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IRS Releases Low-Income Housing Tax Credit Rates for June


The Internal Revenue Service (IRS) issued Revenue Ruling 2020-12, which provides various prescribed rates for federal income tax purposes, including applicable federal interest rates, adjusted applicable federal interest rates, and adjusted long-term and tax-exempt rates for June. As provided in the ruling, Table 4 contains LIHTC Appropriate Percentages Under Section 42(b)(1) for June 2020. The appropriate percentage for the 70% present value low-income housing credit is 7.16% and the appropriate percentage for the 30% present value low-income housing credit is 3.07%. Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. To view the attached revenue ruling from the IRS online, click the Web Link provide below.
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Tax Issues and Tax Reform


"LIHTC Agencies Can Use Existing Guidance to Extend 10 Percent Test and Placed-in-Service Deadlines"

Industry Trends


"Past Performance Is No Guarantee of Future Results, but Maybe…"
"Estimating COVID-19's Near-Term Impact on Renters"
"Surge in Rental Housing Private Activity Bonds Appears Sustainable"

Congress


"Bill Seeks to Provide $100 Billion in Emergency Rental Assistance"

HUD-Related Activity


"What Role Can Affordable Housing Play in the Economic Comeback?"

State and Local Activities


"Coronavirus Pandemic Response Could Bring More Development of Badly Need Affordable Apartments in Wisconsin"

Management and Compliance


"LIHTC Property Owners Face COVID-19 Reality: Rent Receipts Will Decrease"

Green Building


"In These Super-Sustainable New Apartments, You May Never Pay a Heating Bill"

Association News


Get the Latest Updates on Coronavirus
NAHMA Releases 2020 Affordable 100 List Next Week
Time to Start Preparing COQ Awards Applications
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events


Tax Issues and Tax Reform


LIHTC Agencies Can Use Existing Guidance to Extend 10 Percent Test and Placed-in-Service Deadlines
Novogradac (04/13/2020) Shelburne, Mark

Many associations and organizations say adhering to Low-Income Housing Tax Credit (LIHTC) requirements is becoming more difficult or impossible aim the pandemic. Several years ago, the Internal Revenue Service (IRS) issued Revenue Procedure 2014-49, which authorizes program deadline extensions for LIHTC properties in Major Disaster Areas. Virtually all states have a COVID-19 presidential Major Disaster declaration in addition to the national emergency declared March 13. The National Council of State Housing Agencies said on March 31 that IRS informed it that the relief outlined in the procedure is available in jurisdictions with these declarations. The agency in Indiana was the first to act on components of the existing guidance on April 6. Under Internal Revenue Code Section 42(h)(1)(E), LIHTC property owners must expend 10 percent of the property's reasonably expected basis within 12 months of the date of the carryover allocation. Meanwhile, Rev. Proc. 2014-49 does not specify a point at which the authority ends. Agencies may provide extensions for LIHTC developments that are underway and those to be awarded later on. If an agency concludes that owners cannot reasonably satisfy the 10 percent test within 12 months because of the COVID-19 pandemic, the longest amount of time allowed if approved is an additional six months from the original deadline, for a total of 18 months from allocation. Typically, the deadline for owners to place buildings in service is Dec. 31 of the second year after the carryover allocation date. For instance, LIHTC developments with 2018 carryovers must place in service by the end of 2020.
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Industry Trends


Past Performance Is No Guarantee of Future Results, but Maybe…
Notes from Novogradac (05/11/2020) Kincer, H. Blair

The COVID-19 pandemic will likely result in economic recession, and owners of Low-Income Housing Tax Credit (LIHTC) properties may face a decrease in occupancy rates and rental income. However, data from the Great Recession of 2007-2009 reveals that affordable housing occupancy rates and rental income remained relatively stable and recovered more quickly than other real estate categories, based on Novogradac’s proprietary database of operating information from surveys of affordable and market properties. The data shows that the national occupancy rate for two-bedroom, 60 percent area median income (AMI) LIHTC properties declined slightly during the Great Recession, but began a rebound after 2009. In 2008, the occupancy rate was at 96.3 percent and the rate dropped less than 1 percentage point during the slowdown, falling to 95.4 percent in 2009 before beginning a gradual increase through 2019. Data collected by the nonprofit affordable housing organization Enterprise shows a comparable trend. The median occupancy rate for properties in Enterprise's portfolio remained steady during the Great Recession, going from 97.2 percent median occupancy in 2007 to 97.6 percent in 2011. Since 2011, Enterprise's median physical occupancy rate has been between 97.6 percent and 98.0 percent every year, pointing to stability and that the Great Recession did not cause a dramatic fluctuation in occupancy for Enterprise's LIHTC apartments.
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Estimating COVID-19's Near-Term Impact on Renters
Affordable Housing Finance (04/24/20)

