Affordable Rental Housing A.C.T.I.O.N. is “a grassroots campaign led by a broad national coalition of cross industry organizations focused on stimulating investment in affordable rental housing” and is advancing a Federal legislative agenda to help secure the affordable rental housing industry going forward.
Prior to the ARRA and HERA, the tax credit program was faltering nationwide. By way of example, in 2007 over $9 Billion in capital was invested in Low Income Housing Tax Credits (LIHTC), in 2008 only $5.5 Billion in capital was invested in LIHTC and even less expected by close of 2009.
During the recent height of the demand, the price for the LIHTC was in some cases exceeding $1 for each dollar in LIHTC. Fannie Mae and Freddie Mac were purchasing 40% of the LIHTC. With the collapse of the equity markets and the decline in the economy as a whole, the demand for LIHTC has dramatically declined and, correspondingly, the price has also dropped. More specifically, there is less investment money out there and most investment companies are managing losses so they do not receive a benefit from tax credits so even if they have money to invest, investing in LIHTC is less attractive.
The HERA and ARRA were passed in an effort to save the industry, which effectively saved countless affordable homes and construction jobs. The ARRA provided (1) TCAP gap financing to all states, and (2) created the tax credit exchange program which allows tax credits to be returned in exchange for $.85 per dollar. The funds from these programs are just now starting to flow. An example in Delaware is Hollybrook Apartments. The TCAP funds expired today if not committed, i.e. unless something happens they are one time funds with many conditions to using them. The tax credit exchange program has not yet been extended so without an increase in investment funds and a corresponding increase in the price offered, it will be extremely difficult to make the developments financially feasible.
In response to this impending problem, Affordable Rental Housing A.C.T.I.O.N. has proposed the following legislative actions:
1. Extend the tax credit exchange program another year. I believe this is vital to the survival of the affordable housing industry.
2. Allow 4% LIHTC to be exchanged. The bond program has essentially stopped. Allowing 4% LIHTC would reinvigorate the bond program.
3. Allow 5 year carryback for recognizing the tax credits to increase demand. This would essentially reduce the risk to investors by allowing investors, if they are unable to recognize a benefit from using the tax credits, to apply the credits to a prior year and receive a refund if the investor also makes new investments.
4. Broaden the investor base by allowing S Corporations, Limited Liability Companies, closely held C Corporations to invest in LIHTC under certain requirements targeted at sophistication of investor.
You can learn more about the legislative agenda and how you can be a part of it at www.rentalhousingaction.org. I am also attaching the organization’s official written Campaign_Legislative_Proposals_1pg_9-9-09.doc. I note that Delaware Community Investment Corporation, Volunteers of America and the Reznick Group, who have all done work here in Delaware, are all listed supporters of Affordable Rental Housing A.C.T.I.O.N.