Notably absent are discussions on a path forward on a potential successor to the Build Back Better plan
. Democrats have moved on from the “Build Back Better” framing, but they are hoping to rekindle negotiations this spring on a significant one-time tax and spending bill using the budget reconciliation process.
It remains unclear whether Democrats can cobble together a bill that will attract votes from the different poles of their caucus. A few weeks ago, Senator Joe Manchin (D-WV), the key holdout vote in the Senate, said that he’d be interested
in a dramatically scaled down bill
that focuses on tax reform for the wealthy and corporations, cost-saving measures like prescription drug reform, efforts to address inflation, and supporting clean energy development.
No negotiations are underway, however, and the clock is ticking. If Democrats want to pass a bill using the reconciliation process, they would need to hammer out an agreement this summer. Democrats will lose their ability to use the budget reconciliation process on September 30th. This may be their last best chance before the mid-term elections, which could very well see the Democrats losing power in Congress.
If a scaled down budget reconciliation effort does come together, it will be even more challenging for Congress to include critically needed affordable housing resources. Advocates and Congressional housing champions will be making the case that these investments are especially urgent with rising housing costs driving inflation
. While there is no quick fix to the many issues
that contribute to high housing costs, it’s clear that there is major and alarming shortfall in housing supply
that has grown since the financial crisis. Congress could take steps to address that gap: According to one estimate
by Novogradac, expanding the Low-Income Housing Tax Credit and creating a new Neighborhood Homes Credit could finance nearly 1 million affordable homes while reducing the rate of inflation.
We will see if a potential vehicle for these policy solutions emerges. If Democrats’ efforts to use the budget reconciliation process falters, the most likely vehicle for additional tax credit resources would be the traditional end-of-year legislation to extend expiring tax provisions, including the 12.5% temporary increase for Housing Credit allocations.
With so much of our attention focused on Build Back Better, it has been easy to lose sight of the annual appropriations process that funds many affordable housing and community development programs. For the first five months of the current fiscal year, Congress passed a series of short-term extensions of existing funding levels. That changed recently when Congressional leaders struck an agreement to fully fund federal agencies. Last week, President Biden signed into law a bipartisan bill
to set updated funding levels through September 30th.
Here are some quick takeaways for programs that Cinnaire and our partners use, including HOME, vouchers, the CDFI Fund, and others. Many of these funding levels are significantly lower than the amounts proposed by the House of Representatives and the President. These proposals were intended as markers for negotiations and were written without an agreement with Republicans, which was only reached recently.
HUD Funding: HUD will receive an 8% ($4 billion) increase over the last fiscal year. While it is a large increase for HUD compared to recent history, it still represents a lower amount than requested by the Biden Administration and Congressional Democrats. Some highlights include:
- $27.4 billion for Section 8 tenant-based vouchers (up from $25.8 billion in 2021)
- $13.9 billion for Project Based Rental Assistance (up from 13.5 billion in 2021)
- $1.5 billion for the HOME Investment Partnerships program (up from $1.4 billion in 2021)
- $3.3 billion for CDBG (a slight decrease from $3.45 billion in 2021)
- $1 billion for Section 202 housing for the elderly (up from $855 million in 2021)
CDFI Fund: The CDFI Fund will see a $25 million increase to $295 million. This is unfortunately lower than the amount sought by Congressional Democrats and the Biden Administration, but still represents a nine percent increase.
USDA Rural Development: The bill includes over $2 billion for the Rural Housing Service, an increase of $182 million over fiscal year 2021. Within these increases is $40 million for Rental Assistance, which is necessary to fund all expiring fiscal year 2022 contracts.
State and Local Fiscal Recovery Fund Fix for the Housing Credit Not Included: Unfortunately, the bill did not include a broadly supported
fix to the American Rescue Plan Act’s (ARPA) State and Local Fiscal Recovery Fund (SLFRF) dollars for states and local governments. Current requirements make using SLFRF resources very difficult to use with properties developed through the Housing Credit program.
Recently, Reps. Alma Adams (D-NC) and David Rouzer (R-NC) introduced bipartisan legislation
to allow states and local governments to provide long-term loans to Housing Credit properties. Companion legislation is expected in the Senate. The National Council of State Housing Agencies (NCSHA) and industry groups will be working with the champions of these bills to support enactment this year.
Federal banking regulators, including Acting Comptroller of the Currency Michael Hsu (right), have signaled their intent
to propose a joint Community Reinvestment Act (CRA) modernization proposed rule in the very near future. The regulators have indicated their desire to address ongoing inequities, including racial divides, as well as updating rules to reflect modern banking and online banks.
Once the rule is released, there will be a comment period that will enable Cinnaire, its partners, and our industries to weigh in on the proposed rule. The rule is expected to be modeled on the Federal Reserve’s framework released last year. You can read Cinnaire’s comments on that rulemaking here
Soaring costs for housing, coupled with rising interest rates, have spurred industry requests for additional focus on solutions to bring down the cost of housing. Notably, the National Housing Conference led a letter
signed by more than 40 organizations, including Cinnaire, requesting that President Biden form a President’s Council on Housing Affordability to focus multiple federal agencies on solutions to the challenge.
“Driven by more than a decade of housing production deficits, supply shortages, rising labor and material costs, and pandemic-related supply chain issues, the cost of shelter is less affordable for everyone across the income spectrum, particularly for those least able to afford it,” the groups wrote. The letter notes that the main mechanism for fighting rising inflation — rising interest rates — will further harm housing affordability.