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Hill Action on HUD Spending and Housing Credit
On June 17, the U.S. House of Representatives was scheduled to consider its fiscal year 2020 HUD appropriations bill as part of another spending package, and LeadingAge was thrilled to see the June 4 introduction of Senate and House bills to expand and strengthen the Low-Income Housing Tax Credit program. These bills would expand state housing credit allocations by 50% and make several improvements, including clarifying some year-15 issues to help nonprofits attain communities after investors absorb their tax benefits and a basis boost for communities serving extremely low-income households. To learn more, click on the Web Link below.
Industry Trends
"Real Estate Taxes for LIHTC Properties Grew Significantly in 2017"
Congress
"Congress Dangles Tax Credits to Boost Supply of Affordable Housing"
State and Local Activities
"Tackling California’s Housing Crisis"
"Southern California Lacks 759,000 Affordable Homes, Report Says"
Management and Compliance
"Mod Rehab and RAD: The Time Might be Now"
Green Building
"The Art of LEED Certification"
"Multifamily Developers Embrace Green Building"
Association News
Attend LeadingAge Annual Meeting in San Diego
REAC/NSPIRE Data Collection Comments
Keep the Momentum Going from LeadingAge’s Senior Housing NOW Rally!
Help NAHMA Promote Adult Literacy
NAHMA Launches Leadership Training Series
NAHMA Releases 2019 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Industry Trends
Real Estate Taxes for LIHTC Properties Grew Significantly in 2017
Novogradac (05/30/2019) Kincer, H. Blair
Overall expenses for Low-Income Housing Tax Credit (LIHTC) properties in 2017 grew by 2.3 percent, a return to previous years' norms. However, Novogradac's latest operating expense report found that real estate taxes for LIHTC properties increased by 39.5 percent from 2016 to 2017. Potential factors for this unprecedented increase include higher assessed values in certain states, the 2017 addition of new records to Novogradac's dataset from Maryland and Virginia, and a change in how properties are assessed. Novogradac’s appraisal work revealed that in certain states, LIHTC properties in metro areas are seeing rising property values because they are often being compared to market-rate properties. In Texas, for example, the assessor's office currently uses market-rate comparables rather than tax credit properties. Many properties in Ohio's dataset saw their tax abatements lapse. Moreover, differences in state and local property tax rates and assessments can impact real estate taxes reported by LIHTC properties in this dataset, so Novogradac removed various states to determine the effect each had on the overall year-over-year change in real estate taxes. The combined effect of removing LIHTC properties from a handful of states — Washington, Texas, Maryland, Virginia, and Ohio — from the calculation decreased the amount that real estate taxes grew between 2016 and 2017 by more than 20 percentage points: from 39.5 percent to 19.3 percent. It is worth nothing that the three largest expense categories for LIHTC properties in 2017 remain payroll (26.4 percent of total expenses), utilities (16.9 percent), and repairs and maintenance (16.8 percent).
Congress
Congress Dangles Tax Credits to Boost Supply of Affordable Housing
American Banker (06/18/19) Prior, Jon
Sen. Maria Cantwell (D-Wash.) and Rep. Suzan DelBene (D-Wash.) have introduced legislation that would increase the amount of tax credits available for housing developers to sell to investors, including banks. The bill has support of a number of Republicans, including Sen. Johnny Isakson of Georgia and Rep. Kenny Marchant of Texas. The legislation would raise the amount of certain Low-Income Housing Tax Credits states are allowed to give to developers by 50 percent — 10 percent each year through the end of 2024. It would also stabilize the pricing for the 4 percent credit rate used for bond financed projects. This tax credit rate is linked to Treasury bonds and is currently 3.25 percent. The bill would set a minimum rate at 4 percent. The legislation's intent is to increase the amount of affordable housing in the country by allowing developers to build without incurring significant amounts of debt. The 2017 tax revision lowered banks' tax rates, making them less interested in accepting tax credits, leading to a reduction in the amount of affordable housing as developers began charging higher rents to make up for the increased debt accrued during construction. "There had been early reports of downward pressure on tax credit demand stemming from the 2017 tax revision," according to a study published in February by the Congressional Research Service. While the measure is not expected to become law on its own, it could become a component of a larger spending bill.
