Yesterday, the Trump administration released its proposed budget for the 2019 fiscal year. Overall, the budget proposes an $8.8 billion (18.3%) reduction in the HUD budget from the 2017 enacted level, a more drastic cut than the $6 billon HUD budget reduction the Administration proposed for fiscal year 2018. Significant proposals in the budget include:

  • Elimination of several programs including the Community Development Block Grant (CDBG), HOME Investment Partnership Program, Public Housing Capital Fund and Choice Neighborhoods
  • $17.5 billion in Section 8 annual contribution contract renewals (an $800+ million decrease from 2017 enacted level)
  • $10.866 billion in project-based rental assistance (a $50 million increase from the 2017 enacted level)
  • $110 million decrease in Housing Choice Voucher administrative fees
  • $100 million request for the Rental Assistance Demonstration (RAD) program to cover the incremental subsidy for public housing properties that would otherwise be unable to covert to Section 8 assistance
  • Proposed elimination of the unit cap for RAD conversions and September 30, 2020 deadline for RAD application submissions
  • In addition to the elimination of the Capital Fund, $1.7 billion in reductions to the Public Housing Operating Fund
  • $75 million request for the Family Self-Sufficiency program (same as 2017 enacted level)
  • $10 million request for the Jobs Plus Initiative (a $5 million decrease from the 2018 Senate recommendation)
  • Maintained funding levels for lead-based paint mitigation efforts
  • Unspecified funding request to evaluate and improve the EnVision Centers recently launched by Secretary Carson
  • $20 million increase to the Federal Housing Administration (FHA) operations (although a new fee would be imposed on FHA lenders)
  • Requirement that non-disabled persons receiving HUD assistance contribute more than 30% of their adjusted income to their housing costs

Other housing and community development components of this budget include an elimination of the Community Development Financial Institutions (CDFI) Fund grant and direct loan program, $1.8 billion request for veteran’s homelessness programs, and a funding increase for the U.S. Department of Agriculture (USDA) single family housing guaranteed loan program. A full copy of the budget proposal and related materials are available at be www.whitehouse.gov/omb/budget.

Remember that Congress is responsible for passing the budget; this is just a proposal. It remains to be seen if Congress will adopt the President’s proposal. We will continue to provide updates the budget throughout the appropriations process.

 

Wind Mills and Solar PanelsAs in prior years, the Obama administration’s FY 2016 budget includes a number of impactful, and generally positive, tax credit proposals. With respect to the Low-Income Housing Tax Credit (LIHTC), the budget retains many of last year’s proposed modifications, and adds a new proposal to remove the population cap for Qualified Census Tract designations. Specifically, the budget would modify the LIHTC program by:

  • authorizing States to convert up to 18% of their private activity bond volume cap into additional low-income housing tax credit (LIHTC) allocating authority (last year’s proposal limited the percentage to 8%);
  • allowing LIHTC development owners’ to elect a third possible low-income set aside in which at least 40% of a project’s units must be occupied by tenants whose incomes average no more than 60% of area media gross income (with the caveat that no low-income unit could be occupied by a tenant with income over 80% of AMI);
  • increasing the discount rate used in calculating LIHTCs for non-bond financed projects;
  • adding preservation of federally assisted affordable housing to Qualified Allocation Plan criteria;
  • removing the population cap for Qualified Census Tract designations (new proposal for 2016); and
  • implementing a requirement that LIHTC-supported housing protect victims of domestic abuse.

Among other non-LIHTC highlights, the budget would permanently extend the New Markets Tax Credit (NMTC) with a $5 billion annual allocation, and permanently extend both the renewable energy production tax credit (PTC) and energy investment tax credit (ITC). The ITC would be extended at its current 30% credit level (which is set to expire for properties placed in service after December 31, 2016), and the election to claim ITCs in lieu of PTCs for certain qualified facilities would be made permanent.

The U.S. Department of the Treasury’s General Explanation of the Administration’s Fiscal Year 2016 Revenue Proposals (the “Greenbook”) can be found here.

Although the Obama administration’s tax proposals generally tend not to get much traction with lawmakers, the FY 2016 budget is significant in that it adds another voice to the tax reform debate, and signals Presidential support for the NMTC and renewable energy tax credit programs.

