The down-to-the-wire bargaining produced a deal to avert the fiscal cliff, at least temporarily. Like Wile E. Coyote, we took a few steps over empty space without falling. Fortunately, Congress acted before we plummeted to the canyon below. Spending cuts, or sequestration, have been postponed to March 1 to roughly coincide with the end of the current continuing resolution. The agreement on taxes, however, produced several important actions for housing. The American Taxpayer Relief Act (also known as HR 8):
- Extends the Mortgage Debt Relief Act through 2013, which enables mortgage modifications for troubled home loans without triggering taxes on forgiven debt. This is an essential tool for resolving the mortgage debt overhang that still weighs on the economy and helping struggling homeowners. This provision will likely need further extension, as there are still many mortgage modifications to be done.
- In effect extends for one year the fixed 9% credit percentage for the Low Income Housing Tax Credit. This was previously scheduled to expire in 2013 because the provision affected properties placed in service through 2013. By changing the language to affect LIHTC allocations made in 2013, Congress allowed the fixed credit percentage to apply to the current pipeline of Housing Credit multifamily properties. The A.C.T.I.O.N. Coalition, of which NHC is a member, had been seeking a permanent change, but the one-year extension is certainly a positive outcome.
- Extends the New Markets Tax Credit, an important tool for community development that often works closely with housing investments.
- Makes mortgage insurance premiums tax deductible once again, a provision that expired in 2011. Premiums are fully deductible for households with incomes below $100,000, and deductibility declines on a sliding scale for higher incomes. See additional discussion at Housing Wire.
What doesn’t it do? It doesn’t address the debt ceiling, which Treasury announced on Monday that we have hit, officially, although it can delay the need for increase for a few weeks. And it only delayed the across-the-board spending cuts until March, which leaves very little time to avert deep cuts in housing assistance and other essential parts of the social safety net.