Working Families Housing Tax Credit Act

Bill Number: H.R. 893
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-01-31: Referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Last Updated: 2026-05-28T12:56:55Z

AI-Generated Summary

Purpose of the Legislation

The Working Families Housing Tax Credit Act (H.R. 893) aims to encourage the development of affordable rental housing for working families, such as teachers, firefighters, police officers, and veterans, by creating a new federal tax credit. It amends the Internal Revenue Code of 1986 to provide incentives for building or rehabilitating housing targeted at moderate-income households, while also authorizing grants and low-interest loans for related infrastructure in rural and exurban areas. The bill expresses Congress's view that this credit is a key tool for producing quality housing and should be enhanced through pro-housing policies.

Key Provisions

New Tax Credit (Section 42A of the Internal Revenue Code):
Credit Calculation: Taxpayers (e.g., developers or investors) receive an annual credit for 15 years, equal to an "applicable percentage" (typically 5-9%, set by the IRS) of the "qualified basis" (eligible costs) of qualifying buildings. The percentage is designed so the present value equals 50% of costs for new buildings and 60% for existing ones (or rehabilitated ones).
Qualified Projects: A "qualified working families housing project" must include:
At least 20% of units as low-income (rent-restricted for households at or below 60% of area median gross income, or AMI).
At least 40% of units as "working families units" (rent-restricted for households up to an imputed income limit designated by the taxpayer, averaging 100% AMI, with limits ranging from 70% to 180% AMI in 10% increments).
Rent cannot exceed 30% of the applicable income limit; utilities and certain fees may be included or excluded.
Eligible Buildings: Applies to new construction, acquisition of existing buildings (with at least 10 years since last use), or substantial rehabilitation (at least 20% of building basis or a per-unit minimum). Excludes costs financed by federal grants.
Minimum Credit Rates: At least 5% for non-federally subsidized buildings; 2% for subsidized ones (unless also qualifying under the existing low-income housing credit and tax-exempt bond rules, where it could be zero).
State Allocation Limits: Credits are allocated by state housing credit agencies based on a population-based ceiling (greater of $1 per capita or $1.5 million, adjusted for inflation after 2026, plus unused prior-year amounts and returned credits). At least 10% must go to nonprofit-sponsored projects. An extra 20% ceiling boost is for rural/exurban projects.
Extended Use Requirement: Projects must commit to maintaining affordability for an "extended use period" (at least 15 years after the 15-year credit period), enforced via agreements recorded as covenants. Exceptions for foreclosure, with protections for existing tenants.
Other Rules: Includes preferences for high-cost or rural/Indian areas (130% basis increase); prohibits credits for non-prevailing wage projects; allows tenant income to rise above limits if next units go to qualifying tenants; excludes full-time students (with exceptions for married, disabled, veterans, parents, or foster/homeless youth).

Integration with Existing Low-Income Housing Tax Credit (LIHTC, Section 42):
Projects can qualify under both credits, but basis is reduced by the LIHTC credit amount.
States can elect to transfer their working families ceiling to LIHTC for rural projects.

Infrastructure Support (Section 4):
Authorizes $100 million in grants and below-market loans to local governments in rural/exurban areas for infrastructure (e.g., electricity, water, sewers, roads) tied to qualified projects.
Prioritizes clean energy for electricity projects; requires prevailing wages.

Administration and Reporting:
Housing agencies must use a "qualified allocation plan" prioritizing long-term affordability, underserved areas, income diversity (60-100% AMI), transit access, and factors like energy efficiency and historic preservation. Requires market studies and public explanations for allocations.
Taxpayers must certify compliance annually; agencies report allocations to the IRS. Penalties apply for failures.
IRS to issue regulations on multi-building projects, short tax years, anti-abuse rules, and coordination with HUD programs (e.g., Native American housing).

Significant Changes to Existing Law

New Parallel Credit: Introduces Section 42A, modeled closely on the LIHTC (Section 42) but expands eligibility to moderate-income working families (up to 180% AMI), rather than just very low-income (typically ≤60% AMI). Unlike LIHTC's 4% or 9% fixed rates, this uses a dynamic percentage to achieve 50-60% present value.
State Ceiling Adjustments: Adds a dedicated rural/exurban boost (20% of base ceiling) and allows transfers to LIHTC, potentially increasing overall affordable housing capacity without new appropriations.
Broader Income Targeting: Shifts focus from deep affordability to a mix including low-income (20%) and working families (40%), with flexible designations and grace periods for income overages (up to 140% AMI).
Infrastructure Addition: New funding mechanism outside the tax code for supporting developments, emphasizing clean energy and rural areas.
Conforming Tweaks: Updates general business credit rules, basis adjustments, at-risk limitations, and passive activity rules to include this credit; aligns with base erosion minimum tax exclusions.

Potential Impacts

On Government Agencies: IRS and state housing agencies gain administrative duties (e.g., allocations, certifications), potentially increasing workload but with regulatory streamlining for HUD coordination. Local governments in rural/exurban areas benefit from $100 million in infrastructure funding, aiding development feasibility. No direct international effects.
On Citizens: Increases supply of rent-restricted housing for working families (e.g., essential workers), potentially lowering costs and improving access near jobs/transit. Tenants gain enforcement rights for affordability commitments; protections against evictions post-foreclosure.
On Developers/Investors: Provides tax incentives (similar to LIHTC syndication) to attract private capital for moderate-income projects, especially in high-cost or rural areas, but requires long-term commitments and wage compliance, raising costs.
Broader Economy: Could boost housing production (e.g., 15-year credits encourage investment), support rural revitalization, and promote clean energy infrastructure, though limited by state ceilings and effective date (post-2025).

Main Stakeholders Affected

Developers and Investors: Primary beneficiaries of tax credits; must meet income/rent rules and extended commitments.
Working Families and Low-Income Households: Tenants gaining access to affordable units (up to 180% AMI), with protections for income fluctuations.
State and Local Housing Agencies: Responsible for allocations, monitoring, and reporting; nonprofits get set-aside priority.
Local Governments: Receive infrastructure grants/loans for rural/exurban support, enhancing project viability.
Federal Agencies: IRS (credit administration), HUD (coordination on definitions/funding), and Treasury (regulations); essential workers/veterans indirectly supported.
Nonprofits and Tribes: Favored in allocations; special rules for Indian areas and rural projects.

Notable Legal, Constitutional, or Political Implications

Legal: Relies on IRS regulations for implementation (e.g., anti-abuse, multi-building rules), with potential for litigation over allocations or compliance (e.g., tenant enforcement in state courts). Integrates with existing tax code without overriding LIHTC; prevailing wage ties to labor laws (Section 45). No basis reduction for depreciation recapture.
Constitutional: Neutral; promotes equal housing access without apparent equal protection or takings issues, as it's voluntary incentives.
Political: Advances bipartisan housing affordability goals by targeting "hard-working Americans" beyond traditional low-income focus, potentially reducing urban-rural divides. Authorizes funding without annual appropriations, but inflation adjustments ensure long-term viability; emphasizes clean energy and equity for special needs groups (e.g., disabled, homeless youth).

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Ryan, Patrick [D-NY-18]

Recent Actions

2025-01-31: Referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-01-31: Referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-01-31: Referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2025-01-31: Introduced in House
2025-01-31: Introduced in House

Bill Versions

Working Families Housing Tax Credit Act — issued 2025-01-31 — PDF (85 pages)