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Announcements
NAHMA Introduces New Vanguard Award™
The National Affordable Housing Management Association (NAHMA) recently announced its new Affordable Housing Vanguard Award, designed to recognize newly developed affordable multifamily housing communities that showcase quality design and financing through their creation.
The Vanguard Award (www.nahma.org/content/vanguard.html) celebrates success in the multifamily affordable housing industry by recognizing and benchmarking new, quality multifamily affordable housing development. The award will:
• Pay tribute to developers of high-quality affordable housing;
• Demonstrate that exceptional new affordable housing is available across the country, and that it is a positive addition to any neighborhood;
• Demonstrate that the affordable multifamily industry must be creative and innovative to create exceptional properties given the financing and other challenges to development;
• Highlight results of private-public partnerships required to develop today’s affordable housing; and
• Share ideas for unique design and financing mechanisms with industry practitioners to further stimulate creative development in the affordable multifamily industry.
The Vanguard Award complements NAHMA’s Communities of Quality® (COQ) National Recognition Program (www.nahma.org/content/coq.html), through which multifamily properties are certified as having achieved a high standard of excellence in the way they are managed, the services they provide residents, the experience and training of personnel, and other criteria. However, newly developed properties are too new to meet the criteria of NAHMA’s COQ National Recognition Program (particularly in the inspection and financial audit categories), hence the creation of the Vanguard Award to recognize these properties. As the properties mature, they will become eligible – and will be encouraged – to enter NAHMA’s COQ National Recognition Program.
Affordable multifamily housing communities that are less than three years old (as of May 1, 2010) may apply (based on date of completion of new construction or completion of major rehab). Affordable is defined as a property participating in a government funded, insured or otherwise sponsored program that results in rents that are below market rate.
For details on award categories, benefits of participation, and how to apply, click on the link below.
Headlines
Association News
NAHMA March 2010 Conference Will Focus on Key Federal Multifamily Housing Policy Issues
NAHMA and NAA to Co-Locate 2010 National Conferences
NAHMA Educational Foundation Scholarship Applications Go Digital
Revised and Updated Fair Housing: A Guidebook for Owners and Managers of Apartments Now Available
NAHMA Announces New Tax Credit Housing Management Publication
Industry News
"Report Examines LIHTC Market Disruption"
"Affordability Still a Big Issue to Tackle"
"Tax Relief for LIHTC Properties"
"Very Low-Income Housing Hard to Find, Study Shows"
"HUD Secretary Donovan Announces $2 Billion in Recovery Act Grants to Stabilize Neighborhoods, Rebuild Local Economies"
"Galante Outlines HUD’s Multifamily Commitment"
"Weatherization Assistance Program for Low-Income Persons"
"Looking Up From the Bottom"
"Section 8 Voucher Program Faces New Cut"
"Four Northeast Ohio Affordable Housing Projects Awarded Federal Stimulus Money"
"Q&A: Homeownership Incentives, and What They Mean for Renters"
"Treasury Announces Support for HFA Bond Programs"
"Md. Acting to Finance Affordable Housing"
"Scenarios -- Reshaping Fannie Mae and Freddie Mac"
"U.S. Now a Renters' Market "
"Multifamily Properties Experiencing Record Vacancies"
"Apartment Opportunities Seen in Secondary Markets"
Association News
NAHMA March 2010 Conference Will Focus on Key Federal Multifamily Housing Policy Issues
Managers and owners of affordable multifamily housing will gather for the annual NAHMA Winter meeting in Washington, DC on March 14-16, 2010 to consider the impact of recent and proposed federal policies on multifamily affordable housing.
A list of key invited speakers is provided below; for a full meeting agenda, registration and hotel details, please click on the link below.
The March conference is one of three annual events hosted by NAHMA for its members, who are also affiliated with Affordable Housing Management Associations (AHMAs) around the country. The conferences afford NAHMA and AHMA members and guests the opportunity to share best practices, understand federal legislative and regulatory issues and meet with officials from federal and other agencies that affect the industry.
The meeting will be held at The Madison - A Loews Hotel , at 1177 15th Street NW, Washington, DC.
Monday, March 15
HUD Forum 10:00 – 11:30 a.m.
