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OCAFs for FY 2020 Available
The Operating Cost Adjustment Factors (OCAFs) for fiscal year (FY) 2020 were published on Nov. 22 in the Federal Register. These factors are used for adjusting or establishing Section 8 rents under the Multifamily Assisted Housing Reform and Affordability Act of 1997, as amended, for projects assisted with Section 8 Housing Assistance Payments. The factors are effective Feb. 11, 2020. To view the FY 2020 Multifamily Utility Allowance Factors, click on the Web Link below.
Tax Issues and Tax Reform
"Bloomberg Unveils Proposal to Increase Federal Funding for Housing Programs"
Industry Trends
"LIHTC Portfolio Shows Solid Performance"
"Investors Assess LIHTC Market Heading Into 2020"
Congress
"30 State Housing Associations Team Up to Call for Bigger Tax Credit"
Federal Regulation
"CRA Proposal Draws Concerns From Affordable Housing Leaders"
State and Local Activities
"Seattle to Invest a Record $110M in Affordable Housing; Here’s How It Will Rise Across the City"
"Montana Loan Program Could Boost Missoula's Stock of Affordable Rental Housing"
Association News
NAHMA Drug-Free Kids Calendar on Sale
HUD Announces 2020 Annual Adjustment Factors
Montgomery Nomination Advances in Senate
NAHMA Releases 2019 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Tax Issues and Tax Reform
Bloomberg Unveils Proposal to Increase Federal Funding for Housing Programs
The Hill (12/11/19) Axelrod, Tal
Former New York City Mayor Michael Bloomberg on Dec. 11 unveiled new proposals to boost federal funding for housing programs as he seeks to increase support for his late entry into the 2020 Democratic primary. Bloomberg would seek to combat the country’s “severe shortage of affordable housing” by expanding the Low-Income Housing Tax Credit to help bring more construction to low-poverty areas “with substantial community investments to improve schools and reduce crime.” He would also boost funding to federal affordable housing programs and allocate $10 billion for a competition rewarding municipalities that “remove obstacles to the construction of affordable housing in neighborhoods with good schools, transportation and economic opportunities.” To combat homelessness, the plan would expand permanent supportive housing and provide more federal grants to cities that adopt effective homelessness prevention programs. Bloomberg cited his work as mayor to expand affordable housing in New York City.
Industry Trends
LIHTC Portfolio Shows Solid Performance
Affordable Housing Finance (12/04/19) Kimura, Donna
A new CohnReznick report analyzed data from more than 21,000 housing credit properties, finding that Low-Income Housing Tax Credit (LIHTC) properties continue to demonstrate strong performance nationwide. The report found in 2018, on a median basis, a 1.40x debt-coverage ratio (DCR), and more than $700 per unit per annum net cash flow. The median DCR was about 1.15x between 2000 and 2008 and then increased to 1.24x in 2010. Data from the respondents shows only a 0.65 percent cumulative foreclosure rate since the inception of the housing credit program. The report notes that is "a very meaningful data point for regulators who rate the risk of housing tax credit investments. The favorable risk rating affects the amount of capital that regulated financial institutions like banks hold in reserve to offset the risk of their investments. The low foreclosure rate of housing tax credit properties is also important as investors seek credit approvals to make equity investments in housing tax credit transactions." At $16.4 billion, 2018 also witnessed a new high-water mark for investor equity. The presence of banking institutions motivated by the Community Reinvestment Act continued to dominate the investor base while the return of Fannie Mae and Freddie Mac as investors served to provide further diversification to the marketplace, along with other economic-motivated nonbank investors, says the report.
