In This Edition

Affordable Housing Credit Improvement Act reaches 200 cosponsors in the House of Representatives
Resources on CRA reform
2024 outlook for state legislatures in Cinnaire's footprint
Workforce Housing Credit Proposal introduced
New CDFI Certification application released
Cinnaire on Capitol Hil - Housing Credit and CDFI advocacy

Affordable Housing Credit Improvement Act

Reaches 200 Cosponsors in the House

Earlier this week, the Affordable Housing Credit Improvement Act (AHCIA) reached a milestone of 200 cosponsors in the House of Representatives, evenly divided between Republicans and Democrats. While there is no magic to this threshold, it represents a strong show of support for the Low-Income Housing Tax Credit (LIHTC) and taking action to improve the program.

Legislative outlook: That support is critical as the tax-writing committees work on potential legislation including tax provisions. With Congress heading for the exits, there's no drama (or opportunity) for a year-end legislative vehicle in the coming weeks. However, with government funding for federal agencies slated to expire in a staggered fashion in mid-January and early February, there could be movement on tax items in early 2024.

Click here for video of Senator Ron Wyden (D-OR) imploring Congress to act on affordable housing

The tax-writing committees continue to have conversations around a deal centered on the child tax credit and business tax changes, although no agreement has been reached yet. Even if the tax writers reach a deal, it remains to be seen whether there will be a vehicle and whether there would be room for housing provisions.

Our coalitions will continue to push for inclusion of LIHTC provisions in such a tax package, especially the restoration of the 12.5% allocation increase and reduction of the 50% test for bond-financed deals.

NEW RESOURCE: The ACTION Campaign released updated fact sheets on the impact of the Housing Credit across the country: National, State, & District Fact Sheets – The ACTION Campaign (rentalhousingaction.org)

CRA Reform Discussions Continue

In October, three federal banking regulators published their final rule to put in place a long-overdue overhaul of Community Reinvestment Act (CRA) regulations. CRA is the major driver of financial institutions' affordable housing and community development activities, including LIHTC, New Markets Tax Credit, and CDFI lending capital.

From a big picture perspective, the reforms are intended to update CRA regulations to reflect the shift to online banking, putting more emphasis on the areas from which banks take deposits versus their physical branch presence. The regulators have also stated that their goals are to increase CRA-driven bank activity, although it is hard to say what the ultimate impact of the regulations will be given their complexity.

In the final rule, the regulators responded to concerns about their 2022 proposed rule that were raised by the affordable housing and community development industry, including the elimination of the investment test and the uneven split between the retail tests and community development tests. The final rule does eliminate the investment test, but provided additional incentives for banks to continue equity investing through LIHTC and NMTC. The final rule also evened the weighting of the retail and community development tests. Both moves were viewed very positively by affordable housing and community development stakeholders.

There is no shortage of speculation about the new rule and what it might mean, including the potential for evening out CRA hotspots and deserts. In reality, the impact will happen over time as investors digest the highly complex rule and their CRA exams begin under the new regime starting in 2026. Cinnaire will be monitoring potential impacts and staying in close contact with our coalitions and partners.

For more information on the rule and some analysis of its major changes, see below:

Novogradac: Final CRA Regulations Provide New Opportunities

Materials from federal regulators on the new rule

Outlook for State Legislatures in 2024

In Michigan, the legislature adjourned early in 2023 as a procedural move to allow new laws to take effect sooner, including a law to move the presidential primary election to February 27. Adjourning early left a lot of legislation pending for the new year, including legislation to modify the requirements for MSHDA’s pass-through bond financing program and allow for private placement structures. Passing legislation may be more difficult in 2024 because the Michigan House of Representatives will be evenly divided between Democrats and Republicans after two members of the Democratic caucus won their mayoral elections and have since resigned. Their seats will not be filled until April which will require legislation in the House to pass with Bipartisan support.

Indiana’s legislative session in 2024 is expected to begin later and end earlier than usual. The shorter session is due in part to the state’s biennial budget which passed last year leaving non budgetary policies for the 2024 session. Some political commentators speculate the legislature will not consider controversial proposals or proposals that will benefit any candidates running for governor. Housing advocates in the state are interested in educating lawmakers about a state version of the proposed federal Neighborhood Homes Improvement Act, which would create a tax credit for homeownership development.