Panel One
*Carol Galante, Deputy Assistant Secretary, Multifamily Housing, HUD (invited)
Panel Two
*Janet Golrick, Associate Deputy Assistant Secretary, Multifamily Housing, HUD *Bob Iber, Acting Director of Multifamily Asset Management, HUD (invited) *Delton Nichols, Deputy Director, Real Estate Assessment Center, Office of Public and Indian Housing, HUD *Eric Ramsey, Director of Business Relationships and Special Initiatives, Office of Multifamily Asset Management, HUD (invited) *Ted Toon, Deputy Assistant Secretary, Office of Affordable Housing Preservation, Multifamily Housing, HUD (invited) *Gail Williamson, Director, Housing Assistance Policy, Office of Housing Assistance & Grant Administration, Multifamily Housing, HUD (invited)
NAHMA Communities of Quality Awards Luncheon 12:15 – 1:45 p.m.
*Carol Galante, Deputy Assistant Secretary, Multifamily Housing, HUD (invited)
Tax Credit Committee 2:00-3:00 p.m.
*Ryan Abraham, Professional Staff Member, Committee on Finance, U.S. Senate *Greg Brown, Federal Legislative Director, National Association of Homebuilders *Paul Handleman, Branch Chief, Passthroughs and Special Industries, Office of Associate Chief Council, Internal Revenue Service (invited) *Garth Rieman, Director, Housing Advocacy & Strategic Initiatives, Policy and Government Affairs, National Council of State Housing Agencies *Grace Robertson, Program Analyst, Examination Specialization & Technical Guidance , Internal Revenue Service *Jon Sheiner, Tax Counsel, Office of Congressman Charles Rangel, U.S. House of Representatives
Forum Discussion: Case Studies on Problem Properties 3:00-4:30 p.m.
*Leah Lyerly, Vice President, Westminster Company (invited) *Karen Newsome, Vice President-Administration, WinnResidential (invited) *Rich Skoczylas, Regional Property Manager, AIMCO Capital Northeast *Tim Zaleski, Vice President, National Church Residences
Tuesday, March 16
Rural Housing Committee 8:30-9:30 a.m.
*Tom Hannah, Deputy Administrator, Multifamily Housing, Rural Development, U.S. Department of Agriculture (invited)
*Larry Anderson, Director, Multifamily Housing Preservation and Direct Loan Division, Rural Housing Service, U.S. Department of Agriculture (invited) *Michael Steininger, Director, Multi-Family Housing Processing Division, Rural Housing Service, U.S. Department of Agriculture (invited) *Stephanie White, Director, Multi-Family Housing Portfolio Management, Rural Housing Service, U.S. Department of Agriculture (invited)
Senior Housing Committee 9:30-10:30 a.m.
*Willie Spearmon, Director, Office of Housing Assistance & Grant Administration, Multifamily Housing, HUD (invited)
TRACS and Contract Administration Committee 10:45 a.m. -12:15 p.m.
*Deb Lear, Director, Office of Housing Assistance Contract Administration Oversight, Multifamily Housing, HUD (invited) *Lanier Hylton, Office of Program Systems Management, HUD (invited)
NAHMA and NAA to Co-Locate 2010 National Conferences
For the first time, NAHMA will hold its annual summer meeting in conjunction with the 2010 National Apartment Association (NAA) Education Conference & Exposition, which takes place June 22-26, 2010 in New Orleans.
The 2010 NAA Education Conference & Exposition is the largest event in the multifamily housing industry and includes world-class educators and a star-studded lineup of speakers.
Through this partnership, both conferences will address the critical needs of affordable housing communities and the apartment industry as a whole. Discounts will be available to attendees who register for both conferences.
At the NAHMA meeting, scheduled for June 23, discussions will focus on public policy related to federal legislative and regulatory initiatives that impact all of the affordable housing programs, including HUD programs (project-based Section 8, Section 8 tenant vouchers, Section 202 senior housing, and Section 811 special needs housing); the Low Income Housing Tax Credit program; and Rural Housing Service programs (Sections 515, 538 and the revitalization program), among others.
