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LeadingAge Announces Grants to Fund Innovative Projects that Blend Housing and Services for Low-Income Elderly
LeadingAge recently announced the availability of grants through its Innovations Fund, which seeks to catalyze innovation among its members to develop programs that have the potential for demonstrable impact on residents, clients, families, employees or the broader community and have the potential for replication.
Now in its second year, the fund will award 8 projects up to $25,000 for a total of $200,000 in grants.
Selected projects will identify promising strategies for linking health and supportive services with congregate housing settings to help low-income residents meet their needs and safely age in their home and community.
For more details, click on the link below.
Tax Issues and Tax Reform
"LIHTCs Finance Nearly 88,000 Units in 2011"
"Options for the End: Typical Partnership Agreement Exit Provisions"
"Hurricane Sandy Bill Seeks Additional LIHTCs"
State and Local Activities
"How Can Affordable Housing Survive?"
"Section 8 Cuts Threaten to Diminish Access to Affordable Housing"
"Actual Expenses Establish Low-Income Housing Value in Dispute"
"Berkeley Eyes Anti-Tobacco Law in Multi-Unit Housing"
Green Building
"Why You Should Green-Certify Your Apartments"
"Engaging for Energy Efficiency"
Industry Trends
"GSE's $1.02B REMIC Encounters Rate Fears"
Association News
Section 202 Preservation: HUD Issues Consolidated Guidance for Refinancing Section 202 Properties
Congress Begins the Appropriations Cycle for FY14
NAHMA Announces 2013 Affordable 100 List
Become a Specialist in Housing Credit Management® (SHCM®) Company!
Tax Issues and Tax Reform
LIHTCs Finance Nearly 88,000 Units in 2011
Affordable Housing Finance (05/13)
A new analysis by the National Council of State Housing Agencies (NCSHA) reveals that states allocated $978 million in low-income housing tax credits (LIHTCs) in 2011, consisting of $749.7 million from their yearly state ceiling and $228.3 million to bond-financed properties. These housing credits will help produce 87,918 affordable rental homes overall nationwide. NCSHA released its findings in the 2011 Factbook, which also found that the use of credits with tax-exempt bonds increased nearly 23 percent from $186 million the prior year. However, HFAs allocated fewer credits from the state ceiling in 2011 than the year before when about $917 million was reserved for affordable housing developments. Demand for LIHTCs continued to outpace the supply, with developers requesting more than $2 billion in LIHTCs, or more than twice the available authority in 2011. State agencies reported that more than half of the units allocated LIHTCs were new construction projects, while 35 percent of the bond-financed units allocated credits were new construction. Tax-exempt bond financing was the most prevalent federal subsidy in LIHTC developments in 2011, along with project-based Sec. 8 (18.4 percent of the units) and HOME funding (17.6 percent). Mortgage revenue bond (MRB) issuance increased 13.5 percent during 2011, and housing finance agencies issued $8.4 billion in MRBs to raise funds to support first-time home ownership for low- and moderate-income families.
Options for the End: Typical Partnership Agreement Exit Provisions
Novogradac Journal of Tax Credits (06/13) Vol. 4, No. 6 Leonard, Sean B.
Parties involved in low-income housing tax credit (LIHTC) developments need to negotiate various agreements related to their relationship. One of the most crucial is the partnership agreement that stipulates important agreements between the general partner and investor. The parties negotiate such things as funding conditions, credit adjusters, guaranties (completion, deficit funding, etc.), reserves, repurchase, transfer restrictions, and exit strategies, among other things. Exit provisions in partnership agreements are also crucial, and are typically set forth in the partnership agreement as well loan documents, U.S. Department of Housing and Urban Development (HUD) documents, and LIHTC documents (especially the extended use agreement). Internal Revenue Code (IRC) Section 42(i)(7) gives qualified nonprofit entities a right of first refusal to purchase a LIHTC project at a price equal to all outstanding indebtedness secured by the project in addition to associated exit taxes. Amounts owed to the investor by the partnership is typically added to that price. The nonprofit that is ultimately granted the right of first refusal is not identified at closing. Under IRC Section 42(h)(5)(C)(ii), the LIHTC allocating agency must make a determination that the nonprofit entity is not affiliated with or controlled by a for-profit organization. It is also important to verify the nonprofit status of the entity by reviewing its organizational documents, exemption letters, and Internal Revenue Service's list of exempt organizations. The parties should also verify that the entity is not linked to or overseen by a for-profit entity .
