Published by admin on August 19,2016
Homelessness is a serious problem. Despite efforts to curb it—from government housing programs to charitable organizations and shelters—it persists. A recent federal House bill (with bipartisan cosponsorship) has been written that aims to help homeless and formerly homeless students and student veterans attain housing.
H.R. 5290 would amend the Internal Revenue Code to “qualify low-income building units that provide housing for homeless students and veterans who are full-time students for the low-income housing tax credit.” The full-time student must have been a homeless child or youth during any portion of the seven years prior to occupation of the housing unit in order to be eligible. Veterans are eligible if they have been homeless at any point in the previous five years and are full-time students.
So what is the low income housing tax credit (LIHTC) and how would this bill impact affordable housing? The LIHTC frees up funding for the development costs of low-income housing. Investors receive a dollar-for-dollar tax credit that directly lowers owed income tax. These investors propose a project to the state housing finance agency. A certain percentage of units in the development are committed to being both rent restricted and occupied by individuals under a certain income threshold compared to the median gross income in the area.
This commitment includes a number of years (typically 30) that the rent restrictions and availability will exist, meaning that landlords cannot take advantage of a tax credit, then remove rent restrictions. The specific scenarios are outlined here. These projects can be new construction or acquisition and/or rehabilitation of existing housing developments. Once the state housing finance agency approves the project, the credits are claimed over a ten year period.
To summarize: a landlord-investor set aside a certain number of units that have lowered rent to be made available to renters with low income. H.R. 5290 would automatically qualify students that were homeless children or youths within the last seven years and veterans that have been homeless within the last five years as eligible tenants for the rent-restricted units.
If H.R. 5290 is passed and signed into law there would be more incentive for landlords and developers to subsidize housing for formerly homeless veterans and youths while they are in college. This makes it easier for those who have escaped homelessness to stay out—a very real problem, especially in more expensive areas of the country. It is difficult to succeed in higher education while earning enough money to support oneself. It also provides a pathway out for those currently homeless. If they can become a full-time student, they can gain access to cheaper housing.
Will it pass? No way to tell yet, but bipartisan cosponsorship is always a good sign. In an increasingly divided legislature and an election year, cooperation is not something we hear about too often. Because this bill has Democratic and Republican support it may have a better chance of being passed. But the Senate is not currently in session, so any movement by the House will not be matched in the Senate until at least September. We will be certain to keep our readers updated as this legislation progresses or falters.
For questions about the legislation, programs described, or other real estate topics feel free to reach out to the author at firstname.lastname@example.org. If you feel strongly one way or another about this proposed legislation, we encourage you to contact your elected representatives. Anyone looking to obtain their real estate license needs to keep an eye on these important legislative updates.