Reconciliation Bill Likely to Include Billions in Funding for Housing
The Senate is currently considering a dual tract strategy to advance two major pieces of infrastructure legislation, the Bipartisan Infrastructure Framework (BIF), officially known as the Infrastructure Investment and Jobs Act, which passed a procedural vote July 30, and an expected and forthcoming reconciliation bill. The reconciliation bill is expected to contain a variety of “human” infrastructure proposals, some of which were originally proposed in last year’s House infrastructure bill and proposed in the administration’s American Jobs and Families Plans. The BIF, if enacted, would fund traditional physical or “hard” infrastructure priorities such as roads, bridges, broadband access and the like. The reconciliation process, on the other hand, offers Democrats the opportunity to pursue many of the housing and community development goals of the Biden Administration in addition to the human infrastructure proposals that could not be included in the bipartisan infrastructure bill.
Reconciliation is a process by which spending and tax legislation can be passed in the Senate with a simple majority. With the current composition of the Senate, all Democratic members would have to vote for a reconciliation package as it is unlikely any Republicans would vote with Democrats. For a reconciliation bill to considered, both houses of Congress must first adopt a budget resolution that includes reconciliation instructions providing specific budget allocations to certain committees. Those committees each draft legislation that adhere to the budget reconciliation instructions. In the Senate, reconciliation legislation must adhere to the Byrd rule, which requires:
- Provisions included must have a budget impact (positive or negative),
- Such a budget impact must not be “merely incidental,” as determined by the Senate Parliamentarian, and
- The bill cannot increase the budget deficit outside of the budget window. Any provisions increasing mandatory spending or reducing revenues outside of the budget window must be offset with mandatory spending cuts or revenue raising provisions.
Through Reconciliation, Housing Priorities Can be Advanced
Democrats are currently calling for a $3.5 trillion reconciliation bill as part of the forthcoming fiscal year (FY) 2022 budget resolution. The bill will likely draw from previously introduced proposals and legislation to address the overarching infrastructure needs identified by Democrats. Framers of the reconciliation bill, for which text has not been released yet, will look to those portions of the administration’s American Jobs and Families Plans not included in the BIF.
The Moving Forward Act of 2020 (H.R. 2/116th), which notably includes several provisions of the Affordable Housing Credit Improvement Act (AHCIA) and other housing proposals, New Markets Extension Act, Historic Tax Credit Growth and Opportunity Act, and GREEN Act, will serve as inspiration for the reconciliation bill. Below are details about some of the more significant provisions from various legislation and proposals that may be included in the reconciliation bill.
A number of proposals from the Moving Forward Act (H.R. 2) will likely find their way into the reconciliation bill. Some notable provisions that might be included are:
- A temporary reduction in the 50% test for bond-financed housing to 25%
- An increase in the annual 9% LIHTC allocation amount
- Permanently expanding PABs
- A number of indefinite 30% basis boosts primarily for private activity bond-financed properties
- A 150% first-year LIHTC award to address issues related to COVID-19
- Permanently prohibit local approval and contribution requirements
- Extends for one year the 10% test deadline and the rehabilitation expenditure deadline
- Creates a new low-income housing supportive services basis boost to cover a portion of costs for providing certain resident services at LIHTC properties
- Permanently limits the use of qualified contracts
Financial Services Committee Housing Proposals
Rep. Maxine Waters,’ D-California, the Housing is Infrastructure Act includes many priorities that could be included in the reconciliation bill, especially those most similar to the related provisions of the American Jobs Plan. The bill would provide $600 billion for fair, affordable and accessible housing. Additionally, there will be set asides for “high and persistent poverty communities and to improve energy efficiency and climate resiliency.” The bill:
- Includes support for public housing
- Provides funds for the creation and support of affordable housing
- Provides funds for community development
- Establishes a National Investment Authority
- Invests in Homeownership
