In actions intended to accelerate the creation of affordable housing, federal agencies on Friday detailed actions to expand funding and add flexibility. The measures were announced by the White House on Friday as part of an update to the housing supply action plan.
The Treasury Department and the Internal Revenue Service have finalized a regulation that changes the LIHTC qualification criteria. Rather than a single income limit for rent-limited units, the new rule allows properties to qualify based on the average income of all units, according to the White House statement.
The rule aims to create more stable, mixed-income communities. By allowing projects to be cross-financed, more housing can be created for very low-income residents, the agencies say. The development of affordable properties in rural areas should also be encouraged by the new rule.
The IRS has also decided to add flexibility to the schedules for bringing affordable housing online. The agency previously extended deadlines for projects delayed by the pandemic. These deadlines have now been extended to allow flexibility for LIHTC-eligible projects affected by supply chain issues and economic pressures as well as public health concerns.
The provisions have drawn favorable reviews from affordable housing developers. In a report, Business Community Partners Capital Division President Lori Chatman welcomed the change and called the tax credit the most important tool for growing the country’s affordable housing stock. She also called on Congress to further strengthen credit.
And the Affordable Housing Tax Credit Coalition predicted that the income-averaging rule and time extensions would advance the construction of affordable housing despite skyrocketing rents.
Another key initiative by government-sponsored companies aims to provide affordable housing developers with greater funding flexibility. The Federal Housing Finance Agency (FHFA) is expanding the GSE Term Commitment Program, which allows sponsors to obtain financing to repay construction loans for completed projects. It also provides certainty to stakeholders by locking in certain conditions for loans that GSEs will buy in the future. Fannie Mae and Freddie Mac are now allowed to each provide $3 billion in term commitment funding above their annual caps of $78 billion.
Steve Johnson, vice president of production and sales at Freddie Mac, noted in a statement that the step was intended to alleviate uncertainty for stakeholders and facilitate development. In a related move, the FHFA is lifting Freddie Mac’s $500 million cap on term commitments for non-LIHTC projects. Freddie Mac’s annual $3 billion exemption on term commitments will apply to non-LIHTC projects as well as LIHTC projects.
In a joint statement, the National Multifamily Housing Council and the National Apartment Association said they applauded the GSE funding reforms, LIHTC rule changes and other measures. The agencies added that they expected the measures to have a positive impact on the industry and residents.
Transit-focused affordable housing projects and other developments also got a boost last week with the expansion of a US Department of Transportation funding initiative. Under TIFIA 49, announced on October 4 as a new provision of the Transport Infrastructure Finance and Innovation Act, project developers can now borrow up to 49% of eligible project costs, up from 33 % previously. Eligible projects will include residential and commercial developments that involve the improvement of public transit facilities and the costs of which are shared between private sponsors and public bodies.