DASH Act Includes Renters’ Tax Credit, 650,000 Special Incremental Housing Choice Vouchers, and Other Spending Proposals to Address Housing Affordability

Published by Peter Lawrence on Wednesday, September 8, 2021 - 12:00am

Through its numerous provisions, the Decent, Affordable, Safe Housing for All (DASH) Act, announced by Senate Finance Committee Chair Ron Wyden, D-Oregon, strives to increase housing affordability, most notably through the tax code. All told, the DASH Act represents a significant investment towards addressing the affordability crisis facing low- and middle-income renters, low-income homeowners and Americans facing and at risk for homelessness.

In addition to expansion of the low-income housing tax credit (LIHTC), and the proposed middle-income housing tax credit (MIHTC) and neighborhood homes tax credit (NHTC), the DASH Act would further increase rental housing affordability by providing a renter’s tax credit. The renter’s tax credit would be a refundable credit to taxpayers who own and operate affordable rental housing with units affordable to extremely low-income (ELI) tenants – those with a gross monthly family income at or below 30% of the area median (AMI) or at or below the federal poverty line, whichever amount is greater. The tax credit creation and expansion proposed in the DASH Act would be complemented by affordable housing spending provisions also included in the bill:

  • Mandatory funding for a special allocation of 650,000 Housing Choice Vouchers;
  • Supplemental national Housing Trust Fund (HTF) resources and capacity building funding;
  • Newly authorized funding to support the U.S. Department of Agriculture’s (USDA’s) rural housing programs; and
  • Several other proposals to support modular housing, zoning and land use reform and permanently authorize HUD’s McKinney-Vento Homeless Assistance Grant program.

Renter’s Tax Credit Would Benefit Extremely Low Income (ELI) Renters

The DASH Act is not the first bill to propose a renter’s tax credit. On July 29, Wyden and Brown introduced S. 2554, the Renters Tax Credit Act of 2021, which is identical to the DASH Act proposal . During the 116th Congress, Sen. Charles Schumer, D-New York, along with 25 co-sponsors, introduced S. 5065 (116th), the Economic Justice Act, a plan to invest $350 billion in communities of color, which included the creation of a renters’ tax credit that would limit rent to 30% of a tenant’s income. Starting in 2011, through 2017, the Center on Budget and Policy Priorities (CBPP) proposed a renter credit aimed at assisting extremely low-income (ELI) households, to be claimed by rental housing owners that cap rents at 30% of eligible tenants’ income. The CBPP proposal noted several similarities to the LIHTC—for example, how the credit was claimed—and considered the renter tax credit to be complementary to the LIHTC.

Specifically, the DASH Act proposes a project-based renter tax credit targeted to ELI households. The credit would be allocated to states and calculated based 110% (or up to 120% in low poverty neighborhoods) of the difference between fair market rent (FMR) and 30% of a renter’s gross family income. The total annual credit would be equal to the number of months of reduced rent for eligible renters in a given taxable year times the number of eligible units in a building, summed across all buildings owned by the taxpayer. The allocation to states would be as follows:

  • In calendar year (CY) 2021: $12.30 per capita with a $14 million small state minimum.
  • In CY 2022: $24.50 per capita with a $28 million small state minimum.
  • In CY 2023 and thereafter: $36.75 per capita with a $42 million small state minimum, adjusted annually for inflation (the total in 2023 is estimated to be $12.7 billion).
  • Similar to the LIHTC, any unused state allocations would be distributed via a national pool.
Blog Graphic: Projected Renter Credit Allocation from 2021 to 2030
Click to Enlarge

 

Similar to LIHTC qualified allocation plans, states would be required to create a rental reduction allocation plan for the renter credits, detailing the criteria and priorities the state agency would use to allocate credits and report annually on compliance. The credit period would be up to 15 years, with credits claimed by eligible taxpayer owners on an annual basis. State would be required to establish a reserve that would allow for the transfer of credit ceiling between taxpayer owners who over-estimated amounts with those that under-estimated amounts.

