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September is Disaster Preparedness Month


The Federal Emergency Management Agency's "Ready Campaign" has established four universal building blocks of emergency preparedness: Be informed, Make a Plan, Build a Kit and Get Involved. September 30 is "National PrepareAthon! Day," which builds on this foundation by encouraging millions of Americans to focus on a simple, specific activity that will increase preparedness. For more details, click on the link below.

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Tax Issues and Tax Reform


"Calculating Tax Credit Recapture and Interest"
"Housing Crunch"
"Better by Design: Tax Credits’ Structure Provides Superior Results"

State and Local Activities


"De Blasio Orders a Greener City, Setting Goals for Energy Efficiency of Buildings"

HUD-Related Activity


"What HUD Secretary Julian Castro Says Needs to be Done to Boost Homeownership, and Cut Down on Rental Costs"

Court-Related Activity


"Treasury Sued Over LIHTC Program"

Industry Trends


"Gap Financing Growing Concern for Advocates"

Association News


IRS Issues Disaster Relief Guidance for LIHTC Sites
Affordable Housing Education – Robust Program Offering at LeadingAge Annual Conference in Nashville (Oct 19 - 23)
IRS Issues Updated Tax Credit Audit Guide
Senate Bill Would Make Affordable Housing Available to Homeless Students
NAHMA Announces 2014 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!


Tax Issues and Tax Reform


Calculating Tax Credit Recapture and Interest
Novogradac Journal of Tax Credits (09/14) Vol. 5, No. 9 Zochert, Kyle

Low-income housing tax credit recapture can affect any property at any time, and can have a significant financial effect. Recapture exists when qualified basis decreases from one year-end to the next, either in the low-income applicable fraction or in the eligible basis. There are three general situations in which a decrease in qualified basis occurs: a unit is not occupied by a qualified tenant or lack of proper rent restrictions, a building is disposed and not expected to continue operation as a qualified low-income building, or a unit is unsuitable for occupancy. A nonqualified unit is the most commonly encountered cause of a recapture event. The possible outcome may be no loss of credits, loss of current year credits and no recapture, loss of current year credits plus recapture, or loss of current year credits with recapture and no future credits. The recapture amount is calculated by accounting for the eligible basis, total units, and square footage. When calculating the proportion of recapture, the eligible basis is multiplied by the greater of recaptured units or floor space. Recapture affects both past and future credits. After a recapture event, the qualified basis will be increased and credits will be claimed in a smaller amount.
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Housing Crunch
Multi-Housing News (09/14) Foong, Keat

The Low Income Housing Tax Credit (LIHTC) has not, in and of itself, provided enough affordable-housing units to meet demand. The industry-sponsored State of the Nation’s Housing 2014 report, authored by the Joint Center for Housing Studies, found that there were only 3.3 million rental units affordable and available for 11.5 million extremely low-income households in 2012. Less than 25 percent of households eligible for rental subsidies receive them in 2011. Developer Matthew Rieger, president and CEO of the Housing Trust Group, says that a major hindrance to producing more LIHTC housing is the constricted supply of LIHTCs available for projects. More soft financing is needed to meet the program's financing gap, although state and local governments have been facing fiscal issues since the recession and are finding it difficult to provide the same level of soft funding. Rieger says that other barriers to greater LIHTC housing production are declining supplies of developable land and increased costs for developers, including limits to how much rent they can charge. The first solution to the LIHTC shortfall may be to dramatically increase the amount of the LIHTC allocated. The Bipartisan Policy Center last year recommended a 50-percent expansion of the LIHTC program. There also have been proposals to change LIHTC rules regarding the lengths of the credit and compliance periods, and the required income levels.
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Better by Design: Tax Credits’ Structure Provides Superior Results
Novogradac Journal of Tax Credits (09/14) Vol. 5, No. 9 Novogradac, Michael J.

Some critics of tax credits for affordable housing suggest that capital grants are a better alternative. Michael J. Novogradac, CPA, argues that tax credit programs are effective for affordable housing, community development, historic preservation, and renewable energy, and that policymakers should work for reform rather than trying to replace them. Novogradac notes that tax credits are successful because of structural features that are not offered by capital grants. While some tax credit subsidy is consumed by administrative costs, capital grant programs also involve up-front, ongoing administrative costs, and many capital grant programs have a separate stream of funding for administrative costs. According to Novogradac, capital grant programs are less able to enforce a correlation between actual costs and the realization of planned benefits. Tax credit programs are designed to terminate future tax credits and recapture some or all credits already claimed if subsidized goals are not reached. The low-income housing tax credit (LIHTC), Novogradac says, has incentivized the construction, rehabilitation, or preservation of 2.6 million affordable housing units between 1986 and 2012, according to the National Council of State Housing Agencies. LIHTC properties also have a very low rate of failure and recapture.
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State and Local Activities


