House Releases New Bill Text for Build Back Better Act; Adds Back Housing Credit Provisions

Today, the House Rules Committee released a new version of the Build Back Better (BBB) Act — otherwise known as the reconciliation bill or the social policy bill — which the committee will consider this evening. Rules Committee consideration of legislation is the final step before a bill is taken up on the House floor, which could happen as early as tomorrow.

Unlike the draft text issued last week, the new text (the Rule Committee Manager’s Amendment) includes a major expansion of the Housing Credit program and several other key Housing Credit provisions NCSHA has been seeking. The bill also includes all of the major investments in HUD programs, including $9.925 billion for the HOME program and $14.925 billion for the Housing Trust Fund program, that had been included in last week’s draft.

Affordable Housing Tax Programs

Housing Credit cap increase. The bill would provide a cap increase of 10 percent plus inflation each year for three years from 2022 to 2024, amounting to approximately a 41 percent total increase over 2021 levels. In 2025, the Housing Credit volume cap would decrease again to $2.65 per capita or $3,120,000. In 2026 and years thereafter, the volume cap would be the 2025 amounts adjusted for inflation. The table below provides the specific amounts in each of the following four years.

Reduction of bond financing threshold. The bill would reduce the bond financing threshold from 50 percent to 25 percent for calendar years 2022 to 2026.

Basis boost and set-aside for extremely low-income (ELI) properties. The bill would allow states to provide a basis boost of up to 50 percent for properties in which at least 20 percent of the units are rent restricted and designated for households earning no more than the greater of 30 percent of area median income or 100 percent of the federal poverty line. At least 8 percent but no more than 13 percent of each state’s Housing Credit volume cap must be allocated to such properties. The ELI basis boost and set-aside would be permanent.

Closing the qualified contract loophole. The bill would repeal the qualified contract option for properties receiving an allocation of Credits or, in the case of bond-financed projects, the 42(m) letter after January 1, 2022. Properties that received their allocation of Housing Credits or 42(m) letter prior to that date would still be able to go through the qualified contract process, if the owner has not otherwise waived that right; however, the qualified contract price would be fair market value as affordable as determined by the state Housing Credit agency. This change to the program would be permanent.

Protecting nonprofit sponsors’ ability to purchase properties at Year 15. The bill would replace the nonprofit Right of First Refusal (ROFR) with a purchase option for newly financed properties. It also clarifies for existing properties that the ROFR applies to all partnership interests, including assets relating to the building such as reserve funds, and that the nonprofit sponsor may exercise its ROFR with or without the approval of the limited partner and in response to any offer, including that of a related party. The provision does not supersede express language in any existing partnership agreement. This change would be permanent.

Indian area basis boost. The bill would allow state Housing Credit agencies to provide a 30 percent basis boost to properties located in Native American areas. This change would be permanent.

Coordination of Housing Credit and renewable energy credit. The bill would allow Housing Credit developers to take advantage of the Section 48 Investment Tax Credit for renewable energy equipment without a corresponding reduction in Housing Credit eligible basis.

Neighborhood Homes Credit. The bill would establish the Neighborhood Homes Credit (NHC) to promote new construction or substantial rehabilitation of affordable, owner‐occupied housing located in distressed neighborhoods. The NHC would allow project sponsors to claim a credit to cover the difference between the costs to rehabilitate a home in a distressed neighborhood, or build a new home on an empty lot, and the price for which the home is sold. As with the Housing Credit, the program would be overseen by the Treasury Department and Internal Revenue Service, which would allocate credit authority to each state. Each state would be required to designate a single agency to award the credits, and each agency would be expected to develop a Qualified Allocation Plan for their NHC program. Each state’s NHC allocation would be equal to its state population times $3, with a small-state minimum of $4 million, except for in 2025 when the cap would be $6 times the state population or $8 million. In years 2023 to 2025, those amounts would be adjusted upward for inflation. The program would sunset after 2025.

Affordable Housing Spending Programs

HOME Investment Partnerships. The bill would provide $9.925 billion for HOME available through fiscal year (FY) 2026. The bill exempts these funds from HOME’s 24-month commitment deadline, match requirements, and Community Housing Development Organizations set-aside. It also provides broad waiver authority to the HUD Secretary, other than for requirements related to tenant rights and protections, fair housing, nondiscrimination, labor standards, and environmental review.

Housing Trust Fund. The bill would provide $14.925 billion for the Housing Trust Fund through FY 2026. Because of the way the bill is crafted, certain HOME program requirements, such as Davis-Bacon requirements and HOME’s environmental review requirements, would apply to these funds (as opposed to the different environmental review requirements that otherwise apply to the Housing Trust Fund).

First-Generation Downpayment Assistance Program. The bill would establish a new $10 billion program through which states and nonprofits would provide first-generation home buyers with grants for down payment assistance and other expenses associated with purchasing a home. Of the total, $6.825 billion would go to states and $2.275 billion would be awarded competitively to Community Development Financial Institutions and other entities, with that funding available through FY 2026. $500 million would be available for housing counseling for eligible buyers, available through FY 2031, with the remaining funds available to HUD for administration and oversight.

Other Affordable Housing Spending Programs.

• $65 billion for Public Housing revitalization
• $24 billion for Housing Choice Vouchers
• $5 billion for a new program to provide subsidies for 20-year mortgages for first-generation home buyers
• $5 billion for lead-based paint hazard control
• $3.05 billion for the Community Development Block Grant for affordable housing infrastructure activities
• $3 billion for a new Community Restoration and Revitalization Fund
• $2 billion for energy and water efficiency and climate resilience for Section 811, Section 202, and Section 8 properties
• $2 billion for rural rental housing
• $1.75 billion for a new initiative called the Unlocking Possibilities Program that will provide grants to communities for housing planning activities, including streamlining regulatory requirements, reforming zoning codes
• $1.6 billion for revitalization of distressed multifamily housing properties
• $1 billion for project-based rental assistance
• $1 billion for investments in Native American communities
• $800 million for fair housing
• $750 million for the Housing Investment Fund (Capital Magnet Fund)
• $500 million for Section 811 Housing for Persons with Disabilities
• $500 million for Section 202 Housing for the Elderly
• $100 million for a HUD-insured small-dollar mortgage demonstration program
• $100 million for investments in rural homeownership
• $100 million for capacity building
• A requirement that the Federal Home Loan Bank (FHLB) contribute 15 percent of the preceding year’s net income of the Federal Home Bank (not less than $100 million) to the FHLB Affordable Housing Program from 2022 through 2027
• Forgiveness of the National Flood Insurance Program’s accumulated debt