Investors Assess LIHTC Market Heading Into 2020
Apartment Finance Today (12/02/19) Kimura, Donna
Low-Income Housing Tax Credit (LIHTC) investors cite higher land and construction prices as their primary concern for the coming year. Beth Stohr, managing director of affordable housing at U.S. Bancorp Community Development Corp., observes, "The more a development costs, the more credits you need per unit so the fewer units you can build. That’s a real issue at a time when rents have risen much faster than incomes, and there is increasing demand for affordable housing." Michael Lavine, executive vice president and head of the tax credit equity team at Wells Fargo, which expects to close between $2.1 billion and $2.2 billion in LIHTC equity in 2019, says labor and material shortages continue to be an issue. He estimates that 90 percent of Wells Fargo’s investments will be direct investments in up to 114 separate investments, while the remaining 10 percent will be placed in 13 separate multi-investor funds. Investors also note that delays during the financial closing or construction process can be caused by local governments or housing finance agencies asking more questions or being involved in aspects of the deal where they were not before. Still, LIHTC investors are hopeful that 2019's stable market conditions will carry on into the new year. Stohr says, "As we go into 2020, my hope is that we get clarification from Treasury around the income-averaging program, such that we see a lot more use of this new tool next year." Maria Barry, national executive for Bank of America's Community Development Banking team, says, "We expect to see sustained strong activity in RAD [Rental Assistance Demonstration] conversions, and we've seen wider use of historic tax credits in financing affordable housing.
Congress
30 State Housing Associations Team Up to Call for Bigger Tax Credit
Politico Pro (12/06/19) O'Donnell, Katy
A coalition of 30 housing associations from 27 states are calling on congressional leaders to pass a bill that would expand the Low-Income Housing Tax Credit (LIHTC) by 50 percent. The bipartisan legislation, H.R. 3077 (116), would also stabilize the credit’s 4 percent minimum financing rate. “Millions of Americans are facing a housing crisis that affects Democrats and Republicans in rural and urban communities alike – and they need Congress to treat affordable housing as a crucial issue that transcends party lines and partisan politics,” the group wrote to the top four congressional leaders in a Dec. 5 letter. The proposed changes would help build or preserve more than 550,000 affordable homes nationwide over the next decade, according to the coalition and generate 510,000 jobs. Congress last year temporarily increased the LIHTC by 12.5 percent through 2021.
Federal Regulation
CRA Proposal Draws Concerns From Affordable Housing Leaders
Apartment Finance Today (12/13/19) Kimura, Donna
Affordable housing leaders are speaking out about a proposal to revamp the Community Reinvestment Act (CRA). They say the proposal, which was released by federal regulators on Dec. 12, has the potential to weaken the original purpose of the CRA. One of the ways that banks meet their CRA obligations is by funding affordable housing, and they have been the main investors in the Low-Income Housing Tax Credit, the nation’s most important financial tool for developing and preserving affordable housing. However, the proposal presents concerns for affordable housing, says Benson “Buzz” Roberts, president and CEO of the National Association of Affordable Housing Lenders. Under current CRA rules, affordable housing and other community development activities get a lot of attention. Under the current investment test, community development investments count for 25 percent of the entire CRA rating. In addition to that, as part of the lending test, community development lending can either help or hurt a bank, according to Roberts. The proposal seeks to encourage banks to conduct more CRA activities by expanding the scope of activities that would qualify for CRA credit. Banks would have the flexibility to make loans based on where their borrowers are based rather than where they have physical branches. The Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency would publish an illustrative list of qualifying activities and establish a process for stakeholders to confirm whether an activity would receive CRA credit. Banks would be able to target more desirable and lucrative deals outside of their communities while skipping their local areas, according to affordable housing leaders. The public has 60 days to comment on the proposal.
State and Local Activities
Seattle to Invest a Record $110M in Affordable Housing; Here’s How It Will Rise Across the City
Seattle Times (12/11/19) Brownstone, Sydney
Seattle Mayor Jenny Durkan says the city will invest the most it ever has in affordable housing this year, a total of $110 million. That funding will be used for the construction and redevelopment of 1,944 new units, the most ever generated across the city via Seattle investments. Durkan, speaking Dec. 9 at the meeting hall of the Ethiopian Community in Seattle (ECS), emphasized the need for affordable housing amid economic growth and displacement. Ethiopian Village, an ECS project that received $10.7 million from the city as part of the announcement, will provide 89 units for low-income seniors in the neighborhood. Seattle taxpayers opted to fund much of the city’s affordable-housing investment through the Seattle Housing Levy, last renewed for another seven-year period in 2016. The city this year was also able to use a state sales-tax credit authorized by the Washington Legislature that allows local governments to invest in affordable housing. An additional $13.3 million came from that tax credit, as did $32 million from real estate excise-tax revenue and $12.75 million from the sale of the Mercer Mega Block. The new investments will help fund construction of 11 buildings for low-income families, individuals, and seniors, as well as 304 permanent, supportive housing units for people who have been chronically homeless. Mount Baker Housing Association’s Via7 building in Rainier Beach is the city’s largest investment, at $14.3 million. It will house families and individuals earning up to 60 percent of the area median income, $66,400 for a family of four and $46,500 for an individual.