The renter’s credit would be used in conjunction with the LIHTC (the U.S. Department of the Treasury would provide coordination rules), as well as in unassisted buildings. At an eligible property, the number of units assisted could not be more than the greater of 40% of the building units or 25 units, unless the building previously received federal project-based rental assistance. Owners would be required to periodically re-certify income eligibility of renters and adjust rent reductions as necessary. Additionally, owners could not evict renter credit-assisted tenants, except for good cause, and would be required to comply with the Fair Housing Act and other applicable federal and state housing laws.

DASH Act Provisions to Create Special Housing Choice Vouchers

The DASH Act also proposes additional spending to address the affordable housing needs of American renters and homeowners.  Among the various renter-specific provisions included in the DASH Act are a number of proposals to enhance assistance to low-income renters through an authorization of special Housing Choice Vouchers. Mandatory funding would be provided as needed to finance a total of 650,000 special vouchers – 250,000 incremental vouchers would be funded in the first year, and 400,000 in the following. These vouchers would target households with incomes at or below 50% AMI who are currently or at risk of being homeless. The DASH Act would establish a voucher payment standard of up to 125% of applicable FMR, slightly higher than regular Housing Choice Vouchers.

In an acknowledgement of the additional cost to administer these new vouchers, increased administrative funds provided to both public housing agencies (PHAs) and the U.S. Department of Housing and Urban Development (HUD). The bill would provide $300 million annually for five years for increased PHA administrative fee funding to hire service coordinators providing or referring voucher recipients to relevant services. Another $500 million would be provided over two fiscal years to build the capacity of PHAs to accomplish goals under DASH. HUD would receive $15 million a year for five years to administer the newly created special vouchers.

The criteria for state accountability of administering these special vouchers is set forth as follows:

  • States with a rate of homelessness less than 10 people for every 10,000 in population would be required to:
    • Issue 50% of available vouchers to eligible households within two years;
    • Issue 80% of available vouchers to eligible households within three years; and,
    • Issue 100% of available vouchers to eligible households within four years.
  • States with a rate of homelessness more than 10 people for every 10,000 in population would be required to:
    • Issue 40% of available vouchers to eligible households within two years
    • Issue 60% of available vouchers to eligible households within three years
    • Issue 100% of available vouchers to eligible households within four years

Supplemental funding would enhance the Housing Trust Fund

The purpose of the HTF, which is funded by annual contributions from Fannie Mae and Freddie Mac, is to finance affordable housing for ELI and very low-income households. This year, HUD announced an allocation of nearly $700 million through HTF. Still, additional funds are needed to address the affordable housing crisis , especially for ELI households. The DASH Act would provide $10 billion in HTF funding annually for 10 years. The first $10 billion annual allocation to states would be provided as per the existing HTF formula. For the second-year allocation, the HUD Secretary would be required to propose a new HTF formula that considers the effects of COVID-19, among other additional factors, while maintaining a focus on extremely low-income renters. These funds could be used for land acquisition and the acquisition, rehabilitation or development of rental housing that prioritizes housing for people experiencing homelessness. Again, a significant increase in funding requires ensuring agencies are able to handle the additional administrative work that will follow. As such, the DASH Act would provide an additional $65 million annually for five years for administrative and capacity building funding for states to administer this supplemental HTF funding. It’s worth noting the DASH Act proposed $5 billion more over the first five years for the HTF than what was requested in both Waters’ Housing is Infrastructure bill and the FY 2022 budget request, which both asked for $45 billion.

Funding Would Address Rural Housing Needs

In addition to the proposed rural basis boost proposed by the DASH Act (discussed in more detail in the LIHTC DASH Act provisions post), several provisions focused on rural housing needs would bolster USDA rural development programs. The DASH Act proposes:  

  • $2.5 billion in annual authorized appropriations for 10 years for Section 521 Rural Rental Assistance program;
  • $250 million in annual authorized appropriations for 10 years for “off-farm” affordable housing for domestic farm labor; and,
  • $100 million in annual authorized appropriations for 10 years for Section 515 Rural Rental Housing Loan program;
  • $78 million in annual authorized appropriations for 10 years for Sections 514 and 516 Farm Labor Housing Loan and Grant program;
  • Permanent reauthorization of the Multi-Family Preservation and Revitalization (MPR) program (this proposal is identical to H.R. 1728, the Strategy and Investment in Rural Housing Act, introduced in April by Rep. Cynthia Axne, D-Iowa).

