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"HUD Awards Over $1B in Recovery Act Funds to Jump Start Affordable Housing Construction"
"Tax Credit Industry Strives to Survive"
"Tax Credit Attorneys Discuss Strategy for Overcoming Eligibility Issues"
"Controlling LIHTC Property Taxes"
"Reduce the Cost of Property Management"
"Lawsuit: Housing Authority Won't Translate Documents"
"HUD Secretary Donovan Delivers Special Remarks at Solutions for Working Families Learning Conference"
"HUD Publishes Childhood Education With HOPE VI"
"HUD, DOT and EPA Partnership: Sustainable Communities"
"Hazard Mitigation Legislation Introduced by Committee on Homeland Security Chairperson"
"Waiting Game"
"In Marked Shift, Fairfax County Turning From Housing Buys"

"HUD Awards Over $1B in Recovery Act Funds to Jump Start Affordable Housing Construction"
Multi-Housing News (07/09)

The U.S. Department of Housing and Urban Development (HUD) is approving plans submitted by state housing finance agencies for $1.03 billion in funding through the American Recovery and Reinvestment Act of 2009. HUD's new Tax Credit Assistance Program (TCAP) will enable 26 state housing finance agencies to resume funding of affordable rental housing projects across the nation, as well as help revive the residential construction industry. The financial crisis has resulted in the freezing of investments in the low-income housing tax credit (LIHTC) market. The Recovery Act provides $2.25 billion for TCAP, a grant program to provide capital investments in these stalled LIHTC developments. The TCAP grants will be awarded to complete construction of qualified housing projects. The Recovery Act requires state housing credit agencies to give priority to projects that can begin immediately and be completed by February 16, 2012.
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Like most sectors of the economy, the housing credit industry has been hit by the financial crisis and is hoping that government stimulus measures will boost development. The biggest investor in Low Income Housing Tax Credits (LIHTC) has traditionally been financial firms, most of which have suffered heavy losses and therefore have little reason to buy credits from developers, and at the same time gap financing and tax-exempt bond financing have dried up, leaving developers with few financing options to begin development. Those investors who are still active are paying about 70 cents per $1 range of tax credit today, down from more than $1 two years ago, and they are also being more selective, avoiding rural deals or those in unfavorable markets and requiring larger and longer guarantees and reserves. But the news is not all dire?cities are still interested in building more low-income housing, though for the most part they are turning to the strongest developers who are able to rely on established relationships to obtain financing. Construction costs have fallen by about 20 percent this year, and the government stimulus package promises to ease the burden with its Tax Credit Assistance Program and LIHTC Exchange program, which developers say have changed the dynamic of the market and will spur demand. But it remains to be seen whether the benefits will be temporary, as many say the industry will not truly rebound until the investors return.
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When a construction project financed with low-income housing tax credits experiences lease-up delays, a little-known section of tax code offers a way for developers to continue meeting eligibility requirements. Sec. 42(g)(3)(D) gives developers much flexibility to choose which buildings are part of which project for LIHTC purposes, as it treats each project as a single building unless it is identified as otherwise by the end of the first calendar year of the project period. Developers can choose to treat each building as a separate project, then, with its own minimum set-aside test, or do the same for any combination of buildings. This way the developer can maximize credit delivery and continue to satisfy eligibility requirements. The same solution can be used for scattered-site projects, treating each building or combination of buildings separately as is needed. The changes must be coordinated with the state tax credit agency, though, so developers should make contact as soon as circumstances arise that would make changing the configuration of projects beneficial.
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Owners of affordable housing properties have many things to consider when assessing their property for tax purposes, as guidelines for valuation are different in each jurisdiction. Owners should first research any state statutes or local regulations for affordable housing valuation and determine any restrictions, and also look into how local courts have ruled on property valuation cases. Once this is done, owners should determine "highest and best use" and use whichever of the three main valuation approaches is appropriate: costs, sales, and income. The cost approach typically is not useful for affordable housing properties because depreciation of older structures is difficult to measure and construction costs are irrelevant for newer buildings. The sales approach has similar problems because the properties tend not to trade very often and there are few comparable rent structures. The income approach tends to work best, especially for newer properties in the early years of rent/net operating income restrictions, though older properties nearing the end of the restrictions may be better off with a cash flow approach. The income approach requires development of a cap rate, which is best done by comparing the sales of other affordable housing projects. There is unfortunately no one-size-fits-all way to value affordable housing, so owners should be prepared to do a lot of homework.
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Using Building Information Modeling (BIM) can cut the cost of traditional property management by offering much more accurate and comprehensive information than a CAD file. All of the information is located in one place and is greatly simplified, unlike CAD files that can only be read by those trained in reading blueprints. The system can track items that require regular replacement and ensure the inventories are adequate, and the files can also include warranty information on all components, manuals for HVAC systems, specifications for lighting systems, and maintenance to-do lists, greatly simplifying a property manager's job. A BIM file can also help with renovations, as it contains specifications on every component in the structure and can help ensure the new features are consistent with the old and that any new construction properly fits with the existing structural features. The University of Texas, San Antonio recently put its three campuses into BIM with the aim of automating facility and property management, maintenance, and design of renovation and expansion as well as facility brand management of its design portfolio and prototypes.
