After months of negotiation, the House of Representatives passed their Build Back Better infrastructure bill on November 19. The House approved the bill essentially along party lines with 220 votes in favor and 213 in opposition. This bill — scaled back from the original $3.5 trillion package — includes several CDFI priorities and has the potential to bring billions of dollars of new capital to CDFIs. The legislation follows the bipartisan infrastructure bill that was passed into law earlier this month, both key components of the Biden Administration’s domestic policy agenda.
Although the Build Back Better bill has passed the House and has support from the Administration, it will be subject to parliamentary rules and a robust amendment process in the Senate that may modify the bill. The Senate is expected to begin consideration of the bill after the Thanksgiving recess.
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The CDFI provisions in the bill touch several different issue areas:
Housing and Community Facilities
The bill creates the Housing Investment Fund and funds the program at $750 million. Similar to the CDFI Fund’s Capital Magnet Fund (CMF), the proposed Housing Investment Fund would provide flexible grant capital to increase the affordability, accessibility, and quality of housing nationwide. CMF awardees have created over 28,100 affordable housing units, including 4,500 homeownership units, and the Housing Investment Fund will build and improve upon this work.
Another new program is the Community Restoration and Revitalization Fund at the Department of Housing and Urban Development that would allow CDFIs to access funding for housing and civic infrastructure, such as community facilities. This program is funded at $3 billion. Civic infrastructure investments work hand in hand with investments in housing, transportation, climate resiliency initiatives, and other community infrastructure to stimulate new economic opportunities for local residents, improve education and health outcomes, and help ensure a neighborhood’s long-time residents are fully integrated in community life.
Assistance for first-time, first-generation homebuyers is also included in the bill. This funding includes $2.2 billion open to eligible entities, including CDFIs, to use for providing assistance to homebuyers, including down payment assistance, subsidies, and home modifications to accommodate disabilities. The funding for first-generation homebuyers aims to address the racial wealth gap.
The bill also works to build strong, resilient rural communities including the creation of the Rural Partnership Program, a new $970 million program, to ensure 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. OFN appreciates the Committee ensuring that CDFIs are eligible applicants for the program and believes that this will bring much-needed grant dollars to rural communities that have struggled with a fragmented federal support system.
The bill includes language to codify the Small Business Administration’s (SBA) Community Advantage pilot program and includes $224 million in funding for its enhancement and expansion. The bill also increases the SBA focus on addressing ongoing challenges for businesses in accessing small dollar loans with the new proposed $1.4 billion direct lending program. Directing SBA resources to smaller borrowers means that limited government resources are more likely to reach minority, women-owned and very small businesses, as OFN has long recommended. Additionally, it highlights community financial institutions, including CDFIs, as eligible lenders in a new Cooperative Lending Pilot Program and ensures that CDFIs are included as eligible applicants for small business incubator grants.
The House bill also includes several tax provisions relevant to CDFIs. First, the bill creates a new Neighborhood Homes Investment Act, which would create a new tax credit totaling about $5 billion for investments that build or rehabilitate owner-occupied homes in distressed communities. Although permanence for the New Markets Tax Credit has been left out of the bill, however, it does include $175 million in additional allocation for Tribal Statistical Areas for 2022 through 2025. Finally, the bill makes several changes to the Low Income Housing Tax Credit (LIHTC), including a temporary increase in allocations through Fiscal Year 2024.
A new Greenhouse Gas Reduction Fund is also created in the legislation. This fund, housed at the Environmental Protection Agency (EPA), will have $29 billion available across four different categories for projects aimed at reducing greenhouse gas emissions. Two of the pots of money are set aside for “low-income and disadvantaged communities,” which is not defined in the bill. These include $7 billion to support zero emission technologies and $8 billion for qualified projects which help communities reduce or avoid greenhouse gas emissions and other forms of air pollution. Eligible applicants likely include nonprofit CDFI loan funds, but CDFIs are not specifically mentioned in the bill text.