Biden-Harris Administration Encouragement of Equity, Support for Underserved Communities Holds Significance for Tax Credit Stakeholders
Further solidifying its commitment to encouraging investment in communities that have been traditionally underserved, a June 27 press release from The White House detailed two announcements from the Biden-Harris Administration that could potentially affect the allocation and award decisions that determines funding for housing and community development incentives like the new markets tax credit (NMTC), the capital magnet fund (CMF) and various housing grants made by the U.S. Department of Housing and Urban Development (HUD).
The first announcement is through the Investing in America Agenda–President Biden’s large-scale initiative to stimulate the American economy by creating jobs and equitable support communities while investing in climate resilience, manufacturing and infrastructure. The Administration released a May 26 memorandum to federal departments and agencies directing each agency to pursue equitable development policies and practices in their programming.
The second announcement in the press release is on behalf of the Interagency Community Investment Committee (ICIC), which is committing to new actions based on feedback from its October 2022 Request for Information (RFI) on Opportunities and Challenges in Federal Community Investment Programs. In the RFI, the ICIC was seeking input on how it could, “promote economic conditions and systems that reduce racial disparities and produce stronger economic outcomes for all communities.”
Guiding Principles to Encourage Equitable Actions by Federal Agencies
The memorandum to federal departments and agencies highlights the need for change in the approach to how these agencies fund investments, outlines the principals of equitable development and provides recommendations to guide success in equitable development. The principles for equitable development outlined by the Administration can be used by any entity interested in building an equity strategy and for those working with tax credits. They can serve as a tool in thinking through an approach to applications for funding because these agencies may incorporate the below principles into the criteria used in their evaluation of applications received for items like the competitive awards of grants made by HUD.
Below are the principles released by the Administration, followed by questions those seeking funding may want to consider:
- Expand access to resources for underserved communities:
- How does the project expand access to resources in an underserved community?
- How valuable are the resources to the community and how broad is the reach?
- How is the access to resources sustainable?
- Building community wealth:
- Is the project helping to drive short- and long-term wealth creation?
- How much of the wealth created by the project will stay in the community?
- How does the project support current and future residents and organizations?
- Invest in community’s strengths:
- Can the project evaluation process start with a strengths assessment before exploring community needs?
- How is the project plan focusing on the community’s strengths, while considering the community’s needs?
- How is community voice tied to the assessment of strengths?
- Can the project resolve community needs by focusing on the community’s strengths?
- Empower community voice:
- How early can the community be engaged?
- How is community feedback incorporated into each phase of the project?
- How is this engagement tied to determining community strengths and needs?
- Respond to multiple areas of community need:
- Can the project resolve more than one community need?
- How can the project or effort bring additional resources to address the needs of the community?
- How is community voice considered in determining community needs?
- Measure and expand upon what works:
- What are the measures of success for the project and how will those be tracked over time?
- How is it possible to inform other areas of strength or need from the project in the future?
- How is this project tied to the goals of your organization and your long-term strategic goals?
The ICIC Takes Actions to Further its Mission
Organized in July 2022, the ICIC represents the combined efforts of six federal agencies—the Departments of the Treasury, Commerce, Transportation, HUD and Agriculture, as well as the Small Business Administration. Through a collaborative effort, these agencies agreed to work to, “better align federal dollars flowing into underserved communities, including communities of color.”
Included among the original memorandum of understanding were commitments to “seek flexibility and complementarity, to the extent feasible, in the requirements governing the deployment of federal funds and other support–including tax credits, loans, equity, grants, and others–to enhance impact and increase private capital support” and identifying where the provision of technical assistance and other non-financial resources that support the deployment of capital in underserved communities could be enhanced. Though not explicitly mentioned, it is possible that the ICIC could look at the ways in which the low-income housing tax credit (LIHTC), NMTC and the opportunity zones incentives can be enhanced to further deploy capital to underserved communities.
In service of the ICIC’s original goals, the second announcement in the June White House press release detailed the new actions the group has committed to. One goal is to better align federal investments in such a way that community impact is maximized. This includes expanded access to capital and affordable housing. Specifically mentioned was the issuance of guidance to make it easier for Treasury’s State and Local Federal Relief Funds (SLFRF) program to be paired with HUD’s Community Development Block Grant Program. SLFRF guidance issued in July 2022 extended this funding’s use to other programs such as the LIHTC.
Additionally, community development financial institutions (CDFIs) will be encouraged to participate in the existing Mortgage Partnership Finance Program, an initiative run by HUD, through Ginnie Mae and the Federal Home Loan Bank of Chicago to increase access to funding that would support homeownership. The program will serve as another access point to the secondary mortgage market for small lenders, backed by HUD’s Ginnie Mae guarantee. This program can expand the scope of CDFIs that choose to provide the service to their clients and may align well with programming already in place.
The U.S. Department of the Treasury plans to release an RFI later in 2023 to better understand financial data collection from CDFIs. This RFI will be informed by proposed engagement with CDFIs and investors on secondary market access, market development and the value of CDFIs. The RFI provides CDFIs with an opportunity to potentially help shape further access to new programming.
Looking forward, the ICIC will expand to include the Environmental Protection Agency and the Department of Energy, both essential in ensuring a just transition in climate change. Research has shown that Black, Indigenous and people of color and underserved communities will be the most greatly impacted by natural disasters and climate hazards. These communities must be considered through the transition.
What These Actions Could Mean for Future Housing and Community Development Efforts?
While it may be some time before the effects of the Administration’s recent actions toward advancing its equity goals are seen, there could be implications for the various housing and community development stakeholders. The ICIC, in its desire to encourage better coordination and collaboration across public-sector programs, nonprofit and for-profit organizations, and community partners in support of equitable community development, could develop policies that have longstanding effects. As the ICIC continues its work of furthering the participating agencies’ mandates, those that depend on the funding it provides may see requirements to attain that funding change, particularly as it relates to HUD and the Treasury.