House Adds Tax Credit Provisions to Build Back Better Act

On November 3, after extensive, relentless, and targeted advocacy efforts by CLPHA, the ACTION Campaign, members of Congress, and other stakeholders, the House leadership added tax credit provisions previously passed by the Ways and Means Committee to the House Rules Committee version of HR 5376, the Build Back Better Act. The housing tax credit and bond provisions are found in Title XIII Subtitle E of the bill.

CLPHA’s advocacy went down to the very last moments with a final quick-turnaround letter jointly signed by CLPHA and the MTW Collaborative to President Biden, House Speaker Pelosi and Senate Majority Leader Chuck Schumer, once again calling for the tax credit provisions to be included in Build Back Better.

The Build Back Better Act also added in provisions for paid leave benefits, prescription drug pricing, raising the cap on state and local tax deductions, and scaling back some of the clean energy incentives, among other important policy changes.

In addition to adding in the tax credit provisions, some housing policy and funding changes along with specific technical requirements and clarifications, were also included in the Build Back Better bill.

The following is CLPHA’s summary of selected housing, tax credit and bond provision changes found in the revised Rules Committee version of the Build Back Better Act (changes are bolded and italicized):

TITLE IV—COMMITTEE ON FINANCIAL SERVICES

Subtitle A – Creating and Preserving Affordable, Equitable and Accessible Housing for the 21st Century

Sec. 40003. Housing Investment Fund – For FY22, appropriates $740 million to establish a Housing Investment Fund (HIF) in the Department of Treasury within the Community Development Financial Institutions Fund (CDFI Fund) and $10 million for costs to the CDFI Fund to administer and oversee implementation of the HIF. Amounts appropriated remain available until September 30, 2026. Total funding equals $750 million.

Sec. 40007. Revitalization of Distressed Multifamily Properties – For FY22, appropriates $1.550 billion for forgivable direct loans to owners of distressed properties to make necessary physical improvements; and, $50 million for administrative costs and implementation. Amounts remain available until September 30, 2029. Total funding equals $1.6 billion.

Sec. 40009. Housing Vouchers – For FY22, appropriates $15 billion to remain available until September 30, 2029 for incremental tenant based rental assistance, renewals, administrative fees and other expenses related to the utilization of voucher assistance under Section 8(o); $7.1 billion to remain available until September 30, 2029 for incremental tenant based rental assistance for households or at risk of homelessness, survivors of domestic violence, dating violence, sexual assault, stalking, and survivors of trafficking families, administrative fees and renewals, and other expenses related to the utilization of voucher assistance under Section 8(o); $1 billion to remain available until September 30, 2031 for tenant protection vouchers, administrative fees and renewals, and other expenses related to the utilization of voucher assistance under Section 8(o); $300 million to remain available until September 30, 2031 for competitive grants to public housing agencies for mobility-related services; $230 million to remain available until September 30, 2031 for property owner outreach and retention; $300 million to remain available until September 30, 2031 for administrative fees and implementation of the Housing Choice Voucher program generally; and $70 million to remain available until September 30, 2031 for new awards or increasing prior awards for technical assistance or capacity building. Together, funding for Housing Vouchers totals $24 billion.

Subtitle B – 21st Century Sustainable and Equitable Communities

Sec. 40101. Community Development Block Grant Funding for Affordable Housing and Infrastructure – For FY22, appropriates $1.735 billion to grantees under the Community Development Block Grant program; $700 million to Community Development Block Grant colonias grantees; $500 million for manufactured housing infrastructure improvements; $87.5 million to administer and oversee implementation of the CDBG program and the manufactured home construction and safety standards program generally, and other costs; $27.5 million for technical assistance to applicants and recipients of grants. Amounts remain available until September 30, 2031. Total funding for community development equals $3.050 billion.

Sec. 40105. Community Restoration and Revitalization Fund – For FY22, appropriates $2 billion to the Community Restoration and Revitalization Fund for competitive awards of planning and implementation grants to eligible recipients to create or preserve affordable, accessible housing; $500 million for competitive planning and implementation grants to eligible recipients to create, expand, and maintain community land trusts and shared equity homeownership, including through the acquisition, rehabilitation, and new construction of affordable, accessible housing; $400 million for technical assistance, capacity building, and program support; and $100 million for the costs of administration and overseeing implementation. Includes housing authorities as eligible joint applicants. Amounts remain available until September 30, 2031. Total funding equals $3 billion.

Subtitle D – HUD and Community Capacity Building

Sec. 40301. Program Administration, Training, Technical Assistance, and Capacity Building, and USICH – For FY22, appropriates $949.25 million to HUD for administering and overseeing implementation of this title and HUD’s programs generally; $43.25 million for HUD Inspector

General (IG) salaries and expenses, $5 million for the Treasury IG; and $2.5 million for the Agriculture IG. Amounts remain available until September 30, 2031. Total funding equals $1 billion.

Sec. 40302. Community-Led Capacity Building – For FY22, appropriates $90 million for competitive grants to non-Federal entities, including nonprofit organizations providing technical assistance “to community development corporations, community housing development organizations, community land trusts, nonprofit organizations in insular areas, and other mission-driven and nonprofit organizations that target services to low-income and socially disadvantaged populations, and provide services in neighborhoods having high concentrations of minority, low-income, or socially disadvantaged populations”…and providing predevelopment assistance “to community development corporations, community housing development organizations, and other mission-driven and nonprofit organizations undertaking affordable housing development, acquisition, preservation, or rehabilitation activities;” $10 million to HUD for the costs of administering and overseeing implementation of HUD technical assistance programs generally, “including information technology, research and evaluations, financial reporting, and other cross-program costs in support of programs administered by [HUD] in this title and other costs.” Amounts remain available until September 30, 2031.

