On March 23, the President signed the Consolidated Appropriations Act, 2018 (H.R. 1625), a $1.3 trillion dollar spending bill that funds the federal government through September 30, 2018. In addition to preventing a government shutdown, this omnibus spending bill incorporated the following key provisions that help to strengthen and expand the Low Income Housing Tax Credit (LIHTC):

  • A 12.5% increase in the annual per capita LIHTC allocation ceiling (after any increases due to the applicable cost of living adjustment) for calendar years 2018 to 2021.
  • An expansion of the definition of the minimum set-aside test by incorporating a third optional test, the income-averaging test. Pursuant to the Code, a project meets the 40-60 minimum set aside test when 40% of the units in the project are both rent restricted and income restricted at 60% of the area median income. Under the new law, the income test is also met if the average of all the apartments within the property, rather than every individual tax credit unit, equals 60% of the area median income. Notwithstanding, the maximum income to qualify for any tax credit unit is limited to 80% of area median income.

This legislation is a great win for affordable housing advocates who have been pushing for LIHTC improvements through the Affordable Housing Credit Improvement Act, introduced in both the Senate (S. 548 sponsored by Senators Cantwell and Hatch) and the House (H.R. 1661 now sponsored by Congressmen Curbelo and Neal) in 2017, as discussed previously in a prior blog post.

We will continue to provide updates on legislation related to Tax Reform. Just in case you missed it, last month Ballard Spahr hosted a webinar on the impact of Tax Reform on the Low Income Housing Tax Credit with our colleagues from RubinBrown LLP, Enterprise Community Partners, Inc. and Red Stone Equity Partners. Presentation slides and a recording of the webinar are available on our event page.

The Maryland Affordable Housing Coalition (MAHC) held its annual Housing Day in Annapolis today.   The event brings together over 200 affordable rental housing advocates to inform legislators of the value of affordable housing and funding needs to continue to develop and rehabilitate affordable housing in Maryland.  Housing Day also provides the opportunity to hear from State representatives regarding current issues and legislation related to the affordable housing industry.  During today’s program, many State elected and appointed officials emphasized the need to continue to think creatively to meet the increasing demand for affordable housing in Maryland – including the opportunity to focus on work force housing.

A priority of the 2018 Housing Day was to advocate for increased funding for Rental Housing Works (RHW), subordinate gap financing used solely for projects utilizing 4% low-income housing tax credits and Maryland Department of Housing and Community Development’s Multifamily Bond Program.  The Governor’s current budget proposes funding RHW at $20 million, but MAHC is advocating for a $5 million increase in this amount to $25 million in order to keep up with the demand for this popular financing.   MAHC notes that for every $1 invested in RHW generates nearly $11 in new public and private investments and each RHW project creates 174 jobs.  We heard from a number of elected officials regarding the value of speaking about RHW projects that have closed in their districts and the linked map provides a snapshot of the impact of RHW within each Maryland County.

Turning to the national stage, Molly Bryson, a Partner at Ballard Spahr, provided attendees of the 2018 Housing Day with an update on the need to continue to advocate for the expansion and enhancement of the federal low-income housing tax credit through the passage of the Cantwell-Hatch Affordable Housing Credit Improvement Act (S.548) in the U.S. Senate and the U.S. House of Representatives companion bill (H.R.1661 – Affordable Housing Credit Improvement Act of 2017).  The Cantwell-Hatch Act was recently included in the Senate’s initial version of the budget bill, but it unfortunately did not make it into the House’s approved budget bill.  Continued outreach is needed to keep up the momentum of this important legislation.

Ballard Spahr will continue to monitor both Maryland and federal legislation related to affordable housing and provide updates in future blog posts.

As we know, the President has signed what was originally titled Tax Cuts and Jobs Act, the most significant overhaul to the U.S. Tax Code since 1986. The President signed the Act into law after the first of the year in order to avoid some automatic spending cuts.

