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Cost of Resident Services in Multifamily Housing Properties
USDA’s Rural Development (RD) recently issued an unnumbered letter regarding the allowable and unallowable expenses that can be charged to the income of a multifamily property financed under the Section 515 Rural Development Rural Rental Housing program. Program requirements provide a listing of allowable and unallowable expenses that may be charged to project operating budgets. However, the regulation is silent on the expense of tenant services; through this unnumbered letter, RD seeks to clarify that costs of resident services are not an allowable project expense. To read the letter, click on the Web Link provided.
Asset Management
"Getting Comfortable With Creativity: An Expanded Role for Banks in Affordable Housing"
Congress
"Banks See Big Benefits in Low-Income Housing Tax Credit Bill"
IRS-Related Activities
"IRS Faulted for Lax Housing Tax Credit Oversight"
State and Local Activities
"Long Island Affordable Housing Projects Get a Boost From Tax Credits"
"Nashville Mayor Unveils Incentive Plan to Boost Affordable Housing"
HUD-Related Activity
"Small Changes, Big Benefits: HUD Programs Move Forward"
Industry Trends
"Affordable Housing Sales Market Heats Up"
"New Tool Shows Struggles of Financing Affordable Housing"
Association News
Order Copies of NAA Educational Sessions
Webinar Wednesdays Continue
Leadership Training with NAAEI and Dale Carnegie
Own Multifamily Housing: The Essential Industry Text
NAHMA Releases 2016 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Asset Management
Getting Comfortable With Creativity: An Expanded Role for Banks in Affordable Housing
Affordable Housing Finance (07/27/16) Bailey, Laura
The newest edition of the National Affordable Rental Housing Landscape, produced by New York University's Furman Center and Capital One, reveals that securing affordable housing has become a significant challenge for low-income families. Between 2006 and 2014, the renter population grew faster than the stock of rental units in the 11 largest metro areas examined in the study. In Miami, New York, and Los Angeles, the typical renter could afford fewer than 25 percent of recent units. A key finding of the report is that issues of affordability have expanded far beyond the city. Rents rose in 2015 in all suburbs of the 11 metro areas studied, with the exception of Miami. Wyandanch Village, a 177-unit apartment community including 91 units of affordable housing, is a good example of taking a holistic approach to achieving a sustainable community. The developers decided that none of the 15 commercial spaces would be more than 5,000 square feet to encourage local retailers. Capital One provided more than $50 million for construction, including a $14 million permanent loan and a $33 million equity investment. Eighty-five percent of the apartments—both market-rate and affordable—were leased before the first phase of the community opened in 2015, and several leases for the commercial spaces have been signed. Successful transactions call for creativity, skill, and a measured appetite for risk, but it also can be extremely rewarding for banks financially and socially.
Congress
Banks See Big Benefits in Low-Income Housing Tax Credit Bill
American Banker (08/03/16) Eha, Brian Patrick
Congress is considering the first significant increase in years to the Low Income Housing Tax Credit (LIHTC) program. The Senate bill was introduced in May by Sen. Maria Cantwell (D-Wash.) and Sen. Orrin Hatch (R-Utah), with additional features added in mid-July. The bill would expand the program by 50 percent, which would help create or preserve an additional 400,000 affordable units beyond the 900,000 the program it is already expected to provide over the next decade. Such an expansion would likely give banks more projects to invest in, which is critical to meeting their obligations under the Community Reinvestment Act (CRA). "One of the constraints is, there just aren't enough projects," says Robert Likes, head of community development lending and investing at KeyBank. The bill has strong bipartisan support in Congress. However, much of the legislative agenda could remain on hold until after the presidential election and the passing of the lame-duck session. In an era of extreme political polarization and Congressional deadlock, however, the apparent bipartisan support for LIHTC stands out as a bright spot. Ken Thomas, president of Community Development Fund Advisors, says his decades of experience studying the CRA and fair lending practices have taught him that government subsidies are necessary for affordable housing, and believes the tax credit will continue to be supported no matter who wins the White House in November.
