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Announcements
AAHSA to Hold its Annual Meeting and Exposition
October 31-November 3 in Los Angeles
AAHSA’s annual meeting, the largest gathering of aging services and senior housing professionals, will meet this year at the Convention Center in Los Angeles, California, starting Sunday, October 31 at 1 pm through Wednesday, November 3rd at 4:30 pm. Addressing AAHSA’s members in the general sessions to explore AAHSA’s theme of “Who Decides” will be a videotaped appearance by HUD Secretary Shaun Donovan, noted New York Times best selling author and Harvard professor Michael Sandel, actor and community activist Edward James Olmos, and journalist and former CNN anchor Paula Zahn. Also appearing will be the Zimmers, a rousing band of British seniors. Entertainment at the conference will be provided by Comedy through the Ages with Bob Newhart, Vicki Lawrence and John Pinette.
Each day the conference will focus on the varying needs of seniors (and other populations), the models of service and care delivery that will be required to serve them, and the ethical, philosophical, and practical questions associated with the various models. The conference will include sessions covering all the hot topics of management and operations, development, preservation, housing with services, and going green in development and management. For more information about the conference, click on the link below.
Headlines
Association News
House and Senate Appropriations Committees Complete Action on Senior Housing Budget for 2011
AAHSA Convenes Housing with Services Summit
Section 202 Reform Legislation Inches Forward
NAHMA Offers Tax Credit Housing Management Publication
Industry News
"Investing in Distressed Communities: The New Markets Tax Credit Program"
"Budget Plan to Stall Low-Income Housing, Critics Say"
"QAPs Get Greener"
"State Offers Affordable Housing Aid"
"Stuck in Limbo"
"More Focus Needed on Data Collection"
"Tax Credit Crackdown?"
"Energy Efficiency Meets Affordability at Home"
"Bridging the Gap Between Preservation and Transit"
"Private Equity Funds Itch to Pull Trigger"
"Energy Retrofits Could Save $41 Billion a Year"
"Battle to Weatherize"
"Project-Based v. County-Based Approach for Determining Income Limits"
"State Housing Finance Agency, Nonprofit Launch Retrofit Fund"
Association News
House and Senate Appropriations Committees Complete Action on Senior Housing Budget for 2011
Both the House and Senate Appropriations Committees have agreed to provide $825 million for the Section 202 program for fiscal year 2011, and as a result, funding for new development of Section 202 housing next year is assured even if final action on the 2011 budget doesn’t happen until after the November election. The Administration recommended that there be no funds for new development of Section 202 housing pending “reforms” of the program to better target funding, to better leverage funding, and to redesign the program as a platform for the delivery of supportive services. That proposal served as a call to arms and from that moment on AAHSA and all our members and colleagues, including NAHMA and the local AHMAs, delivered our message: We, too, want to reform the program, but it can be done without suspending funding that would not made available until the spring of 2011. It seems the Congressional Appropriators heard our message.
In sharply worded report language, both the House and the Senate criticized HUD for proposing a suspension in funding for new development citing the looming growth in the senior population, the waiting lists in most communities and the worst case housing needs among seniors who represent 21% of the total number of Americans with worst case needs. The House calls for administrative recommendations to reform the program within 30 days of enactment while the Senate calls for recommendations for administrative actions within 120 days of enactment. HUD is working on changes to the 202 program based on the feedback that stakeholders, including AAHSA and NAHMA, provided in the spring. But those changes may not be known until the NOFA comes out in September or October. (Copies of the AAHSA and NAHMA letters are available at http://www.nahma.org/content/shcmnewsbriefs.html). To read both the House and Senate versions of the Appropriations legislation, click on the link below and scroll down to the T-HUD subcommittee.
