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HUD Suspends Mandatory Implementation of Small Area FMRs
On Aug. 11, the Department of Housing and Urban Development (HUD) issued a letter stating the agency is suspending the mandatory implementation of the Small Area Fair Market Rent (FMR) designation for 23 of 24 metropolitan areas that had been previously announced. To read the letter, click the Web Link below. Additionally, the SAFMR demonstration evaluation interim report was released by HUD.
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Industry Trends
"LIHTC Market Settles Down"
"Households Living in Unaffordable and/or Substandard Conditions Increases to 8.3 Million"
Tax Issues and Tax Reform
"Lower Taxes Would Be Boon for Banks. Except in Affordable Housing"
Congress
"LIHTC Front and Center at Senate Finance Committee Hearing"
"Congress May Protect, Expand Special Tax Break for Low-Income Housing Developers"
State and Local Activities
"Texas Awards $67 Million in LIHTCs"
"Austin City Council Looks to Encourage Affordable Housing in Wealthier Areas"
Association News
Earn the SHCM Certification Online
Save the Date: Tax Credit Webinar
Digital Badges for SHCM Coming Soon
‘REWIND’ NAA Educational Sessions
Own Multifamily Housing: The Essential Industry Text
NAHMA Releases 2017 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Industry Trends
LIHTC Market Settles Down
Affordable Housing Finance (08/01/17) Kimura, Donna
The low-income housing tax credit (LIHTC) market has rebalanced after a rocky period with the prospect of tax reform, according to CREA. "After two to three months of almost no activity, the LIHTC market has seemingly reached a new equilibrium as investors have demonstrated a willingness to close on investments that assume a 25 percent corporate tax rate with no upward and downward tax rate adjusters contemplated," says CREA Executive Vice President Tony Bertoldi. Cinnaire CEO Mark McDaniel notes of particular importance is that "the LIHTC industry has come up with a mechanism for addressing the [tax reform] uncertainty...and deals need to be structured to work under these assumptions." Overall consensus on a 25 percent tax rate has allowed the HFAs that are awarding credits and funding deals to move ahead and most investors to clear transactions under that assumption, says RBC Capital Markets' Tammy Thiessen. The recent entry of certain economic buyers also has coincided with market uptick, says the Richman Group Affordable Housing Corp.'s Stephen M. Daley. "I believe they view opportunistically the more favorable pricing due to corporate tax rate uncertainty," he notes. Still, there are concerns among syndicators that any tax reform-related news could disrupt the market again.
Households Living in Unaffordable and/or Substandard Conditions Increases to 8.3 Million
HousingWire (08/10/17) Ramírez, Kelsey
A new report from the U.S. Department of Housing and Urban Development (HUD) finds that the number of families living in unaffordable conditions or in subsidized housing increased from 2013 to 2015. In 2013, 7.72 million very low income unassisted families paid more than half of their monthly income in rent, lived in severely substandard housing or both, the report showed, rising to 8.3 million families in 2015. However, that figure is still less than the 8.48 million families in 2011. HUD says President Donald Trump and his administration are currently seeking to improve affordable housing by decreasing the government's role in the private mortgage market. The administration asserts that government-sponsored enterprise (GSE) reform is still a priority, but legislation has yet to come forward. The National Association of Home Builders (NAHB) is urging more immediate action for the growing unaffordability. NAHB Chairman Granger MacDonald says, "The bipartisan Cantwell-Hatch bill pending in the Senate would expand the low-income housing tax credit (LIHTC), the nation's most successful affordable housing program, and result in an additional 400,000 LIHTC units built over the next decade." He adds, "At the same time, we call on Congress and the administration to approve sufficient funding for the HOME program and important rental assistance programs, including housing choice vouchers and project-based rental assistance." HUD's estimate is based on data from the 2015 American Housing Survey conducted by the U.S. Census Bureau.
