Senators Eye Housing Bills for Bipartisan Tax Policy Push

Lawmakers are hoping that housing-related tax policies will spur bipartisan action this Congress, bringing back bills that they say didn’t get a fair shake last time around.

A bipartisan group of Senate Finance Committee members—Democrats Ben Cardin of Maryland, Maria Cantwell of Washington, and chairman Ron Wyden of Oregon, along with Republican Todd Young of Indiana—are planning to reintroduce tax legislation to promote production of low-income housing and help facilitate home ownership.

The committee will kick off discussions on how tax policy can help create more affordable housing with a hearing on March 7. Housing is one of Wyden’s priorities for the committee, and he’ll be reintroducing his bill to create a middle-income housing tax credit sometime this year.

The Neighborhood Homes Improvement Act will be introduced next week, Cardin said, and the Affordable Housing Credit Improvement Act is slated for spring, Young’s office said.

Both bills aim to make housing more affordable through the use of tax credits, though the first helps with home ownership while the latter would create more low-income rental housing through an expansion of the Low-Income Housing Tax Credit. Similar legislation is also planned to be reintroduced in the House by Reps. Suzan DelBene (D-Wash.) and Brian Higgins (D-N.Y.).

While lawmakers and advocacy groups said they are waiting for a vehicle for the legislation, Cardin said he believes there will be an opportunity, and that the failure to come together on a tax package during last year’s omnibus spending negotiations doesn’t doom the housing bills.

Cardin is working with Young on the NHIA, and said he’s talking to other Republicans to replace retired Sen. Rob Portman (R-Ohio) as a cosponsor on the bill.

“We didn’t get to housing last year,” Cardin said. “I’m certainly hopeful. We need a vehicle and we hope we’ll have one.”

The question is if enough Republicans are willing to come to the table, Wyden said, noting that there’s long been bipartisan support for proposals like the Low-Income Housing Tax Credit among Finance Committee members.

“We’re pushing very hard,” Wyden said. “I mean, to a great extent, it’s going to come down to Republicans.”

The Low-Income Housing Tax Credit, in its current form, is estimated to cost around $13.5 billion annually, according to the Congressional Research Service.

While it will be a heavy push to move any tax legislation over the finish line in the divided Congress, particularly with the GOP threatening to not raise the debt limit over spending, advocates hope to build enough momentum to set up the legislation for the first available vehicle.

A technical corrections bill to recent tax legislation, must-pass legislation, or another government funding bill may provide those chances.

Home Ownership

The Cardin-Young proposal would create a federal tax credit to cover the cost between building or renovating homes in distressed neighborhoods and the price at which they can be sold. The credit, allocated by the states, would also help homeowners in those neighborhoods stay and renovate their home.

In some areas, it costs more to build or renovate a house than the house can be sold for on the open market, leading to a “valuation gap” in those places, said Kristin Siglin, vice president of policy and partnerships at the National Community Stabilization Trust.

The bill is coming back with some slight tweaks—mostly technical changes that came at the behest of the IRS and Treasury Department, Cardin said. More Republicans are reviewing the legislation now, he said, and the goal is to get a “broad bipartisan group” of supporters.

A wide-ranging coalition of advocacy groups are backing the bill, including the American Bankers Association, National Association of Realtors, and National Fair Housing Alliance, according to the Neighborhood Homes Coalition.

“It’s a cost-effective, kind of elegant solution to a problem,” Siglin said. “That’s why it’s got such a broad coalition.”

Low-Income Housing Tax Credit

Also on deck for the Finance Committee is a proposal led by Young, Cantwell, and Wyden to expand the Low-Income Housing Tax Credit. The bill last Congress drew around 200 cosponsors in the House, including 71 Republicans, and 43 cosponsors in the Senate.

A 12.5% increase in the amount of credits a state can award from LIHTC expired in 2021, but wasn’t restored in the omnibus bill last year despite a bipartisan push. The increase was part of a 2018 version of the larger bill.

“We’ve been looking for an opportunity to get it through,” Young said.

The bill would also alter the credit in a way that better serves people with the lowest incomes, said Sarah Saadian, senior vice president of public policy for the National Low Income Housing Coalition. The bill would provide more resources for developers who agree to set aside a certain percentage of units for extremely low-income households.

Saadian would like to see some more slight adjustments, including a provision to allow better data sharing between the Department of Housing and Urban Development and the IRS.

Still, Saadian said she’s not optimistic about any movement on housing policy this year.

“It’s a really challenging environment right now,” Saadian said. “A lot of focus of Republicans is about cutting federal resources, and so it’s just hard to know if that conversation eats up all the oxygen in the room, or if there will be an opportunity to move this forward.”