In both Wisconsin and Illinois, advocates continue to work on housing tax credit legislation. Wisconsin is seeking to expand their existing state low-income housing tax credit program and Illinois is proposing to establish a state tax credit for affordable housing development.

In the mid-Atlantic, the Delaware General Assembly held a hearing on potential responses to the affordable housing crisis, including zoning reforms and a potential dedicated fund for affordable housing. Pennsylvania is considering legislation to increase the cap on the housing trust fund from $20 million to $100 million to expand low-income housing, prevent homelessness and promote homeownership. Maryland is seeking full funding for the Department of Housing and Community Development Capital Budget for Rental Housing.

Cinnaire on Capitol Hill

In October, Cinnaire's Chris Laurent, Chris Neary, and Matt Hodges attended the Affordable Housing Tax Credit Coalition's (AHTCC) Charles Edson awards. At the ceremony, Senator Tammy Baldwin (D-WI) presented the prestigious Edson Award for rural housing to Cinnaire Solutions for The Meadows, a 32-unit project designed exclusively to support agriculture and farmworkers and their families in Darlington.

Senator Baldwin and Chris Laurent, President of Cinnaire Solutions

As part of the conference, Chris Laurent and Chris Neary were joined by Wisconsin affordable housing organizations – including WHEDA and WHPC -- to educate the Wisconsin Congressional delegation about the value of the Low-Income Housing Tax Credit in meeting the state’s affordable housing needs.

John Cipriano and Chris Laurent of Cinnaire Solutions with Chris Neary at the Office of U.S. Senator Stabenow (D-MI), where they educated the team on Cinnaire Solutions projects in Michigan and current market conditions making the development of affordable housing a challenge.

In December, Cinnaire worked with the Opportunity Finance Network and one of its great partners in Michigan, Invest Detroit, to organize meetings on Capitol Hill to educate policymakers in Washington on the current capital environment and its impact on CDFIs and our borrowers. Right now, an unseen and unintended consequence of high interest rates and the tight credit market is that it's becoming increasingly difficult for CDFIs to meet the demand for affordable capital in underserved markets and impactful activities like affordable housing. CDFIs are known for filling gaps in communities that need it most, but with capital tightening, they need access to affordable and flexible capital to meet that critical mission. CDFIs are key to ensuring equitable development, building healthy communities, and addressing our nation's affordable housing crisis.

Representatives from OFN, Neighborworks Capital, Invest Detroit, LOCUS, New Jersey Community Capital, and Cinnaire at the Senate Banking, Housing, and Urban Affairs hearing room.

In addition to OFN and Invest Detroit, Cinnaire was joined by Neighborworks Capital, LOCUS, and New Jersey Community Capital, representing a cross-section of the CDFI industry.

Photo Right: Chris Neary (Cinnaire), Jenn Hayes and David Blaszkiewics (Invest Detroit) at the Office of Senator Gary Peters (D-MI)

Workforce Housing Credit Proposal Introduced

Senate Finance Committee Chairman Ron Wyden (D-OR) and a bipartisan, bicameral group of lawmakers introduced legislation to create a new Workforce Housing Tax Credit (WHTC) focused on middle-income renters. This new WHTC would complement LIHTC, providing additional allocations to states to finance housing between 60-100% of AMI. Action on this legislation is not expected soon.

A full summary can be found here. Novogradac also wrote up a summary of this proposal and its impact when Senator Wyden included this as part of his DASH Act.

New CDFI Application for Certification Released

On December 7th, the U.S. Department of the Treasury’s CDFI Fund released a revised Community Development Financial Institution (CDFI) Certification Application. The CDFI Fund has been working for years to update the application for CDFIs to become certified with the goal of ensuring that high standards for CDFI certification were maintained. Cinnaire submitted a comment letter in December 2022 encouraging the CDFI Fund to move forward with the efforts and recognizing the importance of preserving the integrity of the CDFI certification, while also encouraging the Fund to improve it.

While we and our CDFI partners will continue reviewing the new application, the Fund made some positive changes. The Opportunity Finance Network (OFN), the major trade association of CDFIs, released a statement applauding the new application.