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Proposal to Fix Rate for 9 Percent LIHTC Deals
U.S. Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA) introduced legislation amending the Internal Revenue Code of 1986 (H.R.1142) the last week of February, which makes the 9 percent tax credit rate permanent for new construction projects. The fixed 9 percent rate was first implemented by the Housing and Economic Recovery Act of 2008 and was extended in December of last year as part of the Tax Increase Prevention Act of 2014. However, the December extension applied only to projects with credit allocations prior to Jan. 1, 2015, that had not already elected to fix the rate. The proposed legislation would fix the 9 percent rate for all projects placed in service after Dec. 31, 2014. The legislation proposed also included a provision that would establish a 4 percent floor on the tax credit rate for acquisition costs, but not for projects financed with tax-exempt bonds. Senators Pat Roberts (R-KS) and Maria Cantwell (D-WA) are expected to introduce similar legislation to the Senate in the next few weeks.
Asset Management
"A Consistent Approach to Recognizing Developer Fee Revenue"
Tax Issues and Tax Reform
"Obama Budget Proposal Includes Major Increase in LIHTC Resources"
State and Local Activities
"Missouri Agency Suggests New Priorities in Awarding Subsidized Housing Projects"
HUD-Related Activity
"HUD Announces $1.8 Billion in Funding to Public Housing Authorities"
Green Building
"Going Green With Public Housing in Ann Arbor: Solar Panels and Energy Efficiency"
"Green Buildings Get Lower Interest Rates"
"Does a LEED Logo Mean Your Building Is 'Green'? Not Always"
Industry Trends
"Competition Drives LIHTC Market"
Association News
NLIHC ‘Alignment Project’ Report
New RAD Percentage Cap Waiver Sets Precedent
Whom Does LIHTC Housing Serve?
Resources for Seniors Living in Tax Credit Housing
FY 2015 Income Limits Available
Learn from Anywhere with Webinar Wednesday Series
NAHMA Announces 2015 Affordable Housing Vanguard Award Program
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Asset Management
A Consistent Approach to Recognizing Developer Fee Revenue
Affordable Housing Finance (03/06/15) Seamands, S. Scott
The Financial Accounting Standards Board has issued a new revenue recognition accounting standard effective in 2018 for nonpublic companies. The standard intends to remove inconsistencies in revenue recognition methods used by various industries. The new standard will likely continue to allow revenue to be recognized over time when a developer enhances an asset the customer owns. An approach used by many developers separates each developer fee into three discrete phases, predevelopment, construction, and postconstruction, and allocates each fee consistently, such as 30 percent for predevelopment, 60 percent for the construction period, and 10 percent for postconstruction activities. Ideally, the milestones in the contract triggering release of progress payments would correspond to the discrete processes identified by the developer. To avoid the risk of premature revenue recognition, some developers use a milestone approach that corresponds to the earnings benchmarks described in the development services agreement. Under this method, fee income is recognized as it is received under the terms of the agreement. With the percentage-of-completion method of accounting, meanwhile, the portion of the fee to be recognized during an accounting period is based on an estimate of the percentage of completion of that phase. To be conservative, most developers opt not to recognize any of the predevelopment portion until a construction lender and outside investor make written commitments to fund the project.
Tax Issues and Tax Reform
Obama Budget Proposal Includes Major Increase in LIHTC Resources
Novogradac Journal of Tax Credits (03/15) Vol. 06, No. 3 Novogradac, Michael J.
The Obama administration's fiscal year 2016 (FY 2016) budget proposal was unveiled Feb. 2, and included a nearly $4 billion increase in the low-income housing tax credit (LIHTC) program and proposals to make permanent the new markets tax credit, renewable energy production tax credit, and investment tax credit. The item that would likely most affect the LIHTC community is a proposal to allow states to increase their LIHTC authority by converting up to 18 percent of their private activity bonds (PAB) volume cap into LIHTC allocations, potentially increasing allocable LIHTCs by as much as approximately 50 percent. The U.S. Office of Management and Budget (OMB) estimates the cost of this bond conversion proposal as $3.7 billion over 10 years, which means it makes up about 93 percent of the nearly $4 billion cost of all of the LIHTC proposals in the FY 2016 budget. However that cost of the bond conversion proposal is much less than a straight 50 percent per-capita allocation increase would be. The bond conversion rate would be $1,000 times twice the applicable percentage of the 30 percent present-value LIHTC from December of the previous year. Using that formula at the applicable percentage from December 2014, states could increase their LIHTC authority by $64.40 for every $1,000 of PAB cap. Another significant change in the LIHTC is a new proposal to remove the qualified census tract (QCT) basis boost population cap. In general, a 130 percent basis boost is available for properties in QCTs designated by the U.S. Department of Housing and Urban Development.