AAHSA Convenes Housing with Services Summit
On Tuesday, May 25, 2010, AAHSA convened a summit to explore housing with services strategies that will inform our research and advocacy agenda. Enterprise Community Partners provided funding for the event. Approximately 100 stakeholders, representing federal, state and local housing and services agencies, not-for-profit provider organizations, AAHSA housing members and state associations, researchers and others discussed the ways in which affordable housing combined with supportive services can improve the quality of life for seniors in cost-effective ways. Both the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Health and Human Services (HHS) were active participants and OMB staff from the housing and the Medicare/Medicaid branches participated.
The summit highlighted approaches being explored in Vermont, Oregon and Pennsylvania to implement housing with services models. The group agreed on the need for collaborative, evidence-based research to demonstrate the value of housing and services in meeting elders’ needs more efficiently and effectively than is possible under today’s fragmented approach. They also discussed federal and state policy changes needed to promote affordable housing with services as a sustainable option for low-income seniors. To view background information about housing with supportive services click on the link below and scroll down to the four articles prepared by AAHSA’s Institute for the Future of Aging Services.
Section 202 Reform Legislation Inches Forward
Section 202 reform legislation is slowly advancing. The legislation streamlines the development and preservation of affordable, supportive, senior housing. In the Senate, there is a stand-alone bill, S 118 on which a hearing was held last October. In the intervening months AAHSA and AARP have been working on concerns associated with the provision amending the Assisted Living Conversion Program. We recently reached an agreement on language which would establish a new use of ALCP funds – to create service-enriched housing which is independent housing and which offers licensed or certified health related supportive services (not paid for with HUD dollars). Currently ALCP funds are available only to licensed assisted living facilities. We think that this is a good first step in encouraging housing with services models throughout senior housing. We are encouraged that with these agreements in place, the Senate will move forward with a mark-up on this and the Section 811 reform bill.
In the House, it is a bit more complicated. The Section 202 reform bill is included as Title VII of the House Preservation bill, HR 4868. The Financial Services Committee completed mark-up of the bill on July 27, but its prospects are uncertain. Included in the bill are provisions related to guns and identification which may make it difficult to bring to the House floor. The bill also has a number of other provisions that remain controversial, but will be discussed and amendments considered for a manager’s amendment for floor action. If the bill is not considered in its entirety, there is a good chance that Title VII may be considered separately later in the year.
NAHMA Offers Tax Credit Housing Management Publication
The comprehensive "A Practical Guide to Tax Credit Housing Management" is available from NAHMA. The 74-page spiral-bound book is an informative yet easy-to-read primer on tax credit housing management.
The user-friendly guide will help you understand key concepts in the Low Income Housing Tax Credit (LIHTC) program, including Fractions and Credits, Eligible Basis, Qualified Basis, Minimum Set-Aside, Rules of Calculation of Income, Student Households, Amenities and Services, Non-Transient Occupancy, and more.
In addition, the book is designed as a referencew guide for the Specialist in Housing Credit Management® (SHCM®) certification. The SHCM program is unprecedented as the only national certification program supported by three national trade associations and their members. Joining NAHMA in the strategic alliance are the National Apartment Association Education Institute (NAAEI) and the American Association of Homes and Services for the Aging (AAHSA).
“As experienced affordable housing management professionals know, the tax credit program is the primary production tool for creating new affordable housing properties across every state in the country, and it is also the most important tool for rehabilitating and preserving the nation's existing stock of aging affordable housing,” said NAHMA President Daniel Murray, NAHP-e. “To maximize their careers, management professionals in the affordable housing industry must be able to demonstrate their experience and expertise in mastering the complex requirements of the tax credit program.” The publication can be ordered at NAHMA’s webstore via the link below.
