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Announcements
Coming Soon: Specialist in Housing Credit Management® Biannual Webinar: “Key Housing Credit Compliance Issues”
Twice each year, SHCM certified professionals are offered a free live webinar featuring leading experts on housing credit compliance issues.
The next SHCM webinar is scheduled for Thursday, December 1 at 2:00 Eastern, and will provide an hour of instruction, followed by about 30 minutes Q&A (presenters providing verbal answers to written questions from the audience). The webinar will feature four experts:
Grace Robertson
Program Analyst, Examination Specialization & Technical Guidance,
Internal Revenue Service, Washington, DC
Anita Moseman, FHC, SHCM, NAHP-H
Vice President, Monfric, Inc., Clifton, CO
LIHTC Trainer, Housing Credit Productions
Gianna Solari, SHCM, NAHP-e
Vice President, Operations, Solari Enterprises, Inc., Orange, CA
LIHTC Trainer, Housing Credit Productions
Greg Proctor
President, Windsor Consulting
LIHTC Trainer, Housing Credit Productions
Join our four experts for an informative webinar focused on essential and emerging housing credit compliance issues.
Registration details: The live webinar is free of charge to SHCM certified professionals (your registration will be verified via the SHCM certificant database). To qualify for free registration, SHCM certificants must be current in their annual renewal requirements. For all other non-SHCM professionals, the registration fee is $75.
Continuing Education Credits: SHCM certified professionals will earn 1.5 units (1 and a half hours) of continuing education credit for participating in the event.
For more details, click on the link below.
Headlines
Association News
SHCM Certification Online Leaning Opportunity
Green Property Management Training
NAAEI Webinars: 45L Energy Efficiency Tax Credit
NAAEI Webinars: Putting the Green into Pest Management
NAHMA Offers Green Housing Management Publication
Industry News
"LIHTC Properties Show Strength"
"Is a Consensus Emerging on LIHTC Property Valuations?"
"Preserving Dollars "
"Year 15 Issues for Low-Income Housing Tax Credit Partnership"
"Freddie to Step Up Multifamily Loans"
"Replacing a General Partner"
"Game On"
"Lack of Affordable Housing Is Growing Issue for Seniors"
"Deficit Reduction Effort May Mean Trouble for Tax Credit"
"Rental Options Sought on Foreclosed Homes"
"Missouri Workforce Housing Association Supports Missouri Governor Nixon's Compromise"
"NMHC: Housing Policy Must Adapt to Growing Renter Population"
"A Rising Tide of Renters"
"Payne County Lawsuit Could Set Bar on Value of Housing Tax Credits"
"Winston: WHEDA Aiming to Grow Its Economic Development Mission"
"San Diego Commercial Real Estate Property Managers Turn to Artificial Turf to Reduce Maintenance"
Association News
SHCM Certification Online Leaning Opportunity
NAAEI offered SHCM training entirely online during the month of September 2011. The blended learning class had 63 people enrolled. The course was targeted to affordable housing management professionals as a convenient and affordable way to prepare to earn the Specialist in Housing Credit Management (SHCM) Certification.
All attendees received NAHMAs "Practical Guide to Tax Credit Housing Management" workbook in a .pdf format. The course will be offered again in February 2012. If you are interested in registering for the February class, please contact Shana Treger at shana@naahq.org for additional information.
Green Property Management Training
NAAEI is now partnering with Barry Weaver, CPM, LEED AP of Barry Weaver Consulting, LLC to offer the Green Property Management Course leading towards the Credential for Green Property Management (CGPM).
The 16-hour CGPM course covers:
• Green building principles and practices overview
• Energy efficiency
• Water efficiency
• Integrated pest management
• Indoor environmental quality
• Green operations and maintenance
• Green site landscaping
• Green building systems
• Alternative energy sources
• Energy Star and WaterSense programs
• Recycling and waste reduction
• Tenant green education
The online CGPM course is an innovative approach to green property management training and leads to the Credential for Green Property Management (CGPM):
• Designed to meet HUD’s green training objectives
• Affordable – cost $445.00 per participant and includes the cost of the CGPM application fee
• Specific to the green operational issues of multifamily housing
For details on the Credential for Green Property Management, click on the link below.
