Cinnaire’s Policy Pulse: American Rescue Plan, Troubling Trends in the LIHTC Industry & More

On Wednesday, the U.S. House of Representatives passed an amended version of the American Rescue Plan (ARP), paving the way for President Biden to sign his $1.9 trillion COVID relief plan into law. This latest COVID response from Washington, passed along party lines, takes new steps to respond to both the ongoing public health and economic crisis.

In addition to funding vaccine distribution, schools, and state and local governments, the ARP extends key pandemic-era unemployment insurance provisions that were due to expire on March 14th. The ARP also includes dramatic new policies aimed at boosting aid to Americans with the lowest incomes. While $1,400 checks have grabbed the headlines, expansions to the Child Tax Credit and Earned Income Tax Credit have the potential to significantly boost incomes for the lowest-income Americans. Experts estimate that the one-year expansion of the Child Tax Credit could reduce child poverty in the United States by  half.

For the affordable housing sector, the American Rescue Plan contains several provisions directly affecting the industry and communities it serves, including more than $25 billion in emergency rental assistance and homelessness prevention funding, nearly $10 billion in homeowner assistance, utility assistance, and funding for other programs. More details on the American Rescue Plan’s housing provisions can be found here. The bill also makes significant changes to small business programs, including the Paycheck Protection Program and the reinstatement of the State Small Business Credit Initiative (SSBCI).

What’s next? As we noted in previous Policy Pulse newsletters and in our Advancing Communities Podcast on the post-election outlook, the results of the runoff elections in Georgia – which gave Democrats control of the U.S. Senate – changed the scale of federal relief efforts and government action from Washington. Democrats passed this bill using a Senate budget procedure called reconciliation, which allowed Senate Democrats to pass the bill with a simple majority instead of the normal 60-vote threshold required by Senate rules. It is possible that Democrats will also pursue legislation later this year around infrastructure and economic recovery using the same process, but already key moderate democrats are pushing for a more bipartisan approach. That would require 60 votes and significant bipartisan buy-in.

This is worth watching because infrastructure legislation could be a vehicle for additional affordable housing and community development resources. In 2020, House Democrats included significant expansions of affordable housing programs as part of their infrastructure plan, as we described last year.

On a recent podcast, Cinnaire’s Chief Strategy Officer Jim Peffley was joined by NASLEF’s Bobby Rozen, a longtime advocate for affordable housing in Washington who was involved in the crafting of the original Low Income Housing Tax Credit (LIHTC) program in 1986 and has been closely involved with the evolution of the program over the past 30 years.

Jim and Bobby Discussed an alarming and growing trend in the LIHTC industry – efforts by private sector entities seeking to extract additional capital from owners or developers of affordable rental properties beyond the tax credits the program was designed to provide. These profit motivated investors have come to view the nation’s affordable housing stock as a source of capital and above market returns to the detriment of the people the LIHTC program was designed to serve. Listen in to this thought provoking and informative discussion where Jim and Bobby describe these problematic trends, discuss their implications, and strategize ways the industry can address these challenges to protect our affordable housing stock and the communities we serve.

During the conversation, Jim and Bobby cover:

• A brief overview of the LIHTC program and its structure for investments
• The trend of private equity investors acquiring syndicators to leverage limited partner interests and extract capital from properties beyond the intended tax benefits
• Potential implications for the nation’s affordable housing stock as capital is extracted for profit
• How owners and developers of affordable rental housing can protect themselves and their partnership agreements
• Current efforts underway to address the challenge and preserve affordable housing and LIHTC investments

Cinnaire has engaged on this issue and will continue to educate industry stakeholders, advocates, and policymakers about the importance of addressing these challenges and preserving affordable housing development.

Treasury Updates FAQs on Emergency Rental Assistance

Late last month, Treasury issued Emergency Rental Assistance Program FAQs that replace guidance released during the Trump Administration. The new guidance reflected input from stakeholders, including housing advocates, who urged Treasury to modify the guidance to allow for self-attestation of eligibility and other matters. For more information, the National Council of State Housing Agencies recently provided a summary.

Fed Takes Comments on Community Reinvestment Act Regulations; Joint Rulemaking Expected

The Federal Reserve, one of three federal banking regulators in charge of the Community Reinvestment Act (CRA), took comments on its Advance Notice of Proposed Rulemaking (ANPR). Cinnaire’s comments can be found here.

The Fed’s approach is dramatically different than last year’s rule making by the Office of the Comptroller of the Currency (OCC), which took the unprecedented step of issuing a final rule without cooperation from the Fed and the Federal Deposit Insurance Corporation (FDIC). With new leadership at the OCC under the Biden Administration, it’s expected that the three regulators will work together to issue a joint rule making. In recent testimony, Federal Reserve Chairman Jerome Powell said he sees “an opportunity for a harmonized rule among the agencies.” This will provide another opportunity for industry to comment on a potential CRA revamp.

Historic Funding Levels for the Capital Magnet Fund and Housing Trust Fund

The Federal Housing Finance Agency (FHFA) announced more than $1 billion in affordable housing allocations from Fannie Mae and Freddie Mac, the largest disbursement in history. The U.S. Department of Housing and Urban Development’s (HUD) Housing Trust Fund (HTF) will receive $711 million and the Department of the Treasury’s Capital Magnet Fund (CMF) will receive $383 million, more than double last year’s allocation.

Cinnaire recently received a $4.8 million award from the Capital Magnet Fund.

Rep. Marcia Fudge Confirmed as HUD Secretary

On Wednesday, the U.S. Senate voted to confirm Rep. Marcia Fudge (D-OH) as Secretary of the Department of Housing and Urban Development (HUD). A former Mayor of Warrensville Heights, Rep. Fudge represented Ohio’s 11th district stretching from Akron to Cleveland. In her confirmation hearings, Rep. Fudge pledged to “end discriminatory practices in the housing market, and ensure that our fair housing rules are doing what they are supposed to do: opening the door for families, especially families of color who have been systemically kept out in the cold across generations, to buy homes and punch their ticket to the middle class.”

Rep. Fudge called on lawmakers to dramatically increase funding for affordable housing programs. She has been supportive of housing programs, including the HOME Investment Partnership Program and the LIHTC program. She had also previously introduced legislation aimed at reducing neighborhood blight.

• President Biden: Memorandum on Redressing Our Nation’s and the Federal Government’s History of Discriminatory Housing Practices and Policies
• National Community Reinvestment Coalition: 60% Black Homeownership: A Radical Goal For Black Wealth Development
• National Council of State Housing Agencies (NCSHA): Emergency Rental Assistance Programs by State
• The CDFI Fund published application materials for the $1.25B Rapid Response Program to help certified CDFIs respond quickly to the economic hardships created by the pandemic
• Center for Budget and Policy Priorities: Housing Assistance in COVID Bill Would Prevent Millions of Evictions
• Urban Institute: Strategies for Advancing Impact Investing through Public Policy: A Guide for Advocates and Field Leaders