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Nowhere To Live: Profits, Disinvestment, and the American Housing Crisis
Nationwide, 8 million of the lowest-income renters pay at least half of their income on rent, leaving them without the resources they need to make ends meet. Despite the clear need, only 1 in 4 eligible households receive any help and some households spend years on waitlists due to inadequate funding by Congress. The “Rent Relief Act of 2022,” introduced by Reps. Danny Davis (D-IL), Jimmy Gomez (D-CA), Scott Peters (D-CA), and Jimmy Panetta (D-CA), would help bridge the widening gap between incomes and housing costs by providing a refundable tax credit for millions of housing cost-burdened renters who face impossible choices between paying rent and meeting their other basic needs, including putting groceries on the table and taking care of their health. The bill would create a new, refundable tax credit to put more money in the pockets of families at a time when growing inflation is making housing even more unaffordable, particularly for people with the lowest incomes, who are disproportionately people of color.
Industry Trends
"Freddie Mac Report: Former LIHTC Properties Often Still Provide Workforce Housing"
"Experts Share Midyear Lending Outlook"
Management and Compliance
"What Are 'Reasonable Attempts?' Vacant Unit Rule Requires LIHTC Property Managers to Emphasize Renting to Low-Income Tenants"
Congress
"House Committee Looks to Garner Support for Low-Income Housing Finance"
Court-Related Activity
"Courts Issue Decisions on Right of First Refusal Cases"
Green Building
"Decarbonization Efforts Largely Exclude Affordable Housing"
Association News
NAAEI Offers Tax Credit Property Management Online Training
Pritzker Administration Awards $34 million in Tax Credits for Affordable Housing
HOME Income Limits Data Are Available from FY 1998 to the Present
NAHMA Releases 2022 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Upcoming Events
Industry Trends
Freddie Mac Report: Former LIHTC Properties Often Still Provide Workforce Housing
Novogradac (07/13/2022) Lawrence, Peter
A recent white paper by Freddie Mac Multifamily pointed out that many properties remain reasonably affordable upon leaving the LIHTC program, but their rents tend to increase. The report used data from HUD's LIHTC property-level database and the National Housing Preservation Database's LIHTC data. Freddie Mac Multifamily identified slightly more than 40,000 LIHTC properties over the history of the program, of which 5,321 left the program and are no longer monitored for compliance. Of those that are no longer subject to LIHTC income and rent restrictions, the report noted that LIHTC properties with nonprofit owners are less likely to abandon LIHTC income and rent restrictions, and properties placed in service before 1990 are also more likely to remove LIHTC income and rent restrictions. In 1990, the federal minimum requirement for affordability increased from 15 to 30 years. Among older properties, those with fewer homes were more likely to have abandoned LIHTC income and rent restrictions. The report also found that properties that have been resyndicated are more likely to retain LIHTC income and rent restrictions, and properties in states with extended affordability requirements are more likely to still be subject to LIHTC income and rent restrictions. The report concludes that LIHTC properties no longer subject to LIHTC income and rent restrictions have rents higher than those at LIHTC-restricted properties, but their rents are lower than conventional market-rate homes.
Experts Share Midyear Lending Outlook
Affordable Housing Finance (07/05/22) Serlin, Christine
Multifamily lending continues to be robust because of the industry’s strong foundation, according to experts. Liz Diamond, managing director and head of affordable originations at Berkadia, observes, "There are many borrowers looking to acquire existing affordable properties as well as convert market-rate assets to properties encumbered with rent and/or income restrictions. These restrictions have taken different forms, some are sponsor initiated and align with environmental, social, and governance goals." Diamond also is seeing more use of early rate locks with Fannie Mae and index locks with Freddie Mac. Regarding borrowers, David Brickman, CEO at NewPoint Real Estate Capital, says, "We’re seeing more interest in prepayment flexibility and creative structuring around interest rate protection on floating-rate deals. It's also worth the time to explore new structures and options, which often unlock significant value. The market is simply less predictable than it has been in the recent past, which is one of the drivers behind the increased appetite for locking in near-term fixed-rate financing." Charles Ostroff, Fannie Mae's senior vice president and chief credit officer, multifamily, says, "Last month, our economists noted that the severity and duration of the pandemic-related supply chain disruptions contributed to the increase in multifamily building costs, as the prices of building materials have increased substantially over the past two years. Now added to the mix is inflation, and it's expected to increase construction costs even further in the short term."
