Working Families Housing Tax Credit Act
- Sponsor
- Rep. Ryan, Patrick [D-NY-18]
- Committees
- Transportation and Infrastructure Committee (primary)
- Last action
- Jan 31, 2025
Bottom line
This bill creates a new tax credit to expand affordable housing options for middle-income working families and provides infrastructure funding to support development in underserved areas.
What it actually does
The bill establishes a new federal tax credit, the "Working Families Housing Credit" (Section 42A), modeled after the existing Low-Income Housing Tax Credit (LIHTC). It aims to incentivize the development and rehabilitation of residential rental properties for individuals and families earning up to 180% of the area median gross income, with an average income limit of 100% AMI. It also authorizes $100 million in grants and loans for infrastructure projects in rural and exurban areas connected to these housing developments.
Proponents argue
Supporters argue that the existing LIHTC primarily serves very low-income populations, leaving a significant gap for working families who earn too much for traditional subsidies but struggle with rising housing costs. This credit would address the "missing middle" housing crisis, encouraging the construction of quality housing for essential workers like teachers, firefighters, and veterans, thereby strengthening communities and local economies.
Opponents contend
Critics might argue that expanding tax credits could be fiscally irresponsible, adding to the national debt without clear evidence of effectiveness or potentially diverting resources from existing, proven affordable housing programs. Concerns could also be raised about the complexity of administering another tax credit program and the potential for abuse or unintended market distortions.
The bill is moderately complex due to its extensive amendments to the Internal Revenue Code, requiring a significant time investment to understand fully, especially for those unfamiliar with tax credit mechanisms.
Section 3(a), inserting new Section 42A into the Internal Revenue Code of 1986.
Establishment of Working Families Housing Credit
This provision creates a new tax credit, similar to the Low-Income Housing Tax Credit (LIHTC), to incentivize the development and rehabilitation of rental housing for working families. It defines the credit amount based on an "applicable percentage" of the "qualified basis" of eligible buildings over a 15-year credit period.
Supporters argue
Supporters argue this is the primary mechanism to stimulate private investment in housing for working families, addressing a critical market gap.
Critics contend
Critics might argue that tax credits are an inefficient way to subsidize housing, potentially leading to inflated development costs or benefiting investors more than tenants.
Tradeoffs
Balances the need for private investment incentives against concerns about cost-effectiveness and potential for market distortion.
Section 3(a), new Section 42A(g) of the IRC.
Definition of Qualified Working Families Housing Project and Income/Rent Restrictions
This section defines what constitutes a "qualified working families housing project." It requires projects to meet both existing low-income requirements (20% of units at 60% AMI) and new "working families requirements" (40% or more units rent-restricted for individuals with incomes up to 180% AMI, with an average of 100% AMI). Rent restrictions are tied to 30% of the imputed income limitation.
Section 3(a), new Section 42A(h)(3) of the IRC.
State Allocation of Working Families Housing Credit Amounts
This provision establishes a state-level cap on the aggregate amount of working families housing credits that can be allocated each year. The ceiling is determined by a formula: unused ceiling from the prior year + the greater of $1.00 per state population or $1,500,000 (adjusted for inflation after 2026) + returned credit amounts. States can then allocate these credits to projects.
Section 3(a), new Section 42A(h)(7) of the IRC.
Dedicated Credit Allocation for Rural and Exurban Projects
This provision increases the State housing credit ceiling by an amount equal to 20% of the base amount (the greater of $1.00 per population or $1,500,000). This increased amount can only be allocated to buildings located in rural or exurban areas, as defined by the Secretary of Housing and Urban Development or the Housing Act of 1949.
Section 3(a), new Section 42A(l)(1) of the IRC.
State Housing Credit Agency Allocation Plan Criteria
This section mandates that state housing credit agencies must allocate credits according to a "qualified allocation plan" (QAP). The QAP must include selection criteria that prioritize projects serving qualified tenants for longer periods, projects in areas with insufficient housing supply, projects targeting a range of incomes (60-100% AMI), and projects near transit hubs. It also prohibits criteria requiring local approval or contributions.
Section 3(a), new Section 42A(i)(10) of the IRC.
Prevailing Wage Requirement for Credit Eligibility
This provision stipulates that no credit shall be determined for any building (including rehabilitation expenditures) unless it meets requirements similar to those described in section 45(b)(7) of the IRC, which typically refers to prevailing wage requirements for construction workers.
Section 4 of the bill.
Infrastructure Grants and Loans for Rural and Exurban Housing Projects
This section authorizes the Secretary to make grants and below-market-rate loans to local governments in rural and exurban areas for infrastructure projects (electricity, water, sewers, local access roads) that are connected to qualified working families housing developments. It prioritizes clean energy projects for electricity infrastructure and authorizes $100,000,000 for these purposes.
Allows State housing credit agencies to designate any building as requiring a 130% increase in eligible basis (for new buildings) or rehabilitation expenditures (for existing buildings) if it's necessary for financial feasibility, effectively treating it as if it were in a "difficult development area."
Section 3(a), new Section 42A(d)(4)(B)(v) of the IRC.
Why it matters:Standard legislative practice to include administrative flexibility within detailed rules.
Case for: Proponents argue this provides crucial flexibility for state agencies to ensure projects are financially viable in areas that may not meet federal "difficult development area" criteria but still face high costs.
Case against: Critics might argue this provision could be used to circumvent the intent of targeting truly high-cost areas, potentially leading to less efficient allocation of credits if not carefully overseen.
Estimated impact: Could significantly increase the amount of credit available to certain projects, impacting the overall cost of the program and the number of units built.
Generally excludes units occupied solely by full-time students under age 24 from being considered "working families units." However, it provides several exceptions, including for married students, students with disabilities, veterans, students with qualifying children, and emancipated minors/foster youth/homeless youth.
Section 3(a), new Section 42A(i)(1)(D) of the IRC.
Why it matters:Standard practice for detailed eligibility carve-outs in tax law.
Case for: Proponents argue this prevents the credit from subsidizing traditional student housing while still allowing vulnerable student populations (e.g., student parents, veterans, foster youth) to access affordable housing.
Case against: Some might argue that the general exclusion of students is too broad, as many students are also working families, or that the exceptions add undue complexity.
Estimated impact: Shapes the demographic profile of tenants eligible for housing under the credit, potentially excluding a significant portion of the student population.
Applies "at-risk" rules (from Section 49) to the working families housing credit, generally limiting the qualified basis to amounts for which the taxpayer is at economic risk. It includes special rules for financing from qualified nonprofit organizations, waiving certain requirements if specific conditions (like financing secured by property, portion of building attributable to financing, and repayment schedule) are met.
Section 3(a), new Section 42A(j) of the IRC.
Why it matters:Standard legislative practice for technical tax compliance and to facilitate specific types of financing.
Case for: Proponents argue the at-risk rules prevent taxpayers from claiming credits for investments they haven't genuinely made, while the nonprofit exceptions encourage mission-driven organizations to participate in housing development.
Case against: Critics might argue that the complexity of these rules can deter smaller developers or nonprofits from participating, or that the exceptions could be exploited if not rigorously enforced.
Estimated impact: Influences the structure of financing for working families housing projects, particularly those involving nonprofit lenders, and ensures the integrity of the credit.