As we all return from the holidays and Congress reconvenes, we need to understand the altered federal landscape for affordable housing, as well as what changes may be coming.
The biggest change came when Congress passed the Tax Cuts and Jobs Act in December. While this bill preserves the major tools that create affordable housing, the Low-Income Housing Tax Credit and private activity bonds including multifamily housing bonds, the bill lowers the corporate rate from 35 to 21 percent and creates a Base Erosion Anti-Abuse Tax (BEAT). The lower corporate rate will reduce investor demand for the Housing Credit. While some of the impact from BEAT on investors with foreign investments was mitigated in the bill, there still may be negative impacts on investor demand for the Housing Credit. Congress may pass tax extenders legislation or a tax bill of “fixes,” which could mitigate some of the impacts on the Housing Credit. This leaves the final landscape for the Housing Credit still somewhat uncertain. Novogradac estimates that under the provisions of the final bill, the future affordable housing supply would decrease by 235,000 homes over the next 10 years.
Before leaving for recess in December, Congress passed a short-term continuing resolution (CR) funding the government through Jan. 19, giving Congress about 10 days to negotiate a bipartisan budget deal for FY 2018 spending. It remains very unclear how Congress will address the upcoming deadline; a short-term CR looks most likely in order to allow time to draft an omnibus spending bill. However, congressional leadership is struggling to reach an agreement on spending caps, as well as other issues like immigration, leaving the picture for FY 2018 spending uncertain. And in mid-February, we expect President Trump to release his budget proposal for FY 2019.
The Trump administration has discussed a few areas that may see progress in 2018 including an infrastructure proposal, a continued focus on deregulation and a push for changes related to HUD-assisted housing and rent reforms. Additionally, Congress appears to be engaging in bipartisan and stakeholder discussions on housing finance reform. Congress also needs to reauthorize the National Flood Insurance Program and make structural reforms to the program, including means tested affordability assistance for low-income homeowners. And the Senate will likely consider an $81 billion disaster recovery bill passed by the House in December, so early 2018 is shaping up to be busy with more potential changes, and with opportunities for affordable housing advocacy. NHC will be following all of these developments closely.
Look out for an announcement on the date of NHC’s Annual Budget Forum, where we will share strategies for advocacy, as well as discuss the outlook for federal spending and rent reform. You can view last year’s Annual Budget Forum here.