Management and Compliance
What Are 'Reasonable Attempts?' Vacant Unit Rule Requires LIHTC Property Managers to Emphasize Renting to Low-Income Tenants
Novogradac (06/29/2022) Pinoli, Nicolo R.
An increase in tenant movement is occurring in Low-Income Housing Tax Credit (LIHTC) properties, so LIHTC property owners and managers should be aware about the vacant unit rule. To qualify for the vacant-unit rule, reasonable attempts must be made to rent a low-income unit, or the next available unit, to tenants who are qualified as low-income tenants before any other units in the project are rented to tenants at market rate. The intent is to spur property managers to focus on renting their low-income apartments first, then rent the market-rate apartments. Treasury Regulation Section 1.42-15(a) defines "available low-income unit" as an apartment of comparable or smaller size. An apartment may be deemed no longer available because of a contractual arrangement. If a vacant unit that was occupied by a low-income tenant is leased to a tenant who does not meet the low-income standards the apartment ceases to be a low-income unit. Property managers also should make reasonable attempts to rent that apartment, or the next available apartment, to qualified low-income tenants. If a property manager makes reasonable attempts, vacant market-rate units can still be rented before the vacant low-income units. In Revenue Ruling 2004-82, Q&A 9, the Internal Revenue Service specifically declined to provide an objective definition for the term reasonable. In fact, that guidance specifies, "what constitutes a reasonable attempt to rent a vacant unit is based on facts and circumstances and may differ from project to project." Property managers also should check with the applicable state agency to determine how it interprets IRS rules.
Congress
House Committee Looks to Garner Support for Low-Income Housing Finance
Bond Buyer (07/13/2022) Hussey, Connor
House Ways and Means Committee Chairman Richard Neal (D-Mass.) reignited discussions around what an expansion of the Low-Income Housing Tax Credit (LIHTC) may look like. The credit was a major part of the discussion during a July 13 Ways and Means Committee hearing. LIHTCs are often used in conjunction with tax-exempt bonds to finance affordable housing. “Building a fairer, more prosperous nation includes meaningful access to quality, affordable housing,” said Neal. "We have the tools to address these needs and turn the tide. Last year, this committee put forward proposals that would cumulatively create nearly 1 million additional affordable homes." The LIHTC, as laid out in drafts of Build Back Better last year, would be expanded by reducing the bond financing threshold to 25 percent from 50 percent, increasing the allocation cap by 10 percent, and other measures. For some who spoke at the hearing, the LIHTC has drawn new interest to affordable housing. “We have investors that may typically not be interested in affordable housing, providing 10 years of capital on day one that ends up in the capital stack and helps us build the buildings,” said Audra Hamernik, president and chief executive officer of Nevada HAND in Las Vegas. “Without the tax credit, I’m not so sure they would be interested and we certainly couldn’t find similar capital that would be debt free,” she added. “It’s absolutely critical to affordable housing development to have the tax credits to find those types of investors.”
Court-Related Activity
Courts Issue Decisions on Right of First Refusal Cases
Housing Finance (06/08/22) Kimura, Donna
A few private investors and limited partners in recent years have been challenging the ability of nonprofit housing organizations to use their right of first refusal (ROFR) to purchase a Low-Income Housing Tax Credit (LIHTC) property at the end of its 15-year compliance period at a minimal cost. In May, the Delaware Court of Chancery issued a decision in JER Hudson GP XXI LLC et al. v. DLE Investors LP. In the case, DLE Investors had acquired a limited partner interest in a tax credit fund. When a nonprofit developer of one of the projects the fund invested in exercised its ROFR, DLE asserted that it was the fund general partner's fiduciary and contractual duty to challenge the nonprofit's exercise of its ROFR. The Delaware court concluded that the fund general partner had no such contractual or fiduciary duty, and that DLE improperly attempted to remove the general partner for refusing to challenge the nonprofit's ROFR. In another case, the U.S. Court of Appeals for the Sixth Circuit in May issued a decision in SunAmerica Housing Fund 1050 v. Pathway of Pontiac, Inc., PV North, LLC, and Presbyterian Village North. A district court had granted summary judgment to SunAmerica last year, reasoning that to exercise the ROFR, the partnership needed to receive a bona fide offer, and the general partners needed to manifest a true intention to sell. However, the Court of Appeals for the Sixth Circuit overruled the district court on May 10, concluding there is a distinction between common law rights of first refusal and a ROFR for a LIHTC development.