State and Local Activities
Tackling California’s Housing Crisis
Affordable Housing Finance (06/13/19) Kimura, Donna
Speaking at the National Council of State Housing Agencies’ (NCSHA) Housing Credit Connect conference in San Francisco, California’s housing leaders said they are determined to address the state's affordability crisis. California Treasurer Fiona Ma said, "We are really trying to work together and streamline our processes, figure out how to meet Gov. Gavin Newsom’s goal of building 3.5 million new homes by 2025." That number amounts to 500,000 new homes annually, significantly higher than the fewer than 80,000 new homes built last year. Ma oversees the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee, which allocate Low-Income Housing Tax Credits (LIHTCs) and tax-exempt bonds to finance affordable housing developments. Newsom's proposals include a $500 million expansion to the state housing tax credit, said Tia Boatman Patterson, executive director of the California Housing Finance Agency and the governor's senior housing adviser. Another NCSHA priority is the passage of the Affordable Housing Tax Credit Improvement Act (S. 1703 and H.R. 3077), which calls for boosting the federal LIHTC and establishing a minimum 4 percent rate. That would mean an additional $500 million per year in California, Boatman Patterson said. She added that the state needs to look at land-use policies and ways to reduce regulatory barriers to residential development.
Southern California Lacks 759,000 Affordable Homes, Report Says
Orange County Register (CA) (05/21/19) Collins, Jeff
A report by the nonprofit California Housing Partnership estimates that fewer than a third of low-income families in Southern California have access to housing they can afford. The report also shows a shortfall of nearly 759,000 units that are affordable to low-income renters in the counties of Los Angeles, Orange, Riverside, and San Bernardino as of 2017. In addition, state and federal funds for building or preserving low-income housing in the four-county region declined by nearly $900 million, or 75 percent, from 2009 through 2018. Many economists consider a home affordable when it costs no more than 30 percent of a household’s gross income. That translates into a wage of $43 to $48 an hour to afford the average rental in the Los Angeles/Orange County area and at least $30 to $33 an hour in the Inland Empire to afford median rents ranging from $1,575 to $1,700 a month. Those wages are at least 2.5 times the state minimum wage, the report noted. The housing partnership urged the state to expand the affordable housing tax credit program by $500 million a year. The report also revealed that among households earning less than 35 percent of their county's median income, three-fourths spend at least half of their earnings on rent, making them susceptible to homelessness. Although California voters approved $6 billion in housing bonds last November, the report also urges the state to replace the $1 billion lost annually when more than 400 redevelopment agencies were eliminated in 2012.
Management and Compliance
Mod Rehab and RAD: The Time Might be Now
Affordable Housing Finance (06/10/19) VanAmerongen, Deborah; Cushman, Nate
Owners of properties with Moderate Rehabilitation (Mod Rehab) Housing Assistance Payment contracts might not be aware they can benefit from conversion through Rental Assistance Demonstration (RAD). The Department of Housing and Urban Development’s RAD program enables owners to convert from their current Mod Rehab contract to either a project-based voucher (PBV) or project-based rental assistance (PBRA) contract. A Mod Rehab conversion may also allow for rehabilitation of the property. This transaction could involve new financing sources, such as debt financing, tax-exempt bonds, and federal Low-Income Housing Tax Credits. The longer term of the RAD contract and the potential for a rent increase may present opportunities to attract lenders and investors in the transaction, potentially on more favorable terms than existing financing. A Mod Rehab owner with less experience with the complex financing involved in many preservation transactions could partner with a developer with more experience or could offer the property for sale. Current RAD rules allow project rents to rise. For conversions to PBRA, rents may be increased to the lesser of market rents for the project as substantiated by a Rent Comparability Study, or either 110 percent or 120 percent of Fair Market Rent (FMR), depending on project-specific characteristics. For conversions to PBV, rents may be increased to the lesser of the following three thresholds: the PBV payment standard (not to exceed 110 percent of FMR), the project's reasonable rent, or the rent requested by owner.
Green Building
The Art of LEED Certification
Multi-Housing News (06/06/19) Rodriguez, Sam
Green buildings are becoming increasingly more attractive to residents and local communities because of their ability to lower carbon emissions and conserve water. Many developers are choosing to pursue LEED Certification, an internationally recognized certification that a development project meets the guideline set by the U.S. Green Building Council (USGBC) for achieving high performance sustainability through green design, construction operation, and maintenance. LEED Certification is gaining popularity is certain pockets of the country, such as the Pacific Northwest and around Chicago, but the adoption rate is not as high elsewhere. For example, Utah's first LEED Platinum certified apartment building was finished in 2018. On a nationwide basis, developers often incorporate green features but might not go as far as seeking certification due to financial or logistical aspects. When developers consider pursuing some degree of LEED Certification—either Certified, Silver, Gold, or Platinum—they must weigh factors such as cost, logistics, market, and the potential impact to the bottom line. LEED certification comes with fees for registration that vary based on whether or not the organization is a USGBC member. While certain regions of the country have embraced green building, in other markets it could cost extra for waste management teams to separate materials to be recycled, which makes it very important for developers to understand their market and how it aligns with the LEED certification process. Green communities can result in increased leasing velocity, which means it will fill up quicker even if residents are not willing to pay a premium for green features.