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A lawsuit has accused the Housing Authority in Jacksonville, Florida, of refusing to interpret documents for a local Hispanic resident, eventually leading to her eviction from an apartment complex. The plaintiff, Mailin Soto, was residing in the complex with the assistance of a U.S. Section 8 voucher. When she failed to report income from a new job within 10 days, the voucher was revoked. Soto said that when she signed the documents disclosing this provision, she did not understand the meaning because no one at the Housing Authority would interpret for her, even though she requested it. Soto and her attorneys claimed that the Housing Authority balked at interpreting the documents and that no written information was available in Spanish. The authority contends that Soto understood the agreement she signed and that there were interpreting services available from multiple Spanish-proficient agency employees, including the Section 8 program director. Guidance from the U.S. Department of Housing and Urban Development requires agencies to supply written translated documents wherever their eligible population includes 1,000 or more individuals with limited English fluency and a language in common. The Housing Authority has recently contracted with a company that provides telephone-based interpreting services and has designated an employee as the interpreter for Spanish-speaking clients. The authority has also posted a sign on its door in multiple languages stating that interpreting assistance is available.
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U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan spoke on June 30 at the "Solutions for Working Families: 2009 Learning Conference on State and Local Housing Policy" in Chicago, emphasizing that while home ownership is as important as ever, "it's long past time we recognized that long before the homeownership crisis in this country there was an affordable rental housing crisis - and it's still going on." Donovan said "[i]t's time we made affordable rental housing the priority it needs to be," and admitted to make this possible, "HUD needs to change the way it does business." He spoke about the Transformation Initiative at HUD, saying it will mean better research, evaluation, and accountability measures, "to figure out how we can do more with less and give the marketplace the information it needs to make informed choices ... [a]nd above all, transformation means a comprehensive, balanced national housing policy that recognizes affordable rental opportunities are inseparable from sustainable growth."
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The Department of Housing and Urban Development (HUD) is awarding additional points to public housing authorities that incorporate early childhood education components into their HOPE VI projects. Housing authorities have until Nov. 17 to compete for the $113 million in HOPE VI funds available. HUD Secretary Shaun Donovan is also looking toward 2010 and the Obama administration's proposed Choice Neighborhoods Initiative. The initiative would be a new and expanded revitalization program. Under the fiscal 2010 budget proposal, the administration seeks $250 million for Choice Neighborhoods, double the amount available for HOPE VI in 2009. Donovan says that Choice Neighborhoods will expand the range of activities eligible for funding and bring in a range of participants.
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The U.S. Department of Housing and Urban Development (HUD), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA) have partnered to provide residents of rural, suburban, and urban areas access to more affordable housing and transportation options and to help lower transportation expenses. Initiatives produced by the partnership also will protect the environment, encourage equitable development, and help address climate change. Each agency will work toward integrating land-use planning, investment, water infrastructure, transportation, and housing needs to create sustainable communities that reduce transportation expenses for residents. Initiatives will follow a vision for sustainable growth that reduces U.S. dependence upon foreign oil, lowers greenhouse gas emissions, and protects the nation's water and air. Housing affordability will need to be redefined to incorporate transportation costs to help homeowners and renters make more informed choices about location. Growth initiatives also will target locations with existing infrastructure and transportation choices, and the agencies will provide best practices, analytical tools, and other programs to foster local coordination between housing, transportation, and environmental protection investments.
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U.S. House Committee on Homeland Security Chair Bennie Thompson's (D-Miss.) recently introduced HR 3026, HR 3027, and HR 3028 to tackle natural disaster mitigation issues. The proposed Pre-Disaster Hazard Mitigation Enhancement Program would provide individual states with grant funding, which would be used to create programs, like the My Safe Florida Home Program, that encourage property owners to strengthen their buildings against hurricane damage. Meanwhile, Thompson's proposed Hazard Mitigation For All Act would help retrofit Section 8 or low-income housing against hurricanes.
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Developers and lenders in the student housing niche are paying close attention to the market over the next three to four months. Although The Chronicle of Higher Education predicts over 20 million Generation Yers will be in college by 2015, the economic crisis has prompted schools to make cuts and parents might not be able to afford to send their children to school. Experts note that there will be more development opportunities where big schools are located, while students attending suburban or rural institutions might consider living at home or renting in older apartment communities. Still, experts say lenders continue to provide funding for student housing. "There's financing out there with Fannie and Freddie," notes Campus Apartments Chief Information Officer Dan Bernstein. "Whether it's on the permanent side or construction side, lenders like student housing but only with good owners and operators, not people who are looking to buy and flip. It's a flight back to the fundamentals."
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In Virginia, Fairfax County is looking into how to spend the little money it has left for affordable housing without directly buying up apartment communities. In so doing, the county is looking to distance itself from a controversial program that began with Northern Virginia's building boom. Under the costly plan, Fairfax supervisors have taken more than 2,000 rental units out of the private market over the past four years. The $20 million fund that funds the program was gutted in the most recent budget negotiations, with Fairfax's Board of Supervisors voting to halve the fund. The initial plan to purchase area apartments resulted from concerns that too much low-cost housing would be converted to condos in the region's sizzling market of recent years. With the property boom going bust, the justification for increasing Fairfax's housing stock has vanished. Braddock District Supervisor John Cook states, "Now the economy is different, and we're not seeing condo conversion. In fact, with the recession, what we're seeing is a human service need for the very poor, the homeless, the people who are disabled and unable to find housing." The remainder of the program's money may be spent on housing subsidies for extremely poor or disabled residents.
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