The affordable housing industry has received positive news in recent weeks with regards to two of the major housing production programs – the low-income housing tax credit (LIHTC) and rental assistance demonstration (RAD). With continued program adjustments, particularly during the current challenging economic environment, the affordable housing industry will have the tools to close projects and secure new ones.
For fiscal year 2023, the IRS has announced that it is increasing the per-capita multiplier for 9% LIHTCs, the small-state minimum for 9% LIHTCs, the private activity bond (PAB) per-capita multiplier, and the small-state minimum cap for PABs. The increases announced by the IRS on October 18, 2022 for 2023 are as follows:
- A 15-cent increase for the per-capita multiplier to $2.75, which is the largest increase since 2003.
- The minimum LIHTC for smaller states will increase to $3,185,000.
Private Activity Bond (PAB) 4%
- The PAB per-capita multiplier will increase $120, an increase of $10.
- The minimum cap for smaller states will increase to $358,845,000.
A previous HDJ Perspectives post further expands on how state amounts are determined and allocated by the IRS.
Average Income New Rule
As part of the Housing Supply Action plan, the Biden Administration provided updates and guidance on various measures and deadlines. Of significance is the final rule on the average income test. The new rule will “allow for the average income test to be satisfied if at least 40 percent of a building’s units collectively average 60 percent or less of AMGI.” This update should be a positive since the prior lack of guidance on average income limited its effect and usage.
The RAD program continues to be a critical and impactful tool in the preservation of affordable units. HUD recently released a memo noting that the RAD program to date has preserved over 185,000 homes and generated over $15 billion in investment. HUD has also found that RAD renovations are going deeper into scope as per unit costs have increased from $55,000 per unit during 2013-2018 to $144,000 per unit in 2022.
HDJ, Inc. is a leading national design firm providing architectural and engineering expertise to support the affordable housing industry throughout the United States. HDJ’s diverse portfolio includes successful outcomes with adaptive reuse renovation, acquisition rehab, new construction, historic preservation and RAD.
Author: Joshua Hahn