Obama Budget Proposal Seeks LIHTC Program Changes

President Obama recently unveiled his last – and largest – budgetary wish list for how he'd like to see the U.S. spend its money in fiscal 2017. The FY 2017 budget proposal is his eighth presidential budget request. In it, Obama calls for a record $4.1 trillion in spending, with notable cost increases proposed for clean energy development, medical research and fighting cancer, defense spending, and battling climate change. The proposal would come with a $503 billion deficit, which would be a slight improvement from 2016's projected $616 billion shortfall but would still represent a nearly 15 percent increase since 2015.

With regard to housing programs, it seeks to strengthen the LIHTC program. The Obama administration sought similar LIHTC program changes in the FY 2016 proposed budget. The budget would expand states’ LIHTC authority by allowing them to convert up to 18 percent of their private activity bond volume cap into 9 percent LIHTC allocations. The budget would also remove the cap on the number of qualified census tracts that HUD can designate.

Another series of proposed changes would affect states’ Qualified Allocation Plans. States would be required to include both affirmatively furthering fair housing as an explicit allocation preference as well as the preservation of federally assisted affordable housing as a selection criterion. Once again, the budget proposes using an income-averaging rule to determine a project’s compliance with income eligibility guidelines in order to encourage income-mixing in properties.