State and Local Activities
Missouri Agency Suggests New Priorities in Awarding Subsidized Housing Projects
St. Louis Post-Dispatch (02/27/15) Bogan, Jesse
A report requested by Missouri Treasurer Clint Zweifel suggests that a tax-credit program used to build low-income housing should focus on smaller projects in more affluent areas. The report targets high concentrations of subsidized housing in the Ferguson area, and mainly focuses on projects funded through federal and state tax credits under the oversight of the Missouri Housing Development Commission. Kip Stetzler, interim executive director of the commission, listed several potential changes to the review process of Low Income Housing Tax Credit (LIHTC) project proposals: prohibiting developments with more than 50 units, putting higher priority on LIHTC proposal projects that include “service enriched housing features” such as day care services and shuttle service, and prohibiting new construction in census tracts where more than 20 percent of housing units are subsidized. Units funded by tax credits now make up one-third of Missouri's subsidized housing. Critics say that concentrating low-income housing in a single area leads to crime and accelerates neighborhood decline, but the situation is complicated because subsidized housing involves multiple programs at all government levels.
HUD-Related Activity
HUD Announces $1.8 Billion in Funding to Public Housing Authorities
Affordable Housing Finance (02/12/15)
Public housing authorities (PHAs) nationwide as well as those in Guam, Puerto Rico, and the U.S. Virgin Islands have received nearly $1.8 billion for large-scale improvements to their public housing units. The Department of Housing and Urban Development (HUD) awarded the grants via its Capital Fund Program, which offers funding to roughly 3,100 PHAs to build, renovate, and modernize public housing in their communities. HUD released a study in 2011 that estimated that the nation's 1.1 million public housing units face $25.6 billion in large-scale repairs. The agency's Rental Administration Demonstration program complements the Capital Fund Program to preserve and improve the affordable housing stock. In a statement, HUD Secretary Julián Castro said, "Every American deserves a place to call home where they can successfully raise their kids, enhance their financial security, and build a better life. Through this funding, HUD is committed to strengthening our nation's affordable housing units and to providing folks with the springboard they need to succeed."
Green Building
Going Green With Public Housing in Ann Arbor: Solar Panels and Energy Efficiency
MLive.com (02/23/15) Stanton, Ryan
The Ann Arbor, Mich., Housing Commission is including a number of energy-efficiency upgrades in its effort to renovate hundreds of public housing units it manages in the city. "At all of the sites, we are replacing all of the old light fixtures, furnaces, boilers, appliances, etc., with energy-efficient models, including the elevators," says Jennifer Hall, Housing Commission executive director. The commission even has plans to install solar panels atop some apartment buildings. Jason Bing, healthy buildings director at the local Ecology Center, who is assisting the commission on the project, says the guiding principles include maximizing energy efficiency, reducing or eliminating toxic chemicals from buildings, and using more durable materials to reduce operating costs and promote resource conservation. The housing commission expects to see at least a 20 percent savings in energy consumption.
Green Buildings Get Lower Interest Rates
Environmental Leader (02/13/15)
The U.S. Federal National Mortgage Association is now offering lower interest rate loans for green multi-residential buildings. It is granting a 10-basis point reduction for multifamily refinance, acquisition, or supplemental mortgage loan for buildings with green certification. This represents a savings of $95,000 in interest payments over a 10-year term for a $10 million dollar 30-year fixed rate loan. This is both an incentive to build green and an incentive for existing buildings to achieve certification, according to U.S. Green Building Council CEO Rick Fedrizzi.
