Lawmakers have reintroduced legislation to establish a workforce housing tax credit to help fill the gap between middle- and low-income housing.
The bipartisan bill seeks to finance 344,000 affordable rental homes over 10 years. The Workforce Housing Tax Credit (WHTC) Act also gives housing finance agencies flexibility to transfer their middle-income allocation to their low-income housing tax credit (LIHTC) allocation when necessary and allows developers to combine the two credits to make more projects financially feasible.
“In California’s 19th congressional district, there are many people who work and support their families but make too much to qualify for low-income housing and too little to buy or rent a home near their workplace,” said Rep. Jimmy Panetta. “My bipartisan Workforce Housing Tax Credit Act would address that gap by incentivizing investment in the development of workforce housing for middle-income families.”
The Democrat legislator introduced the act with Rep. Mike Carey, a Republican from Ohio.
“Columbus, Ohio, has seen incredible population and economic growth, but with this new development comes significant challenges,” Carey said. “Given the current shortage of affordable housing, we must continue to do everything we can to incentivize the development of low- and middle-income housing, and this bill does exactly that. Stable housing is essential to the success of individuals and families, and I will continue to focus on ensuring people in Ohio’s 15th congressional district have access to housing.”
Highlights of the WHTC Act include:
- Similar to the LIHTC, state housing finance agencies would allocate the tax credits to developers through a competitive process. The tax credits would be provided to developers over a 15-year period, with a 15-year compliance period and 30-year extended commitment;
- Tax credits are allocated to states based on population, at $1 per capita with a $1.5 million small state minimum. An additional 5% of the allocation would be made available and reserved for middle-income housing developed in rural areas;
- For new buildings, the credit would equal 50% of the cost of the building over the lifetime of the credit. For rehabilitated buildings and bond-financed buildings, the credit would equal 20% of the cost of the building. More credit could be awarded for buildings in difficult development areas, as designated by the Department of Housing and Urban Development (HUD). However, state housing agencies would only allocate the amount of credit needed to make a housing project financially feasible;
- To qualify for the credit, at least 60% of the building’s units must be occupied by individuals with area median incomes of 100% or less where the rents are restricted to 30% of the designated income. The affordability restrictions would remain in place for up to 15 years after the compliance period (for a total 30-year affordability period); and
- WHTC also works in conjunction with LIHTC to support low-income affordable housing. First, a state can tailor the allocation to its needs: It can elect to transfer any portion of their middle-income allocation to LIHTC at any point during the year. Second, WHTC can help the financial feasibility of affordable buildings by combining LIHTC and middle-income housing tax credits for different units as long as at least 20% of the total units are middle-income units.
Previous attempts to create a workforce housing credit have stalled.
Several industry leaders have endorsed the latest bill, including Sharon Wilson Géno, president of the National Multifamily Housing Council.
“Building on the immensely successful LIHTC, the workforce housing tax credit would extend critical support to moderate-income households who are struggling with housing costs,” she said. “Together, both tax credits will help grow the supply of housing across communities nationwide and move us closer to the affordability solutions that American renters urgently need.”
Kris Cook, CEO of the National Affordable Housing Management Association (NAHMA), noted how the housing crisis has extended into the “missing middle.”
“While the LIHTC remains our most successful affordable housing tool for low-income families, a widening gap exists for those earning up to 120% of the area median income,” she said. “Teachers, first responders, and healthcare professionals are increasingly priced out of the communities they serve. This bipartisan legislation, introduced by Reps. Panetta and Carey, provides a necessary, market-based extension of the proven tax credit model to meet this specific need. By providing a scalable financing tool, this act will empower developers and managers to expand the supply of stable, high-quality housing for middle-income earners. NAHMA commends this proactive approach to strengthening the housing continuum. We urge Congress to act swiftly to pass this legislation, ensuring that the American workforce has access to the housing security essential for economic stability and community growth.”