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Save the Date – LeadingAge’s Leadership Summit and Legislative Conference Scheduled for March 18-20, 2013

LeadingAge will hold its Leadership Summit and Legislative Conference, PEAK Conference, in Washington, DC, at the Marriott Wardman Hotel. The event is LeadingAge’s annual advocacy meeting where its members across the continuum of aging services make their voices heard on Capitol Hill about the policies and funding priorities that LeadingAge members support to ensure that seniors receive the services they need, when they need them, in the place they call home. The theme for this PEAK Conference will be housing plus services, the future of affordable senior housing. Key issues of focus will include the challenges raised by the coming year of fiscal austerity, advocacy efforts to restore funding to the Section 202 program, and possible alternatives to the Section 202 program in fiscal year 2013. For more details, click on the link below.


Association News
Housing Groups File Amicus Brief on State Effort to Limit Section 8 Rent Increases
Sequestration, Fiscal Cliff and Housing in the Lame Duck
Housing and Supportive Services – The Future of Senior Housing
NAHMA Offers Green Housing Management Publication

Industry News
"Challenges Facing the Surging Demand for Affordable Senior Housing"
"Will the LIHTC Be Abolished?"
"Developers Take Advantage Of Low Income Housing Development Tax Credits, But Recent Third Circuit Decision Stirs Controversy"
"The Impact of Sandy on the LIHTC Industry"
"NYU Furman Center Report Evaluates Whether Households Receiving Housing Assistance Are Able to Live in Areas With Better Schools"
"California Releases Proposed LIHTC Changes"
"Property Compliance"
"Big Business for Private Placement"
"Pricing Back to 2007 Levels in Six Top U.S. Apartment Markets"
"Rules Hinder Multifamily Development"
"Green Building to Surge Amid New LEDs and Smart Windows"
"Fannie Mae Analyzes the Shift From Owning to Renting in Market"
"Green Construction and Retrofitting Creates More Jobs"
"Affordable Multifamily Segment Holds Steady"
"Why Micro Apartments Are The Next Big Trend in City Living"

Association News

Housing Groups File Amicus Brief on State Effort to Limit Section 8 Rent Increases

Eight national housing organizations -- the National Leased Housing Association, the National Association of Home Builders, the National Affordable Housing Management Association, the National Multihousing Council, LeadingAge, the National Apartment Association, the Institute for Real Estate Management and the Council for Affordable and Rural Housing -- filed an Amicus brief on Nov. 7 in support of a Maine Section 8 property owner challenging the decision of the Maine State Housing Authority to limit rent increases to HUD's Fair Market Rents (FMRs).

At issue in this suit is the decision by the Maine Housing Authority to use the FMR as the default limit on rents when determining a rent increase, rather than requiring a Rent Comparability Study (RCS) to establish market rents for the area.

The Amicus brief makes the point that the use of FMRs in this way could adversely impact the economic interests of all Section 8 owners, as well as efforts to preserve affordable housing assisted under Section 8, by artificially and inappropriately limiting rents to the FMR and thereby reducing rent increases. Such limitations also may adversely impact tax credit financed rehabilitations which rely upon Section 8 rental assistance based on the market.

The industry groups are seeking to overturn the Maine case decision to avert consideration of the approach elsewhere. For a copy of the Amicus brief, click on the link below.
Sequestration, Fiscal Cliff and Housing in the Lame Duck

Unless Congress acts by December 31, taxes will rise for every American, and Sequestration will result in automatic cuts to Federal programs, including to housing and community development programs. These cuts will adversely affect some 2 million vulnerable Americans who would otherwise be assisted by the arious HUD programs.

Sequestration is the proposal adopted by Congress under the 2011 Budget Control Act to force $1.2 trillion in savings in order to reduce the deficit, $600 billion each from non defense and defense discretionary spending. The automatic spending cuts were intended to spur Congress and the White House to reach agreement on a balanced approach to deficit reduction that included spending reductions, responsible entitlement reform and increased revenues. The lame duck session of Congress now playing itself out is consumed with solving this seemingly intractable problem.