New research by the Terner Center for Housing Innovation at UC Berkeley examines the number of renter households that could face income losses due to the COVID-19 pandemic. Nearly 16.5 million renter households have at least one worker in an industry likely to be immediately affected by efforts to flatten the curve in the pandemic, according to the researchers. That indicates that nearly 50 million people are living in a renter household anticipated to experience immediate job or income losses. These renters are also more likely to be people of color: while Latinx and Black residents comprise 18 percent and 12 percent of the U.S. population, but account for 28 percent and 18 percent of the impacted renter population, respectively. The researchers also note that the CARES Act included an eviction moratorium for the one-quarter of renter households nationwide in federally-financed properties, and some emergency funding for critical homeless assistance grants and housing subsidy programs. However, federal relief efforts have yet to fully address growing rent shortfalls that will eventually come due. Among likely-impacted renter households, more than 7.1 million were already experiencing housing cost burdens and are expected be particularly vulnerable. The research also finds that no state is immune to the COVID-related economic impacts that can put renter households at risk of housing instability, with both blue and red states at-risk.
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Surge in Rental Housing Private Activity Bonds Appears Sustainable
Novogradac (04/27/2020) Novogradac, Michael; Lawrence, Peter

The use of tax-exempt private activity bonds (PABs) is expected to rise to offset the impact of the COVID-19 pandemic. Of the nearly 3.5 million affordable rental homes financed by Low-Income Housing Tax Credit (LIHTC) equity since 1987, more than one third—about 1.2 million affordable rental homes—generated LIHTCs via PAB debt financing, according to the National Council of State Housing Agencies’ (NCSHA) Annual Factbook. The yearly portion of rental homes constructed and preserved through the use of PABs has been rising considerably since 2010. In 2018, the most recent year NCSHA published data on units placed in service and receiving their necessary Internal Revenue Service tax forms, PAB-financed affordable rental housing production and preservation increased to more than 53 percent of all LIHTC-financed rental homes. In addition, the most recent annual report on PAB use by the Council of Development Finance Agencies found that in 2018, $7.4 billion was issued to help low-income first-time homebuyers and $14.7 billion was issued to finance multifamily rental housing. More than $22 billion of the total $24.1 billion in PAB issuance, or 91.5 percent, went to housing. Some states that depleted or are close to depleting their PAB carryforwards are expected to direct a greater percentage of their annual cap to multifamily housing. Many states are also providing soft financing to make more PAB financed properties financially viable. For instance, California's legislature approved a boost of $500 million in state LIHTCs for properties that receive federal 4 percent LIHTCs, which are paired with PABs.
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Congress


Bill Seeks to Provide $100 Billion in Emergency Rental Assistance
Affordable Housing Finance (05/11/20) Kimura, Donna

Rep. Denny Heck (D-Wash.) has introduced a measure to provide $100 billion in rental assistance to help consumers pay their rent during the COVID-19 pandemic. Heck's proposed Emergency Rental Assistance and Rental Market Stabilization Act of 2020 is supported by 133 House cosponsors, including Rep. Maxine Waters (D-Calif.), chair of the House Financial Services Committee. Sen. Sherrod Brown (D-Ohio), ranking member of the Senate Banking Committee, intends to introduce a companion bill in the Senate. The planned rental assistance program is based on the Emergency Solutions Grant program that currently supports emergency short-term rental assistance. The Urban Institute estimates it could cost $96 billion to assist approximately 17.6 million renters for six months. The bill calls for sending funds to communities, states, and tribes, with 40 percent allocated to individuals or families experiencing homelessness or at risk of homelessness whose incomes do not exceed 30 percent of the area median income (AMI). Another 30 percent of funds would be used to serve households at 50 percent of the AMI. The remainder of funds would be used to serve households at 80 percent of the AMI, but the Department of Housing and Urban Development can waive income-targeting requirements for jurisdictions that demonstrate that the needs of low-income renters are being met, allowing them to serve households up to 120 percent of the AMI.
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HUD-Related Activity


