In its last action before final adjournment, Congress has cleared a catch-all spending bill that calls for the largest single increase ever in the low income housing tax credit, the mechanism which has been responsible for the development of perhaps a million affordable apartments since its inception in 1987.

President Clinton is expected to approve the increase as part of a larger bipartisan plan to revitalize impoverished communities that the President and House Speaker Dennis Hastert, R-Ill., agreed to develop earlier this year. The proposal was originally part of the proposed fiscal year 2000 budget.

Under the omnibus appropriations measure which includes new tax incentives to boost economic development in urban and rural areas, the tax credit will be increased from $1.25 per capita to $1.50 per capita effective Jan. 1. In January 2002, the allocation will rise again to $1.75 per capita or $2 million, a newly established floor designed to help small states.

Under the program, state housing authorities allocate tax credits in exchange for equity investments in the acquisition, development and rehabilitation of affordable apartments.

Developers then sell those credits to investors, who use them to offset their tax liabilities. The equity raised from the transaction reduces the debt needed to fund the project and also allows developers to lease units at below-market rents.

In addition, the big spending bill increases the cap on tax-exempt private activity bonds over a two-year period between 2001 and 2002 from the current $50 per capita or $150 million, whichever is greater, to the greater of $75 per capita or $225 million.

Also, both the cap and floor amounts for the credit and bonds will be adjusted for inflation starting in 2003.

Furthermore, the bill includes an additional $40 million in credit subsidies for the Federal Housing Administration general and special risk insurance account backing which government-insured multi-family loans. This is in addition to the $100 million in credit subsidies passed in October as part of the housing appropriations bill and should be enough to prevent the lending program to avoid being shut down again this fiscal year.

At the urging of numerous housing organizations, more than 75 percent of the entire House of Representatives had signed on to legislation to hike the tax credit and bond limits. <[> That's at least 100 more than more glamorous initiatives to end to so-called marriage tax penalty, reduce capital gains and reform the estate tax.

The higher annual cap on the low-income tax credit represents a 40 percent increase. The White House estimates the extra credit authority is enough to support an additional 180,000 low-income rental units annually.

"Congress has never increased affordable production programs as much in a single piece of legislation, but the need has never been greater," said John McEvoy, executive director of the National Council of State Housing Agencies.

Increasing the tax credit to account for inflation has been a priority of America's Community Bankers for many years, said ACB President Diane Casey. "Home mortgage and construction lending is a critical part of the mission of community banks and the low-income housing tax credit is a tested and proven means used by many of ACB's members to increase the stock of affordable rental housing in the communities they serve."

The bill also establishes a new "community renewal" program which authorizes the Department of Housing and Urban Development to designate up to 40 renewal communities that will be eligible for a variety of tax incentives, creates a new federal "new markets" tax credit under which a credit will be available for equity investments made in "community development entities" that serve or invest in low-income communities or low-income persons, extends the designation of empowerment zone status for existing zones and grants authority for HUD to designate an additional nine zones.

Published: December 20, 2000

Use of this article without permission is a violation of federal copyright laws.

When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.