Of particular interest to affordable housing providers are the potential cuts to the Section 8 program, over and above the policies now in place by HUD, such as using residual receipts to offset Housing Assistance Payments. If Sequestration occurs, it is estimated that more than $800 million would be cut from Section 8 project based renewal funds. According to some estimates more than 92,000 residents could lose their housing over time if the cuts are made.

The Campaign for Housing and Community Development Funding, a coalition of more than 70 Washington-based housing and community development organizations, has prepared an informational piece on the impacts of Sequestration which can be accessed via the link below.
Housing and Supportive Services – The Future of Senior Housing

Affordable unlicensed senior housing properties -- such as Section 202, low income housing tax credit projects or public housing communities -- linked with health and supportive services can provide a cost-effective answer for meeting the housing and health care needs of lower-income seniors as they age in place. More and more, housing providers are beginning to recognize that combining housing with supportive services is a less expensive housing and health care option than licensed assisted living or nursing homes and that such supportive housing is both marketable and can contribute to the discussions of cost savings that impact the availability of affordable housing funds. It is less expensive to house seniors even with health needs in affordable housing with services than in higher levels of care.

Over two million seniors currently live in these settings across the country. Many have aged in place -- the average resident in Section 202 properties is 76 years old -- and are experiencing declining health and increasing frailty levels. As many as one in four residents are living with multiple chronic health conditions and need assistance with daily living activities. Seniors often cycle in and out of the emergency room and hospital, at high cost to Medicare. Some transfer unnecessarily or prematurely to nursing homes, costs paid by Medicaid, because they need more care or oversight than is available at their housing site unless the housing provider brings in and partners with health and supportive services providers. This is the future of senior housing with housing and services providers working together and finally speaking the same language to benefit the elderly residents.

Two critical components for housing providers to offer housing and services is access to a service coordinator for the property and resident assessments so that housing providers and their partners can offer the appropriate services to the residents.

For an article on the role of a service coordinator, click on the link below. For more information on a LeadingAge tool for assessing resident needs, health and functional status, visit this link:
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

Challenges Facing the Surging Demand for Affordable Senior Housing
Senior Housing News (11/25/12)

Industry and demographic statistics from the Bipartisan Policy Center, U.S. Census Bureau, and National Investment Council point to sustained and significant demand for senior housing in Chicago, the Midwest, and across the country. It is the type of demand and the resultant enthusiasm that could potentially fuel a “build it and they will come” mentality that in the past has plagued other real estate sectors. In almost all facets of the planning, development and management cycle, cost is a critical factor because the operative word in affordable housing is affordability. The U.S. Department of Housing and Urban Development (HUD) annually dictates the rents that can be charged, and the rates have held steady for the past eight years. In affordable housing projects, cost overruns that may be the result of bad planning, bad judgment, and poor performance by a development and management team cannot simply be passed along to the tenants. However, the senior housing market represents a more specialized, niche-oriented segment of the real estate industry. Municipalities looking to attract affordable senior communities within their boundaries, lenders who will support them, and investors who will further bankroll these projects must practice caveat emptor—buyer beware—before entering partnerships. There are some significant challenges faced by those who develop affordable senior housing projects, and how they meet those challenges goes a long way in determining how successful the projects and the alliances they form will be. Challenges include pursuit costs, design and construction, the increasing pressure to make affordable housing projects more energy efficient, property operations (cost control/management issues), maximizing occupancy and minimizing resident turnover, financial considerations, and government/legislation matters. Challenges are inherent in every development opportunity, regardless of the property type; and the complex nature of this form of development can be very risky. It is necessary for development team partners to carefully evaluate the credentials, track record, and expertise of the project developer. How the developer navigates these challenges and other issues that may arise speak volumes to the integrity and potential success, or failure, of a project.

