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Ensuring Compliance with Occupancy Requirements when Using HOME and LIHTC
HUD has created a series of fact sheets on the separate and combined issues of occupancy compliance when using tax credit (LIHTC) and HOME program funds. Among key points: HOME income-eligibility requirements should not be confused with rent setting requirements, and determining how occupancy requirements that apply when HOME and LIHTC funds are combined will depend on the way HOME funds are used in a LIHTC project. Read more about HOME Program Occupancy Rules, LIHTC Program Occupancy Rules and Using HOME and LIHTC Funds Together via the link below. Also available is a new HOME resource page at https://www.hudexchange.info/home/.
Tax Issues and Tax Reform
"LIHTC's Metrics Keep Trending Upward"
"Low-Income Housing Tax Credit Workouts and Bankruptcies: Understanding the Basics"
Congress
"2015 Budget Lifts the Cap on RAD"
State and Local Activities
"Flushing Is Up Next for City Housing Focus"
"MHDC Approves Projects for First Round of Rental Production"
HUD-Related Activity
"Fannie, Freddie Told to Pay Into Trust Fund"
Market and Program Trends
"Investment in Poor Communities Improves Family Income"
Industry Trends
"Big Investor Demand Pushes LIHTC Market"
Association News
Funding for National Housing Trust Fund Released by FHFA Director
2015 Income Limits Coming in February
Prioritizing Preservation of the Low Income Housing Tax Credit
NAHMA Announces 2014 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Tax Issues and Tax Reform
LIHTC's Metrics Keep Trending Upward
GlobeSt.com (12/16/14) Bubny, Paul
A new CohnReznick study on the low income housing tax credit program finds that occupancy and financial performance have improved over the past few years. Full-year data available through the end of 2012 shows improvement in the three major performance metrics-- physical occupancy, debt coverage ratio and per-unit cash flow -- compared to 2008. Survey respondents cited favorable debt leverage, more sophisticated underwriting practices, lower turnover and collection losses, and a general trend towards stabilization in rent and expense growth. "It's been an economic win for communities across the nation in need of additional affordable housing units," says Fred Copeman, principal with CohnReznick and leader of its Tax Credit Investment Services practice. A number of factors, including the interest rate environment, will determine whether the LIHTC sector can sustain the improvement in financial performance metrics in the coming years. Threats to the program include unfavorable tax reform and an increase in construction costs.
Low-Income Housing Tax Credit Workouts and Bankruptcies: Understanding the Basics
Lexology (11/14/14) Bossi, Mark V.
Failed projects that involve low-income housing tax credits (LIHTCs) present particular restructuring and insolvency issues. LIHTC recipients must agree to lease a certain portion of units to tenants with specified income limitations: at least 40 percent of the units must be leased to residents that earn no more than 60 percent of the area's median income, or 20 percent of the units must go to residents earning 50 percent or less than the area's median income. An LIHTC project is generally financed by both senior secured debt and by the tax-credit investor's equity received for the right to receive the project's tax credits. A Land Use Restriction Agreement (LURA) is recorded as an encumbrance against the property and is usually binding on a subsequent owner, but may be foreclosed away by the secured lender on the project, subject to the secured lender's compliance with a "decontrol period" of three years. During that time, the secured lender may not end the tenancy or raise the rent of any low-income tenant without good cause. Investors may pay from $.80 to $1.00 per dollar of federal tax credits allocated for a project. After the 15-year compliance period, the tax-credit investor will have received all tax credits and is no longer at risk of recapture. The investor then typically exits the partnership, selling the interest in the project to the developer.
