The reason our Member Brief is in your inbox right now is because the opportunity to get housing supply funding in legislation before 2025 is right now or never. Congressional negotiators will decide if and what tax provisions get into an omnibus spending bill this weekend. NHC’s diverse members have done an incredible job making the case for changes in the Low Income Housing Tax Credit (LIHTC) and passage of the Neighborhood Homes Investment Act this year and this week. Together they would create or preserve 2 million units of affordable housing over the next ten years. The time for grassroots advocacy is likely over. What matters now is action by Senators who support these two provisions, especially Republican Senators, to make their case to their leadership. It’s time for our friends in the Senate to do everything they can.
Here are some of the points we’ve been making:
- The only answer to both our housing affordability crisis and shelter’s contribution to inflation is dealing with our housing supply crisis. This is the last opportunity to vote for legislation that addresses both issues.
- How big is the supply shortage? Freddie Mac chief economist Sam Khater estimates that to keep up with household formation, we need to build 3.8 million additional units to rent or own, up from 2.5 million in 2018. That’s not going to happen without significant incentives.
- A recent study by the Bipartisan Policy Center found that over the last 20 years, the annual number of new homes permitted in the United States has declined compared to previous decades, even as the population has increased by tens of millions of people. From 2000-2021, the number of homes permitted in the US fell by an average of 36,733 homes every year. Over the same period, the US population grew by more than 150 million people.
- The number of sellers putting homes up for sale dropped 17.2 percent from one year ago, according to the National Association of REALTORS®. This is the eighteenth week of a year-over-year decline in homeowners listing their homes for sale. Less supply blunts the impact of less demand, slowing down the pace that inflation falls despite record-high mortgage interest rates.
- The single most impactful and cost-effective tool to accelerate the production of affordable housing is the Affordable Housing Credit Improvement Act. The bill would change the so-called “50% test” on LIHTC investments by lowering it to 25 percent. This would reduce the amount of bonds required for each affordable housing project and is estimated to result in the financing of nearly 1.5 million additional affordable homes over the next 10 years nationwide. It needs to be in the end-of-year budget and tax bill.
- Another device for increasing the production and rehabilitation of affordable housing is the Neighborhood Homes Investment Act, which also has strong bipartisan support. While our primary focus has been on home prices that are too high, in many areas of the country, such as rural America and the so-called “Rust Belt,” they are too low. This innovative proposal would provide tax credits in these communities to close the “appraisal gap,” making these projects feasible, and creating more inventory for entry-level homeownership. We need this in the bill too.
- As Congressional leaders negotiate a tax bill to accompany the omnibus budget bill, housing must be in any final deal. Without it, inflation will be harder to bring down, and housing prices will remain stubbornly high.