IRS-Related Activities
IRS Faulted for Lax Housing Tax Credit Oversight
AccountingWEB (07/26/16) Sheridan, Terry
A recent report by the U.S. Government Accountability Office (GAO) indicates that IRS oversight of the Low-Income Housing Tax Credit program continues to be "minimal." The IRS administers the program with state or local housing finance agencies under Section 42 of the tax code and Treasury regulations. A 2015 report by the GAO had similar findings and recommended co-administration of the program with the U.S. Department of Housing and Urban Development (HUD). For this year's review, the GAO analyzed 58 allocation plans, including all of the states and District of Columbia, U.S. territories, New York City, and Chicago. Government auditors visited sites and reviewed files of nine allocating agencies, and interviewed IRS and HUD officials. The GAO noted that more than half of the allocation plans developed by the 58 agencies did not specifically describe the selection criteria and preferences that Section 42 requires. Allocating agencies notified local governments about project proposals as they are mandated, but some also required letters of support from governments. HUD says the letters or other forms of local support could have a discriminatory influence on where the housing is located. The GAO found that the IRS recorded only about 2 percent of the noncompliance information it received since 2009. The GAO report recommends that the IRS clarify when the allocating agencies must report noncompliance issues and should participate in the HUD working group to strengthen its oversight. John Dalrymple, IRS deputy commissioner for services and enforcement, says "significant resource constraints" have hindered the agency, but it is working to acquire an updated server and programs to analyze the data.
State and Local Activities
Long Island Affordable Housing Projects Get a Boost From Tax Credits
Newsday (08/07/16) McDermott, Maura
Long Island’s affordable housing complexes are getting a boost from investors who are increasingly eager to fund construction and renovation projects, thanks to tax credit programs. The additional money kicked in by investors is helping developers take on construction projects that previously would not have made financial sense, builders say. The projects all received support from a funding source that has grown more valuable in recent years: low-income-housing tax credits. The tax credit money "is not debt that has to be repaid, so you have a lower operating cost," says Marianne Garvin, chief executive of the CDC, a Centereach-based nonprofit. Plus, projects "are privately built and financed; that’s the thing that’s different from the old public housing," Garvin adds. "Because there is private investment, the design is usually very beautiful . . . because people understand that’s really what drives [communities’] acceptance." With returns uneven on other investments such as stocks, bonds and commodities, investors have been competing to purchase the credits. The competition has become so intense that instead of paying 90 cents or so for each dollar in tax breaks, investors now pay as much as $1.10 or more, developers said. Those higher prices, says R.J. Miller, GHC’s vice president for acquisitions and development, are "making a lot of projects feasible that might not be otherwise . . . Every little penny literally counts on affordable-housing projects, because they’re hard to get done."
Nashville Mayor Unveils Incentive Plan to Boost Affordable Housing
Tennessean (07/12/16) Garrison, Joey
Nashville, Tenn., Mayor Megan Barry has proposed new financial incentives for developers in Davidson County in hopes of spurring more workforce and affordable housing projects. The proposal is described as a pilot program that is already backed by two Metro Council members. The opt-in plan would offer grants of various sizes to developers who build either workforce or affordable housing. Developers of rental apartment projects and owner-occupied homes would be eligible for grants under the plan. An ordinance to be filed with the council defines affordable housing as residential housing units priced for families earning 60 percent or less of Nashville’s median household income. Workforce housing is defined as housing priced for families earning between 60 percent and 120 percent of the area's median income. Barry said in a statement, "We want to target this growth in the urban core, which has seen the greatest impact of soaring housing prices in recent years, as well as along our pikes and corridors, which are targeted for mass transit options now and in the future." The proposal, which the council will consider on a first of three votes next month, is capped at $2 million. It has a two-year sunset, at which time the council and mayor’s office would review the effectiveness of the program to determine whether it should be continued. Qualifying developers would be eligible for a grant capped at 50 percent of the increase in property taxes collected from the new development.