What Role Can Affordable Housing Play in the Economic Comeback?
Affordable Housing Finance (05/08/20) Kimura, Donna

In the context of the COVID-19 pandemic, affordable housing advocates hope to see a large increase in federal rental assistance and expansions to the Low-Income Housing Tax Credit (LIHTC) and other programs. In recent years, LIHTCs have generated about 75,000 new apartment homes annually, the National Association of Home Builders estimates. A key recommendation being made is to set the 4 percent tax credit at 4 percent instead of allowing it to float; it is currently at roughly 3.12 percent. "To take that out of the technical weeds, we have to be sure that we’re getting the maximum bang for our buck in the tax credit market," says David Dworkin, president and CEO of the National Housing Conference. Another key step is leveraging available channels. "That means additional funding to the Capital Magnet Fund, the National Housing Trust Fund, the LIHTC, and HOME funds," he says. "We need those subsidies to ensure that deals can get quickly funded and that we're making up for the shortfall, the gap, in financing that is inevitable." Regarding the Rental Assistance Demonstration (RAD), it should be made "an ongoing initiative in a future stimulus or appropriations bill," says Patrick Costigan, a principal in CF Housing Group who serves as a strategic adviser to the RAD Collaborative. He says the Department of Housing and Urban Development needs to accelerate how RAD and the Section 18 Demolition and Disposition program work together to recapitalize larger public housing portfolios with deeper funding compared to RAD alone.
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State and Local Activities


Coronavirus Pandemic Response Could Bring More Development of Badly Need Affordable Apartments in Wisconsin
Milwaukee Journal Sentinel (04/10/20) Daykin, Tom; Bollier, Jeff

As the COVID-19 pandemic causes the unemployment rate to rise, concerns are emerging that even more people will require affordable housing. Dr. Megan Sandel, who conducts research on the links between affordable housing and health at Boston University Schools of Medicine and Public Health, asserts, "We need a reset. We need to bring huge additional resources to housing." That might occur in an upcoming round of federal economic stimulus funding, which may feature affordable housing tax credits, say Douglas Bibby, president of the National Multifamily Housing Council, and Diane Yentel, president and chief executive officer of the National Low Income Housing Coalition. Yentel asserts that constructing affordable housing "is a great way" to put people back to work. In Wisconsin, the yearly awards competition for tax credits is overseen by the Wisconsin Housing and Economic Development Authority. For the 2020 round, the authority received applications from 46 developers seeking $35.9 million in tax credits to build 2,209 rental units. Based on Wisconsin's population, the authority in 2020 will likely receive roughly $16 million from the main affordable housing tax credit program. The authority intends to announce by the end of April which Wisconsin developments will receive this year's credits. Brian Swanton, president and chief executive officer of Gorman & Co., says tax credits funding should be increased alongside housing vouchers to get more apartments available for lower-income renters. He notes that in some cities, people who receive vouchers are having trouble finding apartment building owners who will accept them.
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Management and Compliance


LIHTC Property Owners Face COVID-19 Reality: Rent Receipts Will Decrease
Novogradac (03/31/2020) Novogradac, Michael; Crow, Todd

Operators of Low-Income Housing Tax Credit (LIHTC) properties are likely to see a decline in short-term rent receipts as a result of the COVID-19 pandemic. The federal CARES Act mandates a 120-day moratorium on eviction filings and late fees for many multifamily rental properties, including LIHTC properties. The legislation also provides forbearance for multifamily borrowers with a federally backed multifamily loan who experience either a direct or indirect financial hardship because of the COVID-19 emergency. After the forbearance period ends, borrowers are responsible for resuming regular payments and making additional payments to repay the mortgage payments that were subject to the forbearance. A reduction in rent receipts for affordable housing properties could be somewhat mitigated for those with tenant-based or property-based Section 8 contracts. A recent annual report on LIHTC residents published by the U.S. Department of Housing and Urban Development found that 28.8 percent of LIHTC units in 2017 received tenant-based Section 8 vouchers and 24.3 percent received project-based assistance. Another mitigating factor could be business interruption insurance. However, any real solution must stabilize the nation's affordable housing stock rather than shift the burden among industry stakeholders. There are existing models for several types of tenant or property subsidies that could potentially be adapted, using HUD's existing delivery and administration framework. It is clear that affordable housing property owners will face challenges, and that national assistance is needed.
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Green Building


