Housing Plus

Housing Plus

Guidance and legal insight for all aspects of housing and community development

By the Housing Group at Ballard Spahr

Request for IRS Guidance on LIHTC Issues

Posted in Low Income Housing Tax Credits, Policy

Last week at the annual meeting of the American Bar Association Forum on Affordable Housing and Community Development (Forum), Michael Novey, Associate Tax Legislative Counsel, Office of Tax Policy, U.S. Department of the Treasury, encouraged the Tax Credit Equity and Financing Committee of the Forum to consider submitting a request to the IRS for priority guidance on issues relating to the low-income housing tax credit (LIHTC). Based on discussions at the annual meeting, the Committee submitted its top five issues today, which can be found here.  Not only does the request provide background on the issues, it also describes why it is important for guidance to be provided now.

Each year the public is invited to submit recommendations to the IRS about what guidance would be helpful for the IRS to provide. This year’s notice from the IRS can be found here.  In past guidance plans, various LIHTC topics have been included, such as the right of first refusal under tax code Section 42(i)(7) and the federally or state assisted exception to the 10-year acquisition credit rule under tax code Section 42(d)(6).  Since the IRS has not yet provided formal guidance on these two important topics, they are among the issues included in the Committee’s request.

We will keep you posted if/when the IRS responds to these issues.

 

TOMORROW – June 1st – Revised RAD Forms Must Be Used

Posted in Public Housing, RAD, Section 8

Earlier in May, HUD received approval from the Office of Management and Budget of the final, revised form RAD documents. HUD had previously solicited two rounds of public comment as part of the Paperwork Reduction Act process.  Ballard’s comments to HUD’s first solicitation of comments can be found here and our comments to the second round here. The final, revised form documents reflect HUD’s incorporation of many of the submitted comments – including comments received as part of the second round of public comment in October 2016.

The May 11th RADBlast! indicates that the revised forms must be utilized for any closing package submitted to HUD on or after June 1, 2017. Many of the revised RAD documents are available in Word format on HUD’s RAD website and both the old and new forms are available on the RAD Resource Desk. For the convenience of our readers, we’ve uploaded copies of the final, revised forms for public housing RAD conversions (RAD First Component) compared to the prior form documents – and you’ll immediately notice the riders to RAD Use Agreement and the HAP Contracts have been incorporated into the body of the respected documents:

If you’ve been following the progression of the revised RAD documents and would like to see the changes made to the documents since they were published for comment in October 2016, please contact me (mohra@ballardspahr.com or 410.528.5337)  and I will be happy to send you comparison copies of these interim revisions.

Overall, HUD was receptive to stakeholder comments and the revised documents reflect the collective knowledge gleaned over the last five years. We look forward to continuing to advance the RAD program.

McClain Weighs in on Potential Effect of Trump Budget Cuts on Affordable Housing

Posted in Budget, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, RAD, Uncategorized

In an interview with U.S. News and World Reports on “The Future of Affordable Housing in the Trump Era,” Amy McClain, who leads Ballard Spahr’s government-assisted housing practice (and is a frequent Housing Plus blogger), cautions that while she doesn’t expect budget cuts to be as severe as those proposed, funding for affordable housing is under threat. Amy notes that the proposed cuts to public housing funds could undermine the Rental Assistance Demonstration (RAD), which allows a public housing project to convert its subsidy to long-term Section 8 assistance and leverage debt and equity in order to finance the project’s rehabilitation or replacement. The post-conversion rents for RAD projects are based on the amount of public housing operating and capital funds allocated to the project pre-conversion. As Amy notes in the article, “If the public housing operating subsidy and the public housing capital fund get diminished [in the budget], then the rents are no longer viable to convert to the Section 8 platform.” Amy also emphasizes the role that affordable housing proponents can play in the budget debate. “It’s going to come down to what the advocacy groups do and the level of education for members of Congress to make sure everyone is aware of the benefit of programs and the impact that the cuts would have,” she says.

Read more about the proposed cuts to HUD’s budget here.

Tax Reform – Proposed Legislation Protecting Affordable Housing

Posted in Historic Tax Credits, Housing Bonds, Legislative Initiatives, Low Income Housing Tax Credits, New Markets Tax Credits, Policy, Tax Credits, Tax Reform, Tax-Exempt Bonds

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.