NAAEI Webinars: 45L Energy Efficiency Tax Credit
Recently extended tax legislation allows for a tax credit of up to $2,000 for qualified energy efficient homes. The home must be constructed by an eligible contractor and be in use as a residence during the tax year. However, the home does not have to be the owner’s primary residence, meaning each dwelling in apartments and condominiums are potentially eligible.
During this presentation you’ll learn what qualifies for the tax credit, how to maximize your tax credit, and how this is one of many credits that can give you a competitive advantage when bidding on projects.
Cost is $29.99 for members and $39.99 for non-members.
To Register, click on the link below.
NAAEI Webinars: Putting the Green into Pest Management
Most people don’t think of pest control being “green,” but pest management in multifamily settings has come a long way from the chemical-intensive practices of the past. Greg Baumann, Director of Technical Services for Orkin, will show you how you can help keep pests out with a much greener pest management program (and far fewer chemicals), and stand out to increasingly eco-conscious consumers.
Cost is $29.99 for members and $39.99 for non-members.
To Register, click on the link below.
NAHMA Offers Green Housing Management Publication
A new publication, Green Housing: A Practical Guide to Green Real Estate Management, is now available from the National Affordable Housing Management Association (NAHMA). The 82-page spiral-bound book is an informative yet easy-to-read primer on green real estate management, and covers all of the basic concepts, such as energy efficiency, indoor environmental quality, resource efficiency, site sustainability, water efficiency, integrated pest management, tenant green education, and creating a green operation and maintenance plan.
According to a recent report by the U.S. General Services Administration, green buildings have 13% lower maintenance costs and consume 26% less energy. Though there is a common perception that “going green” can be cost-prohibitive, property management professionals and building owners and developers are discovering that greening their properties is not only cost-effective but can be truly profitable. Green Housing, by real estate professional and certified green-building expert Barry P. Weaver, is a timely manual for those who have the desire but not a great deal of capital to accomplish green upgrades.
The book may be purchased for $35 per copy, plus $5 shipping and handling, via NAHMA’s webstore via the link below.
Industry News
LIHTC Properties Show Strength
Housing Finance (09/28/11) Kimura, Donna
According to a new study by the Reznick Group, there has not been a deterioration of low-income housing tax credit (LIHTC) property performance, despite the economic turmoil of the past three years. The findings come at a time of increasing scrutiny on both federal programs and the nation’s banks, which play a prominent role in the tax credit program as an investor. For investors and regulators, the study offers reassurance that LIHTC investments have not grown riskier in the last few years. Instead, property performance has improved. “From the industry’s perspective, I think that the data in areas like occupancy, where we’re at 96.6 percent, prove yet one more time the enormous imbalance between the supply of affordable housing units and the demand for them,” said Fred Copeman, a principal at the firm and head of its Tax Credit Investors Services practice. The study also shows a dramatic drop in the number of projects reporting negative cash flow and/or negative debt coverage. The study found that the foreclosure rate remains extremely low, even though it has increased in small increments in recent years. The question still remains as to why there such a low foreclosure rate when roughly 25 percent of the properties are still not breaking even. Copeman explained that developments with deficits often have very minor shortfalls, which can be easily overcome. The reason that fewer properties are operating below break-even is likely due to several factors, including fewer moves among LIHTC renters, the age of the portfolio, more underwriting experience, and lower operating expenses. Reznick Group expects to issue a second report before the end of year that will further examine why operating results have improved, the extent to which the Community Reinvestment Act impacts the price of tax credits based on property location, and what the average development cost is for housing credit properties.
