The U.S. House of Representatives on Friday greenlighted the roughly $2 trillion Build Back Better Act, meaning the fate of billions of dollars in housing funding is now in the hands of the Senate.
The measure’s approval follows the passage of the $1 trillion infrastructure bill, which represents the largest federal investment of this kind in more than a decade. The larger spending measure has already gone through a series of haircuts, with housing financing among the first areas to get cut back. But the Senate is widely expected to make further changes to the measure, including to the cap on state and local tax deductions known as SALT.
Here’s where real estate-related issues currently stand in the Build Back Better Act:
The bill includes $65 billion for public housing, which is significantly higher than the $40 billion initially sought by President Joe Biden, but falls short of the $80 billion Senate Majority Leader Chuck Schumer demanded. The New York City Housing Authority’s backlog of capital needs is estimated to be at least $40 billion.
It also includes $25 billion for federal housing vouchers and $1 billion for project-based rental assistance, down from the previously proposed $75 billion for the former and the $15 billion for the latter. The measure also calls for $15 billion for the Housing Trust Fund and $1.75 billion for the “Unlocking Possibilities Program,” which would provide grants to localities that enact zoning or policies that “reduce barriers to housing supply elasticity and affordability.”
As written, the measure would temporarily increase the cap on state and local tax deductions on federal returns to $80,000 through 2030. The 2017 Republican tax law capped such deductions at $10,000, drawing the ire of states with high taxes, including New York, New Jersey, California and Illinois.
Senate Democrats have floated a different change that would remove the SALT cap entirely, but would only permit those earning less than $400,000 to apply deductions, according to Bloomberg. That proposal is in response to concerns that lifting the cap entirely would disproportionately serve the top 1 percent of earners.
The bill also makes a key change to the Low-Income Housing Tax Credit program. Affordable housing groups have called for reforms to the so-called 50 percent test, which requires at least half of a development to be financed through private activity bonds to be eligible for the tax credits. The measure drops that threshold to 25 percent between 2022 and 2026. According to Rachel Fee, executive director of the New York Housing Conference, this change could lead to the construction of nearly 50,000 new affordable housing units in New York over the next decade.
The spending package includes more than $550 billion aimed at combating climate change, marking the largest such investment in the country’s history. According to the Washington Post, a majority of that sum consists of tax incentives for electric vehicles, expanding clean energy and other green infrastructure.