Will the LIHTC Be Abolished?
Multi-Housing News (11/12) Foong, Keat

In the post-election year of 2013, the government may be ready to continue its push for radically lower income taxes for corporations and high-income earners, while cutting spending on the social safety net. Housing programs, in particular the Low Income Housing Tax Credit (LIHTC) program, may or may not be impacted as federal, state, and local budgets are cut. A prime threat to the very existence of the LIHTC program itself is national tax reform. In listing the dangers to the LIHTC program, Robert Landis, senior vice president and director of asset management at Raymond James Tax Credit Funds Inc., notes that some of the key, long-time congressional supporters of the LIHTC programs are retiring this year. It is unclear who will become the new torch-bearer for the credit. Another issue is that the new generation of members of Congress may see LIHTC as a spending program that is a part of the tax code rather than a very effective housing tool born out of tax reform in 1986 that leverages the resources of the private sector. Under tax reform, the corporate income tax rate will be lowered; but in exchange for the greater benefit of bringing down the highly progressive rate of taxation, a whole host of corporate tax deductions, tax credits, and loopholes will be eliminated. Therein lies the threat to the existence of the LIHTC program: because it is a tax credit, LIHTC may be a prime target or collateral damage. Budgetary concerns at the state and locals levels are also creating obstacles for the housing credit program. Still, while there appear to be mortal dangers to the LIHTC program at the federal level, there are also reasons to believe the program will not be abolished. In fact, Landis says that most in the industry do not believe the LIHTC will be done away with completely. "The concern now is that someone will tinker with the rules so that less housing will be created,” he explains. One point in favor of the housing tax credit is its success, as well as the lack of any scandals associated with it. The LIHTC, which has produced some 2.4 million rental housing units since 1986, “has been remarkably successful for 25 years. No other programs in the history of the U.S. has created more housing more efficiently,” asserts Landis. LIHTC has also been a bipartisan program that typically receives support from both sides of the aisle: Democrats favor the program because it helps produce affordable housing for those in need, while Republicans look positively on the program because it reduces taxes for corporations and elicits the involvement of the private sector, rather than the government, in producing affordable housing.

Developers Take Advantage Of Low Income Housing Development Tax Credits, But Recent Third Circuit Decision Stirs Controversy
Mondaq (11/21/12)

Developers of multi-family apartment complexes geared to low- to moderate-income tenants are increasingly taking advantage of federal low-income housing tax credits (LIHTC) and, where available, their state counterparts, to finance such developments. While LIHTCs are technically not a form of financing, a developer will frequently partner with an equity investor interested in utilizing the tax credits, which are made available following the development or renovation of a qualified low-income housing development project. The credits come in two basic types: 9 percent credits and 4 percent credits, which typically are paired with a bond financing. A recent Third U.S. Circuit Court of Appeals decision, known in the industry as the "Boardwalk" decision, has caused great concern. In that decision, which involved historic rehabilitation tax credits (not LIHTC), the Third Circuit sided with the Internal Revenue Service (IRS) and held that the equity investor was not a true partner in the venture because the equity investor had no "meaningful stake in the success or failure" of the project. The court held that the equity investor was not entitled to the tax credits at issue. The court's decision was extremely fact-specific, thus suggesting that the holding may not have universal application, but the potential parallels for LIHTC transactions are notable, and many in the industry were surprised that the IRS directly challenged the manner in which most tax credit transactions, including LIHTC transactions, are structured. Nonetheless, LIHTC developers and major LIHTC lenders appear, at least for now, to have concluded that the risks associated with the "Boardwalk" decision are limited to historic tax credits, not LIHTC.

