Enterprise Point of Contact:
Senior Policy Analyst, Project Director
Issue Background: Low-Income Housing Tax Credit
The Low-Income Housing Tax Credit (Housing Credit) is the nation’s largest and most successful affordable rental housing production program. Since its creation in the Tax Reform Act of 1986, the Housing Credit has leveraged nearly $100 billion in private investment capital, financing the development of almost 2.8 million affordable rental homes for low-income families.
Tax-exempt multifamily private activity bonds (Housing Bonds) are an important component of affordable housing financing, and are used in more than 40 percent of annual Housing Credit developments each year. Since 1986, Housing Bonds used with Housing Credits have financed over 1 million affordable homes.
The U.S. is facing an affordable rental housing crisis. An unprecedented 11 million renter households — more than one in four of all renters in the U.S. — spend more than half of their monthly income on rent. The Housing Credit and Housing Bonds help address this vast and growing need for affordable homes by producing or preserving almost 100,000 apartments each year. Without these tools, it is virtually impossible to build new affordable housing.
Current Policy State
Affordable housing development has become more difficult as a result of declining Housing Credit rates. When the Housing Credit was established in 1986, Congress set the credit rates at 9 percent for new construction and substantial rehabilitation and 4 percent for the acquisition of affordable housing. Since then, the rates have fluctuated according to a formula related to federal borrowing rates, which have sunk to historic lows. As of August 2015, the "9 percent" credit rate has dropped to 7.5 percent, while the "4 perceent" credit rate dropped to 3.2 percent. As a result, there is 15 – 20 percent less Housing Credit equity available for any given development.
Congress established a temporary minimum 9 percent credit rate for new construction and substantial rehabilitation in the Housing and Economic Recovery Act of 2008 (HERA). This provision simplified state administration of the program and removed the financial uncertainty and risk associated with underwriting Housing Credit-financed properties using the “floating rate” system. The minimum 9 percent rate was extended through the end of 2013 in the American Taxpayer Relief Act of 2012, and again in the Tax Increase Prevention Act of 2014. However, the minimum 9 percent credit rate is now expired, and the Housing Credit is operating in a “floating rate” environment once again.
Representatives Pat Tiberi (R-OH-12) and Richard Neal (D-MA-1) have introduced bipartisan legislation in the House (H.R. 1142) that would enact permanent minimum Housing Credit rates of 9 percent for new construction and substantial rehabilitation and 4 percent for acquisition. Companion legislation (S. 1193) was introduced in the Senate by Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS). A temporary version of this provision, which would extend the minimum 9 percent rate and establish a minimum 4 percent rate for developments allocated before the end of 2016, was included in the "tax extenders" legislation approved by the Senate Finance Committee in July 2015. The timeline for its consideration by the full Senate or the House is unclear at this time, though tax extenders will likely be addressed before the end of 2015.
Enterprise is committed to protecting, strengthening and expanding the Housing Credit and preserving Housing Bonds. Along with the National Council of State Housing Agencies, Enterprise helps to lead the A Call to Invest In Our Neighborhoods (ACTION) Campaign – a broad, grass-roots coalition of over 1,000 national, state, and local organizations advocating on behalf of these two critical programs.
Testimony and Public Comment
- In July 2015, the ACTION Campaign submitted a letter signed by over 1,000 organizations calling on Congress to support the Housing Credit and Housing Bonds.
- In April 2015, Enterprise submitted comments to the Senate's Community Development and Infrastructure Tax Reform Working Group in support of the Housing Credit, as well as the New Markets Tax Credit and disaster tax relief legislation. The ACTION Campaign submitted comments to the working group on the Housing Credit as well.
- In April 2015, the ACTION Campaign submitted a statement for the record responding to a House Financial Services Committee hearing on increasing private sector participation in affordable housing.
- In June 2014, the ACTION Campaign sent a letter to the Ways and Means Committee urging permanent extension of minimum Housing Credit rates.
- In February 2014, the ACTION Campaign issued a response to House Ways and Means Chairman Dave Camp's tax reform discussion draft.
Advocacy Materials and Other Resources
- Visit the ACTION Campaign website to:
- Sign up to receive updates about the campaign, the Housing Credit, and tax reform and tax extenders legislation
- Learn more about the threats facing the Housing Credit and our campaign proposals
- Read the latest news pertaining to the Housing Credit
- Access our advocacy toolkit, including:
State and district fact sheets showing the impact of the Housing Credit and the affordable housing needs in all 50 states and all 435 congressional districts Fact sheets, background and talking points Housing Credit data and reports Sample letters to Congress Sample op-ed and letter to the editor Housing Credit property event guidelines