Senate Finance and Banking Committees Release Sections of the Build Back Better Act

Both the Senate Finance and the Senate Banking, Housing, and Urban Affairs Committees have released the text of their respective sections of the Build Back Better (BBB) Act. The Finance Committee’s text is similar to the tax title in the House-passed version of the BBB Act but with changes to the Housing Credit cap increase and technical modifications to clarify the provision authorizing a basis boost for buildings serving extremely low-income (ELI) households. The Banking and Housing Committee’s text includes historic investments in existing and new affordable housing programs at HUD and USDA.

Senate Majority Leader Charles Schumer (D-NY) maintains the Senate will consider the bill on the floor before Christmas. There have been reports, though, that timing could slip beyond that, possibly into early 2022, should he not be able to secure commitments from moderate Democrats, such as Senator Joe Manchin (D-WV), to support the legislation.

Before the bill can go to the floor, the Senatethe parliamentarian will review the bill and make the final determination as to whether all aspects of the bill comply with Senate rules for reconciliation legislation. That process, often referred to as the “Byrd Bath,” will begin in earnest this week. In anticipation of the parliamentarian’s review, Senate committees already have adjusted language from the version of the bill passed by the House to adhere to Senate rules; however, more changes to the legislation may be needed depending on the parliamentarian’s rulings.

Details on housing programs in both of the relevant committees’ sections follow.

Housing Credit Cap Increase. Under the Senate Finance Committee text, Housing Credit authority would be determined as follows:


The Senate bill effectively extends through 2024 the 12.5 percent temporary increase in authority the industry won in 2018, which will otherwise expire after this year. Then, in 2025, Housing Credit authority would rise substantially, putting the program in the best possible position for negotiations at that time on future years’ authority levels. Conversely, the House version of the legislation would provide higher authority amounts in 2022, 2023, and 2024 than the Senate text but a steep drop in Credit authority in 2025 to a level that would have been lower than the 2017 level (before the 12.5 percent 2018 cap increase went into effect) adjusted for inflation.

For strategic reasons, advocacy partners have been concerned about the 2024 cap increase expiration in the House-passed bill. There are no other tax provisions set to expire in 2024, which would make extending the authority level at the 2024 amount very difficult. However, numerous other tax provisions are set to expire in 2025, making a “tax extender” bill that year far more likely and increasing our chance of extending the higher cap amount into 2026 and beyond.

While the Senate Finance Committee was not able to devote additional resources to the Housing Credit above the amount provided in the House-passed bill, it instead adjusted how much authority would be available each year so that the cap increase could go through 2025, for these reasons.

Housing Credit Extremely Low-Income Provision. The Finance Committee made technical modifications to the provision of the bill that establishes a basis boost for buildings that serve ELI households and a set-aside of 9 percent Credit authority for such buildings. Like in the House-passed bill, buildings that reserve 20 percent of their units for ELI households would be eligible to receive a 50 percent basis boost for the basis associated with the ELI units. The Finance Committee text clarifies that the basis boost would be based on the unit fraction of ELI units to all low-income units (as opposed to the floor space fraction).

Both the House-passed bill and Senate Finance Committee released text to include a set-aside of 8 percent of every state’s new 9 percent authority (of the per capita amount, not the full ceiling) for buildings that are eligible for the basis boost. However, no more than 13 percent of a state’s new 9 percent authority could be used to finance buildings receiving the boost.

The language in both chambers also allows states to provide the 50 percent ELI basis boost to tax-exempt bond-financed buildings receiving 4 percent Credits. However, no more than 8 percent of a state’s Private Activity Bond volume cap could be used to finance buildings receiving the basis boost. The Senate Finance Committee’s text makes minor language changes adding clarity to this aspect of the provision but not making substantive changes.

Other Housing Credit Provisions. All other Housing Credit provisions included in the House-passed bill are included — unchanged — in the Finance Committee text. These are: lowering the bond-financing threshold from 50 to 25 percent for obligations issued in 2022 through 2026; closing the qualified contract loophole; protecting nonprofits seeking to exercise their statutory right of first refusal; establishing a basis boost of up to 30 percent for buildings in Indian Areas; and allowing Housing Credit developers to take advantage of the Section 48 Investment Tax Credit for renewable energy (typically used for solar panels) without a reduction in Housing Credit basis. For more information, see NCSHA’s blog post on the House version of the legislation.