- Builds capacity at the U.S Department of Housing and Urban Development (HUD)
- Creates programs to improve housing equity
In terms of specific, notable expenditures, the Housing is Infrastructure Act includes:
- $150 billion for Housing Choice Vouchers
- $75 billion for green improvements to subsidized and unsubsidized affordable housing
- $45 billion for the Housing Trust Fund (HTF)
- $35 billion for the HOME Investment Partnership Program
- $15 billion for the Community Development Block Grant (CDBG) to fund affordable housing
- $12.5 billion for the Capital Magnet Fund (CMF)
- $7.5 billion for Section 202 supportive housing for the elderly
- $5 billion for new U.S. Department of Agriculture (USDA) financed rural housing
- $2.5 billion for Section 811 supportive housing for persons with disabilities
- $2 billion for HUD Native American housing assistance
- $500 million to rehabilitate existing USDA rural housing
These funds would generally be disbursed over five years. The amounts represent a considerable increase in existing annual funding amounts. For example, HUD announced $693 million in 2021 HTF allocations to states, while the Waters bill would provide $9 billion annually, 13 times the 2021 amount. Similarly, HOME received $1.35 billion for FY 2021, while the Waters bill would provide $7 billion annually, more than five times the 2021 amount. Finally, the Community Development Financial Institutions (CDFI) Fund is expected to award about $383 million in FY 2021 CMF awards while the Waters would provide $2.5 billion, more than six times the expected 2021 amount.
Waters also introduced the Ending Homelessness Act, which has provisions that may appear in the reconciliation bill, but face longer odds given that they were not included in the administration’s infrastructure priorities as included in the American Jobs or Families Plan. The legislation would make the Housing Choice voucher program a federal entitlement, so that every eligible household would receive assistance. When introduced, the bill pledged $13.3 billion in funding to end the homelessness crisis. These include:
- $1 billion annually for five years to McKinney-Vento Homeless Assistance Grants, which is expected to provide 85,000 new permanent housing units
- $500 million annually for five years for new Special Purpose Section 8 Housing Choice Vouchers (HCV), which is expected to provide an additional 300,000 housing vouchers and would give preference to those who are homeless or at risk of becoming homeless
- $1.05 billion annually for five years in mandatory spending dedicated to the National Housing Trust Fund
- $500 million over five years in outreach funding to ensure that homeless people are connected to the resources they need
- $20 million for states and localities to integrate health care and housing initiatives.
The Downpayment Toward Equity Act of 2021 also contains affordable housing provisions that could be in a reconciliation bill. The Act calls for $100 billion in funding. This would take the shape of $20,000-$25,000 grants for downpayments on homes to certain buyers. Eligible participants will be first time and first-generation homebuyers who make less than 120% of area median income (AMI), or 180% of AMI in high cost areas.
A number of prominent Democrats are insisting that the reconciliation bill passes in concert with the BIF, and if not, then to add these priorities to the reconciliation bill. Yet, if the reconciliation bill is to incorporate any significant aspects of the bipartisan infrastructure legislation, it risks losing support from critical moderate Democrat Senators, which would torpedo any chances of success.
This week, Sen. Ron Wyden, D-Oregon, is expected to introduce the Decent, Affordable, Safe Housing for All (DASH) Act. The bill will call for significant investments in affordable housing, with the aim of ending childhood homelessness, and contains provisions similar to the housing provisions of the Moving Forward Act (H.R. 2/116th). In the coming weeks, Notes from Novogradac will explore the DASH Act in a series of posts, focusing on the LIHTC provisions, Middle Income Housing Tax Credit proposal, Neighborhood Homes Tax Credit, and the renter tax credit/rental assistance proposals.
The Senate hopes to pass the BIF and the FY 2022 budget resolution with the reconciliation instructions before their fast-approaching August recess. If the $3.5 trillion reconciliation bill passes with the expected housing and community development incentives, it would represent one of the most significant housing and community development legislation in decades. These provisions would provide billions to expand and rehabilitate the nation’s affordable housing stock, as well as create and preserve millions of affordable homes for the American people.