 

Housing Plus welcomes housing attorney Maia Shanklin Roberts to the blogging team

Posted in Community Development, Energy Tax Incentives, Government-Assisted Housing, Historic Tax Credits, Low Income Housing Tax Credits, Policy, Tax Credits

shankun-roberts_maia_1We are excited that Maia Shanklin Roberts has joined Ballard Spahr LLP and our Housing Plus team. Maia’s background is in community development. She worked with the Maryland Department of Housing and Community Development and the Citywide Coordinating Committee on Youth Violence Prevention in Washington, D.C.

Maia is looking forward to bringing her keen insights about community development to blog readers. She has been involved in numerous affordable housing, adaptive reuse, and mixed-use transactions involving more than $800 million in federal, state, historic, and energy tax credit syndications, tax-exempt private activity bonds, and other public financing.

Please join us in welcoming Maia to the firm and our Housing Plus team.

 

Ballard Spahr and CSG Advisors Host Another Informative Western Housing Conference

Posted in Budget, FHA and GSE Financing, FHA-Insured Financing, Government-Assisted Housing, GSE Financing, Legislative Initiatives, Policy, Public Housing, RAD, Tax Credits

Last week, Ballard Spahr in conjunction with CSG Advisors hosted its 7th Annual Western Housing Conference in Phoenix, Arizona. The Conference brought together a wide range of public and private housing professionals facilitating a dynamic conversation on current developments in government-assisted housing.

The Conference opened with a “Washington Update” – a discussion on housing policy under the Trump Administration. Panelists Emily Cadik, Director of Public Policy at Enterprise Community Partners, and Peter Lawrence, Director of Public Policy and Government Relations at Novogradac & Company LLP, brought extensive insight into the political priorities driving forthcoming changes to government-assisted housing programs.

Significant takeaways from the discussion included:

  • The concern over a predicted decrease in HUD’s budget by $6 million, as outlined by the Washington Post on March 8th. Since the panel occurred, the Trump administration’s budget blueprint for fiscal year 2018 budget was released. Housing Plus posted a blog providing an overview of the budget blueprint on March 16, 2017.
  • The elimination of one or more of the tax credit programs, private activity bonds and/or the reduction of the corporate tax rate through tax reform will have significant impacts on the availability of equity financing needed to at least sustain affordable housing development at its current levels.
  • An infrastructure bill that includes housing may be an opportunity to meet any deficits created by HUD budget cuts to the Public Housing Capital Fund and Community Development Block Grant programs.
  • The spending caps under the existing Budget Control Act also pose a threat to government-assisted housing programs, especially in light of the proposed increases in defense spending and the resulting offsets that would be needed from non-defense discretionary spending.
  • Stakeholders should continue to invite legislators and members of Congress to ribbon cuttings and site visits in their districts. These visits are critical in gaining Congressional support for government-assisted housing programs.

The second session of the Conference focused on lessons learned from implementing the Rental Assistance Demonstration (RAD) program. Nicole Ferreira, Vice President for Development at the New York City Housing Authority, and Jenny Scanlin, Director of Development at the Housing Authority of the City of Los Angeles, each provided a case study from which they described the benefits and limitations of the program and the financial structures making each deal work. Beverly Rudman, Director of the Closing/Post Closing Department in HUD’s Office of Recapitalization, provided an update on the program and described particular challenges facing her office, which oversees the RAD program. The panel highlighted the following as effective tools for successfully underwriting a RAD deal and securing community and tenant buy-in: (1) Tenant Protection Vouchers, (2) the demolition and disposition process under Section 18 of the U.S. Housing Act of 1937, (3) seller take back financing from the Housing Authority and (4) federal and local redevelopment grants.

Panelists Tom Capp, Chief Operating Officer of Gorman & Company, C.J. Eisenbarth Hager, Director of Healthy Community Polices at Vitalyst Health Foundation, and Keon Montgomery, Housing Manager for the City of Phoenix Housing Department, then provided a local perspective on how private/public partnerships can be used to create sustaining change in communities. The panel emphasized the use of health studies in the predevelopment process to generate academic research on the specific needs of the impacted community and solicit funding from public and private partners to address those needs.

