Today, Senators Patrick Leahy (D-VT) and Susan Collins (R-ME) introduced the LIHTC Financing Enabling Long-term Investment in Neighborhood Excellence Act, or LIFELINE Act, which would allow Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to be used to make long-term loans to Low-Income Housing Tax Credit (Housing Credit) developments. The LIFELINE Act is a critical step in unlocking the use of these critical funds to pair them with the Housing Credit, our country’s most successful federal tool for producing and preserving affordable rental housing. The passage of this legislation would help address the shortage of affordable rental housing across the country, a crisis that has only been exacerbated by the pandemic, rising construction costs and inflation.
The SLFRF resources were authorized under the American Rescue Plan Act in March of 2021, providing $350 billion to state, local and Tribal governments to support their response to and recovery from the Covid-19 public health emergency, including through affordable housing. Unfortunately, the law’s language and the subsequent final rule issued by the Department of the Treasury (Treasury) in January of 2022 make it difficult to use the funds with the Housing Credit, as the final rule requires that all SLFRF dollars must be obligated by December 31, 2024 and expended by December 31, 2026. Further, use of the funds immediately as a grant reduces basis for the developers and disincentivizes construction.
The Senate bill demonstrates the strong bipartisan, bicameral support for the LIFELINE Act, following the House legislation introduced in March by Representatives Adams (D-NC) and Rouzer (R-NC), H.R. 7078, which Enterprise and 90 other affordable housing stakeholders endorsed. Representative Carolyn Maloney (D-NY), chair of the House Committee on Oversight and Reform, which has jurisdiction over SLFRF, is also an original cosponsor of the House bill. Congressional sponsors of both bills worked in consultation with the Treasury and authorizing committees in drafting the legislation.
Additional provisions from the Senate bill, expanding on the House version, include:
- Clarifying that only Housing Credit properties placed in service after the date of enactment of the bill are eligible for a SLFRF loan;
- Requiring project sponsors to waive the right to request a qualified contract as a condition of receiving a SLFRF loan;
- Requiring project sponsors to agree to repay SLFRF loaned funds to the entity that originated the loan if a project becomes non-compliant to the extent that it ceases to qualify as low-income housing/fails to comply with the extended use commitment; and
- Requiring the Treasury department to provide annual reports to several Congressional committees on SLFRF obligations to Housing Credit projects and on the status of any repayments on the SLFRF loans.
More than 20 states declared their plans to use the SLFRF to offset the increasing costs for affordable housing development when the program was enacted, but the rule that the funds must be expended by 2026 makes it exceedingly difficult to use with the Housing Credit.
At present, no state in the country has a sufficient supply of affordable rental housing for its lowest income renters, according to a recent report from the National Low-Income Housing Coalition. In fact, the report finds that nationwide, only 36 affordable and available rental homes exist for every 100 extremely low-income renter households. While every state and major metropolitan area faces shortages, the situation is especially dire in Nevada and West Virginia, with only 18 and 61 available affordable rental homes for every 100 extremely low-income renter households, respectively.
While the need remains so high, Enterprise strongly supports the efforts by Senators Leahy and Collins, as well as Representatives Adams, Rouzer and Maloney, to unlock the SLFRF resources so that states and local communities can leverage these funds with the Housing Credit now, in order to help build our nation’s supply of critically needed affordable rental homes.