The big tax bill pushed through Congress by the Republicans contains some provisions favored by housing and real estate groups, but they may not be able to take advantage of them any time soon. President Clinton has vowed to veto the $792 billion measure, and it is not clear when - or if - a compromise bill may be approved or what it might contain.
The major victory for housing advocates in the GOP bill was the inclusion of an increase in the volume cap for the low-income housing tax credit. Under current law, a state can allocate $1.25 in credits annually for each person in its population, a limit that has not been changed since the tax credit program was enacted in 1986. Tax credits for projects financed by tax-exempt bonds don't count against the per capita ceiling.
The tax bill would raise the per capita limit from $1.25 to $1.75 in 10-cent steps over the period between 2000 and 2004, and the cap would then be indexed for inflation. The bill would also provide a $2 million minimum state allocation, effectively raising the allocation for states with populations below 1.6 million.
The bill also would accelerate a scheduled increase in the state limit on tax-exempt private activity bonds, which can be used to finance multifamily housing and other facilities. The state ceiling is now the greater of $50 million per capita or $150 million, and under current law, it will rise to the greater of $75 million or $225 million over the period between 2003 and 2007. The bill would retain the annual increases of $5 and $15 million but start the phase-in next year.
The legislation would also ease the tax bite for individuals on real estate investments by reducing the top capital gains rate from 20% to 18%. The portion of gain attributable to depreciation would be taxed at 23%, rather than 25%.
Storm looms over HUD budget A veto confrontation may also be looming over the fiscal 2000 appropriations bill for the U.S. Department of Housing and Urban Development (HUD), as Congress and the Clinton administration struggle to fit funding needs within the limits of the 1997 budget agreement.
The House Appropriations Committee has approved a HUD funding measure (H.R. 2684) that falls $2 billion short of the administration's request. If the final bill approved by Congress looks like the House committee version, HUD secretary Andrew Cuomo says he will ask President Clinton to reject it.
The bill provides about $26 billion for HUD programs, including $10.5 billion to renew all expiring Section 8 rent subsidy contracts. However, the appropriations panel did not fund the 100,000 additional Section 8 vouchers requested by the administration. The bill provides a credit limit of $18.1 billion for Federal Housing Administration mortgages insured under the General Insurance Fund and Special Risk Insurance Fund. The General Insurance Fund insures mortgages under the FHA multifamily programs.
The Federal National Mortgage Association would have a $200 billion limit for its mortgage-backed securities program, which funds FHA single-family and multifamily loans. Other provisions in the HUD appropriations bill include $1.58 billion for the HOME investment partnership program, which provides block grant funds to support state and local affordable housing programs; $4.5 billion for the community development block grant program, which can also be used for state and local housing and development programs; $970 million for homeless assistance; $660 million for housing for the elderly; $194 million for housing for the disabled; and $37.5 million for fair housing activities. The bill would also establish a Millennial Housing Commission to evaluate ways to increase the role of the private sector in providing affordable housing. The commission would be required to submit a final report to Congress by March 1,2002.
Senate clears rural housing bill Just before Congress left town for the August recess, the Senate passed a fiscal 2000 agriculture appropriations bill that provides $114.3 million for the Section 515 rural rental housing program. This would continue the program at the fiscal 1999 level. The House version of the bill would increase Section 515 funding to $120 million. Both bills provide $100 million for the Section 538 guaranteed rural multifamily loan program.