On December 27, President Trump signed the $1.4 trillion omnibus spending bill for fiscal year 2021, which included establishing a permanent minimum 4% low-income housing tax credit (LIHTC).
“While it may not make the expansive headlines that stimulus checks and unemployment benefits will, one critical component of the this latest legislation signed by President Trump on December 27th includes a provision establishing an interest rate floor for the 4% tax credit,” said Tanya Eastwood, President, Greystone Affordable Development. “While historically low interest rates may be good for the economy, it has actually had an adverse impact on the value of tax credits. With this rate floor finally established and predictability provided to the marketplace, affordable housing developers can more accurately plan their capital stack and funding sources in order to deliver the critical housing needed across the country. This comes at a time where the entire country is desperate to produce and preserve more affordable housing.”
“The housing credit and the equity investment it generates has been responsible for the development and preservation of approximately 3.5 million units of affordable housing across the U.S. since the program was signed into law by President Reagan,” said Will Eckstein, Senior Vice President, Greystone Affordable Development. “About one-third of that development, around 1.2 million units, has utilized tax-exempt bond financing in conjunction with the 4% tax credit.”
“With the tax credit rate now fixed at 4%, some estimates indicate we could see an additional 120,000 units of affordable rental housing built or preserved,” Eckstein added.
“This is a big win for the affordable housing industry overall, and something we as industry participants have been advocating for many, many years. This will open up affordable housing development opportunities that were once not financially feasible due to the historically low tax credit rate and will provide much needed affordable housing to those in need. This has been a long time coming,” added Eastwood, who also served as past President for the Council for Affordable Rural Housing (CARH).