Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Low-income housing development in New Jersey

The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) 

Solar, Wind Bonus Credits 

  • IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023)

  • Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program.

  • The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023).

  • Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits.

  • The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers

Roundtable Comments 

RER chart on Section 48(e)
  • Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:

    • The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.

    • The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenantsbecause owners cannot measure, track or control energy consumption in sub-metered leased units.

    • Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.

    • The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.  

  • Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. 

Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).  

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Roundtable and Industry Coalitions Urge Congress to Act on Affordable Housing Measures

Affordable Housing Industry Coalition May 2023

The Real Estate Roundtable and 18 other real estate organizations urged Congress on May 23 to work with the Biden administration, housing providers, lenders, and other stakeholders to pursue bipartisan solutions to increase the nation’s supply of housing. (Coalition letter, May 23)

“Yes in My Backyard”

  • This week’s joint letter from the Housing Affordability Coalition detailed a wide range of legislative proposals and policy measures that lawmakers should immediately enact to address the nation’s housing affordability crisis.

  • The industry coalition supports legislation that would eliminate harmful land use policies, promote affordable housing near public transit, and support local government efforts to expand housing supply.

  • Separately, The Roundtable joined another coalition of 285 housing, business, and municipal organizations with a show of focused support for the bipartisan, bicameral Yes In My Back Yard (YIMBY) Act, reintroduced on May 18. (YIMBY Coalition letter)

  • The bill requires localities that receive certain federal HUD grants to submit a public report on whether they have local policies in place that remove exclusionary zoning tactics. Encouraging high-density development is “an essential first step in decreasing barriers to new housing of all price levels,” the YIMBY Act coalition letter states.

  • The YIMBY Act passed the House without opposition in 2020. It is championed in the Senate (S. 1688) by Todd Young (R-IN) and Brian Schatz (D-HI), and in the House (H.R. 3507) by Reps. Derek Kilmer (D-WA) and Mike Flood (R-NE). (YIMBY Act summary by Up for Growth)

Tax Measures

  • This week’s Housing Affordability Coalition letter encourages Congress to expand the low-income housing tax credit, create a new middle-income housing tax credit, and establish a dedicated tax incentive to promote the conversion of underutilized office and commercial buildings to rental housing.

  • The letter also supports tax measures that have not been reintroduced yet in the 118th Congress, including incentives to encourage neighborhood revitalization, accelerated depreciation of high-performance building equipment, and reduction of the basis increase necessary to qualify a multifamily rehabilitation project for Opportunity Zone purposes.

  • The industry coalition expressed support for the Biden administration’s proposed solutions such as its Housing Supply Action Plan and investments that are part of its FY2024 federal budget proposal. (Roundtable Weekly, May 22, 2022 and White House fact sheet, March 9, 2023)

On March 7, the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) offered joint testimony before a Senate Finance Committee hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” (Roundtable Weekly, March 10)

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Lawmakers Reintroduce Bill to Reform, Expand the Low-Income Housing Tax Credit

Low income housing SFO residences

Bipartisan, bicameral legislation introduced last Thursday would significantly expand and improve the low-income housing tax credit (LIHTC). The tax credit, strongly supported by The Real Estate Roundtable, subsidizes the construction, rehabilitation, and preservation of affordable rental housing for low- and moderate-income tenants. 

Increasing Supply 

  • The Affordable Housing Credit Improvement Act (AHCIA) would finance nearly two million affordable homes over the next 10 years. (Affordable Housing Tax Credit Coalition, 2023)
  • Led by Sens. Maria Cantwell (D-WA) and Todd Young (R-IN), along with Reps. Darin LaHood (R-IL) and Suzan DelBene (D-WA), the AHCIA (H.R. 3238 and S. 1557) has already garnered nearly 90 cosponsors.  
  • Roundtable President and CEO Jeffrey DeBoer said, “The low-income housing tax credit is a critical and well-designed tool that addresses a pressing issue throughout the country–the lack of affordable rental housing. LIHTC harnesses market forces and the power of the private sector to incentivize the construction and rehabilitation of affordable homes. Countless studies have demonstrated LIHTC’s cost-effectiveness. Inflation has taken a toll on working Americans, but Congress can help reduce the burden of high housing costs by passing the AHCIA reforms.”  
  • A March 7 Senate Finance Committee hearing showed bipartisan policymaker consensus on the need to increase the supply of affordable housing by expanding the LIHTC and other tax incentives. The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA), two key supporters of the AHCIA, offered joint testimony during the hearing. (Roundtable Weekly, March 10) 