Hurricane Sandy Bill Seeks Additional LIHTCs
Affordable Housing Finance (06/13)
A new bill called the Hurricane Sandy Tax Relief Act of 2013 is calling for an increase in low-income housing tax credits (LIHTCs) in the regions impacted by Hurricane Sandy last year. The bill proposes that disaster areas receive an allocation by the greater of $8 multiplied by the population of the impacted area or 50 percent of the state housing credit ceiling. It also would furnish additional bond allocations in the amount of $9.2 billion each for New Jersey and New York and $3.2 billion for Connecticut. The bill is modeled after legislation that had passed in the wake of 2005’s Hurricane Katrina. A few years later, several states in the Midwest similarly received housing credits beyond their annual LIHTC authority to rebuild following severe storms and flooding. The new Sandy legislation was introduced by U.S. Rep. Bill Pascrell (D-N.J.), and had bipartisan support from 28 co-sponsors. The bill additionally calls for a special allocation of New Markets Tax Credits, suspension of mortgage revenue bond requirements for residents in the disaster area, and a waiver from the gross income limitation for theft/loss deduction so individuals can deduct the cost of uninsured losses. "While the Sandy aid we fought so hard for is finally getting to the communities that desperately need it, we know it's not going to be enough to help families and businesses fully recover," says Pascrell, a member of the House Ways and Means Committee. "This legislation will go a long way toward filling this gap by providing immediate tax relief to those impacted by Sandy's devastation."
State and Local Activities
How Can Affordable Housing Survive?
San Diego Union Tribune (06/21/13) Leung, Lily
A panel of industry experts at the National Apartment Association Education Conference & Exposition on June 20 discussed new proposals that could generate money in California for low- to moderate-income families. Greg Brown, who heads government affairs for the National Apartment Association, notes many of those solutions involve policies developers tend to dislike, including linkage fees, which developers must pay to underwrite affordable housing. One proposal is to tack on a $75 fee to record certain real estate paperwork. That proposal would not apply to documents related to sales but would apply to documents tied to refinancings, liens and quit-claim deeds. "Unfortunately, I think it's one of those 'stick' measures," said Ann Kern, senior director of housing finance and program development for the San Diego Housing Commission, an affordable-housing organization in San Diego that receives public funding. The proposal is part of a bill before California legislators that would generate enough money to fund 10,000 apartment and single-family homes annually throughout the state, Kern said.
Another state bill, AB 1051, would put aside money to pay for affordable-housing projects near public transit, part of the an effort to reduce greenhouse-gas emissions. Brown, of the National Apartment Association, said states and municipalities will have to do more to fend for themselves to keep affordable housing, leading to "more creativity" in the sector.
Section 8 Cuts Threaten to Diminish Access to Affordable Housing
New York Observer (06/10/13) Velsey, Kim
New York City is experiencing a shortage of affordable housing units as market forces eliminate them faster than the city can create them. Rents in even the least costly neighborhoods are becoming unaffordable for low-income workers. Major cuts to Section 8 program further threaten consumers' access to affordable housing. Federal sequestration will cut $120 million from the rental subsidy program, according to Crain’s. To handle the cuts, government agencies that oversee housing vouchers may reduce the number issued this year by as many as 6,000. Additional cuts will come in the form of reduced subsidies that could compel tenants and Section 8 housing providers to pick up the slack. The agencies affected by the cuts--the Department of Housing Preservation and Development, the New York City Housing Authority, and the state’s Department of Homes and Community Renewal--will need to reduce the number of new vouchers issued and potentially must change the subsidy formula to reduce subsidies from $100 to $400 a month, Crain’s reports. Officials say the cuts will be problematic, especially for elderly and disabled residents who have no possibility of increasing their monthly incomes. The Section 8 cuts are the largest since the programs’ creation, and Crain’s warns that the funding might never be restored.
