This month, Congressional committees in the House of Representatives put forth legislation to implement the Biden-Harris Administration’s sweeping federal spending proposals outlined in the American Jobs Plan and American Families Plan. OFN is pleased to see both Congress and the Administration taking note of the critical role of CDFIs in strengthening America’s infrastructure. Several CDFI industry priorities are included in the bills.
As highlighted in OFN’s recent blog post, this $3.5 trillion budget reconciliation package comes as lawmakers are set to pass the Infrastructure Investment and Jobs Act, the $1.2 trillion bipartisan infrastructure bill. Under the reconciliation process, this legislation will only need 50 votes in the Senate, meaning it could be passed with only Democratic votes and Vice President Kamala Harris serving as the tiebreaker.
The path forward for these bills remains unclear. There are several competing priorities for the House to address before they could move the bills through the Budget Committee and take up the package on the floor for final passage. With the end of the fiscal year approaching on September 30, lawmakers must pass a continuing resolution to avoid a government shutdown. That short-term funding bill will likely include supplemental funding to address the impacts of Hurricane Ida, which impacted several communities in Louisiana, Mississippi, and Alabama, and caused significant flooding in the Northeast. Additionally, Congress needs to pass a debt limit increase, as Treasury Secretary Janet Yellen has warned Congress that the U.S. is expected to breach the debt limit next month.
The reconciliation measure is slated to face challenges on the Senate side. A growing number of centrist Democratic Senators are signaling opposition of a package with a $3.5 trillion price tag. Further negotiations will be needed to finalize a bill that can reach the 50-vote threshold in the Senate while maintaining the support of more progressive Members of the House.
The following list contains some of the provisions of importance to CDFIs and the communities we serve:
Affordable Housing and Community Facilities
The House Financial Services Committee bill includes several investments in affordable housing, including $9.64 billion for a Housing Investment Fund, which is modeled after the Capital Magnet Fund. Due to parliamentary restrictions on a reconciliation bill, namely the “Byrd Rule,” only provisions directly related to funding a program can be included. This means that any authorizing or other administrative changes to existing programs are generally not allowed, but those changes could be made by creating a new program, such as the Housing Investment Fund.
The bill also includes $7.5 billion for a new Community Restoration and Revitalization Fund at the Department of Housing and Urban Development. This proposal combines two elements of President Biden’s original infrastructure proposal and provides funding for housing and community infrastructure, such as community facilities. CDFIs are eligible applicants for this program.
Additional funding is provided for several other housing programs, including:
- $37 billion for the National Housing Trust Fund
- $35 billion for the HOME program
- $80 billion to preserve public housing
- $8.5 billion in CDBG funding
- $10 billion in first-time, first-generation homebuyer down payment assistance
- $2 billion for the Indian Housing Block Grant Program
- $6 billion for loans and grants to finance green preservation of HUD multifamily housing
- Increased funding for HUD’s fair housing enforcement activities
The House Ways and Means Committee bill covers a variety of tax measures. This bill includes both tax increases on corporations and other entities to help pay for the bill as well as changes and expansions to existing tax credits. The bill includes:
- Permanence for the New Markets Tax Credit (NMTC) program and would index the current allocation amount of $5 billion to inflation beginning in 2024
- Additional $3 billion allocation to support the economic recovery with $2 billion available in 2022 and the remaining $1 billion available in 2023
- Annual allocation of $175 million for Tribal Statistical Areas
- Exemption from the Alternative Minimum Tax for NMTC investments
- Annual allocation of $80 million to territories, including $20 million to Puerto Rico
The Neighborhood Homes Investment Act (NHIA) is also included in the bill. This would create a new tax credit to help build and renovate homes for affordable homeownership. The tax credit would cover the gap between the cost of building or renovating homes and the price at which they can be sold, making renovation and new home construction possible. The NHIA would also help existing homeowners in these neighborhoods to rehabilitate their homes, maintaining and preserving affordable housing.
The bill also modifies the Low-Income Housing Tax Credit (LIHTC) in several ways:
- Increases the 9 percent housing credit and the small state minimum by 50 percent, phased in over five years
- Provides a 50 percent basis boost for LIHTC buildings that designate at least 20 percent of their occupied units for extremely low-income tenants
- Gives states the ability to provide up to a 30 percent basis boost to properties in rural areas if needed for financial feasibility by qualifying rural areas as Difficult Development Areas
The House Small Business Committee bill makes the Community Advantage pilot program a permanent part of the 7(a) program and provides $600 million to enhance, improve, and expand the program.
Community financial institutions, including CDFIs, are highlighted as eligible lenders in a new $500 million cooperative lending pilot program and are included as eligible applicants for small business incubator grants. Funding is also provided to the Small Business Administration (SBA) for the new Office of Native American Affairs, Office of Rural Affairs, and Office of Emerging Markets. The bill also creates a new $4 billion direct lending program under 7(a) to increase access to small dollar loans of less than $150,000. The program would potentially allow mission lenders to partner with SBA to deliver those resources to underserved small businesses.
The House Agriculture Committee bill provides $4 billion for the Rural Partnership Program to provide flexible grant funding for rural communities to support job growth, build economic resilience, and aid economic recovery in communities impacted by economic transitions and climate change. CDFIs are eligible applicants for the program. Additional provisions include $2.6 billion for the Rural Energy for America Program (REAP) program, which provides grants and loans to farmers and small business owners to make energy efficient improvements for their operations.
The House Financial Services Committee bill also includes funding for several U.S. Department of Agriculture’s (USDA) Rural Development programs, including $5 billion for new construction and preservation of USDA Section 515 Rural Rental Housing and Section 514/516 Farm Labor Housing programs and $100 million for the Section 504 Very Low-Income Housing Repair program.
The next few months are shaping up to be incredibly busy for federal lawmakers. As Congress navigates the complex legislative landscape ahead, OFN will continue to advocate for provisions that could bring substantial new investments to CDFIs and the communities we serve.
For more information on OFN’s infrastructure advocacy, please contact Mary Scott Hardwick, OFN senior associate, public policy.