AHCIA Provisions 

AHCIA summary

  • A summary of the AHCIA is available here. Among its many provisions, the legislation would:
    • Boost the allocation of low-income housing credits to states by restoring the temporary 12.5% increase enacted in 2018 (expired at the end of 2021) and phasing in a 50% increase in the LIHTC allocation cap over two years.
    • Lower the threshold of private activity bond financing—from 50 to 25%—required to trigger the maximum amount of 4% housing credits available to individual properties. 
  • The bill would also ensure that low-income housing credit projects that seek to maximize their energy efficiency through use of the section 179D commercial building deduction are not penalized by existing provisions of the law that reduce the basis of the development by the 179D deduction amount. 
  • While movement on LIHTC legislation is unlikely before the debt ceiling debate is resolved, the broad-based, bipartisan support for AHCIA could lead to Congressional action on the bill later in the year. (News – The Affordable Housing Tax Credit Coalition)

 Domestic Content 

  • In related news, the Internal Revenue Service (IRS) released a notice this week on “made in the USA” guidance that can increase clean energy tax credits. The Inflation Reduction Act (IRA) offers a “bonus” tax credit of up to 10%  for solar, wind, battery storage, and other projects that use iron, steel, and components manufactured in the U.S. (JD Supra, May 16) 

The “domestic content” notice provides initial guidance until the Treasury Department proposes rules on the subject. A fact sheet prepared by The Roundtable keeps track of various federal agency actions that implement IRA tax incentives of significance to the real estate sector.      

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Congressional Tax Writers Focus on Policies to Increase Supply of Affordable Housing

NMHC President testifying on Affordable HousingLegislation aimed at increasing the nation’s supply of affordable housing was introduced by Senate and House tax writers this week while the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) offered joint testimony before a March 7 Senate Finance Committee hearing on “Tax Policy’s Role in Increasing Affordable Housing Supply for Working Families.” (NMHC President Sharon Wilson Géno, above and MarketWatch, March 9)

Solutions to Meet the Need 

  • A new report from real estate brokerage Redfin shows that the number of affordable home listings fell 53% from last year—the largest annual drop in Redfin’s records, which date back to 2013. (The Hill and Redfin news release, March 3)
  • The National Low Income Housing Coalition estimates there is a shortage of 7 million affordable and available rental homes in the United States, while a Rosen Consulting Group study reports the underbuilding gap is 5.5 million units.
  • This week’s Senate hearing displayed bipartisan policymaker consensus on the need to increase the supply of affordable housing by expanding the Low-Income Housing Tax Credit (LIHTC) and other tax incentives. (TaxNotes, March 8 and Congressional Research Service, “An Introduction to the Low-Income Housing Tax Credit”)
  • During the hearing, NMHC President Sharon Wilson Géno offered joint testimony that included recommendations to address the affordable housing crisis, including tax policy, regulatory reform, rental assistance, and development incentives. (NHMC News | Video of Géno’s remarks and Written testimony, March 7) 

Senate Bills Senate Finance Committee Chairman Ron Wyden (D-OR)

  • Senate Finance Committee Chairman Ron Wyden (D-OR), above, noted his support for the Affordable Housing Credit Improvement Act (AHCI), the Neighborhood Homes Investment Act, and the reintroduction of the Decent, Affordable, Safe Housing for All (DASH) Act in his opening comments
  • Wyden’s DASH Act would strengthen the LIHTC and offer a new Middle-Income Housing Tax Credit (MIHTC) that would provide a tax credit to developers who house tenants between 60 and 100% of the area’s median income. (DASH Act Text | Bill Summary | Section-by-section)
  • The AHCI would expand the pool of tax credits allocated to states for new affordable housing, make it easier to combine LIHTC with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects.
  • Wyden added in his opening comments, “Members of Congress also need to keep pushing state and local authorities to cut back on the thicket of zoning rules that get in the way of building the housing Americans need.”
  • The Roundtable has supported these Senate bills since they were introduced last year. Real Estate Roundtable President and CEO Jeffrey DeBoer previously stated, “Overly restrictive land-use and zoning policies, construction cost increases, and labor shortages are deepening our housing challenges, which now extend across the entire country. Government at all levels needs to be part of the solution, not part of the problem.” (Roundtable Weekly, July 22, 2022) 

House Action Capitol bright sky

  • Reintroduction of similar LIHTC legislation in the House is expected by Reps. Suzan DelBene (D-WA) and Brian Higgins (D-NY). (BGov, March 2)
  • Additionally, House Ways and Means Tax Subcommittee Chair Mike Kelly (R-PA) and committee member Jimmy Panetta (D-CA) on March 1 reintroduced the More Homes on the Market Act, which would double the capital gains exclusion for home sellers to $500,000 for single individuals and $1 million for married couples. (TaxNotes, March 8) 

Despite widespread congressional support for certain affordable housing legislation, prospects for the bills are uncertain until the national debt ceiling issue is addressed—and a tax legislative package is identified that could include such measures. 

