Kamala Harris' focus on housing may advance muni priorities

Vice President Kamala Harris is pushing housing policy beyond Low Income Housing Credit reform in her bid for the White House.

"My administration will provide first time home buyers with $25,000 to help with the down payment on a new home," she said during a stump speech in Raleigh, N.C., last week.

"We will take down barriers and cut red tape, including at the state and local levels and by the end of my first term, we will end America's housing shortage by building three million new homes and rentals that are affordable for the middle class."

Housing initiatives are relevant to the municipal bond market through the possibility of expanding mortgage revenue bonds and loosening the rules governing LIHTCs which is part of the current administration's Housing Supply Action Plan.

The possibility of moving stalled housing bills forward combined with promises of down payment assistance is offering hope to housing advocates.

"It's consistent with the Biden-Harris Administration's repeated calls to build two million additional affordable homes by enacting the bipartisan Affordable Housing Credit Improvement Act," said Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition.

The AHCIA has been bouncing around in Congress since 2016 but remains unpassed. The Tax Relief for American Families and Workers Act, which also carried the possibility of LIHTC reform sailed through the approval process in the House Ways and Means Committee in January, but remains stalled in the Senate.

LIHTCs are a powerful tool used to finance affordable housing by offering 9% and 4% tax credits to developers through the Treasury. The 9% credits are dispensed through local housing authorities via a competitive award process.

The 4% credits are allocated to projects that receive at least 50% of their funding through tax-exempt private activity bonds. The PAB issuance level is capped by the federal government each year and is always over-subscribed.

Housing advocates would like to see the percentage reduced to 30% which could boost the issuance of PABs.

The election will also usher in what promises to be a lively debate on the future of the Tax Cuts and Job Act which is set to expire at the end of 2025.

As housing remains front and center in policy discussions, hope remains alive for the Affordable Housing Bond Enhancement Act, which is designed to expand the use of mortgage revenue bonds and mortgage credit certificate programs.

Mortgage revenue bonds are tax-exempt bonds that state and local governments issue through housing finance agencies to help fund below-market-interest-rate mortgages for first-time qualifying homebuyers.

The bill was introduced in June 2023 with bipartisan support but it too has languished. A fresh start in January could put things back in motion for several housing related initiatives.

"The Affordable Housing Bond Enhancement Act, Affordable Housing Credit Improvement Act, and Neighborhood Homes investment Act are bipartisan, ready-to-go bills Congress can take up and pass next year that respond directly to voters growing concerns about housing affordability," said Stockton Williams, executive director of the National Council of State Housing Agencies.

"The fact that both parties see housing affordability as a front-burner issue in the election for the first time in memory should set the stage for significant action next year."