NCSHA 2020 Legislative Conference: Wisconsin Housing Tax Credit and Tax-Exempt Bond Priorities

NCSHA 2020 Legislative Conference:

Wisconsin Housing Tax Credit and Tax-Exempt Bond Priorities

WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT AUTHORITY PARTICIPANTS

• Joaquín Altoro, WHEDA CEO
• Kim Plache, WHEDA Deputy Executive Director
• Sherry Gerondale, WHEDA CFO

PRIORITY 1:

Support current and future efforts to expand and improve housing tax credit programs.

CONGRESSIONAL ASK: 

• Cosponsor or continue support for the Affordable Housing Credit Improvement Act (S. 1703/H.R. 3077).
• Work to build support for a critical element of this proposal – the establishment of a permanent minimum 4% Housing Tax Credit rate.

BACKGROUND:

The Low-Income Housing Tax Credit is a federal tax credit created to encourage private sector investment in the new construction, acquisition and rehabilitation of affordable rental housing for low-income households. Since 1986, the housing credit has become the most successful affordable rental housing production program in history. WHEDA’s 2019 allocation of 4% and 9% housing credits will create or preserve more than 2,450 units of housing in Wisconsin. Of these units, more than 2,050, or 83% will be made available for individuals and families earning less than 60% of the median income. These units are critical in addressing the housing shortage in Wisconsin.

The Affordable Housing Credit Improvement Act would expand housing credit resources available in Wisconsin and provide flexibility to better meet state needs. It would increase the 9% housing credits available by 50% over 5 years and establish a permanent 4% housing credit rate for the non-competitive federal credits. Both provisions would increase the number of individuals and families served. Two other important changes involve removing the population cap for difficult development areas and allowing states flexibility to award basis boosts, which increase equity.

The change in the 9% housing credits has the potential to add 800 units per year in Wisconsin. Making the 4% federal housing credit rate permanent will create approximately 25% more equity for each housing credit allocated, making more multifamily projects feasible.   

The other two changes cited above create ways for each state to provide additional credits and equity in areas of greatest need. Currently, under the 4% federal housing credit regulations, the geographic areas eligible for additional credits are defined at the federal level. Defining these at the state level will assist in creating units where they are needed most.  Nationwide, the proposal would allow for production of at least 550,000 new affordable rental units.

PRIORITY 2:

Support current and future efforts that ensure availability of private activity volume cap for housing and economic development and allow states to more effectively use these resources.

CONGRESSIONAL ASK: 

• As mentioned in Priority 1, cosponsor or continue support for the Affordable Housing Credit Improvement Act (S. 1703/H.R. 3077), which would increase bond resources for housing through income averaging and allow limited reuse of bond proceeds that have been repaid after multifamily developers clear initial financing gaps.

BACKGROUND:

Private activity volume cap is the authority to issue federally tax-exempt bonds for specific purposes, including housing for low- and moderate-income individuals and families. The cap is a federal allocation to states based on population. The housing bonds issued with this private activity volume cap include bonds issued under the Mortgage Revenue Bond Program that supports first-time, lower-income home buyers and the Multifamily Housing Bond Program that supports rental housing production. Together, these bonds are essential in expanding housing opportunity for low- and moderate-income working families.

In 2019, private activity bonds enabled WHEDA to provide reduced interest rate mortgages for 2,100 first-time home buyers and financing for more than 1,000 apartments. The average income for first-time home buyers using a WHEDA mortgage was $48,806 or 63.3% of the area median income. More than 800 units were created or improved for people earning less than 80% of the area median income.

The Affordable Housing Credit Improvement Act would expand the use of private activity bonds by allowing use of income averaging in bond-supported developments while keeping the average renter income at 60% of median income. It also would allow limited reuse of bond proceeds that have been repaid after multifamily developers clear initial financing gaps with federal 4% tax credit projects. The change would allow proceeds from construction lending on multifamily developments to be reused to fund long-term mortgages for first-time home buyers, creating a long-term benefit to Wisconsin residents.

Multifamily bonds are a vital tool for addressing the rental housing crisis. Nationwide, there is currently a shortage of more than 7 million affordable rental units for extremely low- income renters and some 71% of extremely low-income renters spend more than half of their income on housing.

Congressional Visits: 03/09-11/20 ­