HUD-Related Activity
Small Changes, Big Benefits: HUD Programs Move Forward
Lancaster Pollard (08/07/2016)
Recent revisions have been made regarding how the Section 202 program could work with the Rental Assistance Demonstration (RAD) program, as well as to a law that changes how Low Income Housing Preservation and Resident Homeownership Act (LIHPRHA) properties can be more beneficial to affordable housing developers. The Sec. 202 program provides capital advances to nonprofit organizations to finance the construction, rehabilitation, or acquisition of supportive housing for very low-income elderly persons. In addition, the program provides rent subsidies for initiatives designed to help make them affordable. As such, it has a well-defined goal—helping low-income people get quality housing. Through the fiscal year (FY) 2017 Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Act, the industry is proposing to allow Sec. 202 project rental assistance contract (PRAC) properties to convert from short-term contracts to long-term contracts through HUD's RAD program. This would allow Sec. 202 PRAC properties to use debt and other financing mechanisms in a manner not possible under current program guidelines. According to HUD data, there are more than 120,000 units of housing covered by PRACs, so a legislative fix that would allow them to convert to long-term contracts under the RAD program would be a major gain for housing developers. The Senate passed its version of the THUD bill on May 19, but the House's THUD bill to date has only made it through the full House Appropriations Committee. Congress reconvenes on Sept. 6 and FY 2017 begins on October 1, so there is a window where this bill could be passed.
Industry Trends
Affordable Housing Sales Market Heats Up
Affordable Housing Finance (08/11/16) Kimura, Donna
The affordable housing sales market is seeing strong activity this year, according to CBRE Affordable Housing. It reports that the number of deals closed in the market is up by "double digits" compared with the same time last year. Robert Sheppard, CBRE Affordable Housing's managing director, says affordable housing stock continues to expand as more low-income housing tax credit (LIHTC) properties age and come to the end of their initial 15-year compliance periods. Looking at the overall affordable housing sales market, CBRE reports that the average size of properties it has sold this year is 139 units, and the average price has been $57,057 per unit. Properties on the market average about 14.5 years old, estimates Sheppard. His firm recently arranged the sale and financing of Diamond at Prospect, a 140-unit affordable community in Denver to Hamilton Zanze Real Estate Investments for $20.5 million. It represented Security Properties in the sale of the property, which contains 98 apartments with income restrictions. The property has averaged 96 percent occupancy for the last three years. CBRE Real Estate and Andrew Behrens of CBRE's San Francisco office secured $12.3 million in acquisition financing on behalf of the borrower. The 10-year fixed-rate loan was provided by Fannie Mae at CBRE's lowest rate to date: 3.07 percent. Due to Denver's 21 percent rent-to-income ratio, the city's cost of living continues to increase, keeping the demand for affordable housing high while maintaining Denver as a desirable location for investors, says CBRE.
New Tool Shows Struggles of Financing Affordable Housing
DSNews (07/29/2016) Baer, Kendall
A report from Redfin and the Urban Institute indicates that financing affordable housing without subsidies is virtually impossible for developers in order to construct homes that are affordable for low- or extremely low-income families. Redfin reports that a new interactive tool from the Urban Institute and the National Housing Conference shows how complex creating affordable housing can be. The tool lets users view how tax credits are the default for buildings with 100 or more units. The report also notes that the promise of federal aid to tenants is essential for attracting lenders and investors to a project. However, the Urban Institute says only about one in four people who qualify for housing assistance actually receives it. Another major obstacle is there is a lack of standardization, so most tax credits and subsidies are awarded through a bidding process, each with its own timelines and applications. Delays in the receiving of these grants can be problematic to some of these projects. It has been seen that some states, such as Massachusetts and Minnesota, have coordinated their grant and tax credit programs in order to mitigate this problem. The report notes that more states should consider better ways to coordinate the variety of grants and tax relief opportunities available to affordable housing because they feel it is important for all levels of government to ensure there is enough funding to meet the need.
