Mortgage group warns proposed policy could "kill" key affordable housing program
The Mortgage Bankers Association (MBA) is sounding alarms over President Biden’s plan to impose a 10% annual cap on rent increases at properties supported by the Low-Income Housing Tax Credit (LIHTC) program.
The administration’s plan calls for doubling mandatory annual contributions from Federal Home Loan Banks to their Affordable Housing Programs from 10% to 20% of the prior year’s net income. This would raise $3.79 billion over the next decade to finance nearly 380,000 affordable rental and owner-occupied homes.
However, the MBA sees the proposed LIHTC rent caps as a threat that could “severely suppress”, if not completely undermine, the program.
“The LIHTC program is the federal government’s most successful tool to construct and rehabilitate housing for low- and moderate-income households,” MBA president and CEO Bob Broeksmit said in a statement. “If the administration imposes unworkable rent caps on LIHTC programs, it will severely suppress – if not kill – the program. Such a move is puzzling and contradicts many of the administration’s other efforts to increase affordable rental housing.”
Broeksmit argued the proposed rent control policy would prove disastrous, citing the current situation in St. Paul, Minn., compared to neighboring Minneapolis as a “perfect example of rent control’s disastrous consequences.”
Read more: Tax reform could put affordable rental housing in peril
“Rent control has consistently proven to be a failed policy that discourages new construction, distorts market pricing, and leads to a degradation of the quality of rental housing – the exact opposite of what is currently needed in markets throughout the country,” he said. “Now is not the time to repeat a policy widely recognized as a failure at the local, national, and global level by nearly every economist.”
The MBA chief contends increasing affordable rental supply, not rent control, is the best way to solve the ongoing affordability crisis impacting markets nationwide.
He urged the administration and Congress to enhance federal multifamily lending programs to make them “more viable, competitive, and less costly for borrowers and developers alike.”
“This includes our continued advocacy for the Senate to pass H.R. 7024, the ‘Tax Relief for American Families and Workers Act of 2024,’ a bipartisan bill that passed in the House earlier this year and includes meaningful enhancements to the LIHTC program,” Broeksmit said.
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