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Physical Inspections and Low-Income Housing Credit Compliance Monitoring
On Feb. 26, the Internal Revenue Service issued a Revenue Procedure notice (2016-15) that amends the Low-Income Housing Tax Credit compliance monitoring requirements to revise and clarify physical inspection and certification review rules. The revenue procedure also permits the physical inspection protocol established by the Department of Housing and Urban Development Real Estate Assessment Center to satisfy the physical inspection requirements of § 1.42-5(d) and § 1.42-5T(c)(2)(ii) and (iii). For more information, click the Web Link provided.
Tax Issues and Tax Reform
"Fixed Rate to Help LIHTC Deals"
"An HFA's Perspective: The QAP Complication"
State and Local Activities
"Restrictions of Low Income Housing Must Be Considered in Valuing Kentucky Property"
"City’s Definition of 'Affordable' Housing Shifts in Talks"
Green Building
"Study: Only 40 Percent of LEED ND-Certified Projects Include Affordable Housing"
Court-Related Activity
"Will Supreme Court Decision Convince Cities to Accept Affordable Housing?"
Industry Trends
"Developers Use Innovative Strategies to Deliver Affordable Housing"
Association News
IRS, Treasury Amend LIHTC Utility Allowances Submetering Regulations
IRS Seeks Comments on New Partnership Audit Provisions
LIHTC ‘Basic Building Block’ for State Housing Agencies’ Rental Housing
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Tax Issues and Tax Reform
Fixed Rate to Help LIHTC Deals
Affordable Housing Finance (03/11/16) Kimura, Donna
A new permanent 9 percent fixed rate recently established by Congress will provide new low-income housing tax credit (LIHTC) deals with a boost. LIHTC syndicators say the new minimum rate could result in 15 percent to 20 percent more credits, and ultimately equity, going to deals, in some cases. "It's important in that it provides certainty and clarity with regard to the underwriting of transactions and ensuring deals pencil," says Christine Cormier, senior vice president at WNC. The differential between the fixed rate and what the industry has been using -- a floating rate that had been about 7.5 percent -- was material enough to potentially jeopardize deals, adds Cormier. With deals potentially receiving more credits, it would mean less gap funding would be needed and deals would be stronger, says Hal Keller, president of the Ohio Capital Corporation for Housing. Still, syndicators will be looking out for any unintended consequences, such as larger deal sizes, which could reduce the number of projects allocated housing credits.
An HFA's Perspective: The QAP Complication
Apartment Finance Today (02/16) Thomas, Sean
For housing finance agencies (HFAs), one of the most complicated aspects of administering the low-income housing tax credit (LIHTC) is the qualified allocation plan (QAP), says Sean Thomas, chief of staff of the Ohio Housing Finance Agency. The complexity arises as HFAs attempt to balance various housing policies that may conflict with each other. Ohio has tried various approaches in its selection process, including different set-asides, scoring criteria (both subjective and objective), and application processes. However, preferences may be removed one year, only to be replaced back into the plan years later in a different form. Certain key issues are debated during the development of the QAP annually, such as geographic dispersion, ratio of new-to-existing affordable housing, populations served, and policy impact. During the past 10 years, Ohio's HFA has tried to fund developments that have a greater impact in communities by addressing such things as green building standards, universal design, permanent supportive housing, linkages to healthcare and education, community redevelopment, and workforce housing. The difficulty lies in determining how to impact policy and still build cost-effective projects. Ohio's development community has demonstrated through many recent projects that housing can have a significant impact on communities and residents, indicating that HFAs should encourage policy-driven developments in QAPs.