Does a LEED Logo Mean Your Building Is 'Green'? Not Always
WGBH News (02/15/15) Hilliard, John
Buildings with LEED certification credentials command higher rents and sale prices, but some buildings use their registration of intention to become LEED-certified as an award without actually getting certified. Because of limited oversight by the U.S. Green Building Council, developers may misappropriate the LEED brand, according to the New England Center for Investigative Reporting. Buildings advertising LEED certification command an average of 7 percent higher rents over traditional buildings, and LEED certified buildings in Boston command nearly double the rent of those without it, according to a 2011 University of San Diego study. NECIR found eight projects in Boston, including Trade Center 128, that advertise LEED certification without actually being awarded certification. The Trade Center liberally places LEED plaques and USGBC logos around the building, but USGBC does not have an official pre-certification logo. USGBC maintains a public database of all certified buildings, although it is not always up-to-date. With limited resources and personnel to track the progress of registered projects, UBGBC relies on LEED registrants to report their progress.
Industry Trends
Competition Drives LIHTC Market
Affordable Housing Finance (03/06/15) Kimura, Donna
Many syndicators predict low-income housing tax credit (LIHTC) prices will continue to rise in the first half of the year, according to a survey by Affordable Housing Finance. About 55 percent of firms surveyed expect prices to increase, while 45 percent say the market will hold steady, and no one anticipates a drop in the first six months of the year. The 22 syndicators surveyed paid an average of 94 cents per dollar of credit in the fourth quarter of 2014, compared with 90 cents a year earlier. Meanwhile, yields to investors averaged 6.5 percent, a decline from 7 percent at the end of 2013. Joe Hagan, president and CEO of National Equity Fund, observes, "We are already seeing direct investors being highly aggressive for deals with seasoned developers located in Community Reinvestment Act [CRA] markets, which will set the trend going forward for the first half of the year." Todd Jones, senior vice president at Boston Financial Investment Management points out, "Given that a large number of states won’t be allocating until late Q1 and Q2, there will be a lack of 9 percent deals in the market, and competition will be that much more aggressive in an already ultra-competitive environment." Meanwhile, the LIHTC market has seen its first deals involving the Rental Assistance Demonstration (RAD) program and is poised to see many more. The federal preservation program, which allows public housing and certain other properties to convert to long-term Sec. 8 rental assistance contracts, is tripling in size to allow up to 185,000 public housing units to participate. Eight syndicators reported closing or having RAD deals in their pipeline as of late January.
Association News
NLIHC ‘Alignment Project’ Report
A survey and in-depth interview of developers in five states by the National Low Income Housing Coalition asked how frequently they employed several strategies when using the Low Income Housing Tax Credit to accommodate extremely low-income (ELI) households. Examined in the study were the strategies of cross-subsidization, state or locally funded rental assistance programs, operating reserves and state or local tax credits. The study is part of the NLIHC’s Alignment Project, which has a goal of showing how housing programs can target assistance more toward the ELI group, since this group faces the greatest shortage of affordable rental housing.
New RAD Percentage Cap Waiver Sets Precedent
The Rental Assistance Demonstration (RAD) statute gives the Department of Housing and Urban Development (HUD) authority to establish waivers and alternative requirements. Pursuant to this authority, HUD has waived the statutory 20 percent cap on project basing of a public housing agency’s tenant-based voucher funding for RAD-converted units.
On Feb. 25, HUD issued a notice advising that the department is waiving the 20 percent cap, to a limited extent and subject to certain conditions, on project basing and certain other provisions governing project-based assistance with respect to an identified portfolio that includes RAD funding for the San Francisco Housing Authority.
This is an important precedent for the program and was critical to the city of San Francisco’s success in financing about $150,000 per unit in renovations on 29 public housing developments.
The California Housing Partnership has been working with city, HUD and San Francisco Housing Authority staff for more than a year to develop the innovative financing strategy that underpins the ambitious revitalization plan. The plan will result in the investment of more than $750 million in new private and public capital into repairing, improving and preserving 29 public housing developments that have been underfunded by Congress for many years as part of a national trend. Participating in RAD will also allow the California Housing Partnership to help the city and its developers raise nearly $500 million in private equity generated through the sale of 4 percent Low Income Housing Tax Credits, a federal resource that would otherwise go unused.
