US Treasury establishes new tax credit rule to expand affordable housing

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By David Lawder

WASHINGTON, Oct 7 (Reuters) – The U.S. Treasury on Friday moved to preserve and expand the supply of affordable housing by finalizing a new income tax credit rule that could qualify more housing projects and extending commissioning times.

The final income averaging rule for the Low-Income Housing Tax Credit now allows for a broader mix of income levels among residents of eligible projects, using an average rather than limits fixed for all units.

The rule clarifies a 2018 law passed by Congress to allow developers more flexibility in qualifying for credits.

Previously, projects eligible for the tax credit, which can offset up to 70% of the costs of an affordable housing project, had to make at least 20% of the units available to residents earning 50% of the territory’s median income. (AMI) or 40% of units at 60% of AMI.

A Treasury official said the new regulations allow at least 40% of a project’s units to meet an average of 60% of the AMI, allowing more high-income tenants to mingle with residents at low income.

Dave Borsos, vice president of capital markets at the National Multifamily Housing Council, an industry trade group, said the change would keep more low-income people in such units, even if their income increased slightly. These units are typically rented at 30% of the tenant’s gross income or less.

“The concern we had as an industry was what happens when you have someone suddenly earning 61% of the income threshold, which would have required you to force that person off the property,” said he declared.

Delays in timelines for bringing a property into service to qualify for the tax credit will also prevent some projects from being disqualified due to construction delays and supply chain issues caused by the pandemic, said Borso.

The Federal Housing Finance Agency has also taken steps to allow housing finance companies Fannie Mae and Freddie Mac to provide additional financing of $6 billion a year to enable developers of affordable housing projects to obtain long-term funding.

The changes announced Friday follow the Treasury’s decision in July to give state, local and tribal governments more flexibility to channel COVID-19 rescue funds to affordable housing, including through direct long-term loans. for projects. (Reporting by David Lawder; Editing by Leslie Adler)

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