Tax Issues and Tax Reform
Lower Taxes Would Be Boon for Banks. Except in Affordable Housing
American Banker (08/03/17) Bean, Steven; Foster, Russell
The Trump administration reportedly supports a reduction in the corporate tax rate from 35 percent to 15 percent. Commercial banks that invest in the affordable housing market have traditionally relied on tax deductions to make their investments in affordable housing financially viable. Because of rent-restricted conditions, project financial margins are almost always extremely tight, and developers almost always face funding gaps when they put together low-income housing tax credit (LIHTC)-funded projects. As a result, the potential reduction in the tax rate threatens to make the gaps even wider and harder to close. In recent negotiations, if investors believe tax cuts will be modest, they have offered to pay $0.95 a credit, down from $1.06 eight or nine months ago. If they think the corporate tax rate will actually be cut to 15 percent, they are lowering their offers even further or are requiring "adjusters," including putting some of their investment dollars into escrow, which could be taken back if rates are cut deeply. LIHTC investments have proved to be an extremely valuable way for commercial banks to help meet the credit needs of their communities. But just like any other investor, they need to receive a reasonable return on investment in order to continue participating in the market. Given all of the benefits of the LIHTC program, Congress is urged to make the LIHTC tax credits worth more, in case the corporate tax rate is cut.
Congress
LIHTC Front and Center at Senate Finance Committee Hearing
Affordable Housing Finance (08/01/17) Kimura, Donna; Serlin, Christine
Sen. Ron Wyden (D-Ore.) on the Senate Finance Committee says the low-income housing tax credit (LIHTC) requires consideration as Congress commences its tax reform initiatives. At a recent committee hearing on affordable housing, Wyden stressed how the LIHTC can be kept intact amid upcoming efforts to revamp the tax system. Proposed tax reform legislation urges a 50 percent cap increase in the annual housing credit phased in over five years. It also would permit "income averaging" at LIHTC developments via a test that would allow the 60 percent of the area median income ceiling to apply to the average of the apartments within a property. New York University Professor Katherine M. O'Regan says the proposed LIHTC reforms should improve economic feasibility in different market settings and give an LIHTC property the flexibility to serve a broader set of incomes. "Reducing the corporate tax rate could reduce the value of the LIHTC and thus investor demand," Wyden warned. "We've heard some talk about the credit declining by up to 17 percent." Wyden said his focus will be on ensuring that issues such as boosting the supply of affordable housing align with tax reform and that "we don't end up having an inadvertent problem as a result of say a reduction in the corporate rate and lowering the value of the credit."
Congress May Protect, Expand Special Tax Break for Low-Income Housing Developers
Washington Times (08/07/17) Sherfinski, David
Congress appears ready to protect and perhaps even expand a special tax break for real estate developers who construct rental housing for people with low-incomes. The low-income housing tax credit (LIHTC) program has helped finance some 2.4 million units as of 2014, and the cost — an estimated $34 billion over the next 10 years — is relatively small, according to congressional scorekeepers. Brian Riedl, a senior fellow in budget, tax, and economics at the Manhattan Institute for Policy Research, observes, "[It] certainly should be protected and expanded regardless of whether tax reform develops into a real bipartisan process or remains the partisan fantasy as people here talk about." Daniel Garcia-Diaz with the Government Accountability Office (GAO) says over the past 30 years, however, agencies that distribute LIHTC credits have been audited only a handful of times by the IRS. The IRS says conducting regular reviews is not part of its statutory duties, and that local agencies should bear that responsibility. Those in the industry say there are internal safeguards federal investigators might not see, and that the program is invaluable amid rising rental costs and federal resources dwindling elsewhere. "We take it very, very seriously," says Granger MacDonald, chairman of the National Association of Home Builders. "I realize that's hard to track from a GAO standpoint, but on a local basis, there is a lot of oversight to make sure the compliance of this program is being carefully, carefully monitored."
State and Local Activities
Texas Awards $67 Million in LIHTCs
Apartment Finance Today (08/10/17) Serlin, Christine
The Texas Department of Housing and Community Affairs (TDHCA) has awarded $67 million in low-income housing tax credit (LIHTC) allocations to help finance or build 69 affordable housing developments statewide. The LIHTCs will help to finance the construction of 50 new properties with 4,009 units and the rehabilitation of 19 properties with 808 units. The TDHCA has helped to create and preserve more than 238,000 affordable housing units in Texas since 1987. The state estimates that in 2016, the new construction and rehab of developments led to the creation of more than 13,000 jobs with $455 million in compensation. In addition to the LIHTC awards, the TDHCA announced that as part of its $4.9 million Homeless Housing and Service Program (HHSP) allocation, it has provided funding to Arlington, Austin, Corpus Christi, Dallas, El Paso, Fort Worth, Houston, and San Antonio to help provide housing and support services for the homeless or those at risk of homelessness. The HSSP can aid the construction, development, or procurement of housing for homeless individuals; the rehab of buildings targeted to serve the homeless population; and the delivery of services and case management to homeless individuals or those at risk of homelessness. "These funds serve as a vital resource of help for some of our most vulnerable Texans, helping them work toward self-sufficiency through supportive housing and a variety of services and enabling them to overcome the challenges of homelessness," says Tim Irvine, executive director of TDHCA.
