(Washington, DC) – Today, Mayor Bowser and District leaders called on Congress to save affordable housing tools in federal tax reform legislation. In its current form, the tax reform legislation will increase taxes on low-income and middle class Americans and devastate affordable housing opportunities in the District, while cutting taxes for the wealthiest Americans and corporations.
“Over the past three years, the District has made unprecedented investments in affordable housing. While some members of Congress seem indifferent to the plight of low-income and middle class Americans, our DC values mandate that we do more for those families,” said Mayor Bowser. “Regardless of the outcome of this pending legislation, we will continue to build and preserve housing that meets the needs of our residents. That is why we are announcing this first step toward investing $500 million in affordable housing.”
Given the uncertain fate of Private Activity Bonds (PABs), the District of Columbia Housing Finance Agency (DCHFA) also announced that the agency has developed a strategy to preserve its bond cap and maximize the production of housing units through what is known as a Convertible Option Bond (COB). DCHFA will issue up to $500 million of tax-exempt PABs, its largest offering ever.
“Given the sudden and unexpected introduction of proposed federal legislation to eliminate tax-exempt Private Activity Bonds, DCHFA is working aggressively and proactively to maximize its ability to carry out its mission of creating and preserving affordable housing in the District of Columbia,” stated Todd A. Lee, DCHFA Executive Director and CEO.
DCHFA will do this through a non-public offering (private placement) or a public offering, not to exceed its unused volume cap prior to the four percent Low Income Housing Tax Credits (LIHTC) elimination date of December 31, 2017 (as prescribed by the House of Representative’s Tax Cuts and Jobs Act of 2017). The elimination of tax-exempt PABs would in turn end DCHFA’s ability to leverage four percent LIHTCs for qualified multifamily rental housing. The immediate delivery of proceeds is required to preserve the tax-exempt status of the bonds. DCHFA anticipates that this issuance would preserve the agency’s ability to leverage tax-exempt bonds and four percent LIHTCs for affordable housing development through calendar year 2020, as permitted by the House-passed tax bill, allowing for the production or preservation of 4,000 units of affordable housing.
“While the proposed congressional legislation would greatly reduce the District’s ability to produce and preserve affordable housing, my faith that we will continue to deliver the right results for our residents in need has not wavered. Despite the roadblocks ahead, we are committed to creating innovative solutions and will meet every challenge head on,” said At-Large Councilmember Anita Bonds. “I am grateful to the members of DCHFA and to the Mayor for joining me to take immediate action.”
DCHFA’s primary financing tools are tax-exempt debt solutions facilitated through the issuance of PABs. From fiscal year 2010 to present, $1.3 billion in DCHFA-issued PABs have leveraged an additional $650 million in private equity, through the allocation of four percent LIHTCs, to deliver over $2.5 billion in total development to the District of Columbia. The end result has been PAB-enabled funding of over 9,000 units of affordable housing in the District of Columbia.
DCHFA works in partnership with the Office of the Deputy Mayor for Planning and Economic Development and the DC Department of Housing and Community Development in support of the city’s affordable housing goals. Through its Multifamily Lending and Neighborhood Investment and Capital Markets divisions, DCHFA issues tax-exempt mortgage revenue bonds to lower the developers’ costs of acquiring, constructing and rehabilitating rental housing. The agency offers private for-profit and non-profit developers low-cost predevelopment, construction, and permanent financing that supports the new construction, acquisition, and rehabilitation of affordable rental housing in Washington, DC.