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Republican Tax Reform Plan Released
In late September, the Trump administration and Republican Congressional leadership released their tax overhaul framework titled, “Unified Framework for Fixing our Broken Tax Code,” which proposes broad tax cuts, simplified taxation tiers, profit and workforce repatriation, and economic growth. The Low-Income Housing Tax Credit was one of a few tax provisions to be explicitly retained in the framework. Responding to strong pressure from NAHMA and our industry colleagues, the plan eases industry concerns over the elimination of LIHTC, but leaves questions unanswered regarding private activity bonds and other business and individual tax provisions. To read the full text or the one-page overview of the proposed plan, click on the Web Link provided.
Industry Trends
"LIHTC Properties Show Their Strength"
Tax Issues and Tax Reform
"Tax Credit Programs Show Value during Natural Disaster Recovery"
"MBA to Congress: We're Ready and Open to Working on Tax Reform"
State and Local Activities
"Durham City Council Votes for Affordable Housing on City Land in Downtown"
Management and Compliance
"LIHTC Projections: How to Help Ensure Your Tax Credit Property Meets Its Intended Goals"
Green Building
"Joint Industry Study Finds Green Building Continues to Gain Traction with Multifamily Developers"
"Cost Still a 'Major Barrier' to Green Building"
Association News
Register for Emerging Trends in Tax Credit Webinar
HUD Expedites Review of Regulatory Relief Requests
DUNS Number Required on All Voucher Submissions
LeadingAge Annual Meeting Features Sessions on HUD and Tax Credit Compliance
NAHMA Releases 2017 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Industry Trends
LIHTC Properties Show Their Strength
Apartment Finance Today (09/20/17) Kimura, Donna
A new report from CohnReznick, "Housing Tax Credit Investments: High Performance and Increased Need," indicates that low-income housing tax credit (LIHTC) properties are operating better than in any period in the program’s 31-year history. The surveyed portfolio of more than 22,000 properties reported, on a median basis, a 97.8 percent physical occupancy rate in 2016. This demonstrates that nearly all units financed under the program are occupied, marking the highest rate seen by CohnReznick since it began collecting data. The report also found that properties are in a better financial position than they have been in the past. "Performance continues to be strong for many reasons," says Cindy Fang, partner at CohnReznick and leader of its Tax Credit Investment Services practice, which wrote the report. "The growing need for affordable housing supports high rates of occupancy for housing tax credit properties and strong operating performance. Virtually all housing tax credit properties are fully occupied barring normal turnovers, many with lengthy waiting lists. And, the unique public-private partnership structure of the housing tax credit program supports a very low rate of foreclosures compared to any other type of real estate." LIHTC properties' generally strong financial position enables them to keep current with their debt payments. Developments had a median 1.35x debt-coverage ratio (DCR) last year, the strongest DCR recorded for the properties surveyed. The median DCR hovered around 1.15x between 2000 and 2008. The study also found that the median cash flow was more than $600 per unit in 2016.
Tax Issues and Tax Reform
Tax Credit Programs Show Value during Natural Disaster Recovery
Novogradac Journal of Tax Credits (10/17) Vol. 08, No. 10 Novogradac, Michael
Communities affected by this year's consecutive storms, Harvey and Irma, will require years to fully recover, but a smart use of community development tax credits could provide a platform from which the affected regions can facilitate recovery. Congressional lawmakers have reintroduced the National Disaster Tax Relief Act, which includes a provision to increase the low-income housing tax credit (LIHTC) ceiling by the greater of $8 multiplied by the population of the qualified disaster area, or 50 percent of the state housing credit ceiling for federally declared disaster areas during calendar years 2012 to 2015. It also calls for a special new markets tax credit (NMTC) annual allocation increase of $500 million to community development entities (CDEs) serving any covered federally declared disaster area for each calendar year of 2012 to 2015. Furthermore, it would provide a special $10 billion allocation of tax-exempt bonds for affected areas for disaster during 2012-2015. Meanwhile, the federal historic tax credit (HTC) would jump to a 13 percent credit for rehabilitation of non-historic buildings placed in service before 1936 and a 26 percent credit for certified rehabilitations of a certified historic structure, respectively, within federally declared disaster areas during 2012 to 2015, a 30 percent increase in the rate for each. In addition, Internal Revenue Service regulations permit any LIHTC apartment to be used for housing those displaced by a presidentially declared natural disaster. In July, the American Institute of CPAs asked Congress to make 10 tax provisions permanent to help disaster victims. Tax credits were not included, but there is significant momentum to add them.
