On May 6, Representatives Jimmy Panetta (D-CA) and Mike Carey (R-OH) introduced the Workforce Housing Tax Credit Act (WHTC), a new tax credit program for moderate-income Americans. The bipartisan legislation seeks to finance 344,000 affordable rental homes in the next decade.
The proposed WHTC copies the model that LIHTC has used for years. States would be given $1 per capita in tax credits with a $1.5 million small state minimum. Then state housing finance agencies would distribute the credits through competitive applications. New buildings would get credit equal to 50% of their cost over the 15-year lifetime of the credit, while rehabilitated and bond-financed buildings would receive 20%. There are rules for receiving up to 5% of the funds for rural areas, and additional funding is available for HUD-designated difficult development areas, but state HFAs would only be allowed to provide funding to make a project feasible.
To qualify for the funds, at least 60% of a building’s units must be occupied by individuals with area median incomes of 100% or less, with rents restricted to 30% of the designated income. These restrictions would last 15 years past the end of the credit period. Combined with the 15-year length of the credit, these restrictions would remain in place for a total of 30 years.
Given the similarities between the systems, it is no surprise that there are rules that overlap these programs. States would be able to move any amount of funding from WHTC to LIHTC at any time. In addition, a single development would be able to apply to both programs, so long as both of their requirements are met, and 20% of the total units are middle-income.
While similar proposals have stalled in past sessions, this bill serves an increasingly necessary goal, assisting the “missing middle”. As the housing crisis has worsened, the income levels it affects have expanded. As higher levels of middle-income Americans go without access to affordable housing, the higher income cap of the WHTC program may alleviate some of the challenge, while making more funds available to LIHTC.