Washington, D.C. – June 23, 2009 – (RealEstateRama) — Today, U.S. Senator Richard Shelby (R-Ala.), ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, joined Senator Evan Bayh (D-Ind.) in introducing the Disaster State Housing Recovery Act. This bill ensures that states with GO Zone or Heartland Act credits, such as Alabama, are treated as Congress intended when it provided the special allocations of credits to aid in their recovery from recent natural disasters.
“The purpose of GO Zone is to help address the shortage of decent, safe, sanitary, and affordable rental housing in the areas that were adversely impacted during the 2005 hurricane season,” said Shelby. “Unfortunately, due to the current economic situation and credit crisis, GO Zone rental housing development plans have been halted. This legislation will ensure that project sponsors are allowed to exchange their GO Zone Housing Credits for cash grants so that they will be able to continue to construct affordable rental housing.”
As a side effect of the economic downturn, the country is facing an affordable housing financing shortage as developers have found it difficult to monetize the Low-Income Housing Tax Credits they have been awarded. In order to address this dislocation, the American Recovery and Reinvestment Act (ARRA) created an opportunity for states to exchange a portion of their credits for 85 cents on the dollar – providing an estimated $3 billion in grants to help jumpstart stalled projects in 2009.
ARRA is ambiguous about the disposition of so-called “disaster credits” – extra housing credits allocated to thirteen states under the GO Zone Act of 2005 and the Heartland Disaster Tax Relief Act of 2008. Senators from these states petitioned the Treasury Department to allow the exchange of unused disaster credits along with standard-issue housing credits. Treasury responded by asserting that current law does not permit inclusion of disaster credits in the exchange. This legislation addresses this inequity by ensuring that disaster affected states can take advantage of the same ARRA exchange provisions as all other states.
