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Cantwell, Hatch Introduce Major LIHTC Expansion Bill
A bipartisan bill to expand the Low-Income Housing Tax Credit (LIHTC) by 50 percent was introduced by Sens. Maria Cantwell (D-WA) and Orrin Hatch (R-Utah) on May 19. In addition to expanding the credit, the legislation would create a new income-averaging option to help developments maintain financial feasibility while providing a deeper level of affordability. The bill also enacts a permanent 4 percent credit rate floor for acquisition and bond-financed projects, providing more predictability and flexibility in financing these projects. See how a 50 percent increase would affect your state by clicking on the Web Link below. Highlights of the bill are available in the News section of Cantwell’s website, https://www.cantwell.senate.gov.
Tax Issues and Tax Reform
"GAO Reviews LIHTC Allocating Agencies"
"Problems Persist in IRS Oversight of Low-Income Housing Tax Credits"
State and Local Activities
"Streetcar Line Drawing Developers of Affordable Housing"
Green Building
"Why Green Building Certification Makes Cents"
"Affordable Housing Pushes Energy Efficiency"
"10-Year Study Shows Green Building Strategies Pay Off—in Real Dollars"
Industry Trends
"Affordability Problems Hamper Housing Recovery"
Association News
Tax Credits First Among Federal Housing Assistance for Low-Income Households
Bipartisan Report Calls for Better Integration of Housing and Services
Learn More about Affordable Housing with Services for Seniors
LIHTC Noncompliance Reporting and Data Collection Highlighted in GAO Report
Data on Tenants in LIHTC Units
NAHMA Releases 2016 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Tax Issues and Tax Reform
GAO Reviews LIHTC Allocating Agencies
Affordable Housing Finance (06/09/16) Kimura, Donna
A new report by the Government Accountability Office (GAO) indicates that state and local qualified allocation plans (QAPs) have not consistently cited all required preferences and selection criteria required under the Low-Income Housing Tax Credit (LIHTC) program. LIHTC agencies are required to provide only the amount of credits that it determines is necessary to ensure a project's financial feasibility. Of nine agencies visited by the GAO, six (California, Illinois, Michigan, Nevada, Virginia, and Washington, D.C.) determined credit amounts by reviewing cost information to find the annual amount of tax credits needed to fill the gap in financing. The remaining three agencies (Chicago, Massachusetts, and Rhode Island) reviewed financial information from developers, but did not explicitly compare the equity gap and qualified basis to determine award credit amounts. Instead, underwriters assessed whether the amounts were reasonable based on their internal underwriting criteria to make award decisions. The analysis also found that 40 of 58 agencies specified limits on the value and calculation of developer fees. The report recommends that the IRS commissioner collaborate with QAPs to clarify when allocating agencies should report such information on Form 8823 (report of noncompliance or building disposition). Moreover, the IRS should ensure that staff from the Small Business/Self-Employed Division participate in the physical inspection alignment initiative of the Rental Policy Working Group and evaluate the use of HUD's Real Estate Assessment Center databases, the report says.
Problems Persist in IRS Oversight of Low-Income Housing Tax Credits
Accounting Today (06/08/2016) Cohn, Michael
A new report by the Government Accountability Office (GAO) indicates that the Internal Revenue Service’s oversight of the Low-Income Housing Tax Credit (LIHTC) program remains minimal. In the new report, the GAO reviewed regulations and guidance for allocating agencies; analyzed 58 allocation plans from the 50 states, the District of Columbia, U.S. territories, New York City, and Chicago; performed site visits and file reviews at nine selected allocating agencies; and interviewed IRS and HUD officials. The GAO concluded that the IRS does not give state and local agencies clear guidance on how to report program noncompliance and does not organize or track information from noncompliance reports. More than half of the qualified allocation plans analyzed by the GAO did not specifically mention all selection criteria and preferences that Section 42 of the Internal Revenue Code requires. Some allocating agencies required letters of support from local governments, even though HUD has warned that letters could have a discriminatory influence on the location of affordable housing. The GAO recommended the IRS clarify when agencies should report noncompliance and participate in the Rental Policy Working Group to assess the use of HUD's database to strengthen IRS oversight. The IRS agreed it should improve its noncompliance data but had to consider resource constraints. HUD supported using its expertise and experience administering housing programs to improve the LIHTC program.
