A bipartisan group of Congressmembers recently urged the Treasury Department and the Internal Revenue Service (IRS) to finalize the average income test rule under the Low-Income Housing Tax Credit (LIHTC) program.
The legislators, led by U.S. Sens. Michael Bennet (D-CO) and Todd Young (R-IN), state that the final rule should support the expansion of affordable housing.
The lawmakers point out that there was a shortage of nearly 4 million homes in 2020. The LIHTC program, which accounts for more than 90 percent of new affordable rental units built today, is the most important federal tool for boosting affordable housing supply. Congress broadened the LIHTC program in 2018 to create the “average income test,” which enables LIHTC properties to serve households with a wider variety of incomes under certain conditions. However, since the IRS released its proposal to implement the new test in October 2020, the test has rarely been used.
“While the average income test is intended to expand affordable housing to more families, stakeholders from across the affordable housing community have raised concerns that implementing IRS’s proposed regulations will be highly complex and risky compared to the LIHTC program’s existing set-aside tests. In fact, since the publication of the proposed rule, few investors have been willing to invest in average income test properties due to the risk associated with that structure, contradicting congressional intent to broaden the program in this manner,” wrote the lawmakers to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig.
Along with Bennet and Young, the letter was signed by U.S. Sens. Rob Portman (R-OH), Ron Wyden (D-OR), and Mike Crapo (R-ID), along with Reps. Suzan DelBene (D-WA), Jackie Walorski (R-IN), Don Beyer (D-VA), and Richard Neal (D-MA).
“We are pleased by President Biden’s May 16, 2022 announcement that IRS will finalize the income averaging rule no later than September 30, 2022. Given the urgency and severity of our nation’s affordable housing crisis, we respectfully ask you to meet or exceed this deadline while ensuring the final rule provides a workable solution that incents affordable housing production,” the legislators wrote.