Together, the NAHMA summer meeting and the NAA Conference & Exposition are essential to smart asset management for owners and managers of LIHTC, Section 8, 202 or 236 properties. Conference sessions will include the latest information on important affordable housing topics such as REAC Inspections, Evictions, Fair Housing Complaints, Multi-Layered Financing, and Preservation Tools, among others.
Among the general session speakers at the 2010 NAA Conference is the 43rd U.S. President George W. Bush, as well as the editor of Fast Company magazine, Bill Taylor, who will speak about management trends, and Bruce Kimbrell of the Disney Institute, who will speak about customer service. The conference also features industry-related tracks for all types of apartment professionals from executives to onsite managers to leasing agents to maintenance technicians.
For more details, click on the link below and scroll to the summer meeting information.
NAHMA Educational Foundation Scholarship Applications Go Digital
Having awarded more than $100,000 to more than 100 recipients in its first three years, the NAHMA Educational Foundation is looking forward to another year of growth for its scholarship program. The number of awards has increased steadily over the first three years. This year, the application requirements and format remain the same; however, submissions must be made online and paper copies will no longer be accepted.
"This will streamline the process at both the applicant and evaluator level,” said Wayne Fox, chairman of the Foundation. “Most importantly, this move will result in operating cost savings for the Foundation that will translate directly into additional Foundation funds being available to provide more scholarship money annually.”
"In 2009, scholarships were awarded to residents living in properties affiliated with 10 different AHMAs,” Fox said. “As a result, another of the Foundation's goals for 2010 will be to expand our coverage to additional AHMAs that have not previously received scholarship awards.”
Deadline for submission of completed applications is 10 p.m. Eastern Standard Time on May 18, 2010.
For additional information, click on the link below.
Revised and Updated Fair Housing: A Guidebook for Owners and Managers of Apartments Now Available
NAHMA has announced the revised and updated Fair Housing: A Guidebook for Owners and Managers of Apartments is now available.
To help property management staff understand and comply with fair housing requirements, NAHMA has partnered with The Compass Group to provide a completely updated and authoritative Fair Housing Guidebook.
The book provides 21 chapters of valuable information, including an overview of fair housing laws and regulations, suggested policy approaches that will provide a firm foundation for each property’s fair housing efforts, citations for landmark cases, plus a variety of appendices containing useful information that is sometimes not easy to find. Finally, the guidebook includes insights from expert owners and managers who have faced these issues and developed particularly effective approaches. It is also available in CD format.
“We believe the new Fair Housing Guidebook is an essential tool and reference that should be kept on hand at every multifamily property across the country. It is available at the affordable and special NAHMA member discount price of just $40 per copy – which we believe will enable every property to purchase its own copy for hands-on staff use,” said NAHMA President Daniel Murray, NAHP-e. For more details on ordering the Guidebook, please click on the link below.
NAHMA Announces New Tax Credit Housing Management Publication
A new publication, A Practical Guide to Tax Credit Housing Management, is now available from NAHMA. The 74-page spiral-bound book is an informative yet easy-to-read primer on tax credit housing management.
The user-friendly guide will help you understand key concepts in the Low Income Housing Tax Credit (LIHTC) program, including Fractions and Credits, Eligible Basis, Qualified Basis, Minimum Set-Aside, Rules of Calculation of Income, Student Households, Amenities and Services, Non-Transient Occupancy, and more.
In addition, the book is designed as a referencew guide for the Specialist in Housing Credit Management® (SHCM®) certification. The SHCM program is unprecedented as the only national certification program supported by three national trade associations and their members. Joining NAHMA in the strategic alliance are the National Apartment Association Education Institute (NAAEI) and the American Association of Homes and Services for the Aging (AAHSA).
“As experienced affordable housing management professionals know, the tax credit program is the primary production tool for creating new affordable housing properties across every state in the country, and it is also the most important tool for rehabilitating and preserving the nation's existing stock of aging affordable housing,” said NAHMA President Daniel Murray, NAHP-e. “To maximize their careers, management professionals in the affordable housing industry must be able to demonstrate their experience and expertise in mastering the complex requirements of the tax credit program.” The publication can be ordered at NAHMA’s webstore via the link below.
