What’s Next for Low-Income Housing Tax Credits?

City of San Francisco

In January 2024, the House passed a bipartisan tax bill that expanded the Low Income Housing Tax Credit. Called the “Tax Relief for American Families and Workers Act of 2024,” the bill restores a temporary 12.5% increase in the LIHTC and supports the use of private activity bonds to finance affordable housing developments.

The bill is currently in the Senate and is facing competition from other national priorities during the 120-day legislative session. We will continue to monitor this development and provide an update.

In other news, investment is anticipated to increase in the LIHTC through HUD’s Fannie Mae and Freddie Mac enterprises. In December, the Federal Housing Finance Agency (FHFA) announced an increase in the equity investment cap for the enterprises to $1 billion each, beginning in 2024. Under the new cap, the enterprises will adjust their investment policies to ensure that investments would only fund projects that remain affordable for the entire 30-year period intended by the LIHTC. Previously, investment was capped at $850 million annually for low-income housing tax credit investment.

Existing loans classified as supporting workforce housing properties will be exempt from 2024 multifamily loan volume caps for both Fannie Mae and Freddie Mac. Workforce housing loans preserve rents at affordable levels in multifamily properties, typically without public subsidies.

In February, the Federal Housing Finance Agency announced that the Housing Trust Fund (HTF) and Capital Magnet Fund (CMF) will receive approximately $301 million for affordable housing purposes from Fannie Mae and Freddie Mac. The competitive CMF application round began in February. The allocations are less than those allocated over the last three years to both agencies, which help to fund affordable housing projects across the country.

Proposed Workforce Housing Tax Credit

Meanwhile, other legislators are bringing forth the need to develop “workforce” housing for middle-income earners. Bills were introduced in both the House and Senate in December 2023 to establish a new tax credit to help fund affordable rental housing for households earning 100% or less of area median income. The bills would allow projects to combine low-income housing tax credits with the new workforce housing tax credit, aimed at reducing the portion of gap financing.

A combination of tax credits and changes to zoning laws is moving forward in several states, starting with the allowance of higher-density units such as duplexes, triplexes and townhomes in previously zoned single-family neighborhoods. Affordable housing developers are also exploring mixed tenant arrangements such as properties with affordable housing for teens in transition, seniors and families.

Overall, interest in multifamily housing developments is high among legislators and industry advocates. However, the vehicles to solve the affordable housing problem are multi-faceted and will require continued collaboration between private and not-for-profit enterprises as well as coordination at the federal, state and local levels.

For more information about affordable housing services provided by LvHJ, view our industry pages.


Next: More solutions for affordable housing financing

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