With new legislative sessions and budget seasons underway, this edition of Policy Pulse is focused on helping you understand the current state of play at the federal and state levels, including what new bill introductions and budget discussions will mean for Cinnaire’s work and the communities we serve.
- The latest on the landscape in Washington and the path forward
- Bipartisan support for key affordable housing legislation growing in Congress
- Strong Congressional support for clearing the way for Fannie Mae to participate in multi-investor funds
- Michigan Regional Housing Partnerships kick off
- State budgets and policy landscape
- What you need to know from Mackinac
- What we’re reading
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The Landscape in Washington |
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Before we provide updates on our legislative priorities, we wanted to provide some quick context on where things stand in Washington and what to expect for the rest of the year. Last month’s debt ceiling agreement came with its fair share of high-stakes drama that has come to be a hallmark of Washington politics, especially during divided government. Beyond avoiding a default, however, the bipartisan agreement set the stage for Congressional consideration of federal spending programs.
The debt limit deal set spending levels for regular appropriations this year, limiting growth in spending to 1% going forward despite rising inflation. In theory, that should have made the regular appropriations process easier since these spending limits were always the biggest sticking point between Democrats and Republicans. However, a conservative revolt over these spending caps resulted in the House GOP going back on the deal.
While Congressional appropriations committees have started work on spending bills, the hard-right outcry has made it much more unlikely that Congress will act by September 30th, when federal government funding expires. The House and Senate will be more than $120 billion apart, leading to open speculation about a stopgap spending measure come the fall -- and a potential government shutdown. It still remains early, but these debates could mean downward pressure on housing and community development program spending – and determine whether we will have to deal with shutdown drama.
Despite this uncertainty, hope springs eternal that a tax package could come together at the end of the year. This is important because affordable housing and community development tax provisions (such as those affecting the Low-Income Housing Tax Credit, New Markets Tax Credit, and potential Neighborhood Homes Credit) will not move without a larger tax legislative vehicle. Earlier this month, House Republicans on the Ways & Means Committee introduced a package of tax cuts, an opening salvo for negotiations around a potential tax package that would come at the end of the year. The same issues that prevented a tax package from being enacted last year remain and there is no real path forward at the moment, but we will be monitoring discussions and building support for affordable housing priorities in the interim.
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Affordable Housing Tax Credit Legislation Showing Strong Bipartisan Support |
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Last month, a bipartisan group of lawmakers introduced the Affordable Housing Credit Improvement Act (S.1557/H.R. 3238). Led by Senators Maria Cantwelll (D-WA) and Todd Young (R-IN) in the Senate and Representatives Darin LaHood (R-IL) and Suzan Delbene (D-WA) in the House, the bill has attracted more than 100 cosponsors, equally divided between Republicans and Democrats. Several members in Cinnaire’s footprint have signed onto the bills. Overall, Novogradac estimates that this legislation, if enacted, would finance nearly 2 million additional affordable homes than otherwise possible over the next ten years. The two main provisions of the bill – restoring the 12.5% allocation cut and further increasing allocations, along with lowering the private activity bond financing threshold from 50 percent to 25 percent -- would have the biggest impact.
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Cinnaire joined more than 2,600 organizations in the ACTION Campaign calling on Congress to enact the Affordable Housing Credit Improvement Act this year. Also last month, Cinnaire's Matt Hodges and Chris Neary participated in the Affordable Housing Tax Credit Coalition’s (AHTCC) and Housing Advisory Group’s (HAG) Affordable Housing Symposium and Advocacy Day. Cinnaire staff met with lawmakers to grow support for the legislation and will be continuing education efforts this year. Cinnaire's team (left) also had an opportunity to pose questions to policymakers, including Senate Finance Committee Chairman Ron Wyden (D-OR).
Photos courtesy of the Affordable Housing Tax Credit Coalition.
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In addition to the LIHTC bill, we also saw the bipartisan introduction of the Neighborhood Homes Investment Act in both the Senate (S.657) and the House (H.R. 3940). Led by Senator Young (R-IN), Senator Ben Cardin (D-MD), Rep. Kelly (R-PA), and Rep. Higgins (D-NY), this legislation would establish a new single family federal tax credit targeted to new construction or substantial rehabilitation of affordable, owner-occupied housing located in distressed neighborhoods, which would be beneficial for many of the communities Cinnaire serves. Prospects for this legislation also remain tied to any potential tax bill at the end of the year.
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Bipartisan Senate Letter Urges Treasury Action to Restore GSE Investments in Housing Credit Funds |
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Uncertainty over the tax status of the Government-Sponsored Enterprises (GSEs) has prevented Fannie Mae from investing in multi-investor tax credit funds, including Cinnaire’s. Cinnaire has been working with members of the National Association of State and Local Equity Funds (NASLEF), the National Council of State Housing Agencies (NCSHA), and others to raise awareness of the impacts of this issue, especially in underserved rural markets struggling to produce and preserve desperately needed affordable housing.