Industry News
Report Examines LIHTC Market Disruption
Affordable Housing Finance (01/10) Kimura, Donna
A study by the Joint Center for Housing Studies at Harvard University reports that the Tax Credit Assistance Program (TACP) and the exchange program should be enough to handle 2007 and 2008 projects and 2009 allocations in large metropolitan areas, but it may not be enough to fund the backlog and new 2009 projects in other areas. "The TCAP and exchange programs were critical stopgaps that, while taking time to get up and running, will likely succeed in funding a substantial portion of the backlog," according to the report, titled "The Disruption of the Low-Income Housing Tax Credit (LIHTC) Program: Causes, Consequences, Responses, and Proposed Correctives." The report finds that investor demand for the LIHTC program is unlikely to catch up with supply without legislative action or a private-market solution, which does not yet exist. "To both revive demand and reduce its volatility in the future, the 10-year use period must effectively be shortened and/or limitations on the deduction of passive losses must be relaxed," according to the report. "Otherwise, LIHTCs will not be competitive with other investments, including business tax credits with shorter use and recapture provisions." A combination of three consensus proposals to strengthen the LIHTC program will most likely be needed to sustain affordable housing production. The proposals include extending the carryback of LIHTCs from one to five years, relaxing passive-loss restrictions to allow certain existing corporations to pass losses onto individual taxpayers, and extending the exchange program.
Affordability Still a Big Issue to Tackle
National Mortgage News -- News (01/21/10) Vol. 34, No. 15, P. 13; Dymi, Amilda
Data and insiders' expectations are challenging the widespread belief that housing has been made more affordable by the foreclosure crisis, saying the ways things could be worse are likely to outnumber the ways they could be better. David A. Smith, CEO of Boston-based CAS Financial Advisory Services, expects housing prices to stabilize but stratify with increased political pressure over all-exchange properties. Smith expects "economic uncertainty and ongoing Washington discussions about additional stimuli, taxes or burdens on business will squelch emergence of any upward pricing pressure," but says one positive will exist in the potential for demand on new equity bids to match the existing supply or new low-income housing tax credit homes offered for sale. Employment is the driving factor in home affordability for one in four homeowners, revealing that the foreclosure epidemic is a symptom of much larger economic problems that still need to be addressed. The historic drop in home prices as a result of the foreclosure crisis has actually worsened housing affordability; and the number of low- to moderate-income homeowners and renters spending over 50 percent of their income on housing increased from 18 percent to 20 percent between 2005 and 2008. Utility cost increase, higher housing payments as a result of adjustable-rate mortgages resettling, an upward trend in the unemployment rate, and minimal moving since the start of the foreclosure crisis have all contributed to the lack of improvement in housing affordability despite the drop in home prices.
Tax Relief for LIHTC Properties
Affordable Housing Finance (01/10) Jennings, Kieran
Improperly assessing property taxes on a low-income housing tax credit (LIHTC) can destroy that property's economic viability. Fortunately, LIHTC property owners can protect themselves by understanding the major reasons for an improper tax assessment, and can take some steps to maintain proper assessments in the future. Unlike other real estate, the values of LIHTC projects generally do not vary significantly from year to year, and restrictions placed on rents and administrative costs often leave LIHTC actual market values so low that a small incremental difference becomes immaterial. Consequently, if a project is fairly assessed, it should be able to remain fairly assessed over its contract period. Property taxes for conventional multifamily housing projects generally comprise one of the largest expenses for an owner, but because rents are reduced and operating expenses are higher, LIHTC properties must operate under significantly tighter margins than most conventional properties. Consequently, taxes can be the difference between making debt service and feeding a property. Assessors cannot simply inspect properties and know they carry LIHTC restrictions, the properties often receive high assessments, which forces LIHTC taxpayers to challenge assessments every time they go through a reassessment. A potential solution for this problem is establishing a system that helps an assessor produce a fair assessment every year. Such a system should incorporate meetings with the assessor to present information the indicates that the property is LIHTC, and should also include the project's financial statements and Land Use Restriction Agreement, which provide the necessary information to assist assessors in establishing a fair rate.