In its final form, this Tax Code overhaul retains private activity bonds and the the low-income housing tax credit. However, according to A Call To Invest in Our Neighborhoods (ACTION) Campaign, the amendment of other critical provisions of the Tax Code, especially, the lowering of the corporate tax rate from 35 percent to 21 percent and the creation of a base erosion and anti-abuse tax, present concern for affordable housing, as these provisions can impact an investor’s tax credit appetite. In an analysis performed by Novogradac and Company, the final version of the bill “would reduce the future supply of affordable rental housing by nearly 235,000 homes over 10 years.” Further, it is anticipated that other changes to the Tax Code, such as those relating to bonus depreciation, depreciation, and interest expense limitations, will impact equity pricing.

The legislation also retains the new market tax credit, with no change to its expiration which is after the 2019 allocation. The 20% historic tax credit was also retained, but with significant modification, including claiming the credit ratably over 5 years.

Ballard Spahr’s Tax Group is also following the legislative developments of other provisions of the bill. Late yesterday, the Tax Group issued a thoughtful analysis of the final bill.

Please use our Tax Reform Alert Center as a resource to find more information on the bill and/or reach out to us directly.



After legislation to repeal the Affordable Care Act was pulled from the House floor last Friday, news headlines across the country began reporting that tax reform is next on the Trump Administration’s agenda. As noted in our prior blog post, tax reform that changes the corporate tax rate, the tax-exempt bonds program and the tax-credit programs will have significant impacts on the production of the affordable housing across the country.

In an effort to protect affordable housing programs, legislators have introduced amendments to the Internal Revenue Code (“IRC”) that either (1) create savings to be reinvested in affordable housing programs or (2) expand the availability of housing tax credits and fix related technical issues.

The following bills were introduced in the past 60 days –

  1. The Affordable Housing Credit Improvement Act of 2017 (S. 548) (the “Cantwell-Hatch bill”). According to The Affordable Housing Tax Credit Coalition, the bill builds upon prior bills (S. 2962 and S. 3237), also introduced by Sentor Maria Cantwell (D) and Senator Orrin Hatch (R), and includes “a new provision addressing planned foreclosures, a provision raising the cap to 30 percent from 20 percent on Difficult to Develop Areas (DDAs), additional criteria for community revitalization plans, a provision which codifies, rather than leaving up to Treasury regulations, the prohibition against any state QAP from including local approval or local contribution requirements, and other technical changes.” A section by section summary can be found here.
  2. Affordable Housing Credit Improvement Act of 2017 (H.R. 1661). The purpose of the bill, as reported in a press release issued by co-sponsor Representative Pat Tiberi (R), is to “make the financing of affordable housing more predictable and streamlined, facilitate housing credit development in challenging markets like rural and Native American communities, increase the housing credit’s ability to serve extremely low-income tenants, and support the preservation of existing affordable housing.” The bill is co-sponsored by Representative Richard Neal (D). A section by section summary can be found here.
  3. Common Sense Housing Investment Act of 2017 (H.R.948). The goal of the legislation, introduced by Representative Keith Ellison (D), is to expand the mortgage interest deduction to lower income homeowners and reinvest an estimated $241 billion in savings over 10 years into affordable housing. More information on the bill can be found here.

Bi-partisan support for these bills, especially S.548 and H.R. 1661, suggest that tax reform protecting housing tax credits is good policy. Monitoring the evolution of these bills; the President’s plan for tax reform and the industry’s response to anticipated changes in the IRC will be telling of the future affordable housing programs, especially those authorized under the IRC.


Ballard Spahr is committed to facilitating and leading the conversation within the affordable housing community, which makes us thrilled to announce our Eleventh Annual National Housing Conference in Washington, D.C., from November 3 to 4. This two-day, complimentary event features engaging discussions, panel presentations, special insights, and networking opportunities with the key influences and power players of the affordable housing industry.