Austin City Council Looks to Encourage Affordable Housing in Wealthier Areas
Austin American-Statesman (08/03/17) Jankowski, Philip
The city council of Austin, Texas, passed a resolution on Aug. 3 intended to better spread affordable housing throughout the city. The resolution proposes to offer incentives to developers who seek to build low-income housing in wealthier areas. The council unanimously approved the resolution by Council Member Greg Casar, who said that by having the city provide an analysis for all properties seeking low-income housing tax credits (LIHTCs), the city might find other ways to provide cheaper housing throughout the city. As part of Austin's recently adopted Strategic Housing Blueprint, the city is calling for 60,000 affordable housing units to be built over the next 10 years, which would account for about 44 percent of the 135,000 housing units the plan determined are needed over the next decade. The newly approved resolution directs city staffers to research programs and incentives to encourage affordable housing in moderate- and high-income areas of the city. Those tools could include the use of taxpayer money and zoning changes, according to the resolution. It also called on staffers to examine the city's ability to provide protections for tenants who live in properties taking part in the LIHTC program. Council Member Ellen Troxclair said staff analysis and council input on participants in the program could serve as guidance for developers who might build affordable housing.
Association News
Earn the SHCM Certification Online
Take advantage of this convenient, affordable way to prepare to earn the Specialist in Housing Credit Management (SHCM) certification online. Each webinar will last for approximately two hours, followed by a question-and-answer period for attendees. The cost for the course, including the SHCM exam, is $549 for members and $599 for nonmembers. Individual webinars can be purchased at $109 each. Upcoming webinar dates are Oct. 3, Oct. 10, Oct. 17 and Oct. 24, and each begins at noon Eastern. To learn more about the program or to register, click the Web Link below.
Save the Date: Tax Credit Webinar
Register today for the Emerging Trends in Tax Credit webinar, which is free for SHCM certified professionals. The webinar takes place Nov. 13, beginning at 2 p.m. Eastern. The presenters are Dodi Gershen, Anita Moseman and Heather Staggs. The cost is $109 for non-SHCM professionals. To register, click on the Web Link provided.
Digital Badges for SHCM Coming Soon
The National Apartment Association (NAA) will soon be offering digital badges for SHCM credential holders. The badges can be shared through social media, email, websites and your digital resume. Digital badges feature encoded metadata: the badge’s issuing organization, its expiration date, and the knowledge and skills it confirms. They also provide employers with immediate verification, all in one click. For more information on the digital badge program, click on the Web Link provide below.
‘REWIND’ NAA Educational Sessions
Order 50-plus education sessions that were presented at the 2017 Education Conference & Exposition in Atlanta for $199. You may earn up to six continuing education credits toward your NAAEI credential renewal.
This year’s audio recordings include the following sessions:
- Opening Doors: The Key to Understanding Permanent Supportive Housing presented by Michael D. Clark, HCCP, principal and owner, Alpha-Barnes Real Estate Services LLC; Tom Gallagher, principal, E&G Group; Jacquie Hoffman, MDiv, president NPH board of directors 2017, regional vice president of property operations, Mercy Housing; and Lori Trainer, CAM, CAPS, vice president, Southern Affordable Services Inc.
- Dealings with HUD: Successfully Navigating Muddy Waters presented by Greg Brown, senior vice president of government affairs, NAA; John McDermott PLLC, general counsel, NAA; Jeanne McGlynn Delgado, vice president, government affairs, American Seniors Housing Association; and Lori Trainer, CAM, CAPS, vice president, Southern Affordable Services Inc.
- Affordable Housing: Key Federal Legislative-Regulatory Issues to Keep You Up at Night presented by Kris Cook, CAE, executive director, National Affordable Housing Management Association (NAHMA); and Larry Keys, director of government affairs, NAHMA.
Click on the Web Link for more information.
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 2017 Affordable 100 List
The National Affordable Housing Management Association (NAHMA) announces its 2017 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 NAHMA News, 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
NAA MAXIMIZE: Multifamily Asset Management Conference
October 2-4, 2017
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NAHMA Regulatory Issues (Fall) Meeting
October 22-24, 2017
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LeadingAge 2017 Annual Meeting & EXPO
October 29-November 1
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