Senate Finance Committee Chair Ron Wyden, Sen. Dan Sullivan, and Reps. Jimmy Panetta and Mike Carey have jointly introduced the Workforce Housing Tax Credit (WHTC) Act [1] to increase the supply of affordable housing for middle-income families who earn too much to qualify for low-income affordable housing and not enough to afford housing near where they work.
The Workforce Housing Tax Credit Act [1] would help to close this gap by establishing the first-ever middle-income housing tax credit, which is estimated to finance approximately 344,000 affordable rental homes. The legislation also provides flexibility so that states can maximize their resources and best meet community housing needs by allowing housing finance agencies to transfer their middle-income allocation to their Low Income Housing Tax Credit (LIHTC) [2] allocation at any time. It also allows buildings to combine the two credits to help make more low-income housing projects financially feasible.
“Right now, America’s nurses, firefighters and teachers are struggling to find affordable housing near the communities they serve. More must be done to fill the ‘missing middle’ between low-income housing and million-dollar homes,” Sen. Wyden said. “Establishing a middle-income tax credit will guarantee more housing, and the flexibility our bill provides will help housing finance agencies best meet the needs of their individual communities.”
The effective date for this provision is buildings placed in service after 2023, in taxable years after 2023.
“Everywhere I travel in our state, I hear from Alaskans reeling from the scarcity of housing. It’s a challenge that afflicts rural and urban communities, low and middle-income families, and stands as an obstacle to greater economic opportunity,” said Sen. Sullivan. “Solving this challenge is a top priority for me, and it will take multifaceted solutions with everyone pulling on the same oar. On the federal level, my colleagues and I are introducing the Workforce Housing Tax Credit Act to broaden a tried-and-true federal tax incentive program—the low income housing tax credit. This will catalyze the private sector to build more housing in urban and rural areas for working families—teachers, law enforcement, first responders, nurses—the backbone of so many communities. Expanding LIHTC will help address the core issue of homelessness and overcrowding in Alaska and empower hard-working Alaskans to stay in our communities and build a more robust workforce.”
Highlights of the Workforce Housing Tax Credit Act include:
- Similar to LIHTC, state housing finance agencies allocate the tax credits to developers through a competitive process. The tax credits would be provided to developers over a 15-year period, with a 15-year compliance period and 30-year extended commitment.
- Tax credits are allocated to states based on population. For 2024, the allocation would be $1 per capita with a $1.5 million small state minimum. An additional 5% of the allocation is made available and reserved for middle-income housing developed in rural areas.
- For new buildings, the credit would equal 50% of the cost of the building over the lifetime of the credit. For rehabilitated buildings and bond-financed buildings, the credit would equal 20% of the cost of the building. More credit can be awarded for buildings in difficult development areas, as designated by the U.S. Department of Housing and Urban Development (HUD). However, state housing agencies would only allocate the amount of credit needed to make a housing project financially feasible.
- To qualify for the credit, at least 60% of the building’s units must be occupied by individuals with area median incomes of 100% or less where the rents are restricted to 30% of the designated income. The affordability restrictions would remain in place for up to 15 years after the compliance period (for a total 30-year affordability period).
- The Workforce Housing Tax Credit Act also works in conjunction with LIHTC to support low-income affordable housing. First, a state can tailor the allocation to its needs: it can elect to transfer any portion of their middle-income allocation to LIHTC at any point during the year. Second, WHTC can help the financial feasibility of affordable buildings by combining LIHTC and middle-income housing tax credits for different units as long as at least 20% of the total units are middle-income units.
“More and more Americans are finding themselves struggling to make rent or find housing in the communities where they work. Teachers, nurses, and fire fighters often find themselves priced out of living in the communities they serve,” said Alicia Huey, Chairman of the National Association of Home Builders (NAHB) [3] and a custom home developer from Birmingham, Ala. “The Workforce Housing Tax Credit Act would provide states and developers with a new source of funding to produce affordable rental housing serving workers earning up to 100% of the Area Median Income. This is exactly the type of solution we need Congress to enact in order to begin solving the housing affordability crisis.”
David Gasson, Executive Director of the Housing Advisory Group [4], added, “It is no secret that the nation faces a severe affordable housing shortage. Sen. Wyden has led the charge to address this crisis through his efforts to secure and expand the Low-Income Housing Tax Credit. Now, along with Sen. Sullivan in the Senate and Congressmen Panetta and Carey in the House, these leaders are expanding on those efforts with the introduction of the Middle-Income Housing Tax Credit. As the LIHTC does for families, seniors, and veterans, the MIHTC will address the vital need for housing of our workforce and those not able to afford market rate housing. We are very appreciative of these housing champions and their efforts to address the nation’s housing crisis.”