GAO Releases Report on HERA Changes
Recently, the Government Accountability Office (GAO) released a new report, “Agencies Implemented Changes Enacted in 2008, but Project Data Collection Could Be Improved.” GAO conducted the study in accordance with a congressional requirement in the Housing and Economic Recovery Act of 2008 (HERA) that it analyze Housing Credit changes enacted in that law. GAO’s 46-page follow-up report on the HERA changes discusses how the IRS and selected housing finance agencies implemented these changes, what HUD’s data show about the number and characteristics of projects completed from 2006 to 2010, and stakeholders’ views on how the HERA changes affected LIHTC developments.
The GAO study says that federal and state agencies implemented the HERA provisions by revising program guidance and modifying plans for allocating Housing Credits. It says the IRS implemented the changes by, among other things, issuing notices and revenue procedures. The study reports that Housing Credit program stakeholders that GAO contacted said that the IRS’s actions were generally sufficient. But as of October 2012, according to GAO, the IRS and Treasury were still working on implementation issues, such as developing guidance on the provision designed to ease restrictions on using Housing Credits to acquire existing federally or state-assisted buildings.
The study also says that the HUD Housing Credit database is incomplete and may undercount projects, in part because HUD didn’t follow up on potentially incomplete information. GAO says a HUD official noted that a HERA provision requiring states to collect tenant-level data (such as race and income) had made collecting project data more challenging because HUD didn’t receive additional resources and available resources had to be divided between tenant and project data collection.
According to the report, program stakeholders told GAO that the broad effects of the HERA provisions on the Housing Credit market were difficult to determine but noted that certain provisions enhanced the financial feasibility of some individual projects. For example, the report says stakeholders said the temporary increase in per-capita credit allocations, temporary credit rate floor, and discretion to use enhanced credits improved the financial viability of some projects by allowing states to award more credits per project. The report also says some state officials also said that the larger awards especially benefited projects in rural areas that can be difficult to finance because they tend to have lower rents and are less attractive to investors than projects in urban areas.