Dallas BA Continues Advocacy for Important and Successful Housing Program
As previously reported, Dallas BA held virtual meetings with members of our service area’s Congressional delegation earlier this summer. One of the key issues we raised was the importance strengthening the Low Income Housing Tax Credit (LIHTC) program. Rental affordability is a challenge for residents at various earning levels, not just those in the lowest brackets. More than one in four renters spends more than half of their monthly income on rent. Without federal assistance, it is financially infeasible to construct new, unsubsidized rental units that even new teachers, police officers and firefighters, as well as retirees, can afford.
To address the challenge, President Reagan and Congress created the LIHTC in the Tax Reform Act of 1986. The program brings private capital to the housing industry with an extremely low default rate, and has been one of the most successful housing programs in our nation’s history. One of key tools in the LIHTC is a 30 percent subsidy, which has a 4 percent floating credit rate that is determined by a formula based on how much it costs the government to borrow money. Because it is tied to federal borrowing rates, when recent COVID fiscal policies were implemented to stabilize the economy, the 4 percent credit rate hit an all time low. In June, the rate reached a record low of 3.07 percent, a reduction of nearly 25 percent of equity that goes into a 4 percent LIHTC project. In short, ability to complete such a project is significantly impacted, reducing the amount of needed rental units.
In late July, we asked those Congressional members to support bipartisan legislative proposals that would enact a minimum 4 percent Housing Credit rate, provide additional basis boosts that allows these developments to access additional equity and allow developments to access that Housing Credit by lowering the bond financing threshold.