While many were celebrating the coming of the New Year with friends and family, Congress was frantically trying to pass legislation to prevent the country from falling off the fiscal cliff. During the early hours of New Years, the American Taxpayer Relief Act of 2012 was passed. While considered an imperfect bill by both Democrats and Republicans alike, there are several housing and community development victories to celebrate.
The Budget Control Act of 2011 would have required across-the-board cuts, also known as sequestration, to both defense and non-defense discretionary funds for a period of 10 years. This would have meant an 8.2% cut to affordable housing programs, including cuts in Minnesota of:
- 2,587 vouchers for families
- $6,025,280 in public housing
- $2,268,442 in homeless assistance
- $105,014 in Housing Opportunities for People with AIDS (HOPWA) Formula Grants
- $3,849,970 in the Community Development Block Grant (CDBG) Program
- $1,101,31 in the HOME program
- $1,411,711 in Native American Housing Grants
This victory is only temporary, however, as Congress merely delayed sequestration for several months. Massive across-the-board spending cuts are scheduled for March 27, 2013, unless Congress comes up with a different plan.
Like sequestration, The American Taxpayer Relief Act is bittersweet with respect to housing and community development tax credits.
Low Income Housing Tax Credit
The Low Income Housing Tax Credit (LIHTC) faced an uncertain future as an important financial level had, in effect, expired. In 2008, Congress replaced LIHTC's long-standing and complicated floating rate system for setting the value of tax credits with a temporary 9% fixed floor rate. This encouraged the development of affordable housing by the private market. The 9% fixed floor rate provision was set to expire for affordable development completed by 2013. Unless public dollars could fill the resulting financing gaps, the development of affordable housing this year would have been stifled. On January 1, 2013, Congress extended the fixed 9% rate for projects are awarded credits before January 1, 2014, regardless of time of construction.
This is also a temporary victory. Affordable Rental Housing A.C.T.I.O.N., of which Minnesota Housing Partnership is a member, is advocating for permanently fixing this 9% rate.
Other Tax Credits
Also passed were an extension of the New Markets Tax Credit program through December 31, 2013 and the extension of energy efficiency credits for new and existing homes through December 31, 2013.
Lower FY13 Spending Cap
As part of the deal, Congress lowered the FY13 discretionary spending cap by $2 billion from the 2012 amount. This could greatly impact affordable housing programs, particularly the Housing Choice Voucher Program and the Public Housing Operating Fund. The Housing Choice Voucher Program needs additional funding to account for inflation and the Public Housing Operating Fund already saw big spending cuts in FY12. The lowered FY13 spending cap will likely mean less affordable housing options for families.
New Year's Day heralded short-lived victories for affordable housing programs. Advocates have their work cut out for them this year to ensure that these programs do not disappear or lose substantial funding.