New Bill Could Increase Eligible Households in Rural Areas

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Note: this article was written by Donna Unsinn, Heartland Properties Compliance Coordinator, for publication in the September 2001 issue of Novogradac's Property Compliance Report.
The 107th Congress is currently addressing legislation of vital importance in the affordable housing industry. The Housing Bond and Credit Modernization and Fairness Act of 2001 (H.R.951 and S. 677) would amend the Internal Revenue Code to re-define the term "area median gross income" for low-income housing tax credit projects and repeal the required use of certain principal repayments on mortgage subsidy bond financing to redeem bonds. It would also modify the purchase price limitation under mortgage subsidy bond rules based on median family income.
Sections three and four of the bill focus on the ability of states to consider statewide median income to determine income limits for tax credit housing. Currently, rural communities are at a disadvantage when compared to urban areas because income levels are too low to support rents that make apartment construction financially feasible. Many families and older adults in need of affordable housing are excluded from eligibility due to low median incomes in rural areas. This legislation will allow the term "area median gross income" for low-income housing credit projects to mean the amount equal to the greater of either the countywide area median gross income, as defined by HUD, or the statewide median gross income when computing rents and income limits for families and older adults.
Currently, managers of tax credit housing are required to use county median income to determine eligibility of potential residents. Since statewide median income is generally higher than the median incomes in rural areas, the legislation will make quality affordable housing available to a broader range of households.
The scenario:
Jim and Carol and their two children apply for a tax credit apartment in Albert Lea located in Freeborn County, a rural area in south central Minnesota. Their total household income is $30,000. Under current regulations, the income limit as determined by HUD for a four-person household in Freeborn County is $28,260, making Jim and Carol ineligible for tax credit housing. Using the statewide median income for Minnesota, however, the household income limits for the same size family would be $37,500, allowing Jim and Carole to qualify for the housing. By having the flexibility to choose the highest income limits, eligibility for rural community residents will be expanded - helping to meet affordable housing needs.
Proponents of S. 677 and H.R. 951 say it will raise the number of low-income people being served in rural areas. The provision will also give housing finance agencies the flexibility they need to allocate credits in areas that are currently not being served due to extremely low incomes.
The repeal of the Mortgage Revenue Bond Ten-Year Rule has broad support in the housing industry. Enacted in 1988, the rule requires Mortgage Revenue Bond issuers to use loan repayments received 10 years after the date of the bond's issuance to pay off old bonds, instead of recycling them to make additional loans to qualified, first-time homebuyers.
According to the National Council of State Housing Agencies (NCSHA), the 10-year rule is cutting many housing finance agencies first-time homebuyer lending by half, or greater. NCSHA predicts the rule will force housing finance agencies to use billions of dollars in mortgage payment to buy back bonds, instead of reinvesting in lower-income homebuyer mortgages.
At last count, 184 House members and 33 Senators had co-sponsored the bills. Seventeen governors have also endorsed the legislation. Bi-partisan support remains a key to the bill's passage.
Sen. John Breaux (D-La.), co-sponsor of S. 677, says the bill is a step in the right direction. "This Congress has a great opportunity to create more housing for thousands of low and moderate income Americans," Breaux says. "This legislation does not create a new federal program, instead it eliminates two obsolete provisions in federal programs to make up for inflation costs to produce more affordable housing."
Sen. Rick Santorum (R-Penn.) says the Housing Bond and Modernization and Fairness Act of 2001 will provide more, safe, affordable housing for those in need. "Private activity bonds and the Low Income Housing Tax Credit help fill a critical housing need," adds Santorum.
What you can do:
Contact your congressional delegation asking them to support this important legislation. You can find your senators and congressional representatives on-line at and Contact your governor's office requesting letters of support be sent to President Bush and congressional delegations.
Donna Unsinn is compliance coordinator for Heartland Properties Inc., an Alliant Energy Resources subsidiary, in Madison, Wis. Founded in 1988, HPI works with communities to meet housing needs and has created more than 5,300 high quality affordable apartment homes for families, older adults and persons with special needs.

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