Yesterday, U.S. Senator Maria Cantwell (D-WA) introduced a bipartisan bill along with 20 colleagues to bolster investments in affordable housing developments and the construction jobs that they support nationwide. The Low-Income Housing Tax Credit (LIHTC) helps finance 90 percent of affordable housing projects in the United States. Since the program was created in 1986, it has helped finance more than 2.4 million affordable apartments nationwide, including more than 56,000 in Washington, and has supported 95,000 jobs annually -- many of which are in the small business sector.
Cantwell's legislation -- the Improving the Low Income Housing Tax Credit Rate Act (S. 1442) -- would improve the existing LIHTC program to provide greater certainty for new housing construction. Cantwell's legislation would eliminate the floating rate used by the LIHTC program and make permanent a 9 percent minimum rate for new projects and 4 percent rate for acquiring existing housing. The LIHTC rate is currently linked to federal borrowing costs -- which vary -- making the financing of affordable housing less predictable.
"This bill supports a proven job creating program that means 95,000 jobs a year across the country," said Cantwell. "The Low Income Housing Tax Credit is a win-win for our communities: It leverages private capital to invest in new jobs and new housing in our communities. This legislation will improve the tax credit for years to come."
Cantwell's bill would end the floating credit rate, which makes the cost of project development increasingly unpredictable. This uncertainty has been particularly challenging over the past few years as the federal cost of borrowing has declined, which in turn lowered the value of the credit. The credit attracts investors, and without those investments, the project requires additional debt financing. However, projects cannot take on additional debt because of its fixed costs, which cannot be made up through increased apartment rental rates due to the low-income housing rent specifications.
This year, affordable housing projects in Washington state are being developed in King, Spokane, Pierce, Snohomish, Clark, Whatcom, Benton, Clallam, Skagit and Yakima counties. Combined these new projects will provide 1,230 housing units. The National Association of Home Builders estimates that for every 100 housing units built with the credit, 116 jobs are created. Last September, Cantwell visited the Nyer Urness House in Ballard, which supported 290 construction jobs through the program, to call for the extension of this key tax credit. The 9 percent rate for the LIHTC was extended as part of the American Taxpayer Relief Act of 2012 until the end of 2013.