Actual Expenses Establish Low-Income Housing Value in Dispute
Affordable Housing Finance (06/13) Servodidio, Gregory F.; Pollack, Elliott B.
A developer in Beattyville, Ky., recently converted a former school into 18 units of low-income housing apartments that triggered a restrictive covenant on land use for 30 years. Under the restrictions, the Beattyville School Apartments could only accept tenants with incomes equal to or less than 50 percent of the local median income. The Lee County property valuation administrator valued the property for tax purposes at $662,700, or roughly $37,000 per unit, in 2011, thereby excluding any value attributable to the issued tax credits. The value was much higher than the $130,000, or about $7,200 per unit, that the taxpayer presented on appeal. The significant disparity was created because the county’s assessor obtained the property’s actual audited expenses as reviewed and approved by both the Department of Housing and Urban Development and the Kentucky Housing Corp. The assessor determined those expenses to be excessive and decided to cap the expenses used in her valuation model at 35 percent of income. The assessor used lower, capped expenses rather than actual expenses, which led to a value that was fivefold higher than the taxpayer thought it should be. On appeal, the hearing officer for the Kentucky Board of Tax Appeals sided with the property owner on the expense matter, concluding that it was inappropriate to cap the expenses used in the income approach because these expenses are to some degree a function of applicable state and federal law, pushing them higher than those at market-rate apartments. The hearing officer observed that the taxpayer’s appeal petition valued the property between $110,000 and $150,000, and opted to put the final value at $150,000.
Berkeley Eyes Anti-Tobacco Law in Multi-Unit Housing
Patch.com (05/03/13) Burress, Charles
If the Berkeley, Calif., City Council approves a proposed anti-tobacco ordinance, it would become the nation's first rent-control city to ban smoking in all multi-unit housing. Under the ordinance, renters would be responsible for enforcing the measure by taking offending neighbors to court, and they could terminate leases without penalty if property owners do not include the no-smoking clause in new leases or do not enforce the clause. Penalties of $100 to $250 would be levied against residents exposing neighbors to secondhand smoke. Medical marijuana would be exempt from the ordinance.
Green Building
Why You Should Green-Certify Your Apartments
Multifamily Executive (05/08/13) Seville, Carl
Green certification programs can add value to multifamily properties by creating more walkable communities, reducing waste, using materials and resources more efficiently, and increasing energy and water efficiency, durability, and indoor environmental quality. Several certification programs are suited to apartment building owners, including Energy Star, LEED, and the National Green Building Standard. Owners can realize lower maintenance, utility, and construction costs, while tenants have quieter, healthier, more comfortable units as well as lower utility bills. Moisture management can improve durability and indoor air quality, reduce dust, dirt, mold, mildew, odors, and sound transmission between units. Water conservation lowers costs, limits storm runoff, and lowers landscape maintenance and irrigation costs. Siting multi-family dwellings near public transportation, services, stores, and popular venues creates vibrant communities and commands higher rents. Third-party verification required by most certification programs helps ensure quality control and may be substituted for municipal inspections or other code compliance inspections. "Millennials, a key cohort of the rental market, see value in green apartments and sustainability-focused companies, and green-certified buildings can help attract this key demographic,” says Alliance Residential's Kelly Vickers. Green properties also currently are attractive to investors and partners. It is important to engage a green building consultant early in the process to conduct a building design analysis, help the building team make cost-effective decisions, improve the building's performance, and streamline the certification process.
Engaging for Energy Efficiency
Apartment Finance Today (05/13) Serlin, Christine
The National Housing Trust has released a report that seeks to encourage utilities and affordable housing stakeholders to collaborate more on energy efficiency programs. The report, 'Partnering for Success: An Action Guide for Advancing Utility Energy Efficiency Funding for Multifamily Housing,' offers best practices for collaboration and case studies for replicating such programs. Utilities continue to spend on programs, but multifamily buildings are often overlooked. Over the past two years, the NHT and partners have engaged utilities, affordable housing stakeholders and energy advocates on taping into this potential source of funding. As a result, utilities have committed $40 million to reduce energy consumption in multifamily housing. "What we've learned is that the utilities need to understand the multifamily housing industry better so they can develop programs that work well for the sector," says Todd Nedwick, NHT assistant director of public policy. "There's a real learning curve, and we think affordable housing stakeholders can play an important role in engaging utilities and in helping them create programs."