Is a Consensus Emerging on LIHTC Property Valuations?
Affordable Housing Finance (09/11) John, Douglas S.
For owners and managers of low-income housing tax credit (LIHTC) projects, property taxes often represent their largest expense. Local assessing authorities, state legislatures, and courts have attempted to form policies to simplify valuation issues associated with LIHTC properties. At least 32 states currently have some statewide guidance to taxpayers on LIHTC valuation. Seventeen states have passed laws and nine state courts have issued decisions that clarify some aspect of the methodology used to value these assets. The bulk of assessing authorities use the income capitalization approach instead of either the sales comparison or cost method. Assessors who value a LIHTC complex using the income capitalization method must select between market rent and the property's restricted rent to determine gross potential income. A clear consensus among jurisdictions has emerged that favor the use of a property's restricted rents. At present, 30 jurisdictions mandate the use of restricted rent amounts in valuing LIHTC properties, while the remaining jurisdictions provide no clear guidelines. With regard to the valuation of the federal tax credits, nine jurisdictions include the value of the LIHTC allocation as part of a property's net operating income. Those authorities assert that the tax credit improves a project's value, so it should be considered by a prospective buyer when estimating the project's value.
Preserving Dollars
Apartment Finance Today (08/11) Ascierto, Jerry
A key financing tool for historic rehabs is Historic Tax Credits (HTCs), which often remain underused. Developers that use both state and federal HTCs can obtain as much as 45 percent of their eligible rehab costs in credits, so a $5 million historic rehab could potentially secure $2.25 million in HTCs through the programs. Developers that use HTCs often break even with a lower occupancy rate or can offer lower rents compared with a higher leveraged new construction deal. “The whole reason for using the HTC is to reduce the amount of debt; therefore, you can in theory reduce the amount of rent,” says Lee Harris, president of Cohen-Esrey Real Estate Services, which has developed or invested in 20 HTC deals. Experts estimate that a typical HTC deal can take approximately 15 months to 20 months to process. Two forms of federal HTCs are available: the 20 percent credit and the rarely used 10 percent credit. Buildings that are on the National Register of Historic Places or that contribute to a historic district are eligible for the 20 percent credit, while those constructed before 1936 can be eligible for the 10 percent federal credit even if they lack historical significance. In addition, 33 states offer their own historic tax credits, with four others now considering legislation to create a program.
Year 15 Issues for Low-Income Housing Tax Credit Partnership
Novogradac Journal of Tax Credits (09/11) Vol. 2, No. 9, Xue, Miao; Thesman, Robert
Low-income housing tax credit (LIHTC) partnerships should begin their year 15 planning during the underwriting process and should continue it through the compliance period. Among the issues that LIHTC partnerships should consider during their year 15 planning process is whether a right of first refusal or buy-sell agreement has been made. In addition, LIHTC partnerships should be aware of the exact terms of agreements affecting year 15 negotiations and outcomes. Buy-sell agreements--as well as some provisions of partnership agreements, lender agreements, and regulatory agreements--could contain requirements and restrictions on disposition transactions made after year 15. Besides agreements, LIHTC partnerships should also look at the exit strategies that are available to them, such as selling the property, selling a partnership interest, the sale of the property or partnership interest at a bargain price, re-syndication, or a qualified contract. Each of these exit strategies have different tax consequences for LIHTC partnerships. Finally, LIHTC partnerships should take steps such as keeping good records of tax returns from previous years, becoming familiar with any executed agreements that might have an impact on year 15, and performing a cost benefit analysis in the early years of the partnership to determine which exit strategies will be best.
Freddie to Step Up Multifamily Loans
Wall Street Journal (08/31/11) P. C9 Yoon, Al
Freddie Mac plans to step up its program to buy loans backed by apartment communities, increasing the availability of financing for owners and strengthening the overall multifamily housing sector. The firm expects to fund more than $16 billion in apartment loans in 2011, an increase from $14.8 billion last year. According to David Brickman, head of multifamily funding for Freddie Mac, over 50 percent of this year's total will come in the third and fourth quarters; and the lion's share will be bundled into commercial mortgage-backed securities for sale to investors.
