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IRS Releases Rates for June
The IRS issued Revenue Ruling 2022-10, which provides various prescribed rates for federal income tax purposes, including applicable federal interest rates, adjusted applicable federal interest rates, and adjusted long-term and tax-exempt rates for June 2022. As provided in the ruling, Table 4 contains Low-Income Housing Tax Credit appropriate percentages under section 42(b)(1) for June 2022:
- The appropriate percentage for the 70% present value low-income housing credit is 7.70%.
- The appropriate percentage for the 30% present value low-income housing credit is 3.30%.
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.
To view the ruling, click the Web Link provided.
Federal Regulation
"Biden Administration Targets Housing Supply Shortage"
HUD-Related Activity
"Can Section 108 Be Used to Assist a LIHTC Development?"
Industry Trends
"Study Finds Affordable Housing Can Boost Nearby Property Values"
"U.S. Faces Shortage of 7 Million Affordable and Available Rental Homes"
Development and Construction
"Rising Construction Costs Stall Affordable Housing Projects"
Rural Development Related Activity
"Rural LIHTC Developments Have Two Options When Calculating Income Limits"
State and Local Activities
"Keep Safe Florida Expands Affordable Housing Resilience Assistance to Miami, Tampa Bay, and Orlando"
Association News
Register for Emerging Trends in Tax Credit Webinar
NAHMA Releases 2022 Affordable 100 List Next Week
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Federal Regulation
Biden Administration Targets Housing Supply Shortage
Wall Street Journal (05/16/22) Ackerman, Andrew; Friedman, Nicole
The Biden administration has unveiled plans to address the U.S. shortage of entry-level homes, including expanding federally backed financing for affordable housing and directing grants toward localities that encourage construction. “While the policies cover a wide range of issues and agencies, most are intended to do one thing: Make it easier and more economical to build affordable housing,” said Jim Parrott, a former Obama administration housing adviser, who had reviewed the proposal. “The total effect should be considerable.” The effort includes reforming the Low-Income Housing Tax Credit and encouraging greater land-use improvements at the local level by favoring jurisdictions that promote “density and rural main street revitalization” for funding from last year’s infrastructure bill, according to a fact sheet distributed by the White House. Two government agencies, the Federal Housing Administration and the Federal Housing Finance Agency, will explore test pilots to increase financing for tiny homes to increase housing supply. Fannie Mae, meanwhile, will consider purchasing loans made to builders prior to construction of multifamily housing. Currently, Fannie generally only buys mortgages for homes already built and certified for occupancy, which is too late for smaller builders that lack access to affordable financing. The administration also is considering moves aimed at boosting the availability of manufactured homes.
HUD-Related Activity
Can Section 108 Be Used to Assist a LIHTC Development?
Novogradac (05/06/2022) Garcia, Teresa
The U.S. Department of Housing and Urban Development's (HUD) Section 108 loan guarantee program is a flexible financing tool for housing and community development. However, the Section 108 program has only about 300 active participants despite having more than 1,200 eligible recipients, a $300 million fiscal year 2022 authorization, and several eligible uses. Under the Section 108 loan guarantee program, HUD gives recipients of Community Development Block Grants (CDBGs) the option of leveraging their yearly grant allocation for low-cost, long-term financing for economic development, infrastructure, housing and public facility projects. CDBG rules allow lending CDBG funds to a community-based development organization for new construction rental housing. The city of High Point, North Carolina, has five 9 percent Low-Income Housing Tax Credit (LIHTC) developments, the last four of which were constructed since 2016 using Section 108 financing for acquisition and public infrastructure. High Point's most recent LIHTC development supported by Section 108 is Avondale Trace Apartments, a 72-apartment new construction property that leveraged $650,000 of federal funds with $10.4 million of private capital. Of the $650,000 Section 108 loan, $425,000 was used for site acquisition and $225,000 was used for site improvements that were contracted for and paid by the city. Among the funds used by the Avondale Trace Apartments was $800,000 from a North Carolina Housing Finance Agency rental production program loan, $7.5 million LIHTC equity proceeds, and $650,000 High Point Section 108 loan. CDBG program rules required High Point to first acquire the LIHTC property and make site improvements prior to conveying the property to a for-profit developer.
