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Cantwell, Hatch Introduce Housing Credit Act
On March 7, Sen. Maria Cantwell (D-WA) and Senate Finance Committee Chairman Orrin Hatch (R-UT) introduced the Affordable Housing Credit Improvement Act of 2017, which is similar to a bill the pair sponsored last year. Several bipartisan senators have also signed on as co-sponsors. The legislation is a comprehensive bill to expand and strengthen the Low-Income Housing Tax Credit. To read the bill, click on the Web Link below.
Industry Trends
"How One Tweak to Affordable Housing Policy Could Make a Big Difference for Developers"
"Lowest-Income Renters Continue to Face Affordable Housing Shortage"
Tax Issues and Tax Reform
"Tax Talk Triggers Pricing Drop for LIHTCs"
"Wall Street Bets on Tax Cuts as Affordable Housing Pays the Price"
Congress
"Grassley Criticizes Oversight of Low-Income Housing Program"
HUD-Related Activity
"Trump’s HUD Budget Cuts Community Assistance Program"
State and Local Activities
"Florida Affordable-Housing Money in Groups' Sights"
"Koenig’s Bill Cuts Funds from Low-Income Housing, Historical Preservation Tax Credits"
"Developers of Affordable Housing in California Are on Pins and Needles Over Trump's Tax Plan"
Association News
Register for Online SHCM Course
GAO Report Examines Role of LIHTC Syndicators
Addressing Affordable Housing Communications Challenges
IRS Releases Population Estimates for 2017
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Industry Trends
How One Tweak to Affordable Housing Policy Could Make a Big Difference for Developers
The Real Deal (03/06/17) St. Clair, Ben
New York City uses a federal formula called area median income (AMI) to determine its affordable housing requirements, including projects taking federal low-income housing tax credits (LIHTCs). Critics say the AMI includes income statistics from Westchester, Rockland, and Putnam counties, making affordable housing out of reach for many city residents. Proponents of an alternative calculation method known as income averaging say its use could make building affordable housing more attractive to developers. Under income averaging, developers would be able to set aside units for wealthier tenants whose rents would help subsidize those of lower-income tenants. While this approach would utilize current AMI calculations, it would also tweak the LIHTC program, which has helped finance more than 75,000 units of low-income housing in New York City between 2005 and 2014. The current LIHTC system sets a 60 percent AMI limit for units receiving credits ($54,360 for a family of four in 2016), but income averaging allows buildings to have tenants whose income exceeds that limit, as long as units receiving credits average incomes at or below 60 percent. Meanwhile, state lawmakers have proposed changing AMI calculations, but this could adversely impact affordable housing development by making projects less financially viable, according to one HUD spokesperson. Seth Pinsky at RXR Realty suggests projects could be required to make units affordable to renters at a lower percentage of the AMI. Pinsky also supports means testing, which involves determining whether a person is financially eligible to receive government assistance.
Lowest-Income Renters Continue to Face Affordable Housing Shortage
Affordable Housing Finance (03/02/17) Serlin, Christine
A shortage of 7.4 million affordable and available rental homes exists for U.S. households who have incomes at or below 30 percent of the area median income (AMI), according to a new report from the National Low Income Housing Coalition (NLIHC). Nationwide, there are only 35 affordable and available units for every 100 extremely low-income renter households. Nevada tops the list for states, with 15 affordable homes available for every 100 extremely low-income renter households, followed by California (21 homes for every 100 households), and Arizona and Oregon (26 homes for every 100 households), according to 'The Gap: A Shortage of Affordable Homes.' Among major metropolitan areas, Las Vegas leads the way, with only 12 affordable homes available for every 100 households, followed by Los Angeles (16 homes for every 100 households), and Houston and Orlando (18 homes for every 100 households). The report also reveals that 71 percent of extremely low-income renter households—8.1 million—spend more than half of their income on housing and lack the resources for other basic needs. To address the shortage, the NLIHC report calls for rebalancing federal housing expenditures to serve the neediest households. NLIHC also supports efforts to expand and reform the low-income housing tax credit program.
Tax Issues and Tax Reform
Tax Talk Triggers Pricing Drop for LIHTCs
National Real Estate Investor (03/14/17) Mattson-Teig, Beth
The low-income housing tax credit (LIHTC) market is somewhat in flux following the presidential election, says Beth Mullen at CohnReznick's affordable housing industry practice. That unease can be partly attributed to potential tax reform plans that call for a lower federal corporate tax rate. Assuming that the current 35 percent federal tax rate will drop to 20 percent, investors are lowering their bid price by about a penny for each percentage point drop, according to Mullen. "Having said that, is not really one size fits all," she says. Other factors that impact tax credit pricing for individual projects include if the investor is also the construction lender on the deal or the developer has a strong track record. As a result, scenarios can exist where pricing has not dropped by as much as 15 cents. Most deals have an upward adjuster provision such that if tax reform does not occur, then investors are expected to put more money into the deal, adds Mullen. The readjustment in tax credit prices is creating some ripple effects across the affordable housing marketplace. The overall changes in proceeds from an equity investment have dropped by between 8 percent and 20 percent, notes Todd Crow, and executive vice president and manager of tax credit capital at PNC Real Estate. In response, some state tax credit agencies are offering soft financing, providing more tax credits to sell, or relaxing income requirements so that the project can support more debt.