The last panel focused on the changes in the affordable housing finance market. Monty Childs, Director of Loan Origination and Structuring at Freddie Mac, John Ducey, Manager of Multifamily Affordable Housing-Credit at Fannie Mae, Sarah Garland, Senior Vice President at PNC Bank, Catalina Velma, Vice President of Public Housing at the National Equity Fund, and Cody Wilson, Director at Stifel, Nicolaus & Company, each provided a unique perspective on the impact of recent and prospective economic changes (e.g. tax reform, HUD budget cuts and rises in interest rates) on the equity, bond and lending markets, as well as the increased challenge in financing small and rural projects. The panel also discussed financing tools like Tax-Exempt Loans (Freddie Mac), Reduced Occupancy Affordable Rehab (ROAR) Execution (Fannie Mae) and FHA 221(d)(4) Loans (HUD), which have been found to address some of the challenges faced in the market.

A copy of the conference materials can be found here.

If you have any questions regarding the information above, or want more information on how to register for next year’s conference, please contact Jennifer Boehm at boehmj@ballarspahr.com.

Administration’s OMB budget blueprint proposes 13% cut and elimination of many HUD programs

Posted in Community Development, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing

 

The Office of Management and Budget (“OMB”) released the Trump administration’s budget blueprint today, providing a general overview of the budget request it intends to present to Congress later this Spring.  As outlined, the blueprint calls for a 13.2% reduction through cutting over $6 billion in funding to the U.S. Department of Housing and Urban Development (“HUD”).

The blueprint describes elements that together comprise reductions to HUD programs realized, in part, by eliminating the following programs:

  • the Community Development Block Grant (“CDBG”) program ($3 billion);
  • the HOME Investment Partnerships Program (“HOME”), Choice Neighborhood Initiative, and Self-help Homeownership Opportunity Program (combined $1.1 billion reduction);
  • Section 4 Capacity Building for Community Development and Affordable Housing ($35 million).

These cuts account for over $4 billion of the total $6 billion.  The remaining cuts are likely to be drawn, in part, from the public housing capital and operating funds as suggested by the leaked budget proposals obtained by The Washington Post last week.

The blueprint also proposes the elimination of the independent Neighborhood Reinvestment Corporation and U.S. Interagency Council on Homelessness, as well as the elimination of the Community Development Financial Institutions Fund within the U.S. Treasury Department.

The OMB blueprint with regard to HUD states, “[t]he Budget also recognizes a greater role for State and local governments and the private sector to address community and economic development needs.” What is missing from this statement is that CDBG and HOME funds are disbursed through States and local governments.  Without these funds, the ability of State and local governments to meet the pressing needs of their communities are significantly hindered.

Keep in mind that the main budgetary piece of business before Congress will be (1) extending the continuing resolution of the FY 2017 budget set to expire April 28, 2017 or (2) finalizing adoption of a  Transportation, HUD FY17 appropriations bill.  The proposals in the budget blueprint will not come before Congress before then.

And, when Congress does consider an appropriations bill, it may initially consider the OMB budget blueprint, but the budget that will evolve through the Congressional process can look very different from the OMB proposals. Constituents have an opportunity to advocate to their Senators and Representatives the value of these programs for the people in their communities and the contributions these programs make to the economy.  At the end of the day, the final appropriations bill set out in the conference report developed by the House and Senate requires adoption by both chambers, with the Senate required to adopt it by three-fifths (or 60 votes), highlighting the need for bipartisan support.

RAD closing deadlines for CY 2017

Posted in Government-Assisted Housing, Public Housing, RAD, Section 8

HUD’s Office of Recapitalization recently released a memo to all CHAP awardees setting forth closing deadlines for CY 2017 RAD transactions. Awardees should be especially  mindful of these intermediate deadlines to ensure that their RAD projects can be promptly processed.

 

Step

Deadline to close by June 30, 2017 Deadline to close by Nov. 30, 2017 Deadline to close by Dec. 31, 2017
Upload all required Financing Plan documents Completed June 15 July 15
Receive a RAD Conversion Commitment (RCC) Completed August 15 September 15
Submit complete closing package April 15 September 1 October 1
All RAD documents approved and ready for HUD signatures June 22 November 16 December 14

Other key takeaways from the memo include the following:

  • Projects that wish to have RAD rents funded with Section 8 subsidy beginning in January 1, 2018 must close by November 30, 2017.
  • In addition to the priority categories listed in Section 1.11 of the RAD Notice, HUD will prioritize projects adhering to the deadlines and those with demonstrable critical deadlines beyond the control of the housing authority and its development team.
  • HUD may require an update to the Financing Plan and re-issuance of the RAD Conversion Commitment (RCC) if the RCC has aged over 6 months.