Industry Trends
Study Finds Affordable Housing Can Boost Nearby Property Values
Housing Finance (05/02/22)
A study by the Urban Institute revealed that affordable housing developments contributed to a small but statistically significant increase in nearby property values in Alexandria, Virginia. Christina Plerhoples Stacy, principal research associate, and Christopher Davis, data scientist, both with the Urban Institute’s Metropolitan Housing and Communities Policy Center, said, "This should ease residents' concerns about their impact on neighborhoods and bolster support for increased development." Stacy and Davis examined Zillow’s real estate and assessor database to estimate the link between affordable housing developments and the sale prices of nearby single-family homes, duplexes, cooperatives, and residential condominiums between 2000 and 2020. They found that affordable housing units in Alexandria were associated with an increase in property values of 0.09% within one-sixteenth of a mile of a development on average; that length is comparable to a typical urban block. The report said, "This effect is statistically significant at the 1% level, roughly meaning that there is a 99% chance of a positive value." It also noted, "Given the known benefits of affordable housing on housing stability, access to opportunity, the economy as a whole, and the overall health of households with low incomes, these results support the development of additional affordable housing in the city of Alexandria."
U.S. Faces Shortage of 7 Million Affordable and Available Rental Homes
Housing Finance (04/26/22)
The National Low Income Housing Coalition (NLIHC) estimates there is a nationwide shortage of 7 million rental homes that are affordable and available to extremely low-income renters—indicating household incomes at 30 percent of their area median income or at or below the federal poverty guideline. Among states, the supply of affordable and available rental homes ranges from only 18 for every 100 extremely low-income renter households in Nevada to 61 in West Virginia, according to the NLIHC's "The Gap: A Shortage of Affordable Homes" report. Among the 50 largest U.S. metropolitan areas, the supply ranges from 13 affordable and available rental homes for every 100 extremely low-income renter households in Las Vegas to 50 in Providence, Rhode Island, the report found. About 7.8 million of the nation’s 11 million extremely low-income renter households were also severely housing cost-burdened, spending more than half of their incomes on rent and utilities. They represent 72 percent of all severely housing cost-burdened renters nationwide. In addition, the report found that 20 percent of Black households, 18 percent of American Indian or Alaska Native households, 15 percent of Latino households, and 10 percent of Asian households were extremely low-income renters. Only 6 percent of White, non-Latino households were extremely low-income renters. Researchers noted that nearly 8 million renters reported being behind on rent in January 2021 and 5.5 million renter households were still behind in March 2022. The report supports retaining the housing investments that were included in the Build Back Better legislation that stalled in the Senate last year.
Development and Construction
Rising Construction Costs Stall Affordable Housing Projects
Pew Charitable Trusts (04/25/22) Hernández, Kristian
Developers of rent-restricted buildings that rely on tax credits or other government aid are seeing costs rise so much that entire projects are at-risk. Jennifer Schwartz, director of tax and housing advocacy at the National Council of State Housing Agencies, notes that the U.S. Treasury Department spending rules prevent the use of federal COVID-19 relief funds for Low-Income Housing Tax Credit (LIHTC) projects. Recovery funds must be spent by the end of 2026, so that money cannot be used for long-term loans to help finance LIHTC developments. However, some state housing agencies are opting to blend federal COVID-19 aid and other funds. Mark Shelburne, housing policy consultant with Novogradac, says some agencies have been able to use recovery funds to cover up to 75 percent of the cost of a loan using certain workarounds, but the process is complex and adds costs to a project. A bipartisan measure proposed in Congress would allow states to use recovery funds to lend money to LIHTC developers. Timothy Henkel, principal and president at Pennrose, says the management and development company has 10 projects with financing gaps that range from $6 million to $8 million. Five of these projects are in Maryland, where the state housing finance agency approved the initial bids more than a year ago. Pennrose had estimated that construction costs would increase by no more than 3 percent in roughly three months it would take to secure the deal and begin construction, but the actual increase was closer to 18%.
