Capitol Express Newsletter: Senate Poised to Vote on Tax Reform Bill, Congress Negotiating Budget Deal
CONGRESSIONAL AND ADMINISTRATION NEWS
Senate Poised to Vote on Tax Reform Bill this Week as Negotiations with the House Continue
The Senate returned from its Thanksgiving recess today with a total of 15 working days to accomplish major legislative priorities before the year’s end, including passing a comprehensive tax reform bill. Prior to leaving Washington, the Senate Finance Committee reported its version of the Tax Cuts and Jobs Act out of committee on a party-line vote of 14 – 12. The Senate is continuing negotiations and is expected to vote on a modified version of its bill later this week.
The House passed its version of the tax reform bill before adjourning by a vote of 227 – 205, with all Democrats and 13 Republicans voting against it. There are significant differences between the House and Senate bills, which can be resolved in two ways – either through a conference committee, or by having the House vote on the Senate-passed version of the bill in order to avoid a conference committee and finalize tax reform more expediently. At this point it is not yet clear which path the GOP will pursue, although a decision will likely be impacted by the outcome of the Senate's vote later this week.
The Senate Finance Committee’s bill is markedly better for affordable housing and community development than the House bill: it retains the Low-Income Housing Tax Credit (Housing Credit); preserves the tax-exemption on multifamily Housing Bonds; adds several no-cost provisions, taken from the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), to strengthen the Housing Credit; and preserves the New Markets Tax Credit (NMTC) through 2019. However, no changes have been made that would address the impact of the lower corporate rate on the Housing Credit. Without this change, the Senate bill would reduce the future supply of affordable homes by over 200,000 units in the next decade. While the House bill would also retain the Housing Credit, it would eliminate both Housing Bonds and the NMTC, which would have a devastating effect on our ability to build and preserve affordable housing and revitalize distressed communities. Read more about the House and Senate bills on Enterprise’s blog.
Sustained advocacy as negotiations continue is critical. Terri Ludwig, president and CEO of Enterprise Community Partners, wrote in The Hill that Congress must sustain our affordable housing and community development ecosystem in tax reform. To do this, it is incumbent on all stakeholders to contact Republican representatives and urge them to preserve the Housing Credit, Housing Bonds and NMTC in any final tax reform bill, and make modifications to the Housing Credit to sustain its production potential under a reduced corporate tax rate environment. Visit the ACTION Campaign website for materials to advocate for the Housing Credit and Housing Bonds, and the NMTC Coalition website for materials to advocate for the NMTC.
Rep. Hultgren Circulates Letter to House and Senate Leadership in Support of Private Activity Bonds
Rep. Randy Hultgren (R-IL-14) is sending a letter to House and Senate leadership opposing the proposed elimination of tax-exempt private activity bonds in the House’s tax reform bill, focusing on the need for private activity bonds (PABs) to support investments in our nation’s infrastructure and affordable housing for low- to moderate-income families. According to Novogradac & Co., the proposed elimination of PABs, which includes multifamily Housing Bonds, would result in a loss of roughly 788,000 to 881,000 affordable rental homes over the next decade, a devastating impact on affordable housing production. Additionally, projects financed through HUD’s Rental Assistance Demonstration (RAD) – an initiative that allows public housing authorities (PHAs) to convert public housing into public-private partnerships using Section 8 contracts – often rely on the Housing Credit and Housing Bonds to finance conversions. Over half of the currently pending RAD projects are planning to use Housing Bonds and the 4 percent Housing Credits that they trigger; without the tax-exemption on multifamily Housing Bonds, these RAD conversions would simply not be possible.
While the Senate version of the tax reform bill would retain private activity bonds, their inclusion in any final tax bill requires continued advocacy. Read more about private activity bonds on the Enterprise blog, see the ACTION Campaign’s talking points on Housing Bonds and visit the ACTION Campaign’s Advocacy Toolkit for more resources to support the Housing Credit and Housing Bonds.
Congress Prepares to Negotiate Budget Deal as Government Funding Deadlines Looms
House and Senate leadership are working to negotiate a budget deal that would raise the non-defense discretionary (NDD) spending cap, which would increase funding available for housing and community development programs. The NDD cap for fiscal year (FY) 2018 is set at $516 billion, nearly $3 billion below the cap for FY 2017. Congress needs to raise the NDD cap to adequately fund vital housing and community development programs like HOME Investments Partnerships, Project-Based Rental Assistance and the Community Development Financial Institutions Fund. A short-term continuing resolution (CR) is expected to pass before December 8, when the current CR expires, so that Congress has more time to negotiate a budget deal. An additional short-term CR may also be necessary to give appropriators time to rewrite their FY 2018 bills to the new caps.