Additional Spending Proposals

Wyden also included the following specific, targeted provisions in the DASH Act:

  • The HUD Secretary would be charged with establishing a Modular Construction Pilot Program, for which grants would be provided to eligible entities – PHAs, tribally designated housing entities, nonprofit entities, companies, religious entities, or units of local or Tribal governments – to promote the construction of affordable homes using modular construction. The bill would provide $10 million over five years for cost-effective and efficient modular building innovations. The grant recipient would be required to guarantee affordability for a period of more than 20 years.
  • Affordable housing advocates have long decried the use of zoning and land use policies that hinder, and in some cases prevent, the construction of affordable housing. To combat this, the DASH Act would support zoning and land-use reforms to promote affordable housing by providing $4 billion over five years to local jurisdictions receiving HUD funding that adopt “pro-housing” policies. The grants would be provided on a sliding scale – jurisdictions under 80,000 residents would be eligible for a maximum grant of $5 million while jurisdictions with more than 1 million residents would be eligible for a maximum grant of $125 million. Any jurisdictions with certain specified zoning or land use policies that impede affordable housing would be ineligible for the grants.
  • The bill would permanently authorize the McKinney-Vento Homeless Assistance Grant program. Administered by HUD, McKinney-Vento funds two programs: the competitive Continuum of Care (CoC) program and the Emergency Solutions Grant (ESG) formula grant program. These programs provide outreach, shelter, transitional housing, supportive services, short- and medium-term rent subsidies, and permanent housing for people experiencing homelessness and in some cases for people at risk of homelessness.

Next Steps

The DASH Act is expected to be formally introduced later this month; currently the bill text, a bill summary and detailed section-by-section summary are already available. The various provisions of the DASH Act are not likely to be passed on their own and will need a more substantial legislative vehicle to carry them forward. That vehicle is likely to be the reconciliation bill as provided for in fiscal year (FY) 2022 budget resolution. The Congress passed the FY 2022 budget resolution August 24; the next step will be for the actual details of the reconciliation bill to be worked out –the current proposed price tag is no more than $3.5 trillion. The House Ways and Means Committee is scheduled to begin considering its portion of the reconciliation bill Sept. 9, while the House Financial Services Committee is scheduled to consider its $339 billion portion of the reconciliation bill on Sept. 13. The budget resolution instructions set a deadline of Sept. 15 for the various committees to submit its recommendations – in each chamber the Committee on Budget would provide reconciliation bills carrying out all such recommendations of their respective committees – setting up an eventful fall.

While Wyden has jurisdiction over tax legislation, the spending proposals in the DASH Act are under the jurisdiction of the Senate Banking, Housing and Urban Affairs Committee, chaired by Sen. Sherrod Brown, D-Ohio. Wyden is expected to urge his colleagues to consider those spending proposals for its portion of the forthcoming reconciliation bill. Brown’s counterpart in the House, Financial Services Committee Chair Maxine Waters, D-California, and several of her colleagues introduced three bills– Housing is Infrastructure Act of 2021, Ending Homelessness Act of 2021, and the Downpayment Toward Equity Act of 2021. The Housing is Infrastructure Act includes a special $150 billion allocation of Housing Choice Vouchers as well supplemental $45 billion over five years in Housing Trust Fund resources, similar to the corresponding spending proposals in the DASH Act. It is less likely that the DASH Act spending proposals that do not have a companion proposal in either of the three bills Waters introduced and mentioned above will be included in the forthcoming reconciliation bill. Some of the DASH Act spending proposals are also likely not be able to be included in a reconciliation bill because of the Byrd Rule, which governs what types of provisions can be included in a reconciliation bill.

Nevertheless, the DASH Act presents a comprehensive set of proposals to address a wide variety of the nation’s affordable housing challenges and Wyden should be commended for the DASH Act’s introduction.