California Voices Help Tax Credit and Section 8 Voucher Reforms Move Forward, Could Become Law by July

We began in March 2007 by focusing on the opportunity presented by Congresswoman Maxine Waters' leadership to improve the voucher program (which is our state's single largest affordable housing resource with more than 300,000 vouchers assisting very low income households). We then worked together in October 2007 on developing a common position in support for Congresswoman Waters' approach to re-authorizing the HOPE VI public housing revitalization program. Early in 2008, we developed a set of comprehensive federal funding and legislative priorities. In April of this year, a group of more than 40 executive directors, commissioners and staff from California housing authorities met in Washington, DC with the housing staff for California's Senators as well as with the leaders of California's Congressional delegation in the House to make a number of requests on behalf of the California Federal Policy Project (FPP). This newsletter describes the outcomes to date of these requests.

Low Income Housing Tax Credit Reform Measures Included in Stimulus/Foreclosure Bill
One of our highest priorities for 2008 is the passage of legislation to improve the effectiveness of the Low Income Housing Tax Credit (LIHTC) program. After being beaten to the punch by Senator Maria Cantwell (D-WA), who introduced her Tax Credit reform bill (S. 2666) in February, Representative Charles Rangel (NY) introduced his own version (H.R. 5720) in the House in April and, with support from advocates around the country, succeeded in getting most of the major provisions included in H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act, which passed the House last month. Although the Senate has yet to act on S. 2666 and is not considered likely to do so as a stand alone bill, there is a chance that the Senate would adopt the tax credit provisions in H.R. 3221 as part of a compromise agreement approved by House-Senate conferees who are working feverishly to send the President a bill to sign before the July 4th recess, which begins on June 27th. Senator Feinstein has yet to state her support publicly.

Project-Based Voucher programs Included in Stimulus/Foreclosure Bill
Another California request to our Senators was to increase their support for the Section Eight Voucher Reform Act (SEVRA), which would make major improvements to the Project-Based Voucher program widely used by California affordable housing developers as well as a number of important reforms to the Housing Choice Voucher program. SEVRA has already passed in the House (H.R. 1851) and was introduced in the Senate on March 3 by Senator Dodd (S. 2684), but faces a tough road to becoming law this year unless there is strong support in the Senate. On March 4, the FPP sent a letter to Senator Feinstein requesting that she join Senator Boxer as a co-sponsor of SEVRA given its importance to California.

After meeting with our group in Washington, Senator Feinstein agreed to be a co-sponsor and leader of the effort to pass SEVRA, which would, among many important provisions, make significant improvements to the Project-Based Voucher program including extending the initial contract term to 15 years, regaining the ability to pre-commit to renewals and setting a firm rent floor. The Senate held a hearing on April 16 on SEVRA but Senate Banking Committee has yet to hold a mark-up, which must occur before the full Senate can take action. At this time, we are asking Senators Feinstein and Boxer to push their colleagues on the Senate Banking Committee for a mark-up of S. 2684 in late June so that it can be acted upon before Congress recesses for the elections in September.

In the meantime, advocates have succeeded in including most of the important project based voucher provisions contained in both SEVRA bills into the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221). House and Senate leaders are currently negotiating which terms from the various House and Senate bills will be included in the final bill, which will then be sent back to both houses for what is hoped will be quick approval before being sent on to the President for his signature. The White House is threatening a veto due to the inclusion in the bill of several provisions that could lead to increased risk to the federal government of having to pay for further bad loans, but House Financial Services Chairman Barney Frank remains optimistic that the President will not risk a veto given the politics involved.

Homeless, Farmworkers and Veterans Access to Tax Credit Housing Threatened
Just when you thought it couldn't get any worse, Low Income Housing Tax Credit attorneys have recently focused on a change the IRS made in 2007 to its interpretation of the General Public Use provision in Section 42 that threatens the availability of Tax Credit housing to targeted populations, including homeless and disabled veterans, farm workers, first responders, teachers, artists, pregnant and parenting teens, and victims of domestic abuse.

The legislative history to Section 42 requires that qualified housing be available for "general public use." Until last year, IRS guidance had allowed housing sponsors to give preferences to certain classes of tenants provided that such preference is consistent with HUD anti-discrimination policies. With the publication of the Form 8823 Guide in 2007, the IRS began retroactively challenging the qualification of existing Section 42 developments that offer a preference to artists or for members of an occupational group, such as farm workers, teachers or first responders, even if the housing was not sponsored by an employer.

These new policies have created considerable uncertainty among investor attorneys and state agencies whether housing for targeted groups is still permissible. Investor attorneys worry that the IRS's new position could ultimately lead to the recapture of credits on existing properties that provided these preferences in good faith.

In response to this new threat, advocates have launched a campaign to get our Senators to address this issue by including a statutory clarification that would permit properties to limit eligibility to members of a specified group, provided that the properties satisfy the non-discriminatory tenant selection criteria and other requirements of the Low-Income Housing Credit program.

While there is still much work to be done, we are pleased to report that we were able to work with other advocates to persuade Senators Boxer and Feinstein to sign a dear colleague letter urging the Senate Finance Committee to clarify that such targeting is consistent with Congressional intent. They have asked that such a clarification be put into the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221).

For additional information, please contact Matt Schwartz or Elyse Perry at California Housing Partnership Corporation.