Neighborhood Homes Credit. Like the House-passed bill, the Finance Committee text includes the enactment of the Neighborhood Homes Credit program, which is modeled on the Housing Credit but would be used to promote new construction and substantial rehabilitation of affordable, owner-occupied housing in distressed neighborhoods. Funding for the program is the same as the House-passed version — the greater of $3 per capita or $4 million in 2022 through 2024, and $6 per capita or $8 million in 2025, after which point the program is scheduled to sunset.

The Finance Committee text provides greater flexibility than the House-passed bill for substantially rural states — those where more than 45 percent of the state’s population lives outside a metropolitan statistical area — relating to the targeting of the Neighborhood Homes Credit. The House-passed bill requires all states to target 80 percent of their credit allocation to very specific qualified census tracts (QCTs) that meet certain income and house price thresholds. In contrast, the Senate Finance text lowers the QCT targeting requirement to 60 percent for substantially rural states. This change is important, as in many rural states Neighborhood Homes Credit QCTs account for a relatively small share of the states’ populations. NCSHA has long advocated for states, particularly rural ones, to be given more flexibility in where they can allocate the new credit geographically.

HOME Investment Partnerships. The Banking Committee text includes $9.925 billion for HOME available through fiscal year (FY) 2026. These funds would be exempt from HOME’s 24-month commitment deadline, match requirements, and Community Housing Development Organization set-aside. It also provides broad waiver authority to the HUD Secretary, other than for requirements related to tenant rights and protections, fair housing, nondiscrimination, labor standards, and environmental review.

Housing Trust Fund. The Banking Committee text includes $14.925 billion for the Housing Trust Fund through FY 2026. Because of the way the bill is being crafted, certain HOME program requirements, such as Davis-Bacon and HOME’s environmental review rules, would apply to these funds (as opposed to the different environmental review requirements that otherwise apply to the Housing Trust Fund).

First-Generation Down Payment Assistance Program. As in the House-passed bill, the Banking Committee text establishes a new federal program through which states and nonprofits would provide first-generation home buyers with grants for down payment assistance and other expenses associated with purchasing a home. The initiative, the First Generation Down Payment Fund, would receive $10 billion through FY 2026, with $6.9 billion going to states and $2.3 billion awarded competitively to Community Development Financial Institutions and other entities.

The funds could be used to help first-generation home buyers, defined as “those who attest that neither they nor their parents have previously owned a home.” Eligible expenses include down payment assistance, closing cost assistance, and interest rate reductions. Funds could also be used to finance pre-purchase modifications needed to make a home accessible for the buyers or members of their household. Home buyers could receive assistance for up to 10 percent of the home’s purchase price or $20,000, whichever is greater, but HUD is allowed to increase the maximum assistance amount for home buyers who are considered economically disadvantaged.

Other Affordable Housing Program Funding

  • $65 billion for Public Housing revitalization
  • $24 billion for Housing Choice Vouchers
  • $5 billion for a new program to provide subsidies for 20-year mortgages for first-generation home buyers
  • $5 billion for lead-based paint hazard control
  • $3.05 billion for the Community Development Block Grant for affordable housing infrastructure activities
  • $3 billion for a new Community Restoration and Revitalization Fund
  • $2 billion for energy and water efficiency and climate resilience for Section 811, Section 202, and Section 8 properties
  • $2 billion for rural rental housing
  • $1.75 billion for a new initiative called the Unlocking Possibilities Program that will provide grants to communities for housing planning activities, including streamlining regulatory requirements, reforming zoning codes
  • $1.6 billion for revitalization of distressed multifamily housing properties
  • $1 billion for project-based rental assistance
  • $800 million for fair housing
  • $750 million for the Housing Investment Fund (Capital Magnet Fund)
  • $500 million for Section 811 Housing for Persons with Disabilities
  • $500 million for Section 202 Housing for the Elderly
  • $100 million for a HUD-insured small-dollar mortgage demonstration program
  • $100 million for investments in rural homeownership
  • $100 million for capacity building
  • Increases each individual Federal Home Loan Bank’s (FHLB) contribution to their Affordable Housing Programs (AHP) from 10 to 15 percent of the previous year’s net income for 2022 through 2027. Each FHLB will be required to contribute a minimum of $100 million to their AHP each year during that time period.
  • Forgiveness of the National Flood Insurance Program’s accumulated debt

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