TITLE XIII—COMMITTEE ON WAYS AND MEANS

Part 1—Low Income Housing Credit

Sec. 135101. Increases In State Allocations – Increases the 9% housing credit and the small state minimum state housing credit ceiling from calendar year 2022 through 2025 according to a statutory schedule as follows:

Calendar Year                   9% Credit                   Small State Minimum

2022                                     $3.14                           $3,629,096

2023                                    $3.54                            $4,081,825

2024                                    $3.97                            $4,582,053

2025                                   $2.65                             $3,120,000

After 2025 adjustments are based upon an inflation cost-of-living calculation. The effective date of this section applies after December 31, 2021.

Sec. 135102. Tax-Exempt Bond Financing Requirement – “Temporarily reduces the 50 percent requirement to 25 percent, to enable housing credit deals to unlock more 4 percent credits. The provision is effective for buildings financed by the proceeds of certain tax-exempt bonds issued in calendar years 2022 through 2026.”

Sec. 135103. Buildings Designated to Serve Extremely Low-Income Households – “Provides a 50% basis boost for LIHTC buildings that designate at least 20% of their occupied units for

extremely low-income tenants and limit rent to no more than 30% of the greater of: 30% of area median income or the federal poverty line. In order to utilize this provision, buildings may not use the average income test to qualify as a qualified low-income housing project. 8% of a state’s housing credit allocation must go to buildings designated to serve extremely low-income households. These buildings may be eligible to receive a 50 percent basis boost, subject to certain limitations. For purposes of the 9% credit, a housing credit agency may not allocate more than 13 percent of the portion of the state’s housing credit ceiling amount to such buildings. Furthermore, for purposes of the 4% credit, a state may not issue more than 8% of its private activity bond volume cap to such buildings. The provision is effective for allocations of housing credit dollar amount after December 31, 2021 obligations of 4% credit that are part of an issue after December 31, 2021.”

Sec. 135104. Repeal Of Qualified Contract Option – “Eliminates the qualified contract exception for buildings receiving allocations after January 1, 2022. Specifically, the provision limits the use of the exception to (1) buildings that received housing credit allocations before January 1, 2022, or (2) with respect to buildings financed with tax-exempt bonds, buildings that received before January 1, 2022 a determination from the issuer of the tax-exempt bonds or the housing credit agency that the building has satisfied the QAP requirements and the financial feasibility determination. In addition, for buildings that may still make use of the qualified contract exception, the proposal modifies the specified statutory price. The price for any non-low income portion remains the fair market value. The price for the low-income portion is the fair market value, determined by the housing credit agency taking into account the rent restrictions required to continue to satisfy the minimum set aside requirements. [HUD] is directed to prescribe regulations necessary or appropriate to the determination of the specified statutory price.

Sec. 135105. Modification and Clarification of Rights Relating to Building Purchase – Changes the right of first refusal safe harbor into an option safe harbor. For existing agreements, the provision clarifies, for purposes of the safe harbor, that the right to acquire the building includes the right to acquire all of the partnership interests relating to the building. It also clarifies that the right to acquire the building includes the right to acquire assets held for the development, operation, or maintenance of the building. Thus, agreements which provide for the right to acquire these partnership interests or building assets do not fail to satisfy the safe harbor. For existing agreements, the provision also clarifies that the right of first refusal safe harbor may be satisfied by the grant of an option. A right of first refusal may be exercised in response to an offer by a related party; a bona fide third-party offer is not needed. A right of first refusal may be exercised without the approval of any owner of a credit project. Thus, agreements with these terms do not fail to satisfy the safe harbor. Finally, the provision amends the minimum purchase price to exclude exit taxes. Thus, agreements that do not include exit taxes as part of the minimum purchase price do not fail to satisfy the safe harbor. The provision clarifies that the option safe harbor shall apply to S corporations and other pass-through entities in the same manner as it applies to partnerships.

PART 2—NEIGHBORHOOD HOMES INVESTMENT ACT

Sec. 135201. Neighborhood Homes Credit – “Establishes a new federal tax credit to encourage the rehabilitation of deteriorated homes in distressed neighborhoods. States would receive Neighborhood Homes Investment Act (NHIA) tax credit authority and administer and allocate credits on a competitive basis. NHIA tax credits would be used to cover the gap between development costs and sales prices, up to 35 percent of eligible development costs. Rehabilitated homes must be owner-occupied for investors to receive the credits. Homeowners must be below certain income limitations, sales prices are capped, and qualifying neighborhoods must have elevated poverty rates, lower incomes, and modest home values. Special rules apply to rehabilitations that occur when homes are already owner-occupied prior to and during such rehabilitation. This provision applies to taxable years beginning after December 31, 2021 and tax credits are provided to states through calendar year 2025. In general, the tax credit ceiling for a State for each calendar year is the product of $3 ($6 in the case of calendar year 2025) multiplied by the state population, or $4 million ($8 million in the case of calendar year 2025), whichever is greater.