Low-income housing credit bill back in the mix for tax package

WASHINGTON — A bipartisan duo is reintroducing a popular measure this week that would expand the low-income housing tax credit with an eye toward including it in Republicans’ budget reconciliation package.

Senate Finance members Todd Young, R-Ind., and Maria Cantwell, D-Wash., are planning to reintroduce a bill that would boost and increase the flexibility of the low-income housing tax credit. The tax credit has long enjoyed bipartisan support and is Congress’ main policy tool for addressing the country’s housing shortage.

The draft bill, shared with CQ Roll Call, would aid the construction of up to 1.6 million affordable homes over a decade by increasing the total tax credits allocated to states and easing some public financing requirements to make it easier for housing developments to qualify. Young is pushing for key provisions of the measure to be included in Republicans’ budget reconciliation package.

The measure “will leverage private sector investment to increase the stock of affordable housing for families in both urban and rural communities,” Young said in a statement. “Our bill tackles the housing affordability crisis head on to help Hoosier families and strengthen our communities.”

Cantwell cited statistics showing housing inflation up 4% nationwide and above that rate in the Pacific Northwest, before any impact of President Donald Trump’s new tariffs are factored into homebuilder costs.

“We need to do more to lower housing costs for everyone,” Cantwell said, arguing that expanding the housing credit will make it “more affordable to build homes and lower rents.”

Long wish list

The measure has a long track record of bipartisan support. But it will have to win out over competing priorities as Republicans look to fit a long list of tax items into a limited tax instruction set by the budget resolution.

Senate Finance Chairman Michael D. Crapo, R-Idaho, has said he’s fielded more than 200 pitches on tax policy provisions from his members. Republicans also have President Donald Trump’s pricey campaign tax cut promises to contend with.

Still, the housing legislation is popular. And the problem it seeks to fix, a shortfall in housing supply that has driven up living costs, has garnered growing attention from voters and politicians alike.

The House version introduced by Reps. Darin LaHood, R-Ill., and Suzan DelBene, D-Wash., has 130 co-sponsors. In the Senate, Finance ranking member Ron Wyden, D-Ore., and member Marsha Blackburn, R-Tenn., are also leading the effort alongside Young and Cantwell. The 2023 version of the bill had 34 co-sponsors in the chamber.

The bill also has powerful backers outside of Congress. The ACTION Campaign and the Affordable Housing Tax Credit Coalition, whose members include affordable housing groups, nonprofits and state public housing agencies, as well as financial institutions and real estate industry groups, endorsed the legislation.

The National Association of Realtors, routinely among the top spenders on K Street, is a member of the ACTION Campaign. The Affordable Housing Tax Credit Coalition counts several major banks, investment managers and other financial firms among its members, including Bank of America’s investment and wealth management division, Capital One Financial Corp., Nationwide Mutual Insurance Co., State Street Bank and Trust Co., TD Bank, Truist Community Capital and JPMorgan Capital Corp.

Credit details

The tax credit is allocated to states, which award the credits to rental housing developers in exchange for reserving a portion of units they’re constructing for low-income residents. Developers usually sell the tax credit to investors, typically financial institutions, in exchange for money they use to finance construction. Financial institutions then use the credits to lower their own tax bills.

Young and Cantwell’s bill would increase the tax credits allocated to states and lower the private activity bond-financing threshold that projects must meet to qualify for the most minimal version of the tax credit, making it easier for developments to collect the incentive. Versions of those two provisions, which account for much of the bill’s projected boost to housing supply, were included in a bipartisan tax bill last year negotiated by Wyden and House Ways and Means Chairman Jason Smith, R-Mo. But without support of Senate Republicans, the bill foundered.

Those two provisions, which included a slightly less generous change to the private activity bond financing threshold than included in the new Senate bill, were estimated to cost about $6.3 billion over 10 years, according to the Joint Committee on Taxation.

The Young-Cantwell bill would also increase resources for hard-to-reach communities, including rural, tribal, low-income and high-cost areas; simplify rules to allow the credit to be used more effectively to preserve existing affordable housing; and codify protections for veterans and survivors of domestic violence.

The bill’s sponsors estimate it would support 2.4 million jobs, generating almost $94 billion in new tax revenue over 10 years.