Industry News
Investing in Distressed Communities: The New Markets Tax Credit Program
Mondaq (07/07/10) Perlow, Gary
The New Markets Tax Credit (NMTC) program is a relatively young effort to offer benefits to distressed communities and investors. Enacted by Congress through the Community Renewal Tax Relief Act of 2000, the NMTC program is similar to the low-income housing tax credit program in that it seeks to revitalize distressed communities by providing investors with tax credit incentives for making capital investments in low-income areas. The NMTC program, which has been renewed every year since its inception, has awarded more than $26 billion through eight rounds of allocations, including a special round of allocations in March 2009 as part of the American Recovery and Reinvestment Act. In the latest round of applications and awards, about 40 percent of applicants received allocations, with awards totaling about 22 percent of the requested amount. The amount of NMTC allocations awarded tends to depend on the general economic climate and the needs of specific geographic areas. The NMTC program is not a permanent fixture of the United States' budget like the low-income housing tax credit program but has attracted widespread lobbying for its extension each year. National banks have increased their presence as investors, and lobbyists are now pushing for a five-year extension. The Community Development Financial Institutions Fund, a branch of the Treasury Department that awards allocations, expects NMTC capital to be available for investment in nearly every state, and in urban and rural communities.
Budget Plan to Stall Low-Income Housing, Critics Say
Wall Street Journal (07/02/10) Timiraos, Nick
Developers warn that a provision to defer low-income housing tax credits in a bid to close New York State's budget gap threatens to permanently chill future investment in a program that has attracted private capital for affordable-housing development. Under the proposed provision, the state would defer for three years the use of the tax credits in excess of $2 million. Developers typically raise equity for new projects by selling the credits to investors, who then can claim them annually for 10 years. Affordable-housing officials say that the state tax program has successfully boosted private-sector development of low-income housing and worry that the credits will be less valuable if investors lose confidence in their ability to claim them as expected. Developers say that the provision could put at risk some of the tax credits that have been authorized but not yet sold. "Investors are going to walk away from these," says Duncan Barrett, an Albany-based developer who serves as president of the New York State Association for Affordable Housing. Additionally, some developers could be forced to repay investors if tax credits cannot be delivered as scheduled. Developers and affordable-housing advocates say that the provision could ultimately undermine state revenues by freezing out future real-estate development. While investors do not lose the right to claim tax credits, the deferral will force them to revamp their assumptions about returns they had anticipated from the tax credits. "Investors who have expected a certain yield will not get that yield. And going forward, when they're presented with these opportunities, they'll say, 'There's too much uncertainty,'" says Marc Jahr, the president of New York City's Housing Development Corp.
QAPs Get Greener
Housing Finance (06/01/10) Kimura, Donna
A new report from Global Green USA finds that all states included green building measures in their low-income housing tax credit programs in 2009, with most including green requirements in their qualified allocation plans (QAPs). The average score rose from 25 to 30, with 34 states improving their scores, and the lowest score was 10 points higher than in 2008. This means developers will have to include green features in their projects to get tax credits, though many have been asking states to loosen some green targets because projects are so hard to finance. But Walker Wells of Global Green says this is short-sighted, as green building is a good long-term investment that offers utility savings and health improvements. “As green building has become more commonplace and less exotic, there has effectively been peer pressure among the states,” says Wells. “What was seen as leadership five or six years ago is now seen as an expectation.” He says the next step may be a federal policy creating a minimum standard for all QAPs.
State Offers Affordable Housing Aid
Boston Globe (07/08/10) P. 1; Laidler, John
Massachusetts is providing 32 affordable housing projects across the state with financial assistance that will help create or preserve 1,786 units of new rental housing. Affordable units for low- and moderate-income families will account for 1,737 of the new rental housing, and 290 units are targeted for families earning less than 30 percent of the area median income. The various forms of financing assistance include $10 million in federal low-income housing tax credits and $16.3 million in state low-income housing tax credits. The federal low-income housing tax credits and state low-income housing tax credits will be sold to investors to leverage an estimated $123.4 million in private investment for project financing. Massachusetts has also pledged $66.5 million in loan subsidies from affordable housing programs funded with state bonds and from the federal HOME program. Locally, the state has offered $1.2 million in federal tax credits and $3.5 million in state tax credits, along with $2.3 million in other program subsidies, to help fund 75 rental units, 72 of them affordable, for the first phase of Malden Mills in Lawrence. State assistance "is critical to the viability of these types of redevelopments," says Gilbert Winn, managing principal of Boston-based Winn Development, which will work on the Malden Mills project. "Without the state and city support of housing funds these buildings cannot in this market afford to be converted into residential uses."