White House Requests Additional Disaster Recovery Funds
The White House has requested an additional $44 billion from Congress in disaster aid, which includes a request for $12 billion going to a forward-looking Community Development Block Grant Disaster Recovery (CDBG-DR) flood mitigation competition, and a majority of the remaining $32 billion going to traditional disaster relief through FEMA and Small Business Administration (SBA) programs. If Congress approves the White House request, the total recovery aid appropriated in 2017 would reach nearly $100 billion. However, government officials in states affected by recent natural disasters have expressed dissatisfaction with the most recent request. Texas has requested $61 billion, Florida has requested $27 billion, and Puerto Rico Governor Ricardo Rossello sent a letter to President Trump requesting $94.4 billion, including more than $46 billion in CDBG-DR funds – $31 billion of which would go to repairing or rebuilding the more than 472,000 housing units that were severely damaged or destroyed. The Administration’s recent request includes funding for continued recovery activities in Puerto Rico and the U.S. Virgin Islands (USVI), but acknowledges that damage assessments are ongoing in Puerto Rico and indicates that it will send an additional request for long-term recovery funding once the territory’s needs are better known. The Administration’s request also expressed support for reauthorization of the National Flood Insurance Program (NFIP), as seen in the 21st Century Flood Reform Act (H.R. 2874), which passed the House earlier this month.
Marking a shift from the previous two disaster relief bills approved this year, the Administration’s request also included spending cuts to offset the cost of the supplemental appropriations. Congress is expected to address this disaster request as part of a year-end spending bill needed to avoid another government shutdown when current funding runs out on December 8.
Fannie Mae and Freddie Mac to Reenter the Housing Credit Market
The Federal Housing Finance Agency (FHFA) recently announced that Fannie Mae and Freddie Mac (the government-sponsored enterprises or GSEs) will be allowed limited re-entry into the Housing Credit market as equity investors, effective immediately. The GSEs have been absent from the Housing Credit market since they were placed into government conservatorship in September 2008, but prior to the financial crisis the GSEs provided roughly 40 percent of annual equity investments in Housing Credit properties. Moving forward, each GSE will be subject to an annual investment limit of $500 million, less than a 5 percent market share, and any investments above $300 million in a given year will be required to be in markets identified by FHFA as having difficulty attracting investors. FHFA Director Mel Watt said that this decision demonstrates the agency’s commitment to affordable rental housing and is intended to complement the GSEs’ Duty to Serve priorities. In addition, the GSEs’ role in the Housing Credit market is intended to serve a countercyclical role, which would protect capital and encourage continued investment in the market during economic downturns.
RESEARCH AND REPORTS
National Housing Conference Announces New Tools for Inclusive Communities
Last week, the National Housing Conference (NHC) announced the availability of the newest section in its Nexus Policy Guide, a resource that provides basic overviews of key affordable housing policies and programs, and in-depth profiles of policy at work. The new section focuses on inclusive communities and covers five topics: inclusionary housing, land-based solutions, shared equity homeownership, rental preservation and voucher mobility.
New Analysis Recommends Regional Approach to Expanding the MTW Program
An analysis by the Brookings Metropolitan Program, Paving the Way for More Affordable Housing: Expanding the Moving to Work Program
STATE AND LOCAL POLICY
Utah, Washington and Colorado Exemplify Local Threats to Affordable Housing in Federal Tax Reform
Communities across the country would experience a drastic reduction in affordable housing production if proposals to eliminate the tax-exemption on private activity bonds are included in a final tax reform bill. An op-ed in the Salt Lake Tribune by Grant Whitaker, president & CEO of Utah Housing Corporation and president of the National Council of State Housing Agencies, argues for the continuing of the Housing Credit and Housing Bonds, highlighting their essential role in financing more than 26,000 affordable apartments in the state.
Similarly, an op-ed in the Seattle Times by Kim Herman of the Washington State Housing Finance Commission, Stephen Norman of the King County Housing Authority, and Andrew Lofton of the Seattle Housing Authority, highlights that multifamily Housing Bonds have financed more than 24,000 affordable units in King County and Seattle alone, and more than 54,000 affordable units in the state of Washington. The elimination of these bonds would undermine the development of more than 2,000 affordable units across the state over the next year.
An article in the Denverite estimates that eliminating multifamily Housing Bonds would reduce the supply of affordable homes in Colorado by 27,000 over the next decade. In 2015 alone, multifamily Housing Bonds financed 62 percent of Housing Credit units in the state – 1,204 of 1,944 units.