MBA to Congress: We're Ready and Open to Working on Tax Reform
HousingWire (10/17/17) Swanson, Brena
The Mortgage Bankers Association (MBA) has sent a letter sent to Congress and the Trump administration expressing support for comprehensive tax reform. The MBA's letter said the group is "specifically pleased that the recently-released 'Framework for Fixing our Broken Tax Code' preserves current key incentives for investing in real estate, including the mortgage interest deduction and the low-income housing tax credit (LIHTC)." The MBA letter also stated, "In an effort to maximize the program's effectiveness, MBA believes that statutory changes should be made as part of the reform effort to expand the amount of LIHTC credits available and offset the impact of proposed lower tax rates on the valuation of the underlying credits themselves." The MBA further said the proposed changes provide policymakers with a tangible opportunity to pursue alternative homeownership tax incentives. And in doing so, the incentives could more efficiently target low- to moderate-income borrowers. "The possibility of limiting or eliminating other critical provisions of the tax code, such as the continued deductibility of business interest and the preservation of Section 1031 like-kind exchanges for investment real estate, has raised significant concerns within our membership," the MBA letter stated. The group also stated that it continues to support current tax law that allows homeowners to exclude a portion of the gains on the sale of a home. The MBA additionally said it believes "this provision increases velocity within the residential marketplace by suitably incentivizing the 'move-up' middle class homebuyer."
State and Local Activities
Durham City Council Votes for Affordable Housing on City Land in Downtown
Durham Herald-Sun (NC) (10/17/17) Vaughan, Dawn Baumgartner
The Durham (N.C.) City Council on October 16 approved a concept plan for the Jackson/Pettigrew Street project on city land next to the bus station. The land is appraised at $2.8 million. The main difference in four proposed plans was whether to include market-rate units alongside affordable units in the apartment building. In the end, the council voted for the plan that has 80 affordable housing units for residents making 60 percent of less of the area median income, as well as retail and office space. Council members praised the collaborative work that went into the design concept. "The market has not been able to create affordable housing – the only way is for us to step in," said City Council member Jillian Johnson. "This is my neighborhood ... and I think it’s really going to improve circumstances for folks living where we live." Initially the Jackson/Pettigrew Street proposal called for exploring an 80-20 split between affordable and market-rate housing among roughly 120 planned apartments. The city then agreed to increase how much space could be used for retail and offices to give developers more flexibility. The low-income housing tax credit could bring $10 million to the project, which it needs to move forward, according to the development team.
Management and Compliance
LIHTC Projections: How to Help Ensure Your Tax Credit Property Meets Its Intended Goals
Affordable Housing Finance (09/25/17) Grubman, Stewart A.
Experts at accounting and advisory firm PKF O'Connor Davies note that low-income housing tax credits (LIHTCs) are established based on eligible development costs, and good projections are the foundation of avoiding cost shifts. Having experts oversee costs early in the process is essential, as are regular check-ins to determine how to redirect costs and maintain eligible development costs. The ultimate goal of any project should always be to reach 100 percent occupancy in the first year of operations, such as by enabling two buildings to have 100 percent occupancy and receive credits instead of four buildings at half occupancy. It is also essential to know and communicate occupancy requirements as stipulated on Form 8609 Part 2—specifically the 20/50 vs. 40/60 requirement. This election is irrevocable, so it is best to consult an accountant and the investor partner before filing this form with the IRS. If a Form 8823 is received, there is usually 90 days to correct, depending on safety issues. Armed with the necessary documentation and background, expert advisors can provide a better idea of what impact an 8823 will have on the overall project. Best practices include communicating early and often, identifying potential problems early, and forming key partnerships, which can include turning to a professional with expertise in relationships who has worked in other aspects of affordable housing and can have strategic conversations with different people at different levels.
Green Building
Joint Industry Study Finds Green Building Continues to Gain Traction with Multifamily Developers
Multifamily Executive (10/04/17)
Green construction is rapidly gaining traction among both single-family and multifamily housing builders, according to new research published in the Green Multifamily and Single Family Homes 2017 SmartMarket Brief. The study shows that at least 33 percent of single-family and multifamily builders who were polled said that green building is a significant portion of their overall activity (more than 60 percent of their portfolio). By 2022, this number should increase to almost 50 percent in both the single-family and multifamily sectors. Within that group, almost 30 percent of multifamily builders fall into the category of "dedicated" green builders (more than 90 percent of their portfolio). Increasing energy efficiency remains the most common method of improving the performance of a green home, followed by creating a healthy indoor living environment. Steve Jones, Dodge's Senior Director of Industry Insights Research, concludes, "Homes are following the larger trend that Dodge has been tracking across commercial and institutional sectors for healthier buildings to become an increasingly important part of being sustainable."