Very Low-Income Housing Hard to Find, Study Shows
San Diego Union-Tribune (01/01/10) Weisberg, Lori
A study by the National Low Income Housing Coalition, an advocacy group for the poor, shows that the country's poorest households are finding it increasingly difficult to secure affordable housing. For every 100 extremely low-income households, there were 37 affordable rentals available, the census study shows. A year ago there were 39 available rentals. Under federal guidelines, affordable rent is defined as one that does not require spending more than 30 percent of one's income on housing. The situation is particularly problematic in California, one of the most expensive states in the country. "We have more low-income households who can’t afford to rent here, compared to 10 years ago, because rents grew faster than incomes, and the problem is bigger than ever with the recession," says San Diego Community Housing Federation executive director Tom Scott. Most affordable-housing developers in the area are unable to create housing to serve the very lowest-income families because the rents those households would be able to pay are not enough to cover continuing operating costs. In San Diego, 14,000 households receive Section 8 Housing Choice vouchers, but there is a waiting list of 40,000, according to the San Diego Housing Commission. "I think Housing Choice vouchers are the best federal low-income housing program the country has ever had," says Housing Commission Chief Executive Rick Gentry. "It provides a deep subsidy and utilizes the marketplace as a resource. If I had my choice of all the programs to increase it would be the Section 8 program, but it is expensive." Gentry says there have been few increases in the program's funding over the past decade, and he doubts there will be a substantial boost in Section 8 vouchers. Many agencies are unable to finance deeply subsidized new housing units for the poor because of the lack of funding to cover daily operating costs. The National Low Income Housing Coalition hopes its census analysis will help persuade Congress to infuse the National Housing Trust Fund with much-needed capital.
HUD Secretary Donovan Announces $2 Billion in Recovery Act Grants to Stabilize Neighborhoods, Rebuild Local Economies
U.S. Department of Housing and Urban Development (01/14/10)
The U.S. Department of Housing and Urban Development has announced $2 billion in Recovery Act funding to states, local governments and non-profit housing developers, under HUD’s Neighborhood Stabilization Program (NSP), to spur economic development in hard-hit communities and create jobs. The grants are being awarded competitively to applicants who developed the most innovative ideas to rebuild local communities, while demonstrating that they have the capacity to be responsible stewards of taxpayer dollars. “By investing Recovery Act dollars in revitalizing hard-hit neighborhoods, we’re not only creating new job opportunities, but giving communities across the country an opportunity for a fresh start,” said Vice President Biden. “These competitive awards go to the heart of the Recovery Act: funding innovative projects that both provide immediate relief and help lay a new foundation for long-term economic growth.”
Galante Outlines HUD’s Multifamily Commitment
Affordable Housing Finance (10/09) Serlin, Christine
Department of Housing and Urban Development deputy assistant secretary for multifamily housing Carol Galante, a longtime affordable housing developer, discussed the Obama Administration's commitment to rental housing. At AHF Live: The 2009 Affordable Housing Developers’ Summit, Galante emphasized how HUD is making changes and transforming itself to help create more affordable housing, and praised HUD Secretary Shaun Donovan. "President Obama understands HUD, both the pros and cons, and had the wisdom to pick Shaun Donovan to be HUD secretary. This is an incredible secretary for HUD. He’s remarkable, and I consider him a mentor," says Galante. Galante also discussed HUD's four main goals: addressing the foreclosure crisis, facilitating sustainable communities, restoring federal leadership in multifamily, and changing how the agency does business. A major part of the transformative initiative will be overhauling the agency's departments. In the multifamily department, Galante is working to be more customer-focused and act as a partner to developers, owners, property managers, and state and local agencies. Galante also notes that HUD is working with other agencies, including Health and Human Services, Transportation, and Education, to obtain more funding to help neighborhoods and to create more housing. Galante says HUD knows that the low-income housing tax credit has been the largest affordable housing program over the past 20 years, and that she is hoping to fix the Federal Housing Administration multifamily program and Sec. 202 to make it easier for developers to use.