Replacing a General Partner
Novogradac Journal of Tax Credits (09/11) Leonard, Sean B.
Sluggish economic conditions during the past few years have impacted many projects financed with the proceeds of low-income housing tax credits (LIHTCs). Many project-level general partners may find themselves in default under the project partnership's limited partnership agreement and/or governing loan documents, often due to unavoidable circumstances. Limited partners now increasingly have to negotiate the exit of defaulting general partners and the entry of replacement general partners. When replacing a general partner, it is essential that partners have an excellent reputation in the industry, years of positive experience managing projects, and adequate financial resources to successfully operate the project. A key step in the replacement process is to have the limited partner conduct a detailed analysis of any required consents early on. A general partner's reputation and experience can be an important factor in obtaining any needed third-party consents, such as lenders, the U.S. Department of Housing and Urban Development (HUD), and credit agencies. The limited partner will typically want the replacement general partner to assume the guaranty of all of the general partner's obligations, which can include guaranties for completing construction of the project, funding operating deficits arising at the project, and against lost tax credits. Some credit agencies will require that a replacement general partner be a nonprofit entity if the LIHTCs were allocated under the nonprofit set-aside.
Game On
Affordable Housing Finance (09/11) Ascierto, Jerry
There are currently some 20 bills in the U.S. House that in some way address Fannie Mae, Freddie Mac, and housing finance reform. National Multi Housing Council President Doug Bibby says, "You've got a lot of action and activity, but nothing really happening. My prediction is that nothing legislatively is going to happen until after the 2012 election." The Obama Administration has offered up three possible solutions, including a fully private market, a private market with an emergency government guarantee in times of crisis, and an always-on guarantee. The main debate centers on how much involvement the government should have in the national housing finance system. However, without action in Congress to reform them, the GSEs have additional time to earn a profit and pay back the government. Bibby notes, "The best thing Fannie and Freddie could do is return to profitability, start paying the government back, and then we’ll see what happens."
Lack of Affordable Housing Is Growing Issue for Seniors
Des Moines Register (IA) (09/19/11) Stegmeir, Mary
In central Iowa, affordable senior housing is extremely limited and being further squeezed by the weak economy and expanding senior population. Three recently completed housing complexes were all financed with the help of low-income tax credits via a program overseen by the Iowa Finance Authority. Builders that use the credits target tenants who earn no more than 50 percent or 60 percent of the area median income. Those numbers corresponded to annual earnings of no more than $25,650 or $30,780 in 2010 for a single person living in Polk County. "There's instant demand, which is a (property) owner's dream," observed Steve Niebuhr, a senior vice president at Hubbell, which completed a project of 31 rental town homes for seniors. "The income-restricted tax credit program and affordable senior housing have been somewhat not emphasized in the past, but I think you're going to see more projects focused in that direction. The demographics are moving more in that direction." It is estimated that in less than 20 years, the number of Iowans ages 65 and up will increase by nearly 50 percent.
Deficit Reduction Effort May Mean Trouble for Tax Credit
Affordable Housing Finance (09/11) Jacobs, Barry G.
