Archer abandons plan to sunset LIHTC

The low-income housing tax credit survived a threat to its future when its chief critic on Capitol Hill, House Ways and Means Committee Chairman Bill Archer (R-Texas), abandoned plans to terminate, or sunset, the credit at the end of 1998.

When it was originally created in the 1986 tax act, the low-income housing tax credit was authorized for a limited time, subject to periodic renewals, but the program was made a permanent part of the tax code in 1993. Archer included a sunset provision in the 1995 budget legislation, arguing that Congress needed an opportunity to review the effectiveness of the tax credit, but that legislation was vetoed by President Clinton.

Archer indicated that he would try again to put the sunset in this year's budget bill, but he backed off after the credit received a strong endorsement from both Republican and Democratic members of his committee.

Oversight Subcommittee recommends revisions for LIHTC

It encourages state tax credit agencies, in developing their qualified allocation plans (QAPs), to consider the need for family housing and for preserving the existing housing stock.

It recommends that states be required to include in their QAPs provisions for regular site visits and enforcement of habitability requirements as part of their monitoring activities.

While the tax credit clearly enjoys solid support in Congress, even its advocates favor some changes in the program. The Ways and Means Committee's Oversight Subcommittee, which held hearings on the tax credit, recommended some revisions in a report to the full committee.

States are primarily responsible for the administration of the tax credit, selecting projects for assistance under their qualified allocation plans (QAPs) and monitoring the projects for compliance with the program laws and regulations. In its report, the Oversight Subcommittee encouraged state tax credit agencies, in developing their QAPs, to consider the need for family housing and for preserving the existing housing stock.

The subcommittee also recommended that states be required to include in their QAPs provisions for regular site visits and enforcement of habitability requirements as part of their monitoring activities.

Budget resolution recognizes Sec. 8 contract renewal problem

Congress recognized the pressing fiscal problem of Section 8 contract renewals in adopting the fiscal 1998 budget resolution, assuring that there will be room for renewals in the 1998 appropriations bill for the U.S. Department of Housing and Urban Development (HUD).

Contracts on hundreds of thousands of Section 8 units are expiring, and Congress and HUD must renew the contracts or face the possibility that projects will collapse and tenants will be put out on the street without access to affordable housing.

While renewing the contracts won't actually increase the money the government is now spending on Section 8, it does require an appropriation of billions of dollars in new funding authority each year. Under the arcane congressional budgetary and appropriations process, this Section 8 funding must be accommodated under overall spending caps, and it must compete for the limited amount of spending authority under the jurisdiction of the VA-HUD appropriations subcommittee.

HUD has estimated that it will need $9.2 billion in budget authority (the authority to spend money) for Section 8 contract renewals in fiscal 1998, and the budget resolution assures that this authority will be available by increasing the VA-HUD subcommittees' funding allocation if necessary.

Court rejects owners' efforts to enforce housing preservation plans

The U.S. Court of Federal Claims has rejected subsidized housing project owners' argument that HUD-approved plans of action (POAs) to preserve low-income housing constituted enforceable contracts.

The Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) authorized a variety of incentives for owners to extend affordability restrictions on Section 221(d)(3) and Section 236 projects, rather than prepaying their mortgages and taking the projects out of the low-income inventory.

The incentives are spelled out in POAs submitted by owners and approved by HUD and, if HUD fails to provide the incentives, the owners are free to prepay their mortgages and convert their projects to other uses.

In Corby Homes Limited Partnership vs. United States, the plaintiffs argued that the POAs constituted contracts between project owners and the government and that failure to fund the POAs therefore constituted a breach of contract.

Rejecting this contention, the court said approval of a POA didn't constitute a binding agreement to fund the incentives since LIHPRHA provides for execution of a subsequent agreement to implement the POA. Accordingly, the court ruled that there was no breach of contract.

Barry G. Jacobs is NREI's Washington Correspondent and editor of Housing and Development Reporter.