On May 8th, the U.S. House of Representatives passed an omnibus housing bill (H.R. 3221) addressing the nation's foreclosure crisis. The package combined several bills into a single measure, including FHA reform, GSE reform and $11 billion in tax-related relief.
The centerpiece of the package was a bill, H.R. 5830, that would allow the FHA to insure up to $300 billion in refinanced mortgages over the next two years for distressed borrowers where lenders agree to principal write-downs. Even though the package was designed to address the downturn in the single-family market, thanks to NMHC/NAA's involvement it also includes several items of interest to apartment firms.
Low-Income Housing Tax Credit Program (LIHTC). The tax measure, H.R. 5720, increases the cap for the LIHTC program for two years to $2.20 per capita (from $2). It also makes other NMHC/NAA-supported changes to the program, such as allowing the credits to apply against the alternative minimum tax, which are designed to address the credit crisis in the tax credit program.
Tax-Exempt Bonds. The bill would temporarily increase the cap for the mortgage revenue and multifamily bond program by $10 billion in 2008.
Real Estate Investment Trusts (REIT). The bill includes a number of provisions long sought by the REIT industry, including increasing the allowable size of taxable REIT subsidiaries, clarifying rules relating to foreign currency gains, and clarifying rules regarding healthcare REITs.
Government Sponsored Enterprises (GSE). The bill does include provisions creating a new regulator for Fannie Mae and Freddie Mac, however, ultimate enactment of GSE reform remains in doubt until the Senate marks up its GSE reform bill. (The House passed its GSE reform bill last May.) The Senate was scheduled to mark up its GSE bill on May 6, but that was canceled. House and Senate leaders still have not reached agreement over several contentious issues related to how much authority the new regulator will have.
FHA Reform. Congress included several provisions to reform the FHA mortgage program, but wisely rejected earlier proposals to reduce or eliminate FHA downpayment requirements. Last year, the House passed a bill creating an FHA zero downpayment program; the Senate passed a measure reducing the three percent downpayment requirement to 1.5 percent. The bills were never reconciled or enacted into law. H.R. 3221 retains the FHA three percent downpayment requirement. NMHC/NAA have lobbied against federally insured no- and low-downpayment mortgages since the measure was first proposed in 2004.
Homebuyer Tax Credit. Legislators are also coming under pressure from the White House to reduce the other homeownership incentives included in the bill. The House measure includes a refundable $7,500 first-time homebuyer tax credit (although the impact of the credit is mitigated by the fact that taxpayers are required to repay the credit, and higher-income households are not eligible to claim it). President Bush has threatened to veto the bill in part because of the credit, which he says would likely subsidize taxpayers who would have purchased homes anyway.
The Senate bill also creates a homebuyer tax credit, although its version is a $7,000 credit taken over two years and only applies to taxpayers who purchase foreclosed properties.
NMHC/NAA have mounted an aggressive media and lobbying effort to oppose subsidies for home buyers, noting that such credits further imbalance our housing policy, encourage people to buy over-priced houses that are expected to fall in value in the coming year and artificially prop up housing prices instead of allowing the much-needed housing correction to proceed. As a result of efforts by us and others, media coverage of the proposed credits has been almost universally critical.
State/Local Grant Program. Finally, law