Weatherization Assistance Program for Low-Income Persons
TradingMarkets.com (01/25/10)
The U.S. Department of Energy (DOE) is amending the eligibility provisions applicable to multi-unit buildings under the Weatherization Assistance Program for Low-Income Persons. As a result of a new rule established on Jan. 25, if a multi-unit building includes units that participate in the Low Income Housing Tax Credit (LIHTC) Program, identified by HUD, or includes units that participate in the USDA Rural Housing Service's Multifamily Housing Programs, and is included on a list published by DOE, that building will meet the income eligibility requirements of the Weatherization Assistance Program without the need for further evaluation or verification. The preamble of the new final rule also provides guidance to States with respect to addressing the requirement that the benefits of weatherization assistance in connection with such rental units, including units where the tenants pay for their energy through their rent, will accrue primarily to the low-income tenants residing in such units. The new final rule will reduce the procedural burdens on evaluating applications from buildings that are part of HUD assisted and public housing programs, the Federal LIHTC programs, and the USDA Rural Development program. This final rule is effective February 24, 2010.
Looking Up From the Bottom
Housing Finance (12/01/09) Asciero, Jerry
Many in the affordable housing industry had their most difficult year ever in 2009. The low-income housing tax credit (LIHTC) equity market continued to fall, debt financing prices rose, and many gap financing sources vanished, leading to the cancellation of many deals. Unfortunately, it looks like 2010 will not be much different. Interest rates are predicted to rise, financing for construction will be difficult to obtain, and no one is predicting a quick recovery in tax credit equity prices. There are some signs of hope. Higher yields on LIHTCs may attract some nontraditional or dormant investors to the market, and the Tax Credit Assistance Program and tax credit exchange program (TCEP), introduced by the American Recovery and Reinvestment Act, may help to jump-start the dormant tax credit development pipeline. "2010 will still be an extremely challenging environment," says Enterprise Community investment senior vice president C. Lamar Seats. "But with the TCAP and the exchange program, and alternate investors coming back to the equity market, it should be a better year." Many in the industry are relying on TCAP and TCEP as a short-term solution. TCAP provides much-needed gap financing for tax credit developments allocated between 2007 and 2009, and TCEP allows developers to exchange unsold credits for $0.85 per tax credit dollar. Unfortunately, these programs have been less than completely effective, and have a limited lifetime.
Section 8 Voucher Program Faces New Cut
Tulsa World (OK) (01/15/10) Averill, Mike
U.S. Department of Housing and Urban Development estimates that the Section 8 voucher program, which allows low-income households to rent homes by paying part of the rent, will be cutting back the amount of funding it provides to local housing authorities. For example, Tulsa Housing Authority officials estimate that the Section 8 program will be funded at 85 percent in 2010, eliminating 702 leasing vouchers. With an average of three people housed per voucher, the cutback means more than 2,000 people will not receive Section 8 housing funds this year, according to Tulsa Housing Authority president and CEO Chea Redditt. Redditt says the Housing Authority has started not to reissue vouchers when they are turned in, either when someone dies or becomes ineligible due to income increases. "We absolutely hope to avoid taking vouchers away from anyone. That would be the very last thing we'd do. That's really not a consideration for us," says Redditt, adding that the voucher reduction would affect low-income families at a time when social services are already spread thin due to the struggling economy. "Housing authorities across the nation are dealing with the same issue. Some are pulling back vouchers because they can't afford to pay the rents," says Redditt.
Four Northeast Ohio Affordable Housing Projects Awarded Federal Stimulus Money
Cleveland Plain Dealer (OH) (01/20/10) Jarboe, Michelle
The Ohio Housing Finance Agency (OHFA) will use federal stimulus funds to help developers launch construction on 13 affordable housing projects, including four located in Northeast Ohio. The agency recently approved more than $53 million in funding, primarily coming from the Tax Credit Exchange and Tax Credit Assistance programs created by the American Recovery and Reinvestment Act. The programs are intended to give developers a way to start their projects now instead of waiting for the economy to improve. Developers of affordable housing rely on federal housing tax credits, which can be sold to investors to pay for projects. In the down economy, fewer investors are buying the credits, and many projects have been delayed as a result. The Tax Credit Exchange program allows OHFA to convert some of those credits into grant funds, giving developers the money they need. The Tax Credit Assistance program uses U.S. Department of Housing and Urban Development money to support the federal housing tax credit program. In Northeast Ohio, the funding will support a Cleveland Housing Network apartment building for the homeless, a YWCA and Cleveland Housing Network apartment for women who have aged out of foster care, a senior-housing renovation project, and a three-story apartment building.