Green Building
Decarbonization Efforts Largely Exclude Affordable Housing
Professional Builder (05/06/22)
The American Council for an Energy-Efficient Economy (ACEEE) reports that electrification and decarbonization efforts are advancing in the residential sector, but are not being extended to affordable housing projects. Existing electrification programs tend to involve single demonstration projects or pilot programs instead of costlier programs that serve large customer populations. Though largely overlooked by major decarbonization plans, the affordable housing sector is poised to benefit from enhanced energy efficiency, particularly because of the long-term financial advantages linked to renewable utilities. A good example of a statewide decarbonization program focusing on multifamily properties with low-income residents is California’s Low-Income Weatherization Program (LIWP), one of the largest building electrification efforts in the country. Since its launch in 2016, LIWP has delivered more than $33 million in incentives based on avoided greenhouse gas emissions for more than 8,100 low-income rental households. Building retrofits include air and duct sealing, electrification of space heating, insulation, hot water, cooking, and distributed energy resources such as rooftop and community solar.
Association News
NAAEI Offers Tax Credit Property Management Online Training
The National Apartment Association Education Institute (NAAEI) offers a 12-hour online course to prepare students for the SHCM certification exam. The training topics include program regulations, unit eligibility, applicant eligibility and certification, documentation, recordkeeping, compliance reporting and monitoring. This course satisfies the education requirements to apply for the SHCM credential and includes the exam study guide.
Pritzker Administration Awards $34 million in Tax Credits for Affordable Housing
Gov. JB Pritzker and the Illinois Housing Development Authority (IHDA) Board announced conditional awards totaling nearly $34 million in federal Low-Income Housing Tax Credits (LIHTC) that will fund 25 affordable housing developments in 15 counties across Illinois. Once sold to investors, the tax credits will generate an estimated $296 million in private capital to finance the creation and/or preservation of 1,343 affordable units for low- to moderate-income families, seniors, veterans and persons with special needs.
HOME Income Limits Data Are Available from FY 1998 to the Present
The HOME Income Limits are calculated using the same methodology that HUD uses for calculating the income limits for the Section 8 program, in accordance with Section 3(b)(2) of the U.S. Housing Act of 1937, as amended. These limits are based on HUD estimates of median family income, with adjustments based on family size. Please note that the 30% income limits for the HOME program have been calculated based on the definition of Extremely Low–Income Family (ELI) as described in Consolidated Submission for CPD Programs section of 24 CFR part 91.5. Therefore, the ELI Limit is calculated as 30% of median family income for the area and may not be the same as the Section 8 ELI Limit for your jurisdiction. The Section 8 Limit is calculated based on the definition of ELI as described in The 2014 Consolidated Appropriations Act, (Section 238 on page 128 Stat 635) which defines ELI as very low–income families whose incomes do not exceed the higher of the federal poverty level or 30% of area median income.
Family sizes in excess of eight persons are calculated by adding 8% of the four-person income limit for each additional family member. That is, a nine-person limit should be 140% of the four-person limit, the 10-person limit should be 148%.
The HOME income limit values for large households (nine-12 persons) must be rounded to the nearest $50. Therefore, all values from 1 to 24 are rounded down to 0, and all values from 25 to 49 are rounded up to 50.
NAHMA Releases 2022 Affordable 100 List
The National Affordable Housing Management Association (NAHMA) announces its 2022 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 issue of NAHMA News. 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 becoming a SHCM Company, click on the Web Link below.
Upcoming Events
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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