The Impact of Sandy on the LIHTC Industry
Affordable Housing Finance (11/12) Reamn, Susan Pristo

The Internal Revenue Service has temporarily suspended LIHTC tenant-income limitations and non-transiency rules to allow families and individuals displaced by Hurricane Sandy to qualify for low-income housing. Similar to the relief provided after Hurricanes Katrina and Rita, Notice 2012-68 allows project owners in any state to temporarily rent vacant units to displaced individuals and families up until Nov. 30, 2013. Only individuals from designated jurisdictions of Connecticut, New Jersey, and New York whose residence was either damaged or destroyed by Sandy are eligible. For purposes of determining a projects qualified basis and minimum set-aside test, displaced individuals will be deemed low-income for the first year of the credit period, and while the individual will no longer qualify as low-income after the first year, this will not change the status of the unit they are renting, which will retain the same status it held before the Oct. 22, 2012 effective date of the Notice until the temporary housing period has ended. Owners will be required to maintain and certify records including the displaced individual's name and social security number, the address of the damaged residence, and a signed statement by the individual stating that they qualify under the provisions of the Notice. Owners will also need to obtain the prior approval of their state housing agency, which will determine the appropriate period of temporary housing, the start and end dates of which must also be certified by the owner. Additionally, project owners in FEMA designated jurisdictions effected by the storm should consult Revenue Procedure 2007-64 for information on potential extensions to their carryover allocation they may qualify for as they restore their project.

NYU Furman Center Report Evaluates Whether Households Receiving Housing Assistance Are Able to Live in Areas With Better Schools
RealEstateRama (11/14/2012)

A report by NYU's Furman Center for Real Estate and Urban Policy and the Moelis Institute for Affordable Housing Policy, prepared for the Poverty and Race Research Action Council, finds that children living in Public Housing and Project-based Section 8 developments and children in households receiving Housing Choice Vouchers live near schools with lower test scores than the schools available to other low-income households. The Low Income Housing Tax Credit (LIHTC) program is the only one of the four studied programs in which participating families live in neighborhoods with schools that perform slightly better than those available to other poor households. The report, "Do Federally Assisted Households Have Access to High Performing Public Schools?," finds that families with children receiving one of four major types of federal housing assistance live near elementary schools that rank quite low on standardized tests scores compared to other schools. LIHTC families live near schools with a median test score ranking at the 31st percentile within their metropolitan area; Project-based Section 8 tenants live near schools with a median test score ranking at the 28th percentile; and Housing Choice Voucher families live near schools with a median test score ranking at the 26th percentile.

California Releases Proposed LIHTC Changes
Affordable Housing Finance (11/12)

The California Tax Credit Allocation Committee (TCAC) had several hearings in cities around the state in November to decide whether to adopt proposed changes to the state's low income housing tax credit program. One change on the table was to divide TCAC's geographical apportionment for Los Angeles County into two separate apportionments -- the city of Los Angeles and the balance of Los Angeles County. Another discussed change was to end the 50 percent rule that requires the last funded project in a region to request no more than 50 percent of what remains in the apportionment at the time. TCAC argued its 125 percent rule -- which forbids the allotment of credits more than 125 percent of the amount originally available in an apportionment -- made the 50 percent rule redundant and unneeded. TCAC meanwhile stood by its rule that allows for the skipping of larger-credit requests to accommodate smaller-credit requests in a region. The committee if it was not allowed to skip such requests it would essentially be discontinuing funding to lower-scoring projects. The committee also discussed increasing the at-risk housing type goal to 15 percent and establishing a 200-square-foot minimum for competitive single-room occupancy units. All of the aforementioned changes, if adopted, will take place in the next two years.

Property Compliance
Novogradac Journal of Tax Credits (11/12)

The National Multi Housing Council and the National Apartment Association led a group of eight other industry members in responding to the Internal Revenue Service's proposed rule that would alter current regulations on utility allowances for low-income housing tax credit (LIHTC) properties. In cases where residents pay their own utilities, the current regulation allows state agencies to accept or reject energy consumption estimates submitted by licensed engineers. Among the provisions in the proposed rule is an amendment giving LIHTC-administering housing agencies broader discretion, permitting them to determine which certified engineers are authorized to prepare estimates. The coalition expressed concern that agencies may use inaccurate methods for calculating utility allowances on an arbitrary basis and that the evaluation process would get overly complicated, noting that a housing agency needs only to check a licensed engineer's state certification to ensure expertise standards. The letter urged that the IRS direct housing agencies to base its evaluation on the facts of the individual project submission.