Q&A: Homeownership Incentives, and What They Mean for Renters
Baltimore Sun (01/06/10) Hopkins, Jamie Smith
Paula M. Cino, director of energy and environmental policy at the National Multi Housing Council (NMHC), says federal subsidies for homeownership total about $230 billion versus federal rental subsidies of $60 billion. She says rental subsidies would have to be raised $36 billion to accurately reflect the number of renters nationwide versus the number of homeowners. She says rental allocations do not take into account diverse housing needs, the fact that 33 percent of Americans are renters, and increases in demand for apartments. Cino cites the Census Bureau's Housing Vacancy Survey indicating that 63 percent of new households were renter-occupied in 2008, with 2.38 million new renter households reported between 2004 and 2008. "Apartments are needed to accommodate the growing number of young professionals, empty-nesters and childless couples seeking smaller, centrally-located, more affordable homes that don't necessitate a long-term financial commitment," she remarks. Cino attributes the housing crisis to "years of 'homeownership at any cost' housing policy" and blames zero-down and seller-financed down-payment programs for the large number of "upside down" mortgages currently plaguing the housing market and the emergence of "voluntary foreclosures." "Homeownership is not the right choice for everyone. . . . We've seen that homeownership is not a sure-fire path to build wealth," Cino says. "Clearly we need a more balanced housing policy that includes homeownership and a robust rental market. A reallocation of some homeownership subsidies should be directed towards the development and support of affordable housing. We also need to encourage responsible land use choices and promote the production of all types of housing."
Treasury Announces Support for HFA Bond Programs
Affordable Housing Finance (12/09) Jacobs, Barry G.
The U.S. Treasury Department recently announced an initiative to support new housing bonds and help struggling housing finance agency (HFA) bond programs carry existing bonds. The program will operate through Fannie Mae and Freddie Mac, using authority granted to the Treasury by the Housing and Economic Recovery Act of 2008 to support the government-sponsored enterprises (GSEs), providing support for both single-family and rental housing bonds. "This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times," says Treasury Secretary Timothy Geithner. "The administration aims to help HFAs jump-start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs." The initiative features two components, specifically a new issue bond program (NIBP) to support fresh agency bond activity and a temporary credit and liquidity program (TCLP) to reduce financing costs for existing bonds. The Treasury will use the NIBP to purchase Fannie Mae and Freddie Mac securities backed by new homeownership and rental housing bonds acquired by the GSEs. The Department of Housing and Urban Development has also issued a proposed regulation that would prohibit the requirement to escrow low-income housing tax credit proceeds to guarantee the completion of HFA financed projects.
Md. Acting to Finance Affordable Housing
Baltimore Sun (01/08/10) Hopkins, Jamie Smith
Maryland is taking advantage of a new federal program offering $92 million in low-interest financing for affordable housing this year, which should allow developers to build or renovate 1,000 rental units for lower-income residents of the state. The financing is part of a nationwide effort to keep affordable-housing production from halting due to the loss of many traditional sources of funding. "This has been the most challenging past year for our industry, and everybody's been affected," said Maryland Affordable Housing Coalition executive director Kimberly A. Fry. Maryland Governor Martin O'Malley is also pushing to extend the heritage tax credit, which is designed to encourage developers to fix older buildings. Traditionally, the affordable-housing program has been funded primarily through bonds issued to provide mortgages for affordable rentals, but the market for the bonds has drastically fallen recently. As a result, the U.S. Treasury Department is temporarily allowing states to issue mortgage-revenue bonds that it will purchase, fixing the interest rate for developers around 4.5 percent, lower than Maryland has even been able to offer before. Lower rates mean not only lower interest payments, but also could allow builders to borrow more so they can tackle more projects. Developers are also heavily relying on federal Low Income Housing Tax Credits to cover the costs of constructing or renovating affordable apartments.