State and Local Activities
Restrictions of Low Income Housing Must Be Considered in Valuing Kentucky Property
Lexology (03/15/16) Horn, Erica L.; Schueler, Maddie
Kentucky's Board of Tax Appeals recently held that restrictions on low income housing must be considered when valuing property in the state. The case involved a complex in Richmond that was subject to federal low income housing tax credit (LIHTC) income and rent restrictions. The taxpayer appealed the 2014 and 2015 assessments of $1,340,000 and $1,040,000, respectively, by the Madison County property valuation administrator (PVA) to the board, claiming a value of $580,000 for tax year 2014 and $585,000 for 2015. The PVA presented an appraisal, in support of its valuation, that treated the complex as regular free market property, while the taxpayer valued the complex using an income approach and not a comparable sales approach due to insufficient data. The taxpayer used some regional sales data to arrive at his capitalization rate, but did not present information to back up the calculation. The PVA's witness acknowledged that the PVA did not conduct an independent appraisal or capitalization rate analysis. The board held that the taxpayer met the burden of proving that the PVA overvalued the property and supported its claimed value.
City’s Definition of 'Affordable' Housing Shifts in Talks
Wall Street Journal (03/07/16) Dawsey, Josh
New York Mayor Bill de Blasio's administration is offering compromises to convince the City Council to pass the mayor's rezoning plan, which is the basis of his affordable-housing program. In private negotiations with the City Council, the de Blasio administration has offered to require developers to build new units that are affordable for people who earn 40 percent of the city’s area median income, or about $31,000 for a family of three. The city initially pushed for the development of apartments that could be affordable for city residents earning 60 percent of area median income, but that benchmark troubled some housing advocates. A vote on the plan could potentially take place at a council meeting by the end of March. The city has engaged Neal Kwatra, an external political consultant, to build a campaign to win support for its plan. For developers, however, the lower number could make it more challenging to build and make money. Many in the mayor's base of minority voters are concerned his plan would gentrify their neighborhoods instead of make them more affordable. The administration says neighborhoods would become more expensive even if they do not act, and are trying to prepare the city for the future. De Blasio has pledged to build or preserve 200,000 affordable apartments over a decade.
Green Building
Study: Only 40 Percent of LEED ND-Certified Projects Include Affordable Housing
Civil & Structural Engineer (03/16)
Only 40 percent of Leadership in Energy and Environmental Design for Neighborhood Development (LEED-ND) certified projects include affordable housing, according to a study published in the Journal of the American Planning Association. Study author and Honolulu planner Nicola Szibbo reported the rating system fails to deliver on its sustainability goal of equity, economy, and environment. Developers can waive the affordable housing credit and still achieve a LEED-ND rating, as the credit is optional. "The affordable housing credit needs to be strengthened or critically reconsidered," Szibbo argues. Her survey of 114 LEED-ND Accredited Professionals (APs) and 20 personal interviews with developers and other LEED-ND APs determined 60 percent of the 2009-2014 LEED-ND projects reviewed opted to ignore the affordable housing credit. In addition, 41 percent of survey respondents think the existing rating does not support social equity or social sustainability. Moreover, 63 percent of respondents see opportunity for improving the LEED-ND affordable housing requirement, and 23 percent want more points in the rating system for affordable housing, versus 13.5 percent who want the credit to be obligatory. Furthermore, 59 percent believe developers are hesitant to include affordable housing in LEED-ND projects because of potential lower profits or the social onus of low-income housing affecting marketability.
Court-Related Activity
Will Supreme Court Decision Convince Cities to Accept Affordable Housing?
Dallas Morning News (02/26/16) Chiquillo, Julieta
Cities that reject low-income housing projects could face lawsuits in the wake of a U.S. Supreme Court decision meant to curb unintentional or hidden discrimination, says Mike Daniel, an attorney for the nonprofit Inclusive Communities Project. In 2015, the Supreme Court determined that housing practices that disproportionately harm minorities can be challenged even if the discrimination is unintentional. Daniel says developers hoping to expand into the suburbs as well as local governments should pay attention to the ruling. Cities can reject low-income housing, but they must rely on accurate information, says Lisa Rice, executive vice president of the National Fair Housing Alliance. For example, a city that says a development will overload a school should have an analysis that confirms that. Regarding the high court's ruling, Rice says, "It simply underscored a provision and a right of the law that has been used for over four decades." But Daniel says the court's opinion specifically cited zoning laws and ordinances that barred apartments in certain communities. Some cities are trying to be consistent in their decisions to offer or withhold letters of support for low-income projects. For instance, the city of Plano, Texas, uses criteria for developments that include energy efficiency and proximity to public transit.