The low-income housing tax credit (LIHTC) program may be undermined by a 12-member bipartisan "super committee" tasked with reducing the deficit by an additional $1.5 trillion over the next 10 years. Seven votes will be required to send a deficit-cutting bill to the House and Senate. Some Republicans on the panel might agree to tax reform that eliminates so-called tax expenditures, which include low-income housing and other special deductions or preferential tax rates. Supporters of the housing tax credit will likely contend that LIHTCs have been beneficial and worth the cost because they have helped create hundreds of thousands of units of housing for the impoverished. The panel may opt to preserve a handful of the most popular provisions, such as the deductions for home mortgage interest and charitable contributions. However, LIHTCs will likely not be among those provisions. Rep. Gary G. Miller (R-Calif.) has introduced legislation to enable depository institutions and government-sponsored enterprises (GSEs) to lease their foreclosed properties for up to five years. The bill is being co-sponsored by Rep. Spencer Bachus (R-Ala.), Rep. Barney Frank (D-Mass.), and Rep. Carolyn McCarthy (D-N.Y.). Treasury Secretary Tim Geithner said, "Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets, and support neighborhoods and home price stability."
Rental Options Sought on Foreclosed Homes
Wall Street Journal (08/10/11) P. A2 Timiraos, Nick
To prevent further drops in home prices and reduce the glut of foreclosed properties on the market, the Obama administration will consider investors' ideas for converting thousands of foreclosures owned by Fannie Mae, Freddie Mac, and the FHA into rentals. HUD favors a proposal to sell hundreds or thousands of foreclosed homes in packages to investors who would rent them out. The administration is willing to field other proposals from nonprofit and for-profit investor groups -- including options that may allow distressed borrowers to remain in place, but as renters instead of owners.
Missouri Workforce Housing Association Supports Missouri Governor Nixon's Compromise
St. Louis American (09/26/11)
The Missouri Workforce Housing Association (MOWHA) has reiterated its support for the compromise on economic development legislation announced in late September between Missouri Gov. Jay Nixon and state House leaders. The agreement preserves the reduced low-income housing tax credit (LIHTC) program. Senate President Pro Tem Rob Mayer recently stated that any proposal that failed to terminate the program is "dead on arrival" in the Senate. MOWHA said it supports biennial tax credit program reviews, but opposes arbitrary termination dates. MOWHA Board Chair Stephen Acree expressed surprise at the demand. "We sacrificed on several fronts in an attempt to satisfy a few Senate opponents," he noted. "Apparently it wasn't enough. In any case, Missouri families are fortunate that LIHTC remains intact." MOWHA has indicated it supports requiring the LIHTC program to be subject to mandatory reviews as proposed by several senators.
NMHC: Housing Policy Must Adapt to Growing Renter Population
Housing Wire (09/23/11) Enochs, Liz
The United States must rethink its housing policy to recognize the growing ranks of Americans opting for rental housing and minimize incentives that prioritize homeownership, according to the National Multi Housing Council (NMHC). NMHC President Doug Bibby said during a presentation at the recent National Apartment Summit in Tysons Corner, Va., that there is a growing chasm between America's housing needs and current housing policy. "The U.S. is on the cusp of fundamental change in our housing dynamics as changing demographics and changing housing preferences drive more people away from the typical suburban house and toward the type of housing that rental housing offers," said Bibby. He went on to say that families with children comprised more than half of households decades earlier; but they made up just one-third of households in 2000 and, by 2025, they will be closer to 20 percent. More than 14 percent of American households live in apartments; and in this decade, renters could make up more than 50 percent of all new households as their ranks increase by more than 7 million, according to the council. Bibby argued that housing policy should change to de-incentivize homeownership, an area where he said benefits overwhelmingly go toward "the wealthy and distort the economy by encouraging people to over-invest in housing."
A Rising Tide of Renters
The Hill (09/14/11) Dellonte, Mark
Mark Dellonte, president of Love Funding, one of the biggest providers of FHA multifamily financing, opposes recommendations to cut the Low-Income Housing Tax Credit program to reduce the federal deficit at a time when the number of renters in need of affordable apartments is on the rise. He cites studies indicating that the number of renter households will climb to 36 percent by 2015 from 32.8 percent in 2004. Dellonte says that multifamily construction starts are expected to total 133,000 in 2011, but upwards of 300,000 units are needed to meet demand. He adds that there is a significant shortage of multifamily units for lower-income renters. Dellonte notes that FHA-insured multifamily loans are among the best performing loans and that additional investments in HUD's multifamily resources will help close the gap in affordable rental supply. "With so much of the nation's focus on the single-family market, we have lost sight of the fact that renting is the only option for many Americans," he says. "Our economy doesn't need another housing crisis. It needs smart housing policy that gives everybody a chance at a roof over their heads, regardless if they own it or not."
