Significant Changes to the LIHTC Program Signed into Law

Hello there everyone and apologies for the long delay in writing.  The recently-approved Omnibus bill made some significant changes to the LIHTC (as well as significant funding increases for HUD), which I outline below:

1. First, the bill increases the 9% LIHTC, which is responsible for most construction of new affordable housing nationwide, by 12.5% for four years, starting in 2018.  The increase in funding will help offset the impacts of corporate tax reform to restore affordable housing production to pre-2016 levels.  
2. Second, the bill makes a complex change called "Income Averaging," which could increase housing affordable to lower-income households and ease LIHTC compliance.  Currently, only housing units that are affordable to households below 60% of the Area Median Income (AMI) are eligible for LIHTCs.  Income Averaging would allow projects as a whole to qualify for LIHTCs, provided that the average affordability is at 60% AMI or less.  For example, a project that has 20 units at 80% AMI and 20 units at 40% AMI would currently only receive LIHTCs for half of the units, i.e. the units at 40% AMI.  Under Income Averaging the entire project could qualify for LIHTCs, because the average income level for all of the units will be at or below 60% AMI.  

These changes together will strengthen the LIHTC program and are a welcome change from a tough two years for the affordable housing industry.  I'll dig deeper into Income Averaging in a future post.