Light BulbOur Ninth Annual National Housing Symposium successfully brought together a rich panorama of perspectives across the affordable housing industry. Laura Green Zeilinger, the Executive Director for the United States Interagency Council on Homelessness (USICH), gave a keynote presentation that affirmed and galvanized the dialogue occurring among our panelists and attendees: the successes of affordable housing depend on collaboration.

Ms. Zeilinger emphasized interdependency – how chronic homelessness, Veterans Affairs, the Affordable Care Act, and federal funding initiatives are as much interrelated societal issues as they are affordable housing issues. From her own experiences with USICH, she described how the complex problem of homelessness (like the need for affordable housing) is fruitfully addressed when various key actors and sectors recognize and work towards a common goal. Ms. Zeilinger offered many valuable insights throughout her presentation:

  • HUD and Veterans Affairs establishing interagency missions to successfully decrease homelessness among Veterans
  • The priority to create targeted affordable housing opportunities for those experiencing chronic homelessness
  • How the costs of healthcare individually and nationally decrease with the availability of housing options and the life-stability they offer
  • Affordable housing initiatives are economically sound endeavors on community and federal levels

We truly appreciate Ms. Zeilinger’s perspectives as we look towards the horizon of affordable housing and beyond. Her whole speech is available.

Housing Plus is thrilled to announce that our very own Amy M. McClain has authored The Beginner’s Guide to Public Housing Conversion under RAD, published by the American Bar Association. The book focuses on the Rental Assistance Demonstration program’s utility as a financing tool for stimulating revitalizations to public housing properties. As an informative guide, the book provides insights into how RAD’s current rules and procedures redefine the conversion of public housing units to Section 8 housing Assistance Payments contracts. Given the stresses facing our nation’s affordable housing stock, Amy undertook the effort to create a resource that would synthesize the U.S. Department of Housing and Urban Development’s RAD Notices and other guidelines into a single source – a strong starting point – for implementing this new housing preservation program.

RAD program conversions provide financing flexibilities that help alleviate the rising capital needs of public housing properties across the country. When public housing units are converted into Section 8 properties, they are removed from the public housing statutory and regulatory framework. The owners can leverage the Section 8 assistance against other financing tools to generate the capital needed to make repairs or to develop new replacement units. The RAD program holds the potential to dramatically evolve and continue to shape the affordable housing landscape. Currently, the statutory authorizations for RAD can only accommodate 60,000 public housing units, but over 120,000 additional units are already awaiting congressional authorization for conversion.

The book serves as a reliable resource for attorneys, developers, lenders, investors, and public housing authorities that want to know more about the benefits, requirements, and successful implementation of the RAD program. Amy combines the resources of the American Bar Association’s Forum on Affordable Housing and Community Development Law with her own extensive experience representing public housing authorities and affordable housing developers in mixed-finance transactions. She worked with Ballard Spahr teams that closed some of the first RAD deals in the country, several involving various funding sources. Amy currently represents housing authorities and developers on a number of pending RAD conversions.

For more information, or to order Beginner’s Guide to Public Housing Conversion under RAD, please visit Shop ABA.

Flag CapitolLast week, House Republicans adopted an amendment to the FY 2015 HUD spending bill that prohibits funding to implement, enforce, or administer HUD’s Affirmatively Furthering Fair Housing Proposed Rule (Proposed Rule).

The Affirmatively Furthering Fair Housing Proposed Rule would significantly modify and augment the obligations of recipients of HUD funds to comply with a provision in the Fair Housing Act requiring the affirmatively furthering of fair housing. Ballard Spahr previously issued an e-alert that discusses the Proposed Rule.

The Proposed Rule has sparked significant discussion and generated both positive and negative feedback and an unprecedented number of comments. To date, even opponents of the obligation to affirmatively further fair housing, however, have not attempted to defund its implementation, enforcement, and administration. We will continue to track any developments as the Proposed Rule is projected to be finalized in October 2014.

Flag CapitolThe Senate Appropriations Committee has approved its draft Transportation, Housing and Urban Development, and Related Agencies Appropriations Bill for fiscal year 2015. While the bill generally falls short of the funding levels requested in President Obama’s budget proposal, it proposed some significant changes to the Rental Assistance Demonstration, and proposes a “pay-for-success” energy and water conservation demonstration.

