Low Income Housing Tax Credit Enriching Private Interests At Expense Of Common Good

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Having gotten his thoughts on the Year 30 problem by reading his article, I thought it would be worth asking Professor Weiss for his view on the Year 15 problem. Here is what he shared with me:

The trend of limited partner investors attempting to thwart the ability of nonprofit general partners from exercising their statutorily defined rights of first refusal in low-income housing tax credit (LIHTC) deals is extremely troubling. Such efforts are regularly contrary to law yet costly for nonprofits to litigate, frustrate congressional intent, violate long-held norms and expectations in the industry, and threaten to jeopardize the ongoing affordability of our already scarce federally-assisted housing stock. Nevertheless, investors see an opportunity for windfall profits and are pouncing.

The fact that these efforts are increasingly being made by aggregators that purchase LIHTC partnership interests for the sole purpose of either pressuring nonprofits to buy them out at exorbitant prices, or with the hopes of eliminating affordability restrictions and raising rents to market levels, is all the more reason for alarm. The Biden Administration and Congress should work together swiftly to clarify this issue in Section 42 of the tax code. State housing finance agencies should amend their qualified allocation plans to ensure credits flow only to projects that will honor nonprofit purchase rights. In the meantime, courts should interpret statutory rights of first refusal consistent with congressional intent to ensure that this valuable segment of our affordable housing stock remains in the hands of mission-driven stewards.

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