Congress
2015 Budget Lifts the Cap on RAD
Housing Finance (12/15/14) Kimura, Donna
The $1.1 trillion spending bill passed by Congress more than triples the number of public housing units able to take part in the Rental Assistance Demonstration (RAD) program. The boost in funding for 185,000 units will enable the Department of Housing and Urban Development to approve applications that have been on RAD's waiting list. Although the expansion of RAD is a bright spot for affordable housing, the spending bill cuts funding in many areas of HUD's budget. The spending bill provides $9.73 billion for project-based Sec. 8 vouchers compared to $9.9 billion in fiscal 2014. "We are also concerned with the inadequate amounts to fully fund the voucher program which through attrition has lost about 100,000 units," says Denise Muha, executive director of the National Leased Housing Association. The bill provides $35.6 billion for HUD programs, up $2.8 billion from 2014, but comes in at $90 million below a year ago when accounting for a decline in offsets of Federal Housing Administration collections.
State and Local Activities
Flushing Is Up Next for City Housing Focus
Wall Street Journal (11/17/14) Kusisto, Laura
The New York City Council held a hearing on affordable housing on Nov. 17. Housing officials were grilled on the details of the affordable housing plan of Mayor Bill de Blasio's administration, which was released in May. The administration wants to build or preserve 200,000 affordable apartments over the next decade. Housing officials said the administration would deliver about 16,000 units by the end of the year, which is short of the annual average of 20,000 units needed to reach that goal. Still, housing officials revealed plans for projects in the Queens neighborhood of Flushing. The administration anticipates that by 2020, developers will not be required to keep some 56,000 units affordable as their tax credits expire, among other reasons, based on data available through New York University's Furman Center for Real Estate and Urban Policy.
MHDC Approves Projects for First Round of Rental Production
The Missouri Times (12/05/2014) Reischman, Collin
Missouri plans to use low income housing tax credits (LIHTCs) to create 1,638 new housing units for seniors, low income individuals and those with special needs. In the latest round of submissions for LIHTC funds, the Missouri Housing Development Commission (MHDC) has approved a total of $30.6 million in LIHTCs for 35 developments. The MHDC dispersed LIHTC funds for developments in St. Louis, Kansas City and elsewhere across the state. The commission opens for two rounds of submissions of LIHTC funding every year. The approval numbers for the latest round were nearly identical to those a year ago, according to MHDC commissioner Jeffery Bay. "It's very good to see that we’re on track with last year, that we're maintaining what seems to be a consistent level of service," says Bay.
HUD-Related Activity
Fannie, Freddie Told to Pay Into Trust Fund
Washington Post (12/12/14) P. A18
Fannie Mae and Freddie Mac will start paying into an affordable housing fund created by Congress more than six years ago. Their regulator, the Federal Housing Finance Agency (FHFA), says the government-controlled mortgage firms finally are fiscally stable enough to capitalize the National Housing Trust Fund. It had barred them from setting aside money for this purpose after they were bailed out by taxpayers during the financial crisis. The directive by FHFA director Mel Watt to start paying into the fund will "help people across the nation secure a decent place to call home," says HUD Secretary Julian Castro.
Market and Program Trends
Investment in Poor Communities Improves Family Income
Apartment Finance Today (12/14)
A study by Local Initiatives Support Corp. (LISC) of several low-income communities nationwide found that families are economically better off in places where revitalization efforts tackle multiple community needs simultaneously, such as affordable housing, safety, education, and employment. The study examined 63 neighborhoods where the nonprofit has been investing for more than a decade, and found that employment and incomes each grew by 9 percent more than they did in similar communities that were not part of LISC's long-term investment strategy. LISC President and CEO Michael Rubinger says the research quantifies how the organization’s strategy, Building Sustainable Communities, improves the quality of life for low-income families. He believes the findings have important implications for policymakers and philanthropic organizations seeking to reduce the income inequality gap. Since launching the strategy in 200, LISC has obtained $750 million in grants, loans, and equity investments that directly fund projects and programs, and also triggered a total of $3.1 billion in development in the 63 targeted neighborhoods. The report highlights four of the 63 neighborhoods studied: Eastern North Philadelphia; the Olneyville neighborhood of Providence, R.I.; Chicago’s "quad communities"; and Southeast Indianapolis.
