WASHINGTON, DC — Legislation introduced in the Senate last week by Senators Bob Graham (D-FL), Orrin Hatch (R-UT), Jim Jeffords (I-VT), Robert Torricelli (D-NJ), and John Kerry (D-MA) is important for restoring the Low-Income Housing Tax Credit (LIHTC) program as a tool for building affordable apartments nationwide, according to the National Association of Home Builders (NAHB).

"Senators Graham, Hatch, Jeffords, Torricelli, and Kerry are to be commended for their efforts," said Gary Garczynski, NAHB president. "This bill is about increasing the supply of affordable rental housing for hardworking American families."

S. 2006 clarifies specific development costs that may be included when calculating the amount of tax credits for which a multifamily project qualifies under the LIHTC program. The legislation is the companion to House bill H.R. 3324, which was introduced by Representatives Nancy Johnson (R-CT) and Charlie Rangel (D-NY) last November.

NAHB says the LIHTC program has been hampered by uncertainties since the Internal Revenue Service two years ago published five Technical Advice Memoranda (TAMs) that essentially disqualified many development costs previously eligible for inclusion under the tax credit program. As a result, the level of equity financing available for each project has been substantially reduced, making a number of affordable housing properties financially infeasible for developers.

The legislation spells out that certain development costs that have been included in tax credit eligible basis under generally accepted industry practice will continue to be included in basis for the Low Income Housing Tax Credit. To accomplish this, the bill introduces the concept of "development cost basis" and specifically identifies costs that will qualify.

“It is critical for all of the eligible basis costs to be clarified to sustain this important program," said Garczynski. "We urge the Senate to support and move this legislation, which can make all the difference in helping us meet the critical demand for affordable rental housing in this country."

Publication date: 03/18/2002