Stuck in Limbo
Apartment Finance Today (06/10) Ascierto, Jerry
The fate of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac is in limbo, even though U.S. Rep. Barney Frank (D-Mass.) stated in January that the House Financial Services Committee would consider an elimination of the mortgage giants. Congress still has not addressed the mortgage firms or their reform even though the GSEs remain in conservatorship. Cato Institute Policy Scholar Mark Calabria says, "One of the primary drivers behind putting them into conservatorship was an impression by Paulson and others that they were not acting in a countercyclical manner, that they were acting like private companies." If the GSEs had failed and forced foreign investors to book losses, credit for housing would have become impossible to find. Doug Bibby, president of the National Multi Housing Council (NMHC) says, "The political [pressure] on the companies was constant, yet they had shareholders that were expecting returns." It is unclear what incarnation housing finance will take in the future and whether the GSEs will become private, public, or a mixture of the two. However, most analysts and experts agree that there will be a place for multifamily housing once the reforms are in place, especially given that the GSEs back about 80 percent of the overall multifamily market and the market remains profitable, represents 30 percent of the GSEs' affordable housing goals, and has delinquency rates below 1 percent. One option could be to break up the GSEs into as many as 12 entities that are private and capitalized with access to government guarantees for securities issued but still can be regulated and placed into conservatorship if necessary. Fees collected from the guarantees could be used to support affordable housing initiatives, and these new entities would have limited portfolio capacity to warehouse loans and offer mortgages to investors.
More Focus Needed on Data Collection
Housing Finance (06/01/10) Pealer, Casius
In order for green building practices to become commonplace in all building types, there must be more replicable models and hard data to go along with the inspirational stories of green building success, writes Casius Pealer of the U.S. Green Building Council. The affordable housing industry has the tools to fill this need, as several government programs already capture relevant data about projects over time. The Department of Housing and Urban Development has been collecting data on utility use and indoor air quality through the Mark to Market program, while the EPA now includes multifamily in its Energy Star Portfolio Manager. Massachusetts company New Ecology offers a Web-based data collection and reporting tool to compare projects, and Stewards of Affordable Housing for the Future is working with energy consulting firm Bright Power to collect project data and develop an online utility management tool to benchmark utility usage and cost and compare properties. These tools can help an affordable housing owner decide how to embark on a green building retrofit, which starts with gathering data on projects. Assembling and analyzing this data can also help strengthen underwriting for investors and allow public agencies to refine utility allowances, determine taxpayer savings, and fuel future research and development.
Tax Credit Crackdown?
St. Louis Post-Dispatch (07/20/10) P. A1; Logan, Tim
Although Missouri Gov. Jay Nixon failed to persuade state lawmakers to scale back the tax credit for rehabilitating historic properties, developers are concerned that a new, expanded review process that adds months to the process and increases costs is the administration's attempt to rein in the tax credit on its own. Builders say redevelopment could dramatically slow as a result, but the state Department of Economic Development says the new review ensures that the program follows the law by processing applications in proper order. The cost of the tax credit has substantially increased in recent years, with the amount redeemed rising from $33.9 million in 2000 to $186.4 million in 2009. Uncertainty regarding the program's future has put a damper on applications, with only 60 filed during the first six months of 2010, during which time only $13.4 million in historic credits were authorized. In addition to reducing the budget by $47 million this year as a result of the reviews, the Nixon administration is taking aim at low-income housing tax credits, which have not been issued during the last few months.
