Novogradac Analysis for NCSHA: Reduction in 50 Percent Bond Test Could Result in 1.4 Million Additional Homes over Decade; Could Also Rescue COVID-19-Hampered Properties

Friday, May 15, 2020 - 9:15am

As many as 1.4 million additional homes would be built or preserved by 2030 if the 50 percent test for bond-financed affordable housing properties were changed, according to an analysis commissioned by the National Council of State Housing Agencies and conducted by Novogradac–a change that could also help preserve properties affected by COVID-19-related financial strain. The Novogradac analysis examines the effect of changing the requirement for private activity bonds (PABs) to finance at least 50 percent of aggregate basis of affordable housing properties in order to qualify for low-income housing tax credits, looking at the results if the minimum requirement were 40 percent, 33 percent or 25 percent. The analysis presumes “freed” bond cap would be used for affordable rental housing and calculates different results based on different scalability for gap financing.

Depending on the minimum percentage and scalability, Novogradac forecasts from 177,665 to 1,421,320 additional homes would be built or preserved from 2021 through 2030. An immediate decrease in the 50 percent test could rescue properties that have received PABs and are either under construction or in the construction pipeline, since COVID-19-related cost increases may endanger their ability to meet the 50 percent PAB test and make them no longer viable. Michael J. Novogradac also wrote a blog post examining the details of the report.