The ROAD to Housing Act's Quiet Capital-Markets Provision

The House passed the 21st Century ROAD to Housing Act (H.R. 1299) on May 20 by a 396-13 vote. Press coverage has focused on the supply provisions and the corporate-landlord ownership limits. The package's most consequential capital-markets provision, however, is the Community Investment and Prosperity Act, which raises the cap on national banks' public welfare investments (PWI) from 15% to 20%.

Per the Affordable Housing Tax Credit Coalition, the Housing Credit accounts for roughly 80% of national bank PWI activity, and a meaningful share of banks have been at or near the existing 15% cap for some time. The cap increase functionally expands how much capital that investor base can deploy into LIHTC equity.

This is the equity-demand counterweight to a problem OBBBA has been quietly creating. Per Novogradac, LIHTC equity has drifted to roughly 84 cents nationwide as the largest LIHTC expansion in 25 years filters into the market. Thinner equity raises per deal shift more weight onto the soft-money layer (i.e. HOME, CDBG, state trust funds, deferred developer fees). The PWI cap lift works on the opposite side of that equation by pulling more bank demand into the credit market, which should arrest some of the per-credit pricing slippage.

For second-tier and Sunbelt markets, where the soft layer is already thin, equity-side relief is more useful than equivalent gap-side relief. Banks with PWI capacity invest in credits across geographies; soft funds are inherently localized. A penny or two of equity pricing recovery in those markets does more underwriting work than a comparable infusion of localized gap financing.

Source: Affordable Housing Finance

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