Energy Efficiency Meets Affordability at Home
Raleigh News & Observer (NC) (07/20/10) Bonner, Lynn
Developers of affordable homes and apartments are ahead of their market-rate counterparts in incorporating environmental sustainability into their plans, says Chris Estes, executive director of the North Carolina Housing Coalition, a group that advocates for more affordable housing. The North Carolina Housing Finance Agency, a clearinghouse for money and tax credits to build affordable housing, gives $4,000 incentives to nonprofits and local governments for each home built to strict energy standards. Developers in the state recently started earning an additional $1,000 grant for each home that meets a green-building standard.
Bridging the Gap Between Preservation and Transit
Apartment Finance Today (07/10) P. 17; Pealer, Casius
The issue of transit is one where affordable housing and green building goals come together. The goal of reducing automobile dependence, including by encouraging more efficient land-use patterns associated with traditional urban neighborhoods or small town centers, also winds up addressing affordable housing and community development goals such as improved access to jobs and a reduced transportation cost burden to low-income families. However, public transit tends to raise property values and rents, making it difficult to keep affordable housing units close by. Many owners of project-based units close to transit are in particular danger of opting out of affordability restrictions. The National Housing Trust (NHT) has quantified the potential loss of affordable housing near transit as part of its effort to minimize these losses, identifying more than 250,000 subsidized apartments in 20 cities within a half-mile of transit and estimating that nearly 70 percent of those apartments have federal contracts that will expire by 2014. There have been some encouraging responses to this situation, including one by the $25 million Denver Transit-Oriented Development Fund, which made its first investment in May 2010 to provide the Urban Land Conservancy (ULC) with capital to purchase and rehabilitate six apartment buildings, resulting in 36 units affordable to families earning up to 50 percent of the area median income. Additionally, a number of states have specifically targeted preservation needs connected to transit through their qualified allocation plans for low-income housing tax credits (LIHTCs). NHT estimates that rehabilitating existing properties requires approximately 40 percent less tax credit equity per unit than building new construction. The author concludes that "more research and communication is needed to ensure success in both public policy and ultimately in project financing." He cites a recent finding by the U.S. Government Accountability Office that "there has been little research that specifically links transit-oriented developments to affordable housing, hindering the ability of policy makers and private investors to make informed decisions or evaluate results."
Private Equity Funds Itch to Pull Trigger
GlobeSt.com (07/15/10) Dolce, Natalie
Private equity funds are eager to purchase distressed real estate, according to Robert Leveen, a senior vice president of Lee & Associates investment services group. Leveen specializes in the acquisition and disposition of multifamily properties throughout Southern California. He notes "there are many private equity funds formed solely for the purpose of acquiring distressed commercial real estate. It is evident that they are itching to pull the trigger and are buying." As an example of how buyers can acquire these types of assets at significant discounts, Leveen cites how he brought in a Los Angeles-based investor to acquire a 260-unit distressed property in Cincinnati that was distressed as a result of defaulting on LIHTC bonds. The property had been rehabbed by the prior owner, and is generating significant income. He also says that indications are that there will be more distressed property coming to market, and it "is clear that investors are back in the market … Since the majority of business comes from lower income markets, it is more challenging today to sell a non-distressed asset, but we are getting these deals done."
Energy Retrofits Could Save $41 Billion a Year
CNet (07/22/10) Lombardi, Candace
A new Pike Research report states that if all the commercial buildings in the United States that currently exist were retrofitted to be more energy efficient, the country as a whole would save over $41.1 billion a year in energy bills. Titled "Energy Efficiency Retrofits for Commercial and Public Buildings," the study estimates that property owners would collectively have to spend about $22.5 billion a year in upgrades over the next decade in order for that savings to be achieved. That would entail energy-retrofitting roughly 79 billion square feet of commercial real estate. The current financial crisis has had a significant dampening effect on property owners' investments in their properties. Financing for such projects is scarce, and the limited investment in building efficiency is not keeping pace with the growing national demand for energy, according to Pike Research. While some major companies have invested in green updates for their properties it has yet to really catch on. Pike Research believes this is about to change and that energy retrofitting for commercial properties will become a strong growth market through 2014 and beyond. "In addition to cost savings, energy retrofits are attractive for purposes of greenhouse gas reductions, energy independence, green branding, property valuation, and productivity," according to the Pike Research report.