Wall Street Bets on Tax Cuts as Affordable Housing Pays the Price
Politico Pro (03/08/17) Woellert, Lorraine
Wall Street is betting on corporate tax reform, prompting fewer companies to be willing to pay top dollar for federal low-income housing tax credits. Development projects from Oregon to Massachusetts face unexpected funding shortfalls. In Milwaukee, a $1 tax credit was worth more than a dollar to investors before last fall's presidential election. Now that same credit is worth about 93 cents, creating a $515,000 financing gap on a long-planned low-income housing project. A Republican tax reform blueprint would preserve the low-income housing tax credit, but it also would lower the corporate tax rate from 35 percent to a flat 20 percent, making the credits less valuable. With reform on the horizon, investors who had bought into tax credit deals before the election now are having second thoughts. As the pace of new construction lags, rising rents and sluggish wage growth have created shortage of 7.4 million homes for the lowest-income households, according to the National Low Income Housing Coalition. Senators Orrin Hatch (R-Utah) and Maria Cantwell (D-Wash.) have introduced a bill to expand the pool of low-income housing tax credits by 50 percent over the next five years. The measure would make more rental units available to the lowest-income households. It would also prevent local officials from blocking tax-credit projects, a provision aimed at the not-in-my-backyard activists who routinely thwart low-income development.
Congress
Grassley Criticizes Oversight of Low-Income Housing Program
Politico Pro (03/02/17) Woellert, Lorraine
Sen. Chuck Grassley (R-Iowa) criticized the oversight of a federal tax-credit program that funds most affordable rental housing. A Government Accountability Office report found that neither the IRS nor HUD tracks the financial intermediaries who market low-income housing tax credits, which fund the construction of millions of rental units in the U.S. "The fact that GAO had to rely on a third-party contractor database for syndicator information because neither the IRS nor HUD maintains that information tells you that no one is minding the store," Grassley said. "That complexity underscores my concern that the IRS and HUD don't seem to know whether a multibillion-dollar program for low-income housing has worked as intended." The report is the second in a GAO series exploring the lower income housing tax credit (LIHTC). In 2015, the agency found only "minimal" oversight of the housing finance agencies that distribute the tax credits to developers. Future GAO reports will look at the cost of LIHTC projects, including syndicator earnings, construction and developer fees, Grassley said.
HUD-Related Activity
Trump’s HUD Budget Cuts Community Assistance Program
CNBC.com (03/16/17) Olick, Diana
The Trump administration released its budget proposal Thursday, which includes the elimination of funding for the Community Development Block Grant Program. The program's current year funding is $3 billion. The cut is part of a $6 billion, or 13 percent, reduction in the fiscal 2018 budget for the Department of Housing and Urban Development. The budget also includes $35 billion for HUD's rental assistance programs and proposes reforms to that program. HUD Secretary Ben Carson has been highly critical of public assistance, suggesting that too many Americans have become dependent upon it. The community development program has garnered bipartisan support since President Gerald Ford signed it into law in 1975. Roughly $150 billion has been allocated to a growing number of "entitlement communities" — generally larger cities and counties, as well as states, according to HUD. Today, roughly 1,200 cities, counties, and states participate. Experts and advocates have said the overall reduction in HUD's budget will put tremendous strain on the nation's housing authorities, which manage public housing and rely heavily on federal funding.
State and Local Activities
Florida Affordable-Housing Money in Groups' Sights
Orlando Sentinel (03/03/17)
A coalition of industry and nonprofit groups Thursday made what has become an annual case for state lawmakers to reject Gov. Rick Scott's efforts to divert money from housing programs to balance the state budget. During a news conference, the Sadowski Housing Coalition called for lawmakers to allocate state and local housing trust-fund money to affordable housing programs. The coalition wants lawmakers to appropriate about $293.4 million for housing programs. The 2017 legislative session begins Tuesday. In his $83.5 billion budget proposal, Scott recommended shifting about two-thirds of the money out of a trust fund earmarked for low-income housing. “These funds help Floridians of modest means to find rental and homeownership opportunities,” said Carrie O'Rourke, vice president of public policy for the Florida Realtors. “Those could be in the form of affordable housing, affordable apartments, down payment assistance to purchase a home, or even money to repair a home.”