Multifamily Developers Embrace Green Building
Multi-Housing News (06/02/19) Friedman, Robyn
Developers are increasingly incorporating sustainable building materials and methods into their projects. More than 1.5 million multifamily residential units were participating in the U.S. Green Building Council’s LEED program as of March 2018, and the organization expects that number to keep increasing. The 2017 National Multifamily Housing Council/Kingsley Associates Renter Preferences Report found that 65 percent of respondents said they would be interested in a community with sustainability/green initiatives, and 78 percent said they would be interested in a community with Energy Star-certified appliances. Paula Cino, vice president for construction, development, and land use policy at the National Multifamily Housing Council, says developers are recognizing "that there are some tangible advantages to green building, particularly when it comes to energy efficiency and water savings." Lauren Zullo, director of sustainability for Jonathan Rose Cos., says green buildings can have utility savings of 20 percent to 50 percent over traditional buildings. SWBR, a Rochester, N.Y.-based architecture and design firm, in 2016 completed DePaul Ebenezer Square, a $16.5 million, 100-unit apartment community in West Seneca, N.Y. The project comprised a blend of affordable and supportive housing, and received LEED for Homes Platinum certification. It also incorporated a 150-kilowatt solar array that is expected to generate 75 percent of the building's electricity. The developer received $300,000 from the New York State Energy Research and Development Authority and $184,050 in New York State Solar Tax Credits.
Association News
Attend LeadingAge Annual Meeting in San Diego
Join 8,000-plus dedicated aging services professionals in exchanging ideas, exploring new strategies and mastering the latest best practices in aging services at the LeadingAge Annual Meeting + Expo, Oct. 27-30, in San Diego, Calif. To find out more, view the conference schedule and register to attend, visit the link below.
REAC/NSPIRE Data Collection Comments
LeadingAge has filed comments with the Department of Housing and Urban Development (HUD) on the agency’s emergency information collection notice concerning the National Standards for the Physical Inspection of Real Estate (NSPIRE). According to the data collection notice, HUD will be asking owners participating in the demonstration to submit annual self-inspection reports and other property specific data and certifications. LeadingAge urged HUD to keep the abilities and resources of smaller properties in mind in considering processes for submitting data and to allow properties to use software they already have for reporting, rather than requiring the installation of any new computer systems. To learn more, click the Web Link below.
Keep the Momentum Going from LeadingAge’s Senior Housing NOW Rally!
More than 1,000 advocates and several key legislators, came from across the country to speak out in support of the need for more #SeniorHousingNOW. See a brief montage and help LeadingAge keep the momentum rolling by joining in its current Advocacy Action Alert to urge Congress to expand Section 202 funding.
Help NAHMA Promote Adult Literacy
Help the National Affordable Housing Management Association (NAHMA) promote adult literacy by connecting affordable housing residents to a free app for improving reading and English skills. The app is available for download until Aug. 31.
NAHMA members are uniquely situated to reach residents of affordable housing who are working hard to improve the financial and educational status of their families. Some of these residents may be interested in taking advantage of a free literacy app to improve reading and English skills.
To help NAHMA succeed in promoting adult literacy and demonstrating that housing is a platform for success, downloadable promotional flyers—available in English and Spanish—are available to share with residents.
The literacy app is free, self-supported, self-paced, and is intended for all ages. The app can be downloaded at https://abc.xprize.org/ac5588 using Community Referral Code 5588 until Aug. 31.
For more information, click on the Web Link below.
NAHMA Launches Leadership Training Series
NAHMA, in cooperation with Brenda Harrington, founder of Adaptive Leadership Strategies LLC, is offering a fully virtual program that combines small group learning with one-to-one coaching called NAHMA Emerging Leaders Learning Series (NELLS), beginning Aug. 8. It is designed to accelerate professional growth for the next generation of leaders in the affordable housing industry. Register for the program through the NAHMA Online Store at nahma.org. The program is limited to a maximum of 15 participants and the deadline to register is July 9. To learn more, click on the Web Link provided below.
NAHMA Releases 2019 Affordable 100 List
The National Affordable Housing Management Association (NAHMA) announces its 2019 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 Apartmentalize
June 26-28, 2019
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NAAEI Affiliate Education Conference
August 19-21, 2019
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NAA Maximize
September 23-25, 2019
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NAHMA Biannual Top Issues in Affordable Housing Fall Conference
October 27-29, 2019
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LeadingAge Annual Meeting + Expo
October 27-30, 2019
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News summaries © copyright 2019 SmithBucklin
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