The American Recovery and Reinvestment Act of 2009 (ARRA) became public law 111-5 on February 17, 1009. It was designed to stimulate the faltering economy and to create or save 3.5 million jobs over the next two years. While the ARRA included important tax breaks for business, emphasis was on spending and not tax relief as a means to generate greater economic activity. This is particularly the case with respect to provisions adopted to generate the construction of critically needed affordable multifamily rental housing.
The Coalition had lobbied for inclusion of four key proposals in the ARRA: 1) gap financing; 2) an increased carryback provision; 3) a Housing Credit exchange program; and 4) an accelerated Credit provision. While we had many supporters both in the Senate and House of Representatives – particularly Senator Maria Cantwell (D-WA) – the cost of the overall package made it impossible to include all the provisions sought by the Coalition and other Housing Credit industry groups. When Congress passed the final version of the bill on Friday, February 13, 2009, only two of the Housing Credit provisions remained.
First, the ARRA includes $2.25 billion which the U.S. Department of Housing & Urban Development will be providing to State Housing Credit allocating agencies (Allocating Agencies) via a formula set forth in ARRA. The funds are intended to provide financing for projects which have not attracted sufficient private equity. Second, the ARRA permits Allocating Agencies to elect to substitute a portion of their Housing Credit allocations in 2009 for grants. A state receiving a grant under this provision is to use these monies to make sub-awards to finance the construction, or acquisition and rehabilitation of qualified low income housing. Once these new provisions are fully implemented, they will allow projects to go forward that have been stalled due to the lack of adequate private equity investment.
Both these provisions will allow Housing Credit projects which are ready to proceed but are lacking equity investment to continue by providing much needed gap financing options.