Atlanta City Council Approves Inclusionary Zoning Ordinance to Preserve Affordability Near Beltline Development
The 22-mile long Atlanta BeltLine, a $4.8 billion-dollar effort to reduce congestion in the city through the development of a mixed-use transit and pedestrian trail, has already resulted in the rapid rise of nearby home values. Responding to concerns of displacement from advocates and long-time residents, the Atlanta City Council took action last week to protect residents of affordable housing by unanimously approving an inclusionary zoning ordinance that would require developers to set aside 10 units at 60 percent AMI or 15 units at 80 percent AMI for new developments near the BeltLine or Westside District. Over the past several years, Enterprise has been active with the TransFormation Alliance and City for All groups to advocate for inclusionary zoning. Enterprise supported councilmember Andre Dickens’ sponsorship of the ordinance and provided economic impact and incentive analysis, advocacy, education and best practices around the proposal. The requirements take effect in 60 days.
D.C. Pledges an Additional $10 million to Preserve Affordable Housing in the City
The Washington, D.C. City Council has approved a new $10 million public-private fund for FY 2018 to preserve affordable housing in the District. This preservation fund, established by the D.C. Department of Housing and Community Development (DHCD), is part of an ongoing effort by Mayor Muriel Bowser's administration to preserve the city's limited stock of affordable housing. Between 2006 and 2014, DHCD reports that the city lost at least 1,000 units of subsidized housing, and the D.C. Preservation Network reports that another 1,750 units are at risk of losing their affordability. Additionally, 13,700 units in D.C. have subsidies that will expire in 2020, putting thousands of families at risk if the affordability of these units is not preserved. Efforts to preserve and rehabilitate the city’s existing affordable housing stock – including the D.C. City Council's decision earlier this year to dedicate $100 million in taxpayer dollars to the District’s Housing Production Trust Fund – are critical as the city continues to face vast and growing affordable housing needs.
IN CASE YOU MISSED IT
News Updates from Community Developments
In recent Community Developments, we highlighted an analysis by the Urban Institute that looks at city residents’ financial health, a new Chicago City Council program that supports developing affordable housing on vacant city-owned lots, New York City’s strategy to shelter homeless individuals and families, and much more. Sign up here to receive Community Developments.
HEARINGS AND EVENTS
Upcoming Hearings and Mark-Ups
- November 28: Executive Session and Nomination Hearing for: Brian Montgomery for Federal Housing Administration commissioner, Robert Hunter Kurtz for assistant secretary for public and Indian housing, and Suzanne Israel Tufts for assistant secretary for administration, Senate Banking Committee
- November 29: Hearing on USDA's Role in Disaster Recovery, House Committee on Appropriations
- November 29: Hearing on Sustainable Housing Finance: The Role of Ginnie Mae in the Housing Finance System, House Financial Services Committee
- December 1: Hearing on Department of Housing and Urban Development, Community Block Grants - Disaster Recovery, House Committee on Appropriations
- November 29: Solutions for Affordable Housing, National Housing Conference (Washington, D.C.)
- November 30: Novogradac 2017 Tax Credit Housing Finance Conference, Novogradac & Co. (Las Vegas)
- December 1: NAAHL Policy and Practice Conference, National Association of Affordable Housing Lenders (Washington, D.C.)
- December 4-6: Homes Within Reach Conference, Housing Alliance of Pennsylvania (Harrisburg, Pa.)
- December 5: Affordable Housing Solutions for Rural Veterans: A Symposium, Housing Assistance Council (Washington, D.C.)
- December 5: Building Cities of the Future, Bisnow (Tampa, Fla.)
- December 6: NYHC/NHC 44th Annual Awards, New York Housing Conference/National Housing Conference (New York)
- December 7: More Than a Home: Investing Together to Create Opportunity, Enterprise Community Loan Fund (webinar)
- December 7: From Houses to High-Rises: A Question of Affordability, AtlanticLIVE (Washington, D.C.)
- January 7-10: PHADA Commissioners’ Conference, Public Housing Authorities Directors Association (San Diego)
- January 7-12: The HFA Institute, National Council of State Housing Agencies (Washington, D.C.)
- January 10-12: Beyond Housing 2018: A National Conversation on Child Homelessness and Poverty, The Institute for Children, Poverty, and Homelessness (New York)
- January 11: Novogradac 2018 Tax Credit Developers Conference, Novogradac & Co. (Miami Beach, Fla.)
- January 22 – 23: Affordable Housing Tax Credit Coalition Annual Meeting, Affordable Housing Tax Credit Coalition (Austin, Texas)
- January 23: Novogradac 2018 New Markets Tax Credit Conference, Novogradac & Co. (San Diego)