State and Local Activities
Streetcar Line Drawing Developers of Affordable Housing
Arizona Daily Star (06/15/16) Pallack, Becky
A 2-year-old streetcar line in Tucson, Ariz., is starting to attract new affordable housing projects. Of three proposed new downtown projects, two seek to reuse old buildings as apartments for low-income seniors. The projects, which will bring in 200 additional apartments, received Low Income Housing Tax Credit (LIHTC) awards from the state that were allocated by the IRS. The city committed about $1.5 million in federal grant money in support of tax-credit projects for a total of $42.5 million in development. A project by La Frontera Partners, called West Point Apartments, will renovate and build onto the Westerner office building, enabling seniors to easily obtain anything they need within a quarter-mile to a half-mile. Some support services will be available on-site. Locating a project on the streetcar line gives significant advantage in the scoring for LIHTC applications, says Dan Ranieri, president and CEO of La Frontera Arizona. The other reuse project, The Marist on Cathedral Square, will preserve the aging adobe Marist College building when it is renovated as apartments for low-income seniors. There is no federal taxpayer money in the Marist project, but it includes a $350,000 loan from Rio Nuevo that comes from local sales tax dollars. A third downtown project will be all new construction at the western terminus of the streetcar line. The West End Station project has been touted by Tucson City Councilwoman Regina Romero.
Green Building
Why Green Building Certification Makes Cents
Multifamily Executive (06/13/16) Seville, Carl
The benefits of green building certification in the apartment sector include improved building performance and resident comfort, just to name a couple. Just as important, though, is the fact that the added cost to developers is limited. Indeed, two of the most notable reasons to certify your project as green are utility and construction cost savings. Energy and water savings are quite possibly the most obvious and easiest benefits of green certification to comprehend. Improving energy and water efficiency indeed does not need to increase multifamily construction costs. In fact, in most cases these savings are achieved through a combination of following building and energy codes and making smart purchasing and construction decisions. Some developers are so confident in their green buildings' performance that they are offering tenants guaranteed utility bills or including utilities in the rent. Building owners and managers say marketing a building as green can attract new tenants and help retain existing ones. Studies have shown that consumers, particularly those in the Generation Y demographic, are willing to pay a premium for products or services that foster their personal environmental goals. Some avoid purchasing those that don't. Furthermore, certified green properties are simply more comfortable, have better indoor air quality, and are quieter than conventional apartments for the most part. If residents are comfortable in their green apartments, they will be less likely to leave when their lease expires. Finally, one less-heralded benefit of green certification is quality control during construction.
Affordable Housing Pushes Energy Efficiency
Energy Manager Today (05/23/16) Weinschenk, Carl
Affordable housing is the biggest mover in energy efficiency in the multifamily dwelling unit sector. Rents are charged via a formula that caps the amount charged to a percentage of the tenant's income, and it is clear that if rents cannot go up, costs must come down. Utilities are fertile ground for such initiatives. Benchmark CT, a partnership between the Connecticut Housing Finance Authority, the Connecticut Green Bank and WegoWise, is a good example of the initiatives that are gaining traction. The program, which offers free benchmarking and helps determine whether buildings are operating at peak efficiency, by assessing meter data and utility bills, is available to 1,600 buildings in Connecticut. Multifamily dwelling units generally lack energy management systems, building management systems and similar platforms that are deployed to keep track of energy. There are a lot of relatively easy gains to be made in the multifamily housing sector because, by and large, saving money in their energy use has not been deeply explored, says Andrew Chen, CEO of Boston-based WegoWise. Building owners know that saving on air conditioning, heat, water and other utilities means that more of that sum can flow to the bottom line, adds Chen.
10-Year Study Shows Green Building Strategies Pay Off—in Real Dollars
Commercial Property Executive (05/04/16) Gray-Donald, James
There is a tangible monetary advantage to investing in green strategies for commercial building performance, as well as intangible advantages, according to a 10-year Bentall Kennedy study. The study focused on historical data on nearly 300 office buildings, including 24 million square feet of Canadian properties and 34 million square feet of U.S. properties. Tangible measures include rent and occupancy levels, while intangibles include the cost of rent concessions, lease renewal rates, and tenant satisfaction scores. Bentall Kennedy found in the U.S., LEED certified properties had an average of 3.7 percent rent premium and a 4 percent gain in occupancy over comparable noncertified properties, while Energy Star certified buildings averaged 2.7 percent higher rents and 9.5 percent higher occupancy than noncertified buildings. In Canada, LEED certified properties had 10.2 percent higher rental rates and 8.5 percent more occupancy, while buildings with both LEED and BOMA Best certification saw 18.7 percent higher occupancy than the control group. Assuming the results can be viewed on a combined basis, a LEED and BOMA Best Level 3 certified North American office asset would have, on average, 3.7 percent higher rental rates, 4 percent higher occupancy levels, and 5.6 percent higher tenant renewal likelihood. These metrics translate into an 8 to 10 percent gain in asset value over an equivalent noncertified office asset.
