In a new Op-Ed in The Hill, Rachel Fee shows what Congress can still do to expand affordable housing supply. Despite signature legislative achievements and a bipartisan effort to lower inflation, the White House and Congress have neglected to address the affordable housing shortage. Housing costs are a major factor in core inflation and a threat to long-term American growth — and the federal government needs to step up and address it now.
President Biden and Congress have the power to remove a major barrier to increasing affordable housing supply by exempting affordable housing projects from the federal volume cap on state’s private activity bonds (PABs) issuances. And they can do it this year.
Many states issued record levels of PABs for housing in 2019 and 2020 — and not just the usual suspects like New York, Texas, Florida and California. So did Maine, North and South Carolina, Utah, Oregon and Montana. Thirteen others issued more than their annual cap in 2019, including Kansas, Georgia, Nebraska and Tennessee. As a result, states of all stripes – red states, blue states, urban states and rural states – are reaching their maximum allowable PAB issuance.
Federal policy, it turns out, is outdated, and it is harming Americans everywhere.
The impact of this change will be truly transformative, even if it is simple. By exempting PABs used on affordable housing projects from the arbitrary cap, Congress can help states unlock their full potential to address the supply crisis at scale, preserving existing Department of Housing and Urban Development (HUD)-assisted housing and spurring the creation of new affordable housing.
Alternatively, Congress could lower the 50 percent test, another artificial limitation placed on states, that requires 50 percent of a development‘s qualified development costs be financed by PABs to be eligible for LIHTC. By bringing some PABs relief to states, Congress will show that it has not forgotten about housing after all.
Read the Op-Ed here.