Industry Trends
GSE's $1.02B REMIC Encounters Rate Fears
GlobeSt.com (06/18/13) Morphy, Erika
Fannie Mae has priced its sixth Multifamily DUS REMIC for $1.02 billion. The transaction was done under the GSE's Guaranteed Multifamily Structures program and was done in a typical fashion, says Josh Seiff, Fannie Mae Director of Multifamily Capital Markets. "Investor demand was strong," he says, noting "that there were a couple of new investors on this deal." However, volatility in the rate environment clearly had an impact on investors, according to Seiff. "Around time we were pricing deal, ten-year Treasuries were bouncing around," he says. "That made it challenging for institutional investors to decide whether to put their money to work." Generally, investors are looking for more input from the Federal Reserve System about the pace of tapering, which impacts demand for all kinds of fixed income products, Seiff says. Investors will continue to put money to work at the right levels, he suggests, indicating that spreads widened out for this issue but not to a significant extent. This issue will settle on June 28, 2013, and the manager is Barclays while the co-managers are Deutsche Bank and Jefferies.
Association News
Section 202 Preservation: HUD Issues Consolidated Guidance for Refinancing Section 202 Properties
On May 30, HUD released consolidated guidance for the prepayment and refinancing of all Section 202 Direct Loans with the publication of Housing Notice 2013-17, Updated Requirements for Prepayment and Refinance of Section 202 Direct Loans. This notice supersedes all prior guidance published since the prepayment and refinancing program was initiated with the passage of the American Homeownership and Economic Opportunity Act of 2000.
This new guidance makes no changes in the processing and approval procedures, but it does clarify some of the more complicated issues, including the changes to debt service savings requirements. Housing Notice 2013-17 expands upon the explanations provided in last year’s notice and FAQs about the elimination of debt service savings accounts and how to account for the funds that previously had been assigned to debt service savings accounts or escrows and the maintenance of Section 8 rents based on prior debt service. While a requirement for prepayment and refinancing or project loans with interest rates above 6% to demonstrate debt service reduction and savings continues, providers can request a rent adjustment to fund operational needs if it is justified under the budget-based rent increase procedures. In the notice HUD warns that “Section 8 contract rents may be lower than in previous calculations with the original (higher) debt service.” However, if the debt service savings can be legitimately “expensed”, then the higher rents can be maintained. The discussion about debt service reductions on Section 8 rents can be found in Section V.E.4 of the notice (click on the link below).
HUD still has to release the regulation and the notice of funding availability for the Senior Preservation Rental Assistance Contracts, or SPRAC, the last piece of the Section 202 refinancing puzzle. SPRAC will be available for the unassisted units in Section 202 projects built prior to 1974 that refinance their mortgages. HUD expects to release the rule and the NOFA later this summer.
For a copy of the HUD notice, click on the link below.
Congress Begins the Appropriations Cycle for FY14
Both the House and the Senate Appropriations Committees have started their work on the fiscal year 2014 budgets for the Department of Housing and Urban Development, and both chambers have established overall caps for discretionary spending and allocated funds to the Transportation HUD Subcommittees (THUD). In addition, both the House and Senate Subcommittees have marked up their respective FY 2014 bills. However, that is where the similarities end.
Overall the House provided only $967 billion in discretionary spending for all its subcommittees, while the Senate has allocated $1.058 trillion in FY14 funding to its subcommittees. The disparity reflects the differences in each chamber’s budget resolution. There has not and will not be a budget conference or budget resolution.
The House Subcommittee marked up its bill on June 19th, and overall the bill cuts HUD spending about 35%. House bill highlights are listed below:
Section 8 Project-Based Rental Assistance (PBRA): The Subcommittee bill funds PBRA at $9.4 billion, underfunding the account by $2 billion. The Subcommittee bill would provide $100 million more than the FY13 pre-sequestration level but $800 million less than the President’s budget request. However, even the Administration’s budget request is too low to renew all Section 8 contracts for a full year. The President’s request is short by some $1.2 billion, and would fund only about 40% of all contracts for a full 12 months while the remaining 60% would be funded for an average of 9 months depending on their renewal date.