Cost Still a 'Major Barrier' to Green Building
Construction Dive (09/28/17) Slowey, Kim
Although 80 percent of real estate and facilities management professionals say attention to wellness is crucial to attracting and retaining employees, cost remains a "major barrier" to green building, according to a yearly survey from Structure Tone. The company estimates 17 percent fewer respondents sought advice on resilience in 2017, although none believe green building is "a fad." In addition, 62 percent considered LEED certification to be a "valuable market differentiator." Concerns over climate change and the need for resiliency plans have diminished since last year, but the poll was conducted before the recent rash of hurricanes and earthquakes that devastated portions of the U.S. and Mexico. Resilient Design Institute president Alex Wilson says insurance firms have been slow to offer incentives for resiliency, but he notes the U.S. Green Building Council has helped the cause of resiliency gain traction by developing LEED pilot credits for that category. The International Well Building Institute has spearheaded the formalization of criteria for measuring achievement in occupant wellness. In addition to certifying buildings and professionals based on its WELL Building Standard, the institute also is seeking to leave its signature on entire developments.
Association News
Register for Emerging Trends in Tax Credit Webinar
Join the experts on Nov. 14 beginning at 2 p.m. Eastern to learn how impressing your investor and monitoring agents will impact the future of your housing credit property.
The webinar will provide 1.5 hours of instruction, followed by a 30-minute question-and-answer session. It is presented by Heather Staggs, CPO, FHC, SHCM, president of S.T.A.R. Momentum Compliance Consulting Inc.; Deborah Gershen, NAHP-e, FHC, SHCM, vice president of Moderate Income Management Company Inc.; and Anita Moseman, FHC, SHCM, NAHP-H, CPO, vice president of Monfric Realty Inc.
It is free to current SHCM certified professionals and $109 for non-SHCM professionals. Be sure that you renewed your SHCM credential in 2017 in order to participate in this webinar free of charge.
For questions about your renewal, contact Natasha Patterson, ACA, from NAHMA, at npatterson@nahma.org or 703-683-8630, ext. 117. For registration issues, contact Shana Treger, from NAA, at shana@naahq.org or by phone 703-797-0608.
To register for this course, click the Web Link below.
HUD Expedites Review of Regulatory Relief Requests
The Department of Housing and Urban Development (HUD) published a notice expediting the review process of requests for relief from HUD regulatory and administrative requirements for public housing agencies (PHAs) on Oct. 6. As a result of major disaster declarations made by President Donald Trump following Hurricanes Harvey, Irma and Maria, PHAs and tribes located in Florida, Georgia, Puerto Rico, Texas and the U.S. Virgin Islands may receive expedited review of waiver requests through the remainder of the calendar year.
To view the notice, click the Web Link provided. In addition, NAHMA’s Disaster Recovery Resources webpage continues to be updated with recovery information.
DUNS Number Required on All Voucher Submissions
Effective Dec. 1, vouchers that do not contain an active Dun & Bradstreet’s Data Numbering System (DUNS) Number will generate a Tenant Rental Assistance Certification System (TRACS) fatal error and will not receive payment until corrected. Click on the Web Link below to read the memorandum dated June 2 that implements the requirement to include the DUNS numbers on all vouchers submitted to TRACS.
LeadingAge Annual Meeting Features Sessions on HUD and Tax Credit Compliance
LeadingAge’s Annual Meeting & EXPO, the nation’s largest annual event for the not-for-profit aging services field, will take place Oct. 29-Nov. 1 in New Orleans. In education sessions, during general sessions and through eye-opening, one-of-a-kind experiences, attendees will be immersed in activities focused on helping older adults thrive. LeadingAge has highlighted some great sessions to attend by day for HUD and Tax Credit senior housing providers. Find out more at
http://leadingage.org/sites/default/files/HUD%26Tax%20Credit%20Housing
.pdf and by clicking on the Web Link provide below.
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
LeadingAge 2017 Annual Meeting & EXPO
October 29-November 1, 2017
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NAA Campus Connex
February 13-14, 2018
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NAHMA Winter Meeting
March 4-6, 2018
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NAA Advocate
March 13-16, 2018
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Leading Age PEAK Leadership Summit
March 18-21, 2018
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NAA Apartmentalize
June 13-16, 2018
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NAHMA Fall Meeting
October 21-23, 2018
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