Thanks to recent RAD-related waivers, the city was able to finance about $150,000 per unit in renovations.
Whom Does LIHTC Housing Serve?
A recent report published by the Department of Housing and Urban Development Office of Policy Development and Research highlights those households who benefit from the development and operation of this housing. “Understanding Whom the LIHTC Program Serves: Tenants in LIHTC Units as of December 31, 2012” uses data collected from state housing finance agencies to provide demographic and economic information regarding residents of housing credit properties. As the report notes, some of the data reporting from housing finance agencies was incomplete, this being the first public release of this data collection work. Nonetheless, the study’s authors believe “it provides a useful picture of the program’s beneficiaries.”
Resources for Seniors Living in Tax Credit Housing
The U.S. Department of Health and Human Services has a whole division--the Administration for Community Living--that focuses on addressing the needs of, and playing a key role in, representing and advocating for individuals with disabilities and older adults throughout the federal government. This includes ensuring that individuals with disabilities and older adults are represented, and directly involved as appropriate, in the development and implementation of policies, programs and regulations related to community living.
FY 2015 Income Limits Available
Effective March 6, the Department of Housing and Urban Development published Section 8 Income Limits calculated for every fair market rents area with adjustments for family size and for areas that have unusually high or low income-to-housing-cost relationships. These limits can be found at http://www.huduser.org/portal/datasets/il/il15/index.html.
However, projects financed with Section 42 Low Income Housing Tax Credits (LIHTC) or Section 142 Tax Exempt Private Equity Bonds should use the Multifamily Tax Subsidy Project Income Limits available at Multifamily Tax Subsidy Project Income Limits http://www.huduser.org/portal/datasets/mtsp.html.
Learn from Anywhere with Webinar Wednesday Series
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 or to register click on the link below.
- March 25, How to Master Writing a Marketing Plan presented by Lori Valenti Webb
- April 8, Fair Housing CSI: Deconstructing Disability Disasters to Avoid Repeating Them! presented by Doug Chasick
- April 15, How to Get Your Customers to Write Reviews and Creative Ways to Use Them to Generate Traffic presented by Kate Good
NAHMA Announces 2015 Affordable Housing Vanguard Award Program
The deadline for submissions for the National Affordable Housing Management Association (NAHMA) 2015 Affordable Housing Vanguard Award is April 3. The award celebrates success in the multifamily affordable housing industry by recognizing and benchmarking new, quality multifamily affordable housing development.
Vanguard Award Categories:
- New Construction (two subcategories: more than 100 units and under 100 units)
- Major Rehabilitation of an Existing Rental Housing Community
- Major Rehabilitation of a Nonhousing Structure into Affordable Rental Housing
- Major Rehabilitation of a Historic Structure into Affordable Rental Housing
Affordable multifamily housing communities that are less than three years old, as of April 3, 2015, may apply, based on date of completion of new construction or completion of major rehab. Please note: A management company may submit only one entry for each category. Affordable is defined as a property participating in a government funded, insured or otherwise sponsored program that results in rents that are below market-rate housing.
This year’s Vanguard Awards program is sponsored by the NAHMA-endorsed Multifamily Affordable Housing Insurance Program (MAHIP), provided by Wells Fargo Insurance Services. For details on the national resources, depth-of-industry understanding and market strength of the MAHIP program, visit
https://wfis.wellsfargo.com/industries/habitationalrisk/Pages/mahip.as
px. “Wells Fargo is a proud sponsor of the Vanguard Awards,” commented Megan Davidson, ARM, CRIS, vice president of Wells Fargo Insurance Services USA, Inc. “We appreciate and support what you do to make communities better and safer places to live and thrive. Wells Fargo believes and supports affordable housing from a lending and investment standpoint, as one of the largest providers of insurance to affordable housing providers, and as volunteers and supporters of organizations such as Habitat for Humanity. Our goal is to support your success by financially protecting what you value most, and fulfilling all your commercial insurance needs,” she said.
For more details on the awards program visit, click the link below. To download the application, visit,
http://www.nahma.org/wp-content/uploads/2014/04/Vanguard_AwardEntry201
5_FINAL.pdf.
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 2015 INFORMATION, INC.
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