WASHINGTON - With the cost of housing squeezing family budgets across the country, Senate Finance Committee Ranking Member Ron Wyden, D-Ore., released draft legislation Thursday that would create a new tax credit to spur the development of rental homes affordable to Americans with moderate incomes.
The new incentive, called the Middle-Income Housing Tax Credit (MIHTC) is carefully designed to work in conjunction with the Low-Income Housing Tax Credit (LIHTC), a popular existing program that has helped to finance the construction of nearly three million affordable rental units since its creation in 1986.
“Many people across Oregon know what it’s like to see rents climb skyward beyond their ability to pay. When every penny goes into the rent check on the first of the month, you can’t even dream of saving for a down payment on a first home, paying for college or building a nest egg for retirement. In my state and nationwide, affordable housing is key to climbing the ladder of economic mobility,” Wyden said.
“The bottom line; America’s housing policy needs a remodel. It should start by using proven tools to develop new homes for Americans earning low and moderate incomes. This new tax credit will work hand-in-hand with the tax credit for low-income housing, which has been a huge success for decades.”
Building on the successful LIHTC model, the new credit would allocate funds to states based on population. State housing authorities would then follow a competitive process to allocate the tax credits to developers for individual projects, either new construction or rehabilitation.
In order to fit the new MIHTC program to the different needs of cities around the country, the qualification standards for MIHTC would be tailored to local economies and incomes.
Tenants’ rents in the MIHTC properties must not exceed 30 percent of Area Median Gross Income (AMGI), a figure calculated by the Department of Housing and Urban Development that takes local economic factors into account.
Furthermore, MIHTC would require at least 60 percent of a property’s units to be occupied by individuals or families with incomes that fall between 60 and 100 percent of AMGI. That would align the new middle-income credit with LIHTC, which caps the incomes of those in qualifying projects at 60 percent of AMGI.
In Portland, a family of four between 60 and 100 percent of AMGI would earn between $44,000 and $73,000.
In order to help guarantee that the MIHTC program does not detract from investment in low-income housing, a state’s unused MIHTC dollars would be returned to the existing pool of funding for LIHTC. Wyden is also a cosponsor of the Affordable Housing Credit Improvement Act, bipartisan legislation that would expand LIHTC.
The MIHTC discussion draft is a detailed legislative proposal, but it is not final. It is being circulated to stakeholders, members of Congress, federal officials and others for review and comment. The responses will be reviewed and, if appropriate, incorporated into legislation.
Please submit comments on the proposal to MIHTC@finance.senate.gov.