Analyzing the Impact of Lowering the 50 Percent Test for 4 Percent Tax-Exempt Bond-Financed Properties – March 2021 Update
On behalf of NCSHA, Novogradac updated its April 2020 analysis of the results of lowering the 50 percent financed-by threshold for 4 percent low-income housing tax credit properties. Under current law, if a developer finances 50 percent or more of a project with tax-exempt private activity bonds, the owner is generally eligible to claim tax credits that don’t impact an agency’s LIHTC volume cap. The updated analysis takes into account the enactment of a 4 percent floor for the 30% net present value LIHTC, enacted in December 2020.
Private Activity Bond Thresholds
Because the amount of private activity bonds in a state is limited and there are uses for these bonds outside of residential rental housing, it’s important to understand how changing this 50 percent requirement might impact LIHTC programs. This free report analyzes the outcomes related to bond cap levels if the financed-by threshold were lowered to 40 percent, 33 percent or 25 percent.
Increasing the Amount of Affordable Housing
Reducing the private activity bond requirement would free up these funds for more housing developments. In addition to estimating the amount of “freed” financing capacity, the report looks at what would happen if this capacity were applied to rental housing financing.
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