De Blasio Orders a Greener City, Setting Goals for Energy Efficiency of Buildings
New York Times (09/22/14) P. A1 Flegenheimer, Matt

New York City Mayor Bill de Blasio has announced new energy efficiency standards for all of its public buildings. The effort is part of a pledge to reduce greenhouse gas emissions by 80 percent by the year 2050 from levels seen in 2005. New York City plans to pressure private apartment owners to ensure reductions as well, a move that could upset some residential and commercial building owners. However, officials are framing the move as part of the city's focus on income inequality, noting that, overall, lower-income residents pay a larger proportion of their rent for energy than more wealthy residents, and they often live in buildings that are less efficient. City officials say the long-term savings will have both environmental effects and financial benefits for lower-income residents. In the near-term, however, New York City will devote at least $1 billion of its capital funding to enhancing city-owned buildings over the next 10 years, and the funds will be included in the city's 10-year capital plan, set to be released in early 2015. Among the possible upgrades to be made are boiler improvements, solar-power installations, and the introduction of an "air conditioner exchange program" in public housing, where the cooling units are often older and less efficient. A draft report on the proposals notes that the steps will help the city take a big step toward a "complete transition away from fossil fuels," and it expects building-based green house gas emissions to drop an additional 10 percent by 2025.
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HUD-Related Activity


What HUD Secretary Julian Castro Says Needs to be Done to Boost Homeownership, and Cut Down on Rental Costs
Washington Post (09/16/14) ElBoghdady, Dina

New HUD Secretary Julian Castro has cited increased homeownership for all Americans -- including those with damaged credit -- as one of his main priorities. "It's time to remove the stigma associated with promoting homeownership," he declared in his first public policy speech, Sept. 16 at the Bipartisan Policy Center's housing summit in Washington. Castro also noted that lenders have been reluctant to widen access to credit since the mortgage crisis. "The truth is that the dream of homeownership is out of reach for too many Americans," he said, and pledged to work to preserve existing affordable housing. He also said he would strive to alleviate the affordability crunch in the rental sector. Castro additionally used his speech to show support for stalled legislation from Sens. Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) that would overhaul the nation's housing-finance system. The bill would dedicate billions of dollars every year to producing affordable housing, according to Castro.
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Court-Related Activity


Treasury Sued Over LIHTC Program
Affordable Housing Finance (09/16/14) Kimura, Donna

The Inclusive Communities Project (ICP) of Dallas has sued the U.S. Treasury Department, alleging that the agency's administration of the low-income housing tax credit (LIHTC) program helps to perpetuate racial segregation. The ICP claims that the Treasury Department, along with the Office of the Comptroller of the Currency, violated their duties to promote fair housing under the Fair Housing Act. According to the suit, "Defendants' willingness to accept and condone racial segregation in their programs is a cause of the racially segregated locations of 19,511 LIHTC non-elderly units in 50 percent or greater minority census tracts in the city of Dallas (97 percent of such units in the city)." As a result, the ICP says, families in segregated LIHTC units are disproportionately located in areas with high rates of crime and poverty. Supporters of the LIHTC program are concerned the lawsuit could unintentionally harm, rather than improve, the program, as it focuses on Dallas but also includes some national figures. The lawsuit notes that from 1995 to 2002, 41 percent of LIHTC units in the United States were in tracts with more than 50 percent minority populations, and that figure increased to 44 percent in 2006. Sharon Wilson Geno, a partner at Ballard Spahr and leader of the firm's government-assisted housing practice, expressed concern that the suit could result in more regulations, which could make the program less appealing to investors. In addition, she said, it could make state housing agencies that allocate LIHTCs "more conservative and less forward thinking" about affordable housing sites.
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Industry Trends


Gap Financing Growing Concern for Advocates
Affordable Housing Finance (09/18/14) Machak, Lindsay

Gap financing is among the key topics for developers this year, and experts recently discussed the issue at the Bipartisan Policy Center's 2014 Housing Summit. During a panel discussion, housing experts spoke about trying to make deals work as legislators make cuts. Robert Rozen, principal at Washington Council Ernst & Young, noted that each year, as Congress debates appropriations, supportive financing for the low-income housing tax credit (LIHTC) program is increasingly reduced, especially the Community Development Block Grant program and HOME funds. "They've already been cut drastically in the last few years. They’ll continue to be cut,” Rozen said. "That's a great source of gap financing, and that's on top of state and local cuts." A problem with the LIHTC, said Michael Novogradac of Novogradac & Co., is that it does not cover operating expenses. "You at least have to have enough rent to cover operating expenses on an ongoing basis," he said. "And when you're trying to serve the extremely low income levels, that won't be enough to cover operating expenses and then you need some sort of operating expense subsidy." Meanwhile, Ali Solis of Enterprise Community Partners, noted the overwhelming demand for housing, with about 11.5 million families with incomes below 30 percent of the area median income currently seeking placement in about 3 million available and affordable apartment homes. Income averaging is one possible solution, according to Solis, who said that it could generate rental income from some higher-income tenants in the developments and then help support some lower-income families with innovative financing.
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Association News