Industry Trends
Developers Use Innovative Strategies to Deliver Affordable Housing
Seattle Times (03/12/16) Bhatt, Sanjay
Harvard University’s Joint Center on Housing Studies estimates that nearly two-thirds of renters in the Seattle-area who earned between $30,000 and $45,000 in 2014 spent more than 30 percent of their income on housing. In May 2015, Seattle-based Spectrum Development Solutions unveiled 120-unit Anthem, the first of three apartment projects on First Hill within walking distance of each other. The rent for an 847-square-foot, two-bedroom unit is about $1,545 a month, about $750 less than a similar market-rate unit. Spectrum expects to complete the 75-unit Decibel in June and an 85-unit project, Reverb, in September. All three projects will receive a tax break under the city's multifamily tax-exemption program and will use capital from private equity investors. Spectrum is also tapping historic-preservation tax credits to support 125 affordable units opening later this year at the Publix Hotel redevelopment in the International District. In the near future, Spectrum plans to use low-income housing tax credits to support a project that can accommodate those making up to 40 percent of median income. Spectrum was inspired by Imagine Housing's Velocity project, a 58-unit apartment building in Kirkland, Wash., whose units are restricted to households making no more than 60 percent of area median income. The project got its start after for-profit developer Polygon Northwest won a competition held by King County and the city of Kirkland to develop next to the park-and-ride lot.
Association News
IRS, Treasury Amend LIHTC Utility Allowances Submetering Regulations
On March 3, the Internal Revenue Service (IRS) published a notice containing final and temporary regulations that amend the utility allowance regulations for the Low-Income Housing Tax Credit (LIHTC). Comments on the rule are also being solicited at https://www.gpo.gov/fdsys/pkg/FR-2016-03-03/pdf/2016-04618.pdf.
The final regulations provide that utility costs paid by a LIHTC property tenant, based on actual consumption in a submetered rent-restricted unit, are treated as paid by the tenant directly to the utility. Thus, the utility costs do not count against the maximum rent that the LIHTC building owner can charge. The temporary regulations extend the principles of these submetering rules to LIHTC property owners that provide low-income tenants with energy directly acquired from a renewable source and that is not delivered by a local utility provider. The regulations became effective March 3 upon publication in the Federal Register and can be accessed by clicking the Web Link below.
IRS Seeks Comments on New Partnership Audit Provisions
Notice 2016-23, issued March 4, requests comments on the new partnership audit regime enacted as part of the Bipartisan Budget Act of 2015 (BBA). Section 1101 of the BBA creates a new regime for auditing all partnerships effective for tax years beginning after Dec. 31, 2017, although some partnerships may elect into the regime prior to that date. This notice requests comments from the public to help implement the new rules and to assist in the guidance process. Comments are requested by April 15, 2016. To read the notice, click the Web Link.
LIHTC ‘Basic Building Block’ for State Housing Agencies’ Rental Housing
Novogradac & Company’s Low-Income Housing Tax Credit Showcase is a 166-page report that highlights the success of the program since its creation in 1986. Read the Novogradac report by clicking on the Web link provided below. To download a copy, visit http://www.novoco.com/products/special_report_showcase_lihtc.php.
Become a Specialist in Housing Credit Management® (SHCM®) Company!
The three 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), the National Apartment Association Education Institute (NAAEI), and LeadingAge (formerly AAHSA, the American Association of Housing and Services for the Aging).
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.
Upcoming Events
NAHMA Public Policies Forum
June 15, 2016
More info
NAA Education Conference & Exposition
June 15-18, 2016
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NAHMA Regulatory Issues Meeting
October 23-25, 2016
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LeadingAge 2016 Annual Meeting and EXPO
October 30-November 2, 2016
More info
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