Stimulus Bill Prompts Smiles and Frowns; Agencies Ponder Implementation
By A. J. Johnson & Caitlin Jones
4 min read
Tax Credit Advisor, March 2009: Affordable housing professionals are both happy and sad about the newly enacted economic stimulus bill. They’re pleased with provisions that will provide billions of dollars in new funds for stalled low-income housing tax credit (LIHTC) projects, and billions more for improvements to public and assisted housing projects. But they’re dismayed that the final bill left out other vital tax proposals designed to address today’s severe shortage of housing credit equity.
Many questions have been raised about the act’s two LIHTC funding initiatives. These questions and thoughts on implementation were raised on a 2/20/09 Webinar whose panelists included three from state housing agencies.
“We’re happy that some effort was made to address the [equity[ shortfall in the [LIHTC] program that’s going on right now because of the economy,” David Gasson, Housing Advisor Group spokesman, and vice president of syndicator Boston Capital, told the Tax Credit Advisor.
“We’re grateful for the appropriation, [and] we see the exchange program as being helpful in dealing with some of the stalled inventory,” said Washington, DC attorney Richard Goldstein, a partner in Nixon Peabody LLP and counsel to the Affordable Housing Tax Credit Coalition.
Garth Rieman, of the National Council of State Housing Agencies (NCSHA), said, “We’re very pleased that Congress has provided resources to address the shortfalls in the housing credit properties…We think that they [Congress] came through with some resources that will be very valuable to the [Housing Finance Agencies] as they try to make sure these ready-to-go projects get built as quickly as possible.”
The act’s two LIHTC initiatives include one that will allow state housing credit agencies (HCAs) to exchange unused housing credit authority for cash grants, and provide financial assistance (“subawards”) to stalled LIHTC projects. The second provision provides $2.25 billion for apportionment to state HCAs through the U.S. Department of Housing and Urban Development’s (HUD’s) HOME program, for gap financing for stalled LIHTC projects. (See p. 1 article for details.)
LIHTC advocates were disappointed that the act didn’t include other proposals designed to jumpstart corporate investment in housing credits and broaden the base of investors. They particularly lamented the omission of an “accelerator” provision to permit taxpayers to claim twice the normal credit amount in the first three years of the 10-year credit period, and a “carryback” provision to allow taxpayers to go back up to five tax years to utilize unused housing credits.
Advocates said they will continue to seek inclusion of these or similar provisions in future legislative vehicles considered by Congress.
In the meantime, state HCAs, developers, and practitioners are eager to see how the new exchange and HOME gap financing initiatives will work and be implemented. There are tight timelines to get the money out.
Those interviewed and panelists on the 2/20/09 Webinar, sponsored by NCSHA and the Institute for Professional and Executive Development, said some guidance will be required from the IRS or U.S. Treasury and from HUD to assist implementation. At a minimum, Treasury/IRS will need to issue procedures for how state HCAs are to exchange credits for cash credits. HUD, meanwhile, is expected to spell out which HOME program requirements will and won’t apply to projects awarded gap financing funds. State HCAs will have to figure out how to competitively award the gap funds to projects, among many decisions.
Webinar panelists from three state HCAs à Pennsylvania, New Jersey, and North Carolina à said their overriding objective will be to get the new funds out as quickly as possible to stalled LIHTC projects that are ready to go. “The key right now for us is to get our stalled pipeline moving,” said Holly Glauser-Abel, of the Pennsylvania Housing Finance Agency.
Glauser-Abel said PHFA has about 44 projects with credit awards but no equity. Mark Shelburne, of the North Carolina Housing Finance Agency, cited 40 to 50 projects in this situation, while Debra Urban, of the New Jersey Housing and Mortgage Finance Agency, cited about 44.
States must also figure out how to award the HOME gap financing funds competitively, as the act requires. “Whatever competition we have to run for these HOME funds needs to be simple and stripped down and quick,” Shelburne said. State agencies will also have to determine what if any adjustments they will need to make to their current 2009 LIHTC funding rounds, because of the two new funding initiatives.