Montana Loan Program Could Boost Missoula's Stock of Affordable Rental Housing
KPAX.com (MT) (12/16/19) Kidston, Martin
The Montana Department of Commerce is now accepting applications for a program that will provide $15 million to fund multifamily development through low-interest loans. The new Multifamily Coal Trust Homes Program will provide the money through the state's Coal Tax Trust Fund. A bill supporting the Coal Trust Homes Program cleared the state Legislature this year, marking the first time that state funding has been allocated for the development or rehabilitation of affordable rentals in Montana. Loans from the program could support the development of 240 new or rehabilitated rental homes in the state, according to state officials. The funds would be a huge boon for developers in Missoula, says Montana James of Missoula's Office of Housing and Community Development. Missoula's affordable housing goals have been described as aggressive. The city's recent housing plan would bring 590 Low-Income Housing Tax Credit homes to market over the next five years.
Association News
NAHMA Drug-Free Kids Calendar on Sale
Holiday shopping season is in full swing. The one-of-a-kind 2020 NAHMA Drug-Free Kids calendars make great gifts. The only way to get one (or more) is by downloading the order form and sending it in today. The calendar cost is $5.50 each, which is a Department of Housing and Urban Development and U.S. Department of Agriculture allowable project expense.
The calendars feature outstanding original artwork by children, seniors and adults with special needs living in affordable multifamily housing. The underlying message for the annual calendar contest is always a drug-free theme but the association wanted to open the door for more avenues of expression, so a subtheme is incorporated into the poster contest. The subtheme this year is Sharing Our Stories: Learning from Others, Young and Old.
To download the order form, click on the Web Link provided. To see the national winners, visit
https://www.nahma.org/awards-contests/calendar-contest/current-winners
/.
HUD Announces 2020 Annual Adjustment Factors
HUD announced in the Federal Register, the fiscal year 2020 Annual Adjustment Factors (AAFs) for adjustment of contract rents on the anniversary of those assistance contracts for months beginning after Dec. 10. The factors are based on a formula using residential rent and utility cost changes; the FY 2020 AAFs are the first to use the revised Bureau of Labor Statistics area definitions.
AAFs established in the notice are used to adjust contract rents for units in certain Section 8 housing assistance payment programs during the initial term of the HAP contract:
- The Section 8 New Construction, Substantial Rehabilitation, and Moderate Rehabilitation programs
- The Section 8 Loan Management and Property Disposition programs
To view the FY 2020 AAFs, click on the Web Link provided.
Montgomery Nomination Advances in Senate
The Senate Banking Committee approved the nomination of Brian Montgomery as Department of Housing and Urban Development (HUD) deputy secretary. The committee voted 20-5 to advance the current acting deputy secretary, with several Committee Democrats opposing the nomination based on leadership decisions during Montgomery’s current tenure at HUD.
Montgomery continues to serve as HUD assistant secretary for housing and Federal Housing Administration commissioner, in addition to his new role as acting deputy secretary. If confirmed by the full Senate, Montgomery will serve as the second most senior official at the agency, managing day-to-day operations and overseeing HUD’s nearly 8,000 employees. To learn more about Montgomery, click on the Web Link 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 two 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) and the National Apartment Association Education Institute (NAAEI).
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 CompusConnex
February 18-19, 2020
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NAHMA Biannual Top Issues in Affordable Housing Winter Conference
March 8-10, 2020
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NAA Advocate
March 10-11, 2020
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NAA Apartmentalize
June 17-19, 2020
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NAHMA Biannual Top Issues in Affordable Housing Fall Conference
October 25-27, 2020
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News summaries © copyright 2019 SmithBucklin
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