Perspectives

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Fixed 4% LIHTC Rate Welcome News

The Consolidated Appropriations Act of 2021, a $1.4 trillion omnibus spending bill passed by Congress in December 2020 and signed into law by the president, includes $900 billion in emergency coronavirus relief, and a series of changes that greatly impact the affordable housing industry.

4% Minimum LIHTC Rate

The establishment of a 4% fixed minimum rate for acquisition LIHTCs and tax-exempt bond financed developments is a major win for the industry. This comes after years of advocacy of this policy and the establishment of a fixed 9% minimum LIHTC rate.

Since its inception, the 4% LIHTC rate has been below 4%. In the latest published rate (December 2020), the 4% rate was actually 3.09%. The lower the rate, the less equity available for a tax credit project. Ultimately, making deals harder to pencil.

With a fixed rate of 4% and new equity generated for projects, Novogradac estimates that an additional 130,000 units will be built from 2021-2030. This potentially means nearly 35,000 new units in California, 7,500 in Texas, 5,000 in Illinois, 1,500 in Michigan, 3,000 in Ohio, and 2,000 in Virginia. Furthermore, Novogradac estimates that this will generate 160,000 new jobs and $18.5 billion in wages and income.

Emergency Rental Assistance

Another important piece of the spending bill is the $25 billion in emergency rental assistance. States and cities with more than 200,000 residents will each receive $200 million. Novogradac has provided a state-by-state estimate of this allocation.

At least 90% of the money is to be used to pay rent and utilities; states and cities can directly pay landlords and utility companies or allocate the funds to residents for the same use. This assistance is available to households below 80% area median income, with those households below 50% area median income as the priority.

In the near term, economic uncertainty and housing insecurity will persist. Both legislative measures will provide relief in advancing the supply of affordable housing and helping residents remain in their homes.Hooker DeJong, Inc., (HDJ) is a leading national design firm providing architectural and engineering expertise to support the affordable housing industry. HDJ’s diverse portfolio includes successful outcomes with adaptive reuse renovation, acquisition rehab, new construction, historic preservation and RAD. Contact HDJ to learn more about how we can support your affordable housing needs.

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