In These Super-Sustainable New Apartments, You May Never Pay a Heating Bill
Curbed (03/06/20) Sisson, Patrick

Sendero Verde is a 100-percent affordable apartment development in East Harlem, New York, slated to open in 2022. The 361-unit development will be the largest passive house apartment building nationwide when completed. Meanwhile, the under-construction Second and Delaware project in Kansas City, Mo., will add 276 luxury rental units to the Market City neighborhood when it opens this autumn. In Cambridge, Mass., another under-construction project called the Finch Cambridge passive house will be the largest affordable housing project completed in the city in at least the last 40 years. Tenants who live in a passive house building enjoy lower utility bills and better air quality. The building envelopes, or exterior walls, of passive house projects are extremely tight and feature triple-paned windows and continuous insulation. Each project also requires advanced heating, ventilation, and air conditioning (HVAC) systems to move air into and around the building. Mechanical air circulation results in better indoor air quality, says Spencer Orkus, managing director at L+M Development Partners, a developer with the Sendero Verde project. The company also worked on the Beach Green Dunes II project in the Far Rockaway neighborhood, where tenants pay just $10 a month for cooling costs during the summer. The nation’s underfunded affordable housing stock loses 10,000 units annually due to deterioration and lack of maintenance, and they will need to be replaced and expanded in the coming years.
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Association News


Get the Latest Updates on Coronavirus

The National Affordable Housing Management Association (NAHMA) has created a Coronavirus Information and Resources webpage to provide members with the latest updates in a rapidly changing situation. Additionally, NAHMA is emailing members as new information becomes available. A direct link to the webpage is available on NAHMA's home page or click on the Web Link below.
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NAHMA Releases 2020 Affordable 100 List Next Week

The National Affordable Housing Management Association (NAHMA) will announce its 2020 Affordable 100—a list of the 100 largest affordable multifamily property management companies ranked by affordable unit counts—next Wednesday, May 27. The list will also appear in the May/June NAHMA News. The NAHMA website version expands the list to the top 120 largest multifamily property management companies. In addition, the online version presents two specialty lists: the 25 largest housing credit (LIHTC) property management companies and the 25 largest Rural Development program property management companies.
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Time to Start Preparing COQ Awards Applications

While in self-isolation why not fill some time by entering the NAHMA 2020 Communities of Quality (COQ) Awards competition? The submission deadline to NAHMA is Nov. 5.
To enter the awards competition, a property must first apply for and achieve national recognition as a NAHMA Community of Quality with a minimum score of 325 points on its National Recognition application. The deadline for submitting an application to a local AHMA for consideration in the national program is Sept. 3.
The Communities of Quality (COQ) Awards recognize outstanding property management companies providing the highest quality of safe, affordable multifamily rental housing in communities across the country.
Judging is based on a point system that takes into account your National COQ Recognition Program application and the required COQ Awards application essay. All affordable multifamily properties may compete—it doesn’t matter how big or small your community may be, where it is located, or which affordable rental program (HUD, RD or LIHTC) it participates in. To download a copy of the COQ Awards brochure, click on the Web Link below.
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Become a Specialist in Housing Credit Management® (SHCM®) Company!

The two national associations sponsoring the Specialist in Housing Credit Management® (SHCM®) certification program invite your company to become a Specialist in Housing Credit Management® Company, a corporate designation created specifically to honor management companies that successfully maintain a significant portion of their properties and staff to the high standards of the SHCM certification program.
The SHCM program, developed especially for management companies involved with properties developed and operated under the Low-Income Tax Credit (LIHTC) program, is sponsored by the National Affordable Housing Management Association (NAHMA) and the National Apartment Association Education Institute (NAAEI).
Earning the SHCM Company designation publicly demonstrates that a company is among the finest managers of LIHTC housing in the industry.
For more details on how to become a SHCM Company, click on the Web Link below.
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Upcoming Events

NAHMA Biannual Top Issues in Affordable Housing Fall Conference
October 25-27, 2020
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NAA Apartmentalize
November 4-6, 2020
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May 2020