 

Regulatory comments due in March & other housing news updates

Posted in Fair Housing, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, Section 8, Tax Credits, Tax Reform

Comments on the following HUD and housing related guidance are due this month.

  • HOTMA implementation for Section 8 Voucher Programs – Due March 20, 2017

On January 18, 2017, HUD issued a proposed rule to implement certain sections of the Housing Opportunities through Modernization Act of 2016 (HOTMA) that affect the tenant-based Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs. Among other changes, the proposed rule amends the definition of public housing authority (PHA) owned housing, and institutes new provisions regarding housing quality inspection requirements for both the HCV and PBV programs. HUD is seeking public comment on a variety of questions surrounding the implementation requirements and future changes of both programs.

Comments may be submitted to HUD  electronically at www.regulations.gov (Docket No. FR-5976-N-03) or by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500.

  • Moving to Work (MTW) Demonstration Operations Notice – Due March 24, 2017

As noted in our previous blog post, HUD is soliciting comments to its Operations Notice for the expansion of the MTW Program. The full list of questions for which HUD seeks public comment is listed in Appendix C of the Notice. Comments can be submitted electronically at www.regulations.gov (Docket No. FR-5994-N-01)  or by mail to the same address noted above.

  • DOJ Proposed Rule amending Section 504 Regulations – Due March 20, 2017

On January 19, 2017, the U.S. Department of Justice (DOJ) issued a notice of proposed rulemaking to revise its regulations at 28 CFR Part 42 that implement Section 504 of the Rehabilitation Act of 1973. Section 504 prohibits discrimination based on disability in all programs and activities that receive federal financial assistance. Key revisions include amending the interpretation of the applicable definition of  “disability”;  updating accessibility standards for new construction and alteration of buildings and other facilities; and editing various provisions and terminology to promote consistency with judicial decisions and the Americans with Disabilities Act and related amendments.

Comments may be submitted to DOJ (1) electronically through www.regulations.gov (Docket No. OAG 154); (2) by regular mail to Disability Rights Section, Civil Rights Division, U.S. Department of Justice, P.O. Box 2885, Fairfax, VA 22031-0885; or (3) by overnight, courier, or hand delivery to Disability Rights Section, Civil Rights Division, U.S. Department of Justice, 1425 New York Avenue NW., Suite 4055, Washington, DC 20005.

The following lists additional housing news our readers may have missed recently —

  • Dr. Ben Carson Confirmed as HUD Secretary

On March 2, 2017, Dr. Ben Carson was sworn in as the 17th Secretary of the U.S. Department of Housing and Urban Development. According to  HUD’s press release, Secretary Carson intends to embark on a listening tour of various HUD field offices and communities throughout the country.

  • Affordable Housing Credit Improvement Act of 2017 introduced in U.S. Senate

In an effort to help reform the low-income housing tax credit, Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT) introduced the Affordable Housing Credit Improvement Act of 2017 (S. 548), along with several other Democratic and Republican co-sponsors on March 7th. The bill includes and expands upon similar legislation introduced by the Senators last year (S. 2962 and S. 3237). Visit the Affordable Housing Tax Credit Coalition’s S. 548 advocacy page for more in-depth summaries of the bill’s provisions and comparisons between the current bill and 2016 legislation. Interested persons can also track the bill’s progress at www.congress.gov.

  • Public Housing Authorities prevail in Operating Reserves Litigation

In late January, the United States Court of Federal Claims ruled in favor of approximately 350 public housing authorities on the merits of a motion for summary judgment against the U.S. Department of Housing and Urban Development (HUD). Led by housing industry groups, the complaint alleged that HUD breached its Annual Contributions Contract with the PHAs for fiscal year 2012 when the formula used for budget calculations and allocations did not property follow HUD regulations and thus reduced the operating fund subsidies the PHAs were eligible for in that year. A full copy of the Court’s decision can be accessed here.  Plaintiffs’ attorneys were advised to file a status report in February 2017 to advise how the Court should proceed with the case.