Tenant-Based Rental Assistance: The Subcommittee bill funds tenant-based rental assistance at $18.6 billion, 7% lower than the President’s budget request. Contract renewals would be funded at $17 billion, $968 million below the President’s request and $242 below FY13 pre-sequestration levels.
Home and CDBG Programs: The Subcommittee bill would cut the HOME Investment Partnerships program 26% from its FY13 level of $948 million to $700 million. In FY10, HOME funding was $1.8 billion. The Community Development Fund, of which CDBG funding to states and localities is the largest part, would be cut from $3.3 billion to $1.7 billion, the lowest funding level since 1975. Both programs are critical to building and preserving affordable housing as gap funding.
Preservation Provisions: While the dollars have been cut, surprisingly, the Subcommittee bill would extend several provisions which would further preservation of affordable housing. The bill extends through FY15 language to authorize project-based vouchers in lieu of tenant-based vouchers that would otherwise be issued for expiration of Rent Supplement (Rent Supp), Section 236 Rental Assistance Payment (RAP), or Section 8 mod rehab contracts. The bill would also increase the number of public housing units that could convert subsidy streams under the Rental Assistance Demonstration from 60,000 to 150,000. However, the House bill only provides $75 million for Tenant Protection Vouchers -- half of the FY13 enacted level.
The Senate Subcommittee mark-up started from a very different place, with very different results and policy choices. The Senate THUD Subcommittee allocation is $54 billion -- nearly $10 billion above the House allocation of $44.1 billion. Although a draft of the Senate bill is not yet released, the Subcommittee released a summary of the bill’s funding provisions as follows:
Section 8 Project-Based Rental Assistance (PBRA): The Senate Subcommittee bill provides $10.7 billion for the Section 8 project-based rental assistance program for the renewal of project-based contracts. This level of funding is $500 million above the President's budget request and $1.45 billion above the fiscal year 2013 enacted level. Some short-funding of Section 8 renewal contracts would be required.
Section 8 Tenant-Based Rental Assistance: The bill provides $19.6 billion for the housing choice voucher program. This level of funding is $683 million above the fiscal year 2013 enacted level. The total includes $17.6 billion for the renewal of existing housing choice vouchers and $1.69 billion for program administration. The bill also provides $75 million for 10,000 new HUD-Veterans Affairs Supportive Housing (HUD-VASH) vouchers for homeless veterans and $3 million for a rental assistance pilot program for Native American veterans living on reservations or tribal lands who are homeless or at-risk of homelessness.
HOME and CDBG Programs: The bill provides $1 billion for the HOME Investment Partnerships program, which is $2 million more than the fiscal year 2013 enacted level and $3.15 billion for CDBG grant funding for states and communities across the nation -- $350 million above the President’s budget request.
Both the House and Senate Appropriations Committees expect to complete consideration of their bills before the start of the July 4th recess; however, neither bill has been scheduled for floor action. Both bills may be difficult to get to the floor of their respective chambers. The House bill is seriously underfunded, although the House Republican majority may be able to pass it. The Senate bill, with its higher allocations, may not be able to clear a 60-vote hurdle that will be required for debate. The likely outcome of this process will come this fall in another Continuing Resolution.
For more details on the House bill, click on the link below.
NAHMA Announces 2013 Affordable 100 List
The National Affordable Housing Management Association (NAHMA) today announced the release of the NAHMA Affordable 100, a list of the 100 largest affordable multifamily property managers, ranked by affordable unit counts. The list is available at NAHMA’s website (see link below).
NAHMA would like to extend its sincere thanks to the NAHMA Survey Task Force, without whose hard work and support this survey would not be possible. In particular, sincere appreciation goes to Task Force Chair John Yang of RentalHousingDeals.com, and task force members, Janel Ganim, Property Solutions; Jed Graef, MRI Software; Dave Layfield, ApartmentSmart.com; Mark Livanec, Yardi; Lori Russell, RealPage; Gustavo Sapiurka, RealPage; and Shari Smith, Choice Property Resources, Inc. For more details, click on the link below.
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 2013 INFORMATION, INC.
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