Big Business for Private Placement
Affordable Housing Finance (10/12) Anderson, Bendix

Typical tax-exempt bond (TEB) closings just a few years ago had dozens of attorneys, bankers, and bond experts who would spend entire days to close deals. Now, however, private-placement deals have become a leading method to handle TEB financing for new construction deals. In many parts of the country, private placement is much more efficient and cost effective than other options, offering very low all-in interest rates often below 5 percent, experts say. The up-front fees to close a private placement deal usually add up to 2 to 4 percent of the bond issue, compared with 3 to 5 percent for TEBs credit enhanced by Freddie or Fannie, according to Wade Norris, partner with Eichner Norris & Neumann, PLLC. “It's an incredibly efficient execution with none of the significant costs of issuance,” says Richard Barnhart, CEO of Pennrose Properties, which has financed six communities with privately placed TEBs over the last two years. However, borrowers only have a few choices for private placements. Geography is another limiting factor, because the largest players are major banks driven by the Community Reinvestment Act (CRA). As such, most private placement bond deals are built within the depository footprint of the banks, often on the coasts or close to major metropolitan areas. However, for the sake of a relationship, banks will sometimes make tax exempt loans far outside of their CRA areas. In other areas, private-placement deals are less common because state and local agencies offer a strong alternative. States like New York and Maryland have agencies that take an active role in issuing and guaranteeing TEBs, but for mixed-income housing in markets like New York City private placements are still common. Experts also are bringing TEB financing to rural areas. Private-placement deals are filling in for less competitive structures, at least for now.

Pricing Back to 2007 Levels in Six Top U.S. Apartment Markets
World Property Channel (10/04/12) Leon, Hortense

Real Capital Analytics' Commercial Property Price Indices show that in the second quarter, six of the top apartment markets saw pricing reach levels not seen since the market's peak in December 2007. Boston, for instance, has exceeded peak pricing by 13 percent, says RCA managing director Dan Fasulo, and prices in Seattle, San Francisco, and Manhattan also have recovered. According to RCA, apartment sales hit $6.4 billion in August, which generally is a slow month. While sales of garden apartments surged 76 percent from August 2011 to $4.4 billion, there was a 26 percent decrease in mid- and high-rise apartment sales over the same period. RCA reports average cap rates of 6.1 percent nationwide from May to August and an increase in average unit prices.

Rules Hinder Multifamily Development
NuWire Investor (11/05/12) Anderson, Bendix

Developers eying new projects quickly discover that local building codes might not fit the particular housing market and can prevent apartment developments from getting off the ground. "Model codes are developed by stakeholders at the national level," says Paula Cino, senior director of energy and environmental policy for the National Multi Housing Council (NMHC). "They are not customized for local jurisdictions." The NMHC and the National Apartment Association hope to ease many of these discrepancies with a new series of building code toolkits to help multifamily developers create a positive dialogue with local planning officials. The toolkits aim to help communities update the codes to attract the types of developments they want. The first toolkit, National Model Building Codes and Standards: Apartment Issues Tracking, summarizes the issues that could impact apartment development in the current model codes, including the International Building Code (IBC), the NFPA 13R Sprinkler Standard, and the ASHRAE 90.1 and ASHRAE 90.2 energy standards. There also is a toolkit for communities looking into a sustainable development code like the 2012 IgCC.

Green Building to Surge Amid New LEDs and Smart Windows
USA Today (11/14/12) Koch, Wendy

The promise of lower utility costs is promoting more green building in the United States. With the availability of innovations such as new light-emitting diode bulbs and smart windows that automatically adjust to outside conditions, more green-certified construction projects are projected to be built in 2015. For example, more than half of the companies surveyed by McGraw Hill Construction will seek green certification for at least 60 percent of their construction projects. The survey was presented at the U.S. Green Building Council's annual Greenbuild conference in San Francisco. McGraw Hill's Harvey Bernstein notes the lead reason to build green three years ago was to do "the right thing," while now the primary motivator is to meet client/market demand and to reduce operating costs. A second study from Turner Construction projects a similar explosion in green building. Turner's 2012 survey of corporate executives found that 90 percent are committed to eco-friendly construction, while 48 percent of respondents said they were "extremely or very likely" to certify their projects with LEED.

Fannie Mae Analyzes the Shift From Owning to Renting in Market
Loan Safe (11/15/12) Ferreras, Alex

Fannie Mae's Economic & Strategic Research Group released a new edition of Housing Insights that examines how the housing and economic downturns affect the homeownership and rental markets. The report finds that homeownership rates continue to decline, particularly among young households; single-family housing is absorbing a disproportionate share of new rental demand; and housing affordability problems are mounting among young renters while easing for young homeowners. The report indicates that challenging labor markets, houses lost to foreclosure, and tightening of mortgage qualification criteria have contributed to the decline in homeownership among younger people.

Green Construction and Retrofitting Creates More Jobs
Environmental Protection (11/02/12) Richards, Dell

Green building and energy efficiency retrofits of affordable housing are not only helping struggling families find decent places to live, they are also creating more jobs for the economy than traditional building methods. In fact, a recent Apollo Alliance study found that 21.5 new jobs are created nationally for every $1 million invested in energy efficiency programs. In the last couple of years, for instance, Mutual Housing California has spent $44 million on construction in Sacramento and Yolo County. The nonprofit also invested $7 million in energy-saving renovations at existing Mutual Housing properties. Sunseri Construction, which has erected almost 7,000 units of affordable housing in the last two decades, listed 40 local contractors for each community built in Sacramento and Davis. "It is common knowledge that a healthy construction industry is a component of a healthy economy," concluded Mutual Housing California CEO Rachel Iskow. "What is not well-known is the role of affordable housing construction in the industry and the role it has played in keeping people employed and small businesses solvent while the rest of the housing market crashed."

Affordable Multifamily Segment Holds Steady
Atlanta Business Chronicle (11/01/12) Hudson, Wes

Jon Toppen, founder of Tapestry Development Group and longtime affordable housing developer, recently sat down with staff at the Atlanta Business Chronicle to answer questions relating to the affordable housing industry. Toppen said that if HUD's budget shrinks significantly early next year or if the LIHTC program is eliminated in tax reform, the impact on developers could be devastating. However, he noted that due to solid private financing and the re-introduction of permanent loans by some large banks, developers feel that they can be successful. Toppen said that the historically low interest rates are playing a key role in allowing developers to work on more projects at any given time. "But with HOME funding shrinking, this key subsidy that we have leveraged in the past is becoming increasingly scarce and our projects that target lower-income households are being most negatively impacted by this reality," Toppen concluded.

Why Micro Apartments Are The Next Big Trend in City Living
Business Insider (11/01/12) Galante, Meredith

As more big cities face housing shortages of epic proportions, they are forced to rethink their approaches to real estate by considering micro-apartments. New York City's housing shortage has prompted Mayor Michael Bloomberg to commission 80 apartments in Manhattan each measuring 300 square feet that will likely rent for $2,000 a month. "People from all over the world want to live in New York City, and we must develop a new, scalable housing model that is safe, affordable and innovative to meet their needs," Bloomberg said. The city of San Jose, Calif., has already built 220-square-foot micro-units, with other large cities across the nation also considering the idea. The city of Dongguan, China, is contemplating building apartments that measure just 160 square feet -- about the size of a parking space. But some worry the trend is lowering the standard of living for millions of people who rent. Additionally, they said the micro-units could lead to a class divide as only the super-rich could afford to live in larger apartments.

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December 2012
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