Act (TCJA) are set to expire in 2025. The administration’s pressing need to address expiring tax cuts may offer yet another platform from which advocates can launch their proposals for a restructuring of private activity bond regulations.
The urgent need to address the housing affordability crisis demands robust legislative action and innovative financing mechanisms. By advocating for changes to the Private Activity Bond framework and fostering bipartisan support, housing advocates seek to create an environment where affordable housing is not just a possibility but a widespread reality. With the potential for major reforms on the horizon, the upcoming legislative sessions could prove pivotal in laying the groundwork for a sustainable solution to one of the most pressing challenges facing American families today.