Koenig’s Bill Cuts Funds from Low-Income Housing, Historical Preservation Tax Credits
The Missouri Times (02/01/2017) Zimpfer, Travis
Missouri state Sen. Andrew Koenig has proposed a bill to cut or completely eliminate a dozen state tax credit programs. The most impacted would be the low-income housing tax credit (LIHTC), the Neighborhood Preservation tax credit, and the Historic Preservation tax credit. The cap on the LIHTC would drop from $160 million to $90 million, from $16 million to $1 million on the Neighborhood Preservation credit, and from $140 to $50 million on the Historic Preservation credit. Among those opposed to the bill said the cuts would greatly affect their organizations, including Jorgen Schlemeier, representing the Missouri Workforce Housing Association. He said the LIHTC was created in the 1980s specifically to unleash the ability of the private sector to create better facilities and decentralize state mental hospitals and veterans homes that were subject to the whims of government. Catherine Edwards of the Missouri Association of Area Agencies on Aging opposed cuts to the Senior Citizens Property Tax Relief tax credit in the bill. Koenig's bill would make the credit applicable only to homeowners and not renters. Sen. Bob Dixon pointed out that the tax credits were not grants, but a form of investment. He also questioned the priorities of the Senate in changing tax policy without first addressing some problems inherent in the system. Koenig’s bill would also cut Missouri’s corporate income tax down to 4 percent, while another bill would make tax credits non-transferable.
Developers of Affordable Housing in California Are on Pins and Needles Over Trump's Tax Plan
Los Angeles Times (02/26/17) Dillon, Liam
President Donald Trump's promise to cut business tax rates has large banks and other investors backing away from a California tax credit program that reduces what companies owe in taxes in exchange for investing in low-income housing projects. After election day, affordable housing projects across the state immediately saw multimillion-dollar budget gaps and future dollars are now at risk. The tax credit program is the largest source for funding for low-income housing in California, and the market downturn could mean a reduction in state low-income housing funding by $250 million this year, says Matt Schwartz, president and chief executive of California Housing Partnership, a nonprofit advocate for low-income housing. Developers are asking housing agencies in San Diego and Los Angeles to make up for shortfalls. Peter Lawrence, a director at Novogradac, a national accounting and consulting firm that specializes in affordable housing, says it is unclear when the president and Congress are going to introduce legislation and what the ultimate result might be. “The practical matter is we're all facing extraordinary levels of uncertainty and trying to make changes in real time,” adds Daniel Falcon, a vice president at developer McCormack Baron Salazar.
Association News
Register for Online SHCM Course
Take advantage of this convenient, affordable way to prepare to earn the Specialist in Housing Credit Management (SHCM) certification in four online sessions, or brush up on your housing credit compliance knowledge. Each webinar will last for approximately three hours, including a question-and-answer period for attendees. The webinars take place on consecutive Tuesdays: April 4, 11, 18 and 25, and each begins at 12 p.m. Eastern.
The schedule for this course is:
- April 4: Chapter 1, Program Regulations presented by Gwen Volk
- April 11: Chapter 2, Unit Eligibility presented by Heather Staggs
- April 18: Chapter 3, Applicant Eligibility & Certification presented by Anita Moseman
- April 25: Chapter 4, Monitoring & Compliance presented by Dodi Gershen
The cost for the course, including the SHCM exam and SHCM application fee, is $599; National Apartment Association Education Institute (NAAEI) designates will receive a $50 discount for the entire course. Individual webinars can be purchased for $109 each. To register, click the Web Link provided below. For more information about the SHCM program, visit https://www.naahq.org/education-careers/credentials/shcm. If you need assistance with the registration process, contact Shana Treger by emailing shana@naahq.org.
GAO Report Examines Role of LIHTC Syndicators
The U.S. Government Accountability Office on March 1 released a report on the role of syndicators in Low-Income Housing Tax Credit (LIHTC) transactions. Low-Income Housing Tax Credit: The Role of Syndicators describes the role of syndicators in the LIHTC market, the factors that influence their use and the characteristics of active syndicators. To read the report, click on the Web Link provided.
Addressing Affordable Housing Communications Challenges
According to a recent report from a group of researchers and affordable housing proponents, the affordable housing movement across the U.S. has had tremendous success in creating understanding of the affordable housing challenges communities face, and in growing support for the actions government can take to solve the problem. FrameWorks Institute teamed up with Enterprise Community Partners to think about how advocates’ messages affect public thinking. A subsequent paper, You Don't Have to Live Here: Why Housing Messages Are Backfiring and 10 Things We Can Do About It (2016) lays out the challenges that advocates face and uses new research conducted by the FrameWorks to put forward evidence-based messaging recommendations that can be used to advance a strong affordable housing and community development agenda. Click on the Web Link to learn more.
IRS Releases Population Estimates for 2017
The Internal Revenue Service on Feb 27 published Notice 2017-19, which lists its 2017 calendar year resident population figures. These figures are used to determine states’ 2017 Low-Income Housing Tax Credit (LIHTC) ceiling and tax-exempt private activity bond caps. Under Rev. Proc. 2016-55, each state’s LIHTC ceiling in 2017 is the greater of $2.35 multiplied by the state population or $2.71 million; a state’s tax-exempt bond volume cap will be the greater of $100 multiplied by the state population or $305,315,000. To view the notice, click on the Web Link.
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.
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
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March 19-22, 2017
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June 21-24, 2017
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October 2-4, 2017
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October 22-24, 2017
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LeadingAge 2017 Annual Meeting & EXPO
October 29-November 1
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