Battle to Weatherize
Housing Finance (06/01/10) Anderson, Bendix
Only about half of the $5 billion in the U.S. Department of Energy’s Weatherization Assistance Program has been spent so far, and to get a piece of the pie, multifamily housing developers need to convince state officials that the funds can be used for more than just single-family homes. The program is aimed at making affordable housing properties more energy-efficient, and the funding must be spent by March 2012. Housing advocates, like Lydia Tom of Enterprise Community Partners, say many states are not aware that the weatherization funds have ever been used on multifamily rentals, but New York spends half of its $60 million per year on multifamily; Colorado, Kansas, New Jersey, Ohio, Oregon, and Pennsylania also weatherize apartments. However, some states have created rules that prevent the funds from being used on multifamily; Oklahoma requires that the funds be used on properties where residents pay their own utility costs, and many affordable housing properties do not submeter electricity. One reason for states' reticence to use the funds for multifamily may be the extra paperwork needed to verify that 65 percent of residents are low-income. Also, few states have the type of expert needed to weatherize apartment buildings. These problems can be solved, though, and advocates say that once states are used to spending the money on multifamily, it will become the norm.
Project-Based v. County-Based Approach for Determining Income Limits
Novogradac Journal of Tax Credits (07/10) Vol. 1, No. 7, P. 1; Kroger, James R.
Under the Internal Revenue Code, income limits for LIHTC and tax-exempt bond properties have been determined by Department of Housing and Urban Development (HUD) Section 8 income limits. However, in 2009, HUD published income limits as a separate data set called Multifamily Tax Subsidy Projects (MTSP), and includes both the Section 8 income limits as well as the Housing and Economic Recovery Act of 2008 (HERA) Special income limits. HUD is now publishing the MTSP income limits with two new adjustments -- a HERA Special adjustment for counties with no income decrease in 2007 or 2008 due to HUD’s Hold Harmless policy, and a HERA Hold Harmless provision to prevent income limits from decreasing. If the HERA Hold Harmless provision is applied on a project basis, projects in the same county have different income and rent limits depending on when they are placed in service; but if the same provision is applied on a county basis, projects have the same income and rent limits irrespective of when they placed in service. Projects placed in service in later years are at a disadvantage to projects that were placed in service in earlier years if considered under the project-based approach in both the amount of rent they can charge and in the number of tenants that can qualify to live in the project. Furthermore, the project-based approach creates complex rules and multiple data sets for state monitoring agencies, property managers, and investors. Property managers may be unsure which income limit is correct and might erroneously move in ineligible tenants, deny tenancy to tenants that are eligible, or over- or under-charge rents. More guidance is needed from the IRS on such issues as whether the calendar year is based on a 12-month calendar year or a HUD income year, and how to determine the income limit for projects with buildings placed in service in different credit periods.
State Housing Finance Agency, Nonprofit Launch Retrofit Fund
Spokane Journal of Business (07/01/10) Vol. 25, No. 14, P. B11
Owners of affordable housing properties in the state of Washington have an opportunity to tap a $2 million financing pool to help finance their retrofitting projects. Enterprise Community Partners and the Washington State Housing Finance Commission (WSHFC) have created the Washington Green Communities Retrofit Loan Fund, which will target properties in rural and urban areas that were financed through the federal low income housing tax credit (LIHTC) program. Enterprise and WSHFC plan to make about 20 loans through the Washington Green Communities Retrofit Loan Fund, and the loans will average about $100,000. "Greening and preserving affordable multifamily housing is an important component to our work at the Commission," according to Steve Walker, director of the Tax Credit Division, Washington State Housing Finance Commission. "This fund offers developers a viable option to maintain affordability while achieving sustainability." A full energy audit will be conducted on properties to determine the potential savings from the retrofit projects. Reducing energy and water consumption can save building owners 15 percent to 20 percent on utility costs.
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