On August 1, a bipartisan group of legislators introduced the Preserving Rural Housing Investments Act, a bill in the U.S. Senate and House of Representatives that would clarify the ability of Fannie Mae and Freddie Mac to invest in multi-investor funds, which are critical to their ability to reach rural markets. The legislation was led by Senators Jerry Moran (R-KS), Mark Warner (D-VA), Todd Young (R-IN) in the Senate and Reps. LaHood (R-IL) and Kildee (D-MI) in the House. Cinnaire strongly endorses this legislation.
“Our bipartisan bill, supported by Democrats and Republicans, will help expand rural affordable housing opportunities across Michigan,” said Rep. Kildee. “By clarifying outdated rules in the tax code, we can protect investments in rural affordable housing in the small-town communities that need it the most.”
“We can’t address our housing affordability crisis without building more units,” said Sen. Young. “By making one simple clarification, this bill will unlock new partnerships that are crucial for rural low-income housing investments, bringing much-needed projects to our rural communities.”
“Rural communities face an unseen housing crisis that we work every day to address,” said Mark McDaniel, President and CEO of Cinnaire. “This common-sense legislation will help us bring investment to create more quality housing options in rural America. We strongly endorse this bipartisan effort to make sure rural communities get the support they need to thrive.”
The legislation would address uncertainty about whether the Government-Sponsored Enterprises (GSEs) are Tax-Exempt Controlled Entities (TECEs). Current law includes restrictions to prevent tax-exempt entities from benefitting from tax incentives, including depreciation, intended for taxable entities. Due to the Preferred Stock Purchase Agreements between the GSEs and the federal government in place since the financial crisis, some investors raised questions about whether the GSEs should be considered TECEs. Although a bipartisan group of Members of Congress have stated that it was clearly not Congressional intent for the GSEs to be considered TECEs, the lack of certainty around this issue led Fannie Mae to exit multi-investor Low-Income Housing Tax Credit (LIHTC) funds for a time. Fannie Mae has resumed its investments through a temporary strategy, but it is not seen as a viable long-term solution.
The Preserving Rural Housing Investments Act would clarify that the GSEs are not TECEs, thus ensuring that they can invest in multi-investor funds. Multi-investors funds are essential for attracting investments in rural communities, which typically have smaller scale developments. Multi-investor funds are also an efficient, effective way for the GSEs to meet their Duty to Serve requirements for rural housing. In particular, Fannie Mae has been a long-standing investor in helping meet the needs of rural markets. Given the critical need for investment in rural housing, clarifying the GSEs’ ability to participate in multi-investor funds is a necessary step for the health of rural communities.
Cinnaire, along with fellow members of the National Association of State and Local Equity Funds (NASLEF) and the National Council of State Housing Agencies (NCSHA), has called for the U.S. Treasury Department to provide guidance to address this problem. To date, however, such an administrative solution has not been found. While Cinnaire and its partners will continue pushing for an administrative solution, this legislation represents strong bipartisan support in Congress for ensuring that the GSEs are able to meet the housing investment needs of rural communities.
In addition, the Senate Appropriations Committee included language in its committee report passed through the Committee on August 1 that directed the Treasury Department to identify administrative solutions to resolve the issue. Cinnaire is grateful to the Committee for including this language and for Committee members for requesting it, including Senator Gary Peters (D-MI).