Industry Trends
Affordability Problems Hamper Housing Recovery
Affordable Housing Finance (06/22/16) Serlin, Christine
Harvard’s Joint Center for Housing Studies (JCHS) has released its latest report, concluding that while the nation is seeing its housing recovery make steady progress, challenges still remain. Even though multifamily construction is booming across the nation, much of this new housing is geared toward the upper end of the market. "As much as we’re building new housing, we can’t keep up with the pace of demand," says Chris Herbert, JCHS managing director. In 2014, according to the National Low Income Housing Coalition (NLIHC), only 31 rental units were affordable and available for every 100 extremely low-income renters, those with incomes at or below 30 percent of the area median income. Only 57 affordable and available rental units were available for every 100 very low-income renters. The number of very low-income households eligible for federal rental housing assistance has increased by 3.8 million from 1993 to 2013, but the number of assisted renters only grew by 532,000 during this same timeframe. "We’re not funding affordable housing solutions at the scale to meet the need," says Diane Yentel, NLIHC president and CEO. "We don’t lack an understanding or solutions, we lack political will, but we are starting to see a shift there," says Yentel, citing efforts to increase the National Housing Trust Fund and expand the low-income housing tax credit program as well as the Obama administration’s $11 billion request to end family homelessness.
Association News
Tax Credits First Among Federal Housing Assistance for Low-Income Households
The Congressional Budget Office (CBO) recently updated its guide to federal housing programs, Federal Housing Assistance for Low Income-Households (September 2015). As part of this update, CBO highlighted the tax credit program saying, “the Low-Income Housing Tax Credit (LIHTC), accounts for most of the assistance provided indirectly to low-income households. It is available to developers of low-income housing and, according to an estimate by the staff of the Joint Committee on Taxation (JCT), accounted for $7 billion in tax expenditures in 2014. Tax expenditures resemble government spending programs in that they provide financial assistance to specific entities or groups of people or for designated activities.” However, as the report points out, the household characteristics of people receiving indirect assistance through the LIHTC are not well documented. Click on the Web Link below to access a copy of the guide.
Bipartisan Report Calls for Better Integration of Housing and Services
In a new report, called Healthy Aging Begins at Home, the Bipartisan Policy Center made 30 recommendations for how government can improve access to quality housing for seniors. They include enhanced housing subsidy programs for low-income seniors, modest steps aimed at integrating housing with health care and supportive services, and encouraging greater use of technology to improve care at home. Read the report by clicking the Web Link below and find a LeadingAge analysis at
http://www.leadingage.org/Bipartisan_Report_Calls_for_Better_Integrati
on_of_Housing_and_Services.aspx.
Learn More about Affordable Housing with Services for Seniors
Hear the latest in research, best practices and compliance regarding affordable housing with services for seniors at the upcoming LeadingAge annual meeting and exposition, Oct. 30-Nov. 2 in Indianapolis, Ind. Click the Web Link below for more details, a full conference agenda will be posted shortly on www.leadingage.org.
LIHTC Noncompliance Reporting and Data Collection Highlighted in GAO Report
Although the Government Accountability Office (GAO) found that tax credit allocating agencies generally have processes to meet requirements for allocating credits, reviewing costs and monitoring projects, a May 2016 GAO report on oversight of LIHTC found that some state allocating agency practices raise concerns and that the IRS could improve noncompliance reporting and data collection. Read the report by clicking the Web Link below.
Data on Tenants in LIHTC Units
The Department of Housing and Urban Development (HUD)’s Office of Policy Development and Research recently issued the second annual data release of information on the characteristics of tenants in tax credit properties, as mandated by Congress.
The Housing and Economic Recovery Act (HERA) specifically requires housing finance agencies (HFAs) to submit to HUD information concerning race, ethnicity, family composition, age, income, use of rental assistance, disability status and monthly rental payments of households residing in Low-Income Housing Tax Credit (LIHTC) properties. This report represents the second annual data release of information collected under this mandate. Though state housing finance agencies are required to report specific tenant data to HUD, this report shows how HFAs are failing to complying with this requirement to report various data to HUD.
According to the report, 32.3 percent of LIHTC units have at least one member who is at least 62 years old. And, 31.5 percent of all LIHTC units have a head of household who is at least 62 years old. For more details, click the Web Link provided.
NAHMA Releases 2016 Affordable 100 List
The National Affordable Housing Management Association (NAHMA) announces its 2016 Affordable 100—a list of the 100 largest affordable multifamily property management companies ranked by affordable unit counts—is available on its website, click Web Link below, as well as in the June issues of Affordable Housing Finance magazine and Units magazine. 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.
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
NAHMA Regulatory Issues Meeting
October 23-25, 2016
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LeadingAge Annual Meeting & EXPO
October 30-November 2, 2016
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