Scenarios -- Reshaping Fannie Mae and Freddie Mac
Reuters (01/13/10) Daly, Corbett B.; Waitz, Nancy; Adler, Lynn
The U.S. Treasury announced at the end of 2009 that the $200 billion cap each on losses for Fannie Mae and Freddie Mac would be lifted, enabling the firms to have unlimited losses through the end of 2012. More recently, President Barack Obama announced plans to outline reforms for the mortgage firms, which hold about 75 percent of all U.S. residential mortgages, in his 2011 budget proposal to be released in February. Among the options being considered by policymakers and others is full nationalization of the GSEs, which could help return the entities to their stated mission of nurturing affordable housing, but it also could increase the U.S. debt to GDP ratio to above 100 percent and foster investor anxiety. Another option would be to convert the firms into investors and offer government guarantees of those investments. A third model would entail turning the companies into cooperatives with the firms that currently sell them residential loans, focusing the firms' attentions on stable business rather than on profits. A utilities model would make the mortgage firms private with hefty government oversight, but take away government guarantees on their business transactions. Otherwise, policymakers could transform Fannie Mae and Freddie Mac into private mortgage finance companies to help raise funds in the capital markets, though without the competitive advantages they have currently. Still some have suggested replacing the entities with covered bonds as a mortgage finance tool.
U.S. Now a Renters' Market
Wall Street Journal (01/07/10) P. A3; Timiraos, Nick
Reis Inc. reports that the nation's apartment vacancy rate ended 2009 at 8 percent, the highest level since the New York-based research firm began tracking such statistics in the top 79 U.S. markets three decades ago. Rents dipped 3 percent in 2009. More and more apartment owners are finding that they must now go the extra mile to entice residents to renew leases. Camden Property Trust CEO Richard Campo states, "We'll shampoo their carpets. We'll paint accent walls. We'll add Starbucks cards." He expects the first and second quarters of the new year to be "pretty ugly," but expressed optimism that the sector would gain steam in the second half. During the October-through-December period, vacancies rose in 52 markets, improved in 17, and remained flat in 10. Owners and managers were hit especially hard in 2009 by competition from new supply, with 120,000 new rental units added to the market last year. However, the rental market could be adversely impacted further by a rise in the number of renters buying houses with the help of government programs. Camden Property reported that move-outs due to house purchases last summer rose to 13 percent from 11 percent at the beginning of 2009. However, experts say that as rents continue to decline in some markets, apartments will become more attractive than owning.
Multifamily Properties Experiencing Record Vacancies
Structured Finance News (12/22/09)
Freddie Mac reports that the multifamily housing sector is experiencing record vacancy rates because of two primary factors -- rising unemployment and low household formation. Indeed, high jobless rates among teenagers (27 percent) and 20- to 24-year olds is forcing many to postpone household formation or move back with their parents or friends, laments Freddie Mac chief economist Frank Nothaft. In addition, apartment vacancy rates have moved up in many markets as federal tax credits for first-time homebuyers have encouraged more renters to become homeowners. A recent Census Bureau study showed that the vacancy rate on communities with ten or more apartments was 13.5 percent as of the end of the third quarter. For apartments built since the beginning of 2000, Nothaft adds that the vacancy rate is 23.2 percent, "reflecting in part the slow rental rate of newly built dwellings. The economist went on to quote a National Council of Real Estate Fiduciaries report, stating that multifamily property values have declined 29 percent from their mid-2008 peak. Finally, the FDIC states that the number of multifamily housing loans 90 days or more past due has doubled since 2008, topping 3.6 percent in 2009's July-through-September period -- the highest since 1993.
Apartment Opportunities Seen in Secondary Markets
GlobeSt.com (01/13/10) Cronan, Carl
At the recent National Multi Housing Council's Apartment Strategies Conference in Boca Raton, Fla., investors suggested that it is more lucrative for them to look past the primary markets and focus on internal rates of return (IRR) rather than on cap rates. IRR are often competitive in local regions and larger cities, which is why investors should consider the long-term stability of the secondary markets, particularly with regard to class B and C properties that REITs have overlooked. Discounted apartment properties may be scarce in 2010 as most of the "low-hanging fruit" has been plucked, according to Prime Group Principal John Adair. Rent growth is expected in 2010, and primary financing for investors dealing in apartments is likely to come from government-sponsored entities. The Marcus & Millichap's 2010 apartment research report reveals that cap rates will be more reasonable and above-trend rent growth is expected in the next few years, with investors citing Boston, Denver, and Washington, D.C., as favorable markets.
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