Recap of HUD’s Early January Guidance

Posted in Government-Assisted Housing, Policy, Public Housing, RAD, Section 8

Earlier this month, the US Department of Housing and Urban Development (HUD) issued a number of final rules and notices as summarized below.

Final Rules

  • HUD Revises Lead-Based Paint Regulations

Effective on February 3, 2017, HUD’s final rule amends the agency’s Lead Safe Housing Rule currently at 24 CFR Part 35. Changes to the lead-based paint regulations include revising the definition of “elevated blood lead level” and establishing more rigorous testing procedures for assisted units housing children under age 6 with high blood lead levels.  Public housing authorities (PHAs) are required to comply with the updated lead-based paint policies and procedures by July 13, 2017.

  • HUD Final Rule on Broadband Infrastructure Requirement

On December 20, 2016, HUD issued a final rule requiring the installation of broadband infrastructure (i.e. cables, fiber optics, wireless infrastructure) whenever a multifamily rental housing property funded or supported by HUD undergoes new construction or substantial rehabilitation. While the rule applies to most HUD programs, compliance is not required if (i) broadband installation would result in fundamental alteration in the nature of the program or undue financial burden, (ii) installation is not feasible due to the location of the new construction or substantial rehabilitation, or (iii) installation is infeasible due to the structure of the housing being rehabilitated. Also exempted from the rule are multifamily rental housing properties only carrying a HUD-insured FHA mortgage or a HUD-guaranteed loan. HUD also issued a technical correction to the final rule on January 12th.

  • Federal Housing Administration (FHA) Strengthens Home Equity Conversion Mortgage Program (HECM)

HUD’s final rule codifies in full various changes to HECM program regulations and policies adopted pursuant to the Reverse Mortgage Stabilization Act of 2013 (Public Law 113-29), as well as additional guidance previously issued through assorted mortgagee letters under the Housing and Economic Recovery Act of 2008 (Public Law 110-89).  These changes become effective on September 19, 2017.

  • Freedom of Information Act  (FOIA) Amendment

Issued on January 12, 2017, this final rule implements the changes found in the FOIA Improvement Act of 2016 (Public Law 114- 185) as applied to HUD.

Notices

  • MTW Program Expansion Proposed Operations Notice

HUD is currently soliciting comments to its proposed Operations Notice for the Expansion of the Moving to Work (MTW) Demonstration program. The 2016 Appropriations Act (Public Law 114-113), authorized HUD to expand the MTW program by an additional 100 agencies over a seven year period.  As a first step of the expansion, HUD published this Operations Notice which proposes significant amendments to existing MTW program framework in an attempt to develop simplified approaches to administering housing assistance. Among other changes, the new MTW framework would grant certain general waivers to MTW agencies, and reduce data collection and reporting requirements. Comments are due by mail or electronically by March 24, 2017.

  • HUD Seeks Comments for MTW “Substantially Serving” Methodology

In another MTW related notice, HUD is currently seeking comments and recommendations for a revised methodology it will use to help measure the performance of MTW agencies. By statute, MTW agencies are required to assist substantially the same number of eligible low-income families as non-MTW agencies. HUD’s current methodology found in PIH Notice 2013-02 relies on historic public housing and housing choice voucher utilization rate data. New recommendations and comments to HUD’s proposed evaluation methods are due by February 21, 2017. Comments and recommendations may be delivered by mail or electronically to: Moving to Work Office, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 Seventh Street SW., Room 4130, Washington, DC 20410–0001 or email at mtw-info@hud.gov.

This recent PIH notice establishes the verification procedures PHAs must take whenever  a potential or current resident request housing assistance as a result of being a VAWA self-petitioner.

  • Allocations and Other Guidance for CDBG Recovery Grantees

Effective as of January 23, 2017, this notice allocates Community Development Block Grant (CDBG) disaster recovery funds to multiple Southern states to assist with long-term recovery. The notice outlines specific state-by-state dollar allocations and amends the grant award and administration requirements previously published in Federal Register Notice 81 FR 83254.

On January 13, 2017, HUD announced the approval of the AFFH Assessment Tool to be used by PHAs. The notice also discusses changes made to the AFFH Assessment Tool based on public comments received. Notwithstanding this notice,  PHAs are not required to conduct or submit any assessments of fair housing until further written HUD guidance and data is provided.