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Real Estate Coalition Raises Concerns About White House Directive for Federal Agencies to Strengthen Tenant Protections

White House Blueprint Rental housing - publication cover

A coalition of 12 national real estate organizations raised concerns this week about the Biden administration’s “Blueprint for a Renters Bill of Rights,” which directs federal agencies to strengthen tenant protections. (White House Fact Sheet and Coalition statement, Jan. 25 and GlobeSt, Jan. 26)

Industry Response

  • The White House on Wednesday issued the “Blueprint” that includes a set of principles to encourage voluntary private sector actions that increase affordable rental units—and drive action by the federal government, state and local partners on tenant rights enforcement. The administration will also launch an effort in the spring to get local governments and housing providers involved in a “Resident-Centered Housing Challenge.” (White House Blueprint for a Renters Bill of Rights and The Washington Post, Jan. 25)
  • The real estate coalition, which includes the National Multifamily Housing Council (NMHC), expressed disappointment that the White House announcement was “solely focused on renter protections, creating potentially duplicative and onerous federal regulations that interfere with state and local laws meant to govern the housing provider and resident relationship.” (Coalition statement, Jan. 25)
  • NMCH also issued a statement that acknowledged the White House action did not include the threat of a national rent control policy—and urged the administration to prioritize implementation of its Housing Supply Action Plan issued last May. “The best renter protection is an abundant supply of housing,” NMHC stated.

Affordable Housing Solutions

Affordable Housing row

  • The administration’s Housing Supply Action Plan includes zoning incentives and government financing to address an estimated shortfall of 7 million units for low-income renters nationwide. It aims to create hundreds of thousands of affordable housing units in the next three years, with the goal of closing the nation’s housing supply shortfall in five years. (Roundtable Weekly, May 20, 2022 | PoliticoPro, May 16, 2022 | National Low Income Housing Coalition, April 2022)
  • On the legislative front, congressional committees showed support last year for the Affordable Housing Credit Improvement Act (S. 1136). The bill (detailed summary here) has not been reintroduced yet in the 118th Congress. The measure would expand the pool of tax credits allocated to states for new affordable housing, make it easier to combine the Low Income Housing Tax Credit (LIHTC) with other sources of capital like private activity bonds, and facilitate LIHTC rehab projects. (National Multi-Housing News, Jan. 16)
  • Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Overly restrictive land-use and zoning policies, construction cost increases, and labor shortages are deepening our housing challenges, which now extend across the entire country. Government at all levels needs to be part of the solution, not part of the problem. The Affordable Housing Credit Improvement Act would be an important step forward.” (Roundtable Weekly, July 22, 2022)

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure.

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Roundtable Submits Comments to HUD on Barriers to Affordable Housing Development; NMHC Releases 2020 Outlook on States’ Rent Control Efforts

HUD-logo-450w

The Real Estate Roundtable today submitted a suite of policy suggestions (revised January 21, 2020) to the Department of Housing and Urban Development (HUD) to improve access to affordable housing.  The comments respond to HUD’s Request for Information seeking public feedback on laws, regulations, land use requirements and administrative practices posing barriers to housing affordability and availability.

The Roundtable’s comments offer policies intended to bring more safe, decent, and affordable housing within reach of indigent and low-income households.  It also urges HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. 

Recognizing “there is no single, best solution to promote housing affordability and increase housing supplies,” The Roundtable suggests a number of strategies to address the challenges and opportunities for public, low-income, and middle class housing, including:

  • Expand the Low-Income Housing Tax Credit (LIHTC) program, and provide a similar tax incentive focused on housing development for America’s middle class;
  • Use GSE reform to re-focus the mission of Fannie Mae and Freddie Mac on liquidity in the mortgage markets for low- and middle-income home buyers, while also encouraging GSE interventions to enhance middle class rental housing;
  • Reform procedures and rules under the Community Reinvestment Act (CRA), so banks can receive “credit” when they serve lending needs and increase housing supplies in middle class neighborhoods (80-120 percent of Area Median Income);
  • Foster a Yes in My Backyard – or “YIMBY” – environment whenever states and cities seek the “carrot” of federal grants, that obliges localities to implement land-use laws to deliver high density zoning needed to entitle affordable housing projects;
  • Promote greater production of manufactured housing as a high quality, less costly alternative to site-built homes; and
  • Direct the General Services Administration to prioritize increasing affordable housing supplies when it disposes of surplus federal properties for re-development by states, localities, and the private sector.

The comments conclude with an assessment of rent control laws which have “a long-term effect to worsen the housing crisis,” The Roundtable wrote to HUD.  The letter notes that numerous studies show these laws decrease housing supplies and can illogically benefit high-income earners who have no incentive to move out of controlled units.

In a related development this week, the National Multifamily Housing Council (NMHC) released a report on “Rent Control: A 2019 Recap and a 2020 Look Forward,” which provides a national assessment of rent cap efforts by multiple states. The new report supplements NMHC’s Housing Affordability Toolkit that explains the cost drivers behind apartment development and delves into best practices to address the affordability challenge. 

During The Roundtable’s January 28 State of the Industry meeting in Washington, DC, a discussion of housing availability and affordability will feature Federal Housing Finance Agency Director Mark Calabria and Rep. Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee.

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