Earlier this year, President Obama included within his Administration’s budget to Congress certain tax proposals. Among those was a proposal to allow states to convert up to 8 percent of their private activity bond (PAB) volume cap into Low-Income Housing Tax Credit (LIHTC) allocations. For every $1,000 of PAB volume cap converted, a state would receive 9 percent LIHTCs equal to $1,000 times the applicable percentage of the 4 percent LIHTC for the previous December times two. This proposal was recently discussed at the Bipartisan Policy Center Housing Commission roundtable on affordable housing held on July 23. Those in favor of this proposal suggest that because states have failed to use a large portion of PAB volume cap in recent years, the proposal would increase available low-income housing projects which are in short supply. Others, however, argue that as interest rates rise and the demand for PAB increase, more PAB volume cap will be utilized which would limit or possibly eliminate a state’s ability to convert PAB volume cap into LIHTC allocations. In addition, multifamily housing bonds are just one of the many types of bonds that PAB volume cap can be used for, and housing finance agencies do not necessarily determine the use for PAB volume cap allocations. Either way, the proposal is interesting. For additional information about the proposal and additional context for this debate please see Housing Solutions: What Role Should Affordable Multifamily Housing Bonds Play?
By Jacob Carlton on September 28, 2014