Rural Development Related Activity
Rural LIHTC Developments Have Two Options When Calculating Income Limits
Novogradac (05/04/2022) Stagg, Thomas
In rural areas, as defined by the U.S. Department of Agriculture, 9 percent Low-Income Housing Tax Credit (LIHTC) properties may calculate income limits based on the National Non-Metro Median income (NNMI) or by using the greater of the applicable income limit for their county. The NNMI limit is an essential benchmark for LIHTC properties. The U.S. Department of Housing and Urban Development (HUD) typically publishes the NNMI limit in its Frequently Asked Questions (FAQs) and in its documentation system. According to HUD's Methodology for Determining Section 8 Income Limits, "HUD rounds income limits up to the nearest $50" when calculating the family size adjustment for Section 8 limits. However, HUD does not follow this convention when calculating the family size adjustment for the NNMI limit. In contrast to 2020, HUD has reverted to its custom of using a separate rounding convention for NNMI limits. Properties that used the HUD website during this window or the Novogradac Rent & Income Limit Calculator will need to re-compute their limits to make sure they are in compliance with HUD's latest calculation.
State and Local Activities
Keep Safe Florida Expands Affordable Housing Resilience Assistance to Miami, Tampa Bay, and Orlando
Florida Politics (05/05/22) Figueroa IV, Daniel
The Keep Safe Florida program has expanded its operations to the Miami, Orlando, and Tampa Bay areas, extending its benefits to homeowners in Miami-Dade, Broward, Palm Beach, Orange, Lake, Osceola, Seminole, Hillsborough, Hernando, Pasco, and Pinellas counties. "Protecting, preserving, and providing more housing for residents is both a critical need and a critical focus for our city," said Orlando Mayor Buddy Dyer. "As we respond to a changing climate and continually seek ways to make our community more sustainable, healthier, and more equitable, the Keep Safe Florida program will be a valuable tool to increase resilience and safety for residents." In addition to predictions of above-average tropical storm weather this year, experts warn that Florida is heading for a tsunami of a balkanized home insurance industry, threats from climate change and sea level rise, and the second-highest population growth in the United States. In its first year, Keep Safe helped 45 owners and operators of affordable housing properties avail themselves of free property assessments and resilience resources. The Enterprise and Truist Charitable Fund expects to aid 150 operators between the three regions over the next year. Some assistance via Keep Safe includes helping owners and operators understand which properties are at greatest risk of damage from natural hazards; identifying strategies for high-risk properties and supplying resources and recommendations to reduce the potential harm storms and other disasters present to properties and residents; and providing information to multifamily housing owners and managers concerning the resources available to help deploy resilience strategies.
Association News
Register for Emerging Trends in Tax Credit Webinar
Join an expert for a webinar to learn the emerging trends in tax credit on Tuesday, May 24, beginning at 2 p.m. Eastern, and earn SHCM credential continuing education units.
The webinar will provide 1.5 hours of instruction and a 30-minute question-and-answer session. It is presented by Dodi Gershen, NAHP-e, FHC, SHCM, vice president & director of management, The Gershen Group.
Part one of the webinar covers the Violence Against Women Act Reauthorization Act of 2022. Part two will review items in the IRS Notice 2022-05. The notice provides specific new relief and extends the temporary relief for certain requirements as a response to the continuing presence of the pandemic and precautions necessitated by new disease variants.
The webinar is free to current SHCM certified professionals and $149 for non-SHCM professionals. Be sure to renew your SHCM credential to qualify for the free webinar.
If you have any questions about your renewal, contact Natasha Patterson of the National Affordable Housing Management Association (NAHMA) at npatterson@nahma.org or 703-683-8630, ext. 117. Contact Stefani Hurst of the National Apartment Association Education Institute (NAAEI) at SHurst@naahq.org or 703-797-0665 for registration issues.
To register, click the Web Link provided.
NAHMA Releases 2022 Affordable 100 List Next Week
NAHMA will announce its 2022 Affordable 100—a list of the 100 largest affordable multifamily property management companies ranked by affordable unit counts—next Wednesday, May 25. The list will also appear in the May/June NAHMA News and the June issue of NAA’s 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. For more information, click on the Web Link provided below.
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 becoming a SHCM Company, click on the Web Link below.
Upcoming Events
NAA Apartmentalize
June 22-24
https://apartmentalize.naahq.org/
NAHMA Biannual Top Issues in Affordable Housing Fall Conference
October 26-28
https://www.nahma.org/meetings/
NAA Assembly of Delegates
November 15-17
https://www.naahq.org/meetings-events/upcoming-meetings
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