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December 30, 2020 | Legal Advisory

The Consolidated Appropriations Act, 2021 (the CAA) became law this past Sunday. The CAA has several features of interest to the low-income housing community.

4% Deal Floor: The 4% low-income housing tax credit is worthy of its title. Before the CAA, the actual 4% credit value depended on an average of annual applicable Federal mid-term and long-term rates. Lately, those rates have been very low, resulting in a 3.06% to 3.09% credit. That lower credit rate means that low-income housing projects have been realizing much less capital from the 4% tax credit. Combined with reduced financing from other traditional low-income housing financing sources, the lower credit amount has, according to several estimates, dramatically reduced the number of low-income housing units constructed in recent years. The CAA establishes that the annual 4% low-income tax credit will be worth at least 4% of the qualified basis of the project. That means that low-income housing development will be less vulnerable to periods of low applicable Federal rates.

$25 Billion in Emergency Rental Assistance: Each state will be allocated a share of the $25 billion pool to provide assistance to low- and moderate-income families. According to an estimate published by the National Low-Income Housing Coalition and Novogradac, an accounting firm, Massachusetts will receive approximately $460 million of that pool. This money, together with other unemployment benefits, stimulus checks, and an extended eviction moratorium, will help many low-income families, and also provide revenue to operate low-income housing projects.

Increased LIHTC Allocation for Disaster Areas: The CAA also authorizes housing agencies to allocate more 9% credits to projects in designated disaster areas. The $1.2 billion increase will help areas – like California – whose housing stock has been damaged or destroyed by wildfires and other disasters.

This advisory was prepared by Nutter’s Tax Department. If you would like additional information, please contact your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.