With every new Congress, legislation needs to be re-introduced. After delayed election results and a contentious battle for Speaker of the House, a very divided U.S. Congress got off to a slow start this year. But we are starting to see legislation introduced, including several of
Cinnaire’s policy priorities. Bill introductions are an important marker to help rally support in Congress for additional resources and policy changes to programs.
The Affordable Housing Credit Improvement Act (AHCIA), which would increase resources for the Low-Income Housing Tax Credit (LIHTC) program, is expected to be reintroduced very soon. The bill will continue to have strong bipartisan support. The LIHTC program was featured prominently in a recent Senate Finance Committee hearing as an effective tool for addressing the growing affordable housing crisis in the United States. At that hearing, several Senators representing states in Cinnaire’s footprint, including Senator Debbie Stabenow (D-MI) and Senator Todd Young (R-IN), pointed to the value of the LIHTC program.
The Neighborhood Homes Investment Act (NHIA) was also discussed in the hearing. NHIA was introduced recently by Senator Ben Cardin (D-MD) and Senator Young to create a tax credit for single-family housing redevelopment in distressed areas.
Finally, the New Markets Tax Credit Extension Act, which would make the NMTC program permanent and index allocations to inflation, has also been introduced in the U.S. Senate with bipartisan support. Bipartisan reintroduction of the House bill is expected this week.
Prospects for action and the impact of the looming debt ceiling debate
All the above legislative priorities will not advance on their own. While there is interest in addressing housing as a bipartisan issue in the tax code, any progress will require some agreement on a bipartisan basis to advance on a larger legislative vehicle.
It is too soon to tell whether such a vehicle will emerge, and there are significant headwinds to bipartisan cooperation in this Congress. Divided government sometimes leads to bipartisan deals, but the lengthy race for Speaker of the House exposed the difficulty that Republican leadership will face in keeping its own caucus unified. It also empowered the extreme minority and demonstrated the leverage they have over Speaker Kevin McCarthy (R-CA) and his tenuous hold on the speakership.
Looming over Congress’ consideration of all these items is the non-negotiable need to raise the U.S. borrowing limit, also known as the
debt ceiling or debt limit. Congress will need to take action on this at some point this summer. Battle lines are being drawn, with Congressional Republicans, driven by the far-right flank, demanding deep spending cuts to domestic spending programs in exchange for any action.
In 2011, a similar dynamic was at play with Republicans controlling the House and President Obama facing re-election, which resulted in a fiscal belt-tightening agreement that led to budget sequestration. Unlike 2011, however, President Biden is much more dug in against potential cuts, refusing to negotiate fiscal policy around such a
high stakes issue that could imperil the economy.
We will see how the debate plays out over the coming months, including the impact of the fragile banking sector, but it is likely there will be some bumps in the road.
Budget and appropriations process underway
In addition to raising the debt ceiling, Congress will need to fund the federal government. The current federal spending bill expires on September 30th, meaning that Congress will need to either reach a bipartisan agreement to fully fund federal agencies or enact a Continuing Resolution (CR) to maintain current spending levels. Work is underway by the Appropriations Committees to determine potential funding levels, but any federal spending hinges on the outcome of debt ceiling negotiations.
Cinnaire has encouraged its Congressional delegations to fully fund several key programs that benefit the communities we serve and support our work. Cinnaire’s Katey Forth and Chris Neary recently participated in the CDFI Coalition Institute along with several CDFIs from across our footprint, including meetings with the Michigan Congressional delegation and other offices to support funding for the CDFI Fund.
Cinnaire also signed a letter, along with 748 organizations across the country, requesting additional funding for the HOME Investment Partnerships program. Senator Chris Coons (D-DE) is leading a letter in the U.S. Senate requesting $2.1 billion for HOME.
Regulatory front: Monitoring the impact of bank instability and future rulemakings
It is too soon to tell what the long-term impact of the recent bank failures will be on the regulatory environment. There has been no shortage of proposals in response to the crisis, from potentially higher deposit insurance to reinstating higher regulatory scrutiny for regional banks. The Biden Administration is looking into both regulatory and potential legislative changes to heighten bank rules after the collapse of Silicon Valley Bank. We will be monitoring the developments on this front and any potential impact on affordable housing and community development.
Separately, federal banking regulators are still planning to release a final rule to update
Community Reinvestment Act (CRA) regulations at some point this year, although the timing is unclear. You can read Cinnaire’s comments
here.