Day one is our Housing Authority Summit. Housing authority executives will join us to discuss the most critical issues and challenges they face and explore solutions to help push your housing authority into the future. Panels and roundtables will cover various topics, including property tax exemptions, strategic relationship development, financing strategies, fair housing, and RAD transactions. Registration for the Summit is limited to those in leadership roles at housing authorities; however we will curate blog content around the pertinent matters that will be covered. If you would like additional information on attending the Summit, please contact Jennifer Boehm.

Day two will feature our National Housing Symposium, an open event where our high-powered lineup of presenters will explore today’s housing market and look into the future, now that post-recession demand is driving exciting programs and initiatives. In addition to the popular Heard on the Hill discussion, panels will discuss the latest in RAD projects, fair housing problems, demographic trends, Year 15 issues, and multifamily housing bonds. Registration is free, and our detailed program description is available.

We are excited to provide an informative and collaborative forum for dialogue, exploration, and networking within an industry about which we feel so passionate. Though we will certainly blog about conference updates and insights, we hope you will join us in person!

On October 22, 2014, the federal regulatory agencies responsible for implementing regulations under Dodd-Frank finalized the risk retention rule for asset-backed securities (the “Risk Retention Rule”). For the securitization of multifamily loans, compliance with this rule is required beginning December 24, 2016. Securitizations for multifamily loans created before December 24, 2016 do not need to comply with the Risk Retention Rule requirements. While we will only discuss multifamily loans here, please note that the Risk Retention Rule applies to the securitization of residential (single family) mortgages beginning December 24, 2015. Also note loans originated through a state Housing Finance Agency (“HFA”) are exempt from the Risk Retention Rule.

On and after December 24, 2016, Section .7 of the Risk Retention Rule gives commercial mortgage-backed securities (“CMBS”) sponsors the option to satisfy their risk retention obligation by exercising the third-party purchaser option, which allows up to two third-party purchasers (“B-Piece Buyers”) to hold a pari passu portion of eligible horizontal residual interest (“B-Piece”). Below is a list of the requirements necessary if exercising this option:

  • Each B-Piece Buyer must perform an independent review of the credit risk of each securitized asset, pay for the B-Pieces in cash at closing, without financing, and must not be affiliated with any party to the securitization transaction, other than the Special Servicer, investors, and originators of less than 10% of the unpaid principal balance of the securitized assets in the transaction.
  • An unaffiliated “Operating Advisor” must be appointed, whose responsibility is to consult with the Special Servicer on any material decisions after the principal balance of the B-Piece has been reduced by principal payments, realized losses, and appraisal reduction amounts to a principal balance of 25% or less of its initial principal balance. The Operating Advisor is required to act in the best interest of the investors as a whole and has the authority to recommend that the Special Servicer be replaced.
  • Sponsors must make certain disclosures to potential investors, including the name and form of organization of each B-Piece Buyer, a description of each B-Piece Buyer’s experience in investing in CMBS; a description of potential conflicts; the fair value of each B-Piece, the dollar amount to be acquired by the B-Piece Buyer, the purchase price paid for the CMBS interest, and other material information.

A B-Piece Buyer must comply with the Risk Retention Rule’s requirements concerning hedging of interest as if it were the retaining sponsor and may not transfer its B-Piece for 5 years following closing of the securitized transaction. After 5 years, the B-Piece may be transferred to a different B-Piece Buyer, who complies with the requirements of B-Piece Buyers generally. All subsequent B-Piece Buyers must comply with the transfer restrictions. When all mortgage loans in a CMBS transaction have been fully defeased, the risk retention obligation is terminated.

We at Housing Plus are thrilled to announce that Christopher D. Bell has joined the firm’s Real Estate Department and the Housing Group. His housing finance practice, experience with GSEs, and overall industry leadership strengthens a thriving group of attorneys who represent many of the country’s leading housing lenders, borrowers, and investors nationwide.

Before joining Ballard Spahr, Chris practiced at Fannie Mae for more than a decade and became the agency’s lead attorney for affordable housing transactions and for secondary market construction loan participations and syndications. Serving as Associate General Counsel of Housing and Community Development, he advised on various regulatory matters for the agency; provided guidance on complex real estate transactions that included mortgage-backed securities, bond credit enhancement, mezzanine debt, senior housing, and pool purchases; and assisted in the enhancement of Fannie Mae form loan documents, the Delegated Underwriting and Servicing Guide, and other agency products.

