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Washington Wire: Possible Changes on the Horizon for HUD, Historic Tax Credits

Published by Michael J. Novogradac on Friday, January 1, 2010

Journal cover January 2010   Download PDF

Welcome to the inaugural issue of the Novogradac Journal of Tax Credits. As all of us who work in the low-income housing, new markets, historic and renewable energy tax credit industries step into 2010, we do so with great hope that the coming year will bring increased opportunity and success for the families and communities we serve.

It is with that same optimism that we at Novogradac & Company unveil our re-designed, re-named and expanded Novogradac Journal of Tax Credits, in which we will provide our readers with news, analysis and commentary on affordable housing, community development and renewable energy tax credits.

The Novogradac Journal of Tax Credits is the consolidation of the Novogradac Journal of Tax Credit Housing, our flagship publication of the last two years, the Property Compliance Report and the New Markets Tax Credit Report. Existing readers of each of these publications will find the new combined publication continues to provide them the extensive coverage that they have come to expect in their specialty area. However, they will also find that the new combined publication will provide them with expanded and more comprehensive coverage of low-income housing tax credits, tax-exempt housing bonds and new markets tax credits as well.

And most exciting of all is that we have added coverage of historic tax credits, renewable energy tax credits, and U.S. Department of Housing and Urban Development (HUD) programs. This further expansion of coverage will give all of our continuing and new readers an opportunity to learn more about the resources available in these areas and how to put them to use in their day-to-day community development efforts and affordable housing initiatives.

We are confident you will enjoy the additional columns and Q&As that will be written by industry experts, as well as the additional photos, charts and graphs, and brief news items on people, projects, and industry and states’ issues.
Last month in a prelude to some of the changes that will take place on these pages, I dedicated my Washington Wire column to news on the new markets and renewable energy tax credits. This month I focus my comments on HUD and the latest news on the historic tax credit front.

The 2010 HUD Budget
The good but not great news is that overall, the Senate and House conferees agreement reflects a 12 percent increase in HUD funding over 2009, but it’s less than President Barack Obama’s requests.

On December 16, President Obama signed into law a $446.8 billion omnibus appropriations bill (H.R. 3288); this legislation includes the Transportation-HUD appropriations measure. Only five of the fiscal year 2010 appropriations bills had been signed by the president and the agencies funded by the remaining seven were covered by a continuing resolution that was to expire on December 18. The Transportation-HUD appropriations bill was passed by the House on July 23 and by the Senate on September 17, 2009.

The overall 2010 bill provides $122.1 billion in budgetary resources for programs funded in the bill, $977.4 million below the President’s request and $13.4 billion (or 12 percent) above the 2009 level, excluding the Recovery Act funding.

Commenting on the HUD appropriations bill and the continuing resolution, Monica Sussman, of Nixon Peabody, told attendees of the Novogradac Tax Credit Housing Finance Conference in Las Vegas last month that because there was a year-long continuing resolution last year, HUD has been operating off 2008 dollars and there were doubts that the HUD appropriations bill would be passed before the continuing resolution expired on December 18.

The HUD budget for 2010 is about $46 billion. The biggest numbers are for Section 8 project-based and tenant-based (or housing choice) vouchers. These two account for $26.7 billion of the budget.

The conference report shows that Section 8 tenant based vouchers would receive $18.2 billion, or $348 million above the President’s request and $1.2 billion above 2009 funding, to support 2.1 million vouchers to individuals and families. Section 8 project based vouchers would receive $8.5 billion, or $457 million above the request and $1.4 billion above 2009, to provide affordable housing to 1.3 million low-income families and individuals, two-thirds of whom are elderly or disabled.

In other voucher-related funding Veterans Affairs housing vouchers would receive $75 million, matching 2009 and $75 million above that requested, and family unification vouchers would get $15 million, or $5 million below 2009 and $15 million more than requested.

In the area of public housing, where approximately 1.2 million households reside and are managed by some 3,300 public housing authorities (PHAs), the bill will invest $2.5 billion in the Public Housing Capital fund. That’s $256 million above the request and $50 million above 2009, to help Public Housing Authorities make critical repairs and improvements to public housing units and improve living conditions for residents.

The Public Housing Operating fund would receive $4.775 billion, which is $175 million above the request and $320 million above 2009, for maintenance, crime prevention and energy costs. Housing for the elderly (Section 202) would see $825 million to rehabilitate and build housing for low-income elderly people.

Other housing related funding includes $300 million in grants to rehabilitate and construct housing for disabled Americans and allow housing options for them to live independently (Section 811); $335 million for housing for persons with AIDs; and $1.865 billion for homeless assistance grants.

Housing counseling and foreclosure prevention would receive $385 million to help homeowners at risk of not meeting their mortgage payments. Additionally NeighborWorks organizations would receive $35 million for additional capital grants to develop and finance affordable housing projects across the country.

Community Development Block Grants would be funded at $4.45 billion to fund community and economic development projects in 1,180 localities. The Sustainable Communities Initiative would receive $150 million of that for grants to assist local communities with integrating housing, transportation and energy planning efforts.

HOPE VI would receive $200 million to fund competitive grants to transform communities of extreme poverty into sustainable mixed-income neighborhoods by demolishing severely distressed public housing. Of the $200 million, $65 million would be provided for the Choice Neighborhood Initiative. Brownfields redevelopment would receive $17.5 million.

In the area of rural housing, $25 million would go to the Rural Innovation Fund and Native American housing block grants would receive $700 million to rehabilitate and construct housing on Native American lands. This formula grant program provides a range of affordable housing activities including housing development, housing services, crime prevention and safety, and activities that provide creative approaches to solving affordable housing problems on Indian reservations and Indian areas.

In some bad news, the $1 billion that was in the President’s budget for the National Housing Trust Fund, was not funded.

Historic Tax Credit Proposed for School Rehabilitation
In my December 1 podcast, I reported on a bill that would exempt public school rehabilitation from the tax-exempt use exception to the rehabilitation tax credit. If H.R. 4133 is enacted, the change would allow the historic tax credit to rehabilitate public schools.

The idea was proposed in October in a New York Times op-ed written by Republican senator and former Virginia governor George Allen and former Virginia state Democratic Party chairman Paul Goldman. Since then, the proposal, introduced on November 19 by Reps. Eric Cantor, R-Va., and Artur Davis, D-Ala., has continued to gather bipartisan support and has been endorsed by former Democratic National Committee Chairman and gubernatorial candidate Terry McAuliffe and current Virginia governor Tim Kaine.

Under the plan, the historic tax credit could be used by developers to rehabilitate schools, then the schools would be leased back to local districts. Allen called the proposal “a home run of an idea.”

Goldman said most buildings more than 50 years old can qualify for the tax credit. In their op-ed, Goldman and Allen wrote that they had spoken with investors in Virginia and reported that if Congress amends the law, they already have the money pledged to modernize more schools in Virginia than has ever been done at any one time in any locality in the state’s history. H.R. 4133 was referred to the House Committee on Ways and Means.

The gathering bipartisan support for this bill is encouraging and increases the chances that the change could be adopted. We will continue to track its progress and in the meantime, a copy of the bill is available on our web site at

On that upbeat note, I sign off my first Washington Wire column in the Novogradac Journal of Tax Credits. Thank you for joining us. The staff of the Novogradac Journal and I look forward to the months ahead and providing you with the very latest and most comprehensive news, analysis and commentary on affordable housing, community development and renewable energy tax credits. We welcome your input, comments and questions by phone at (415) 356-8000 or by e-mail at [email protected].

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