Association News
Order Copies of NAA Educational Sessions
Order your copy of more than 50 education sessions that were presented at the 2016 NAA Education Conference & Exposition in San Francisco. You may earn up to six continuing education credits toward your NAAEI credential renewal. Order today for $299.
NAHMA audio recordings will include the following sessions:
- NAHMA Presents: A Year After SCOTUS—Latest Trends in Disparate Impact. Presented by Harry J. Kelly, Nixon Peabody LLP; and Michael W. Skojec, Ballard Spahr LLP
- NAHMA Presents: Affordable Workforce Housing—Identifying the Need and Potential Solutions. Presented by Cynthia Parker, BRIDGE Housing; Angela Boyd, Enterprise Community Partners; and Elizabeth (Libby) Seifel, Seifel Consulting Inc.
- NAHMA Presents: Key Federal Legislative and Regulatory Issues Impacting Affordable Multifamily Housing. Presented by Kris Cook, NAHMA; Greg Brown, NAA; and Tom Azumbrado, San Francisco Multifamily Hub, HUD
- NAHMA Presents: Affordable Housing Preservation Options—Save It, Sell It, Buy It. Presented by Kasey Burke, Meta Housing Corporation; and Daniela Greville, McCormack Baron Salazar Inc.
Webinar Wednesdays Continue
Join NAAEI, Apartment All Stars and Multifamily Insiders for Webinar Wednesdays, the largest premium webinar series in the industry to provide SHCM designates with access to industry thought leaders to discuss innovative ideas, best practices and emerging industry trends. These webinars will give participants the tools they need to become industry superstars in their own right. To review upcoming webinars, click the Web Link below.
- Aug. 24: Don Sanders, Employees First, Customers Second—A Winning Management Philosophy
- Sept. 21: Kristi Fickert, Outreach and Partnership Marketing in the Digital Era: Ideas, Tips & Tricks to Help You Better Maximize Your Outreach Marketing Efforts
- Oct. 5: Patrick Morin, Beyond Disruption: Tapping the Creative and Competitive Nature of Your Team
- Oct. 19: Alex Jackiw, Success in Your Career Is More Than Just Being Polite
- Nov. 2: Lisa Trosein, How to Deliver Bad News
- Nov. 8: Doug Chasick, Mastering Maintenance: Seven Fair Housing Pitfalls Your Service Team Must Avoid
- Nov. 16: Rick Ellis, Followership: How Dynamic and Trustworthy Followers Create Successful and Effective Leaders
- Nov. 30: Doug Miller, Dark Clouds Are Gathering in Multifamily—Is It Time to Start Building Your Ark?
- Dec. 14: Kate Good, Kate Good's 2017 Marketing Playbook
Leadership Training with NAAEI and Dale Carnegie
Responding to the need for leadership training within the apartment industry, NAAEI has partnered with Dale Carnegie Training to deliver a world-class leadership training program. This program targets regional employees and corporate department heads, helping them make the transition from being a great manager to an effective leader. The next two-day program takes place Sept. 21-22 in Austin, Texas. For more information, click the Web Link below.
Own Multifamily Housing: The Essential Industry Text
Multifamily Housing: The Essential Industry Text, has been developed as a definitive reference and interactive guide aimed at expanding the knowledge of multifamily professionals and as a complement to “on-the-job” experience for investors, developers, owners, managers, consultants and suppliers. As college students consider the apartment industry as a viable career option or choose to earn degrees in property management or real estate, this text offers a single source with best practices, uniform guidelines and standardized operational procedures, complete with a comprehensive glossary and industry terminology. Click on the Web Link below to purchase a copy.
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
More
LeadingAge Annual Meeting & EXPO
October 30-November 2, 2016
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