IRS Issues Disaster Relief Guidance for LIHTC Sites

The IRS recently released revenue procedures that provide guidance about temporary disaster relief for qualified developments that were financed by the LIHTC or tax-exempt bonds. Revenue Procedure 2014-49 offers key modifications to Revenue Procedure 2007- 54. These include:
• Changing the reasonable restoration period for recapture relief and the tolling period for severely damaged, destroyed, or uninhabitable buildings in the first year of the credit period;
• In determining qualified basis, using the building’s qualified basis at the end of the taxable year immediately preceding the first day of the incident period as determined by FEMA, rather than at the end of the taxable year preceding the president’s major disaster declaration;
• Incorporating a temporary suspension of certain income limitations for displaced individuals;
• Eliminating the need for self-certification of income eligibility;
• Permitting an agency to allow an owner within its jurisdiction to provide emergency housing relief to displaced individuals from other jurisdictions;
• Describing the consequences of providing emergency housing relief in the first year of the credit period and after the first year of the credit period; and
• Modifying the safe harbor relating to the amount of credit allowable to a restored building to provide relief in circumstances where the restoration cost is less than the eligible basis cost.
For more details, click on the link below.

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Affordable Housing Education – Robust Program Offering at LeadingAge Annual Conference in Nashville (Oct 19 - 23)

Senior housing providers – from organizations small and large – will find a range of sessions to address residents needs/concerns, ensure up-to-date regulatory compliance, explore tools for preservation/refinancing, and strategies to inspire visionaries seeking to expand the availability of housing with supportive services through partnerships or new subsidiaries.

Session highlights include:
* HUD Compliance Update
* Preservation Strategies for 202 Properties
* The Art of Developing HUD Resident Policies
* Housing Policy Forum
* Prepare to Recapitalize Your Housing Property after Year 15
* Working with Residents with Dementia in Independent Housing
* HUD Management Update

More details on the conference and its some 30 targeted HUD senior housing and housing with services sessions can be found via the link below.
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IRS Issues Updated Tax Credit Audit Guide

IRC42ATG, issued September 2014, incorporates changes of and comments to the January 2014 draft posted for comment. This audit technique guide was prepared to assist IRS examiners audit taxpayers, usually partnerships, owning IRC §42 low-income housing projects. Two related topics, auditing partners and completing the Examination of Income, are also addressed.

For details, click on the link below.
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Senate Bill Would Make Affordable Housing Available to Homeless Students

Bipartisan legislation recently introduced by Sen. Rob Portman, R-Ohio, and Al Franken, D-Minn., would amend a law that prevents some college students from qualifying for affordable housing. The Housing for Homeless Students Act of 2014 would allow full-time students who experience or have recently experienced homelessness to become eligible — or retain eligibility — for LIHTC housing.

The proposed law would tweak a provision of the LIHTC program that makes full-time college students ineligible for affordable housing units that were developed under the program.

“Students shouldn’t have to choose between stable housing and going to school full-time,” Portman said. “This common-sense bill will improve the way we help low-income students by giving them access to stable and affordable housing while they attend school full-time so that they can go on to graduate and succeed.”

“We can’t make young people and veterans in Minnesota who have experienced homelessness make the difficult choice between housing or an education,” Franken said. “But right now, they’re being forced to put one above the other. Our bipartisan bill will fix this problem by giving students access to affordable housing while they pursue their education.”

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NAHMA Announces 2014 Affordable 100 List

NAHMA recently announced its 2014 Affordable 100, a list of the 100 largest affordable multifamily property managers, ranked by affordable unit counts. The list is available at NAHMA’s website via the link below, as well as in the June issues of Affordable Housing Finance magazine and Units magazine.

The NAHMA website version of the list also includes the next 20 largest multifamily property management companies, for a total list presenting the top 120. In addition, the NAHMA website version presents two specialty lists -- the 25 largest housing credit (LIHTC) property management companies, and the 25 largest Rural Development program property management companies. The NAHMA website also provides the listed management companies with the option to include hyperlinks to their own corporate websites, so web visitors can quickly and easily find out more information on a particular company.

The Affordable 100 was created in an effort to accurately determine the size of the portfolio of affordable multifamily units receiving federal subsidy in the United States. It lists affordable units containing at least one of following federal subsidies: HUD Project-based Section 8, Section 42 LIHTC, HOME funds, bonds and USDA Section 515.
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Become a Specialist in Housing Credit Management® (SHCM®) Company!

The three national associations sponsoring the Specialist in Housing Credit Management® certification program invite your company to become a Specialist in Housing Credit Management® (SHCM®) 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 link below.
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September 2014