Industry Trends
Big Investor Demand Pushes LIHTC Market
Affordable Housing Finance (12/04/14) Kimura, Donna
Investors and syndicators are advising developers to remain in contact with low-income housing tax credit partners, given the uncertainty of the coming year. “Communicate early and often,” recommends Red Stone Equity Partners' Ryan Sfreddo. “These deals take 24 to 36 months from the time of the QAP [qualified allocation plan] launch, site selection, structuring your deal, applying for credits, and putting a shovel in the ground.” Sfreddo also says developers should not pursue their early assumptions too aggressively, since the abundance of investor capital now may not be available 24 months from now. Developers were receiving strong prices for their housing tax credits while investor yields continued to decline heading into the new year. Bank of America Merrill Lynch's David Leopold notes this is a time when demand for high-quality Community Reinvestment Act (CRA) investments tops supply, with the result being higher credit prices to developers nationwide. He reports the current hunger for credits will persist, provided there is some marginal benefit over alternative investments such as CRA-qualified mortgage-backed securities. Syndicators estimate yields have fallen to between 6.25 and 6.5 percent at the end of 2014 as investors pay premium prices to earn needed housing credits. RBC Capital Markets' Tony Alfieri envisions the possibility of yields falling to about 6 percent by mid-2015. A change in interest rates or property will cause investor demand “to fluctuate with the realities of the market,” according to Leopold.
Association News
Funding for National Housing Trust Fund Released by FHFA Director
Federal Housing Finance Agency (FHFA) Director Mel Watt sent letters to the CEOs of government-sponsored entities (GSE) Fannie Mae and Freddie Mac announcing the end of a temporary suspension of the allocations the companies were to make to fund the National Housing Trust Fund (NHTF) and the Capital Magnet Fund (CMF).
The FHFA issued a press release (available via the link below) announcing the decision, and has directed Fannie Mae and Freddie Mac to begin setting aside funding -- an estimated $300 and $500 million -- for fiscal year 2015, which runs from January to December. Though funding may not be available for use, pending release of final regulations and issuance of block grants to states, the fact that at least 75% of the rental housing funds must benefit extremely low-income households may provide new sources of funding to pair with the low-income housing tax credit program.
Within 60 days after the end of the fiscal year, Fannie Mae and Freddie Mac are to transfer the funds, so presumably funds could be available in early 2016.
The suspension was originally imposed in November 2008 during the recession after Fannie and Freddie experienced losses and were taken into conservatorship. Although Fannie Mae and Freddie Mac returned to profitability in 2012, it took 2 more years for advocates to get the suspension lifted. Meanwhile, many advocates are continuing to push for 2012 to 2014 payment to be made to the fund retroactively.
HUD will administer the NHTF funds, which will be block granted to states for production, preservation, rehabilitation, and operation of rental housing. At least 75% of the rental housing funds must benefit extremely low-income households. The Capital Magnet Fund is administered by the U.S. Department of the Treasury, and is a direct grant program to Community Development Financial Institutions and others to support a range of housing and community development activities, with at least 70% used for housing.
2015 Income Limits Coming in February
The HUDUser web site, available via the link below, has been updated to include an announcement that the publication of HUD’s FY 2015 programmatic Income Limits will occur following the publication of 2015 poverty guidelines issued by the Department of Health and Human Services (HHS). HUD anticipates that the FY 2015 Income Limits will be published in February 2015.
Prioritizing Preservation of the Low Income Housing Tax Credit
Congress is expected to consider tax reform during the coming year, and protecting the tax credit is among LeadingAge’s top tax priorities. As such, LeadingAge has joined the Steering Committee of the ACTION Campaign, a coalition of more than 650 national, state and local organizations committed to ensuring that Congress strengthens the Low Income Housing Tax Credit. The ACTION website includes a range of tools for helping to advocate for the program, including facts sheets and an Advocacy Toolkit, available via the link below.
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.
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.
Abstract News © Copyright 2014 INFORMATION, INC.
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