As previously noted in this blog, the Senate bill supports the expansion of the RAD cap from 60,000 units, to 185,000 units. It takes further steps to strengthen RAD, allocating $10,000,000 for the administration of the program, and supporting both the RAD conversion of Single Room Occupancy dwellings and the use of Rental Housing Assistance and tenant-based rental assistance funds for RAD conversions. The bill also clarifies the reporting requirements in RAD’s authorizing legislation, the fiscal year 2012 Appropriations Bill, requesting an impact study of the fiscal year 2012-2013 RAD conversions.

HUD is anxious to expand the reach of RAD and the Senate language is a good start. While the House bill does not authorize any increase in RAD, it will be interesting to see if a compromise that allows at least some expansion of RAD can be negotiated in the final bill. HUD reports that it currently has received applications for approximately 180,000 units.

In addition, the Senate version includes a  proposed utility demonstration program which would allow owners of HUD-assisted properties to seek private funds for investing in improvements of their energy and water infrastructure. The program centers on “performance-based agreements” in which private organizations pay for the energy retrofits, and can then retain any documented savings from their improvements other than the income HUD will keep to offset the demonstration’s administrative costs. As proposed, the pay-for-success demonstration is capped at 20,000 units, and is only eligible at properties that participate in three HUD programs: Project-Based Section 8, Section 202 Supportive Housing for the Elderly, and Section 811 Supportive Housing for Persons with Disabilities.

This is a long awaited innovation which, if enacted, will create a new tool for financing energy related improvements in some of the HUD-assisted portfolio. There is hope that, if successful, this initiative could be expanded to support the rehabilitation of RAD units, and also be applied to other programs.

For more on these developments, click here for a summary of the bill, and here to read the full text of the legislation.

On April 30th Ballard Spahr was proud to host representatives from the Maryland Department of Housing and Community Development (DHCD), the Maryland Attorney General’s office, Pennrose Properties and AGM Financial to discuss evolving trends in affordable housing development in Maryland.  The briefing, held in Ballard Spahr’s Baltimore office, included:

  • A discussion by Pat Sylvester, the Director of DHCD’s Multifamily Programs, Ivy Dench-Carter of Pennrose Properties, Margaret Allen of AGM Financial and Ballard Spahr’s Amy McClain on the 2013 revisions to the QAP’s impact on the fall funding round, the success of Maryland’s Rental Housing Works program and the implementation of the Rental Assistance Demonstration (RAD) Program.
  • A presentation by Anne Marculewicz from the Maryland Attorney General’s office about the new Maryland “Multifamily Rental Housing Program Efficiency Act,” which eliminates the “local approval” requirement and consolidates several DHCD loan programs into one program —  called the Rental Housing Program — to provide construction and rehabilitation funding for both elderly and multifamily projects.  (A copy of the Act can be found here.)
  • An update from Ballard Spahr attorneys Mary Grace Folwell and Scott Cockerham on federal legislation impacting affordable housing, including an update on federal appropriations, the so-called “Camp” proposal, the tax “extenders” bill and HUD’s “Affirmatively Furthering Fair Housing” demonstration program in Baltimore (discussed here in our April 18, 2014 blog post).

More detailed information about the briefing can be found here.  Thanks to all the participants for making the briefing a success!

The Obama administration recently revealed its proposed $3.9 trillion federal budget for fiscal year 2015. Like Chairman Camp’s tax reform proposal and the proposed EXPIRE Act tax extenders package discussed in previous blog posts, the Obama administration’s budget includes a number of interesting tax credit-related proposals. Highlights include:

  • Permanently extending the New Markets Tax Credit (NMTC) with a $5 billion annual allocation
  • Authorizing States to convert a portion of their private activity bond volume cap into additional low-income housing tax credit (LIHTC) allocating authority
  • Allowing LIHTC development owner’s to elect a third possible low-income set aside in which at least 40% of a project’s units must be occupied by tenants whose incomes average no more than 60% of area media gross income (with the caveat that no low-income unit could be occupied by a tenant with income over 80% of AMI)
  • Increasing the discount rate used in calculating LIHTCs