Payne County Lawsuit Could Set Bar on Value of Housing Tax Credits
Stillwater NewsPress (OK) (09/06/11) O'Bannon, Ricky; Pere, Anita
A lawsuit filed in Payne County, Okla., may have a significant impact on whether federal low-income housing tax credits can be considered revenue. The case was initially filed in 2007 and was settled in the spring of 2011. Stillwater Housing Associates (SHA) and the Payne County Assessor's office were in conflict over how the county should determine the taxable value of an apartment complex that had received Section 42 tax credits. SHA contended that the property was worth less because the amount of income it could provide was limited due to the lower rents paid by low-income tenants. Assistant District Attorney Lowell Barto, who represented the county, said the county preferred what is known as the "income and expense approach" under which the net income of a property is divided by the capitalization rate. If a property had a net income of $550,000 and a capitalization rate of 9 percent, this means it would have a taxable value of $6.1 million. At issue in the case was whether the tax credits, which were sold to investors, served as income for the property. Oklahoma Court of Civil Appeals Judge Carol Hansen agreed with the SHA in the case, asserting in an option that, "The low income housing tax credit is a tax benefit that belongs to the investor rather than a right or privilege belonging to the land." William Elias, who represented Stillwater Housing Associates, noted that Article 10, Section 6 of the Oklahoma Constitution prohibits "ad valorem" taxation of intangible property, including credits, according to court documents.
Winston: WHEDA Aiming to Grow Its Economic Development Mission
Wisbusiness.com (08/17/11) Clark, Brian E.
Wyman Winston took the reins of the Wisconsin Housing and Economic Development Authority (WHEDA) back in January, overseeing a $3.7 billion portfolio, with roughly $2 billion backing loans for single-family homes and another $700 million for multifamily housing and apartment developments. Much of the funds are used to guarantee loans that are originated by banks. Winston reports that WHEDA has applied for approximately $100 million in federal New Market tax credits for next year. His goal is to leverage that money to attract additional public and private sources, resulting in $1 billion in investments statewide over the next four years. Winston states, "In some cases, that lending will be in partnership with community banks and other banks like what we do now. But the New Market tax credits are a critical component." Unlike other state agencies that have seen at least some of their duties shuffled under the Walker administration, Winston reports that WHEDA’s responsibilities have remained unchanged. In fact, Winston and his staff are working closely with Walker's office to achieve the governor's goal of gaining 250,000 jobs over the next four years. To this end, the first part of the year was spent looking at how WHEDA could assist under-served rural and urban markets that are often passed over even in good economic times.
San Diego Commercial Real Estate Property Managers Turn to Artificial Turf to Reduce Maintenance
Caymanmama.com (09/18/11)
In San Diego and elsewhere, an increasing number of commercial property managers are turning to artificial turf as a means of reducing maintenance costs and increasing cash flow for clients. Scot Wozniak of San Diego Lawns, Inc. is among those industry professionals who has seen an increasing trend toward installing water-efficient low-maintenance artificial grass on commercial properties to ensure the best cash flow possible. He states, "I can sit down with any property owner and go over the numbers to determine the return on investment for installing artificial turf. In most cases, owners are stunned at how much they spend on water and maintenance costs each month." Commercial properties, in particular, are prone to over-spending on such things as maintenance and water. Wozniak concludes, "Larger properties obviously can save quite a bit more each month than smaller properties. While there are some initial outlays to install synthetic lawns, that investment is quickly recouped."
Abstract News © Copyright 2011 INFORMATION, INC.
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