Last week, a bipartisan group of 20 U.S. Senators sent a letter to U.S. Treasury Secretary Janet Yellen urging the Treasury Department to issue guidance to address the issue and enable the GSEs to resume participating in multi-investor funds. Five Senators from Cinnaire's footprint -- Senators Stabenow (D-MI), Peters (D-MI), Young (R-IN), Braun (R-IN), and Baldwin (D-WI) - signed the letter. |
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Michigan Regional Housing Partnerships Kick Off |
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As part of Michigan’s first statewide housing plan, MSHDA has formed Regional Housing Partnerships (RHP) in 15 regions across the state. The RHPs will be tasked with creating action plans for their area in alignment of the statewide plan. MSHDA has awarded coordination grants to the lead and co-lead organizations for each RHP and intends to fund the work of the RHPs through the Community Development Block Grant (CDBG) and Michigan Housing and Community Development Fund (HCDF). The regional action plans will include metrics to measure progress and structured for implementation over 4 to 5 years. RHPs will submit their action plans to MSHDA by the end of September for review of any gaps in the Statewide housing plan.
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State Budgets and Policy Landscape |
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Illinois
In Illinois, affordable housing advocates have been supporting the Build Illinois Tax Credit which would have provided $35 million or $350 million over ten years in state housing tax credits. Initially the Governor’s Office of Management and Budget as well as the legislature’s revenue forecasting agency anticipated strong state tax revenues, making the state housing tax credit financially feasible and politically viable. Unfortunately, tax receipts were lower than anticipated and the proposal has stalled this legislative session. The legislative champions are committed to continuing their support for the measure in future sessions.
While a new state tax credit did not advance into law, Illinois continued to make investments in affordable housing. The recently passed state budget, includes $138 million in new funding for gap financing for LIHTC developments. The funding will be available as grants and forgivable loans through IHDA.
Michigan
In Michigan, state lawmakers are working to finish the state budget. Both chambers have passed separate budget legislation and are working to finalize a deal through a conference committee. In the House, lawmakers approved $150 million for the Housing and Community Development Fund. $100 million over the Governor’s requested budget. Additionally, CDFIs in the state including Cinnaire are advocating for a second round of funding for the state’s CDFI Fund. Currently, the Senate passed budget includes $35 million for the Fund while the House budget does not include funding. The amounts and programming for each effort are subject to change as lawmakers in both chambers continue to negotiate.
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Indiana
In Indiana, the legislature concluded and enacted a new law establishing a loan fund known as the Residential Housing Infrastructure Assistance Program to assist local governments finance infrastructure to help bring sewer, water, roads and other infrastructure to new housing developments. The intent of the legislation is to provide another tool for developers to reduce the cost of bringing housing units online. Over the next 2 years, the state has budgeted $75 million to the loan fund, which will be administered by the Indiana Finance Authority. IFA will use criteria to prioritize applicants such as the local government investing in a housing study, improving zoning regulations, and through demonstrated need for housing inventory as indicated by the Indiana state housing dashboard. Additionally, the new law removes restrictions on the state's residential TIF statute. Current law requires residential TIF districts to be used in areas of low new growth and to seek approval from the local school board. The new law removes these requirements in an effort to expand the use of residential TIF districts.
Delaware
With the General Assembly’s session coming to a close, we are monitoring Governor Carney’s proposal to provide significant and unprecedented state funding for affordable housing programs.
Wisconsin
In Wisconsin, the Governor signaled support for expanding the state’s affordable housing tax credit in his executive budget bill which makes recommendations for the legislature to consider. Legislation to expand the state housing tax credit from $42 million to $100 million is making its way through both chambers. The Assembly passed AB 39 with bipartisan support and the Senate’s version of the legislation has passed out of committee and awaits further consideration.
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What You Need to Know From Mackinac Conference |
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The recently concluded Detroit Regional Chamber’s Mackinac Policy Conference featured major policy announcements from Governor Gretchen Whitmer and Detroit Mayor Mike Duggan. Governor Whitmer unveiled two initiatives, the first branded “Make it in Michigan” and the second focused on growing Michigan’s population. Mayor Duggan’s policy announcement would reform Detroit’s property tax system to incentivize investment.
Make it in Michigan is an economic strategy to invest in People, Places and Projects. The announcement at the conference set the vision for the strategy with the intention of making future announcements as the governor rolls out the initiative. In short, the strategy will invest in people through education, workforce and civil liberties; it will invest in places to make them attractive to live, work and invest; and it will invest in projects by competing for manufacturing and supply chain opportunities. Following the announcement, the Governor released a statement saying the strategy aims to: “Make Michigan a state full of attractive, vibrant communities where people want to live, work, and grow with investments to build more housing, expand access and lower the cost of child care, connect homes and businesses to high-speed internet, redevelop vacant or blighted properties, and bring new life to main streets and downtowns."
Growing Michigan Together is a new bipartisan council to develop strategies to grow Michigan’s population. The council is tasked with setting a population goal for the year 2050 and advise the governor on policies to reach the goal. The council’s recommendations may include ways to improve education, retain talent, modernize transportation and grow Michigan’s economy.
Mayor Mike Duggan proposed reforming Detroit’s property tax system by establishing a Land Value Tax. Like any municipality, Detroit levies property tax to help fund public services and works. In simple terms, property tax is calculated on the assessed value of a parcel resulting in properties with a building being taxed at a higher rate than vacant parcels or blighted buildings. Based on the Mayor’s analysis, one property owner holds 261 parcels of vacant land consisting of 22 acres. This individual pays $6,542 in taxes which is about the same amount of taxes for a $200,000 home located in Detroit. The Mayor’s proposal would cut property tax by about 27% and establish a land value tax at three times the current level. For the proposal to move forward, the state legislature would need to pass legislation to allow municipalities or just Detroit to levy a land value tax. In the meantime, the Mayor is meeting with stakeholders to build awareness and support for the proposal.
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