While Chris was with Fannie Mae, many of us at Housing Plus have had the pleasure of collaborating with him and coming to know him as an industry dynamo with deep practical knowledge and transactions experience that benefits lenders and borrowers. Although we have always viewed him as a colleague, it is truly exciting to now see him as part of our housing team.

Housing Plus bloggers Michael Skojec and Amy Glassman will be featured speakers on Novogradac’s webinar: “Consequences of Disparate Impact for Multifamily Housing” on July 22. The webinar will discuss the implications of the Supreme Court’s decision in the Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. case and explore how the Court’s opinion will shape future cases, HUD’s fair housing efforts, and the larger housing landscape.

The discussion points will include the following topics:

  • Fair Housing Act and defining disparate impact
  • Making a disparate impact claim (including examples)
  • How HUD’s three-step burden-shifting rule works
  • Recent lower-court decisions in Washington, D.C., and Illinois
  • Two prior cases (Magner and Mount Holly)
  • ICP v. TDHCA facts and history
  • Key issues argued in the Supreme Court case
  • Majority opinion, causation, and other safeguards
  • How this plays out—future litigation
  • Possible HUD modifications to the rule
  • One housing authority’s concerns
  • The upcoming affirmatively furthering rule

Registration is still open, but will close at 2 p.m. on July 21. We will be sure to follow up with the webinar’s key takeaways.

Roof OutlineLast week, HUD’s Office of Multifamily Housing Programs announced Thomas R. Davis as the new Director of the Office of Recapitalization. Mr. Davis will oversee the Office’s efforts to further financial stability and viability for the preservation and recapitalization of affordable housing. The Office’s key programs include Mark-to-Market (M2M), Section 236 Preservation, Senior Preservation Rental Assistance Contracts (SPRAC), and the Rental Assistance Demonstration (RAD).

Prior to his new appointment, Mr. Davis led the affordable housing consultant practice at Recap Real Estate Advisors and directed public housing recapitalization projects, particularly those under HUD’s RAD program. Mr. Davis also worked extensively with multi-state nonprofit affordable housing owners and developers. He directed large-scale affordable housing revitalization projects with The Community Builders, and managed a multi-jurisdictional portfolio financing of government-assisted, LIHTC units at the Preservation of Affordable Housing, Inc. (POAH). He began his career at Morrison & Foerster, where he specialized in affordable housing and LIHTC issues.

We at Housing Plus have had the pleasure of professionally collaborating with Mr. Davis, and we are excited to see his diverse affordable housing experience and background shape HUD’s multifamily housing programs.

On April 9, 2015, the Housing Authority of the City of El Paso (HACEP) and its development, private equity and lending partners closed Phase I of the largest Rental Assistance Demonstration (RAD) project in the country. Hunt Development Group has joined HACEP in undertaking the development, preservation and rehabilitation of all of the 1,590 existing low-income housing units across 13 separate public housing apartment complexes in El Paso, Texas in connection with the conversion of those units to Section 8 RAD units.

The project utilized several forms of financing, including private equity, tax-exempt loans and bonds and subordinate loans. Freddie Mac and Centerline Mortgage Partners, Inc., a wholly owned subsidiary of Hunt Mortgage Group, LLC, provided $59,625,000 in long-term, senior debt financing through Freddie Mac’s new Direct Purchase of Tax-Exempt Loans program. The conduit lender for this tax-exempt loan, the Alamito Public Facilities Corporation, also issued $65,375,000 in tax-exempt, short-term bonds, in support of the project.

Ballard Spahr was honored to be a part of this historic transaction, closing the nation’s largest RAD conversion to date, ensuring that over 1,500 families will have affordable and sustainable housing available on a long-term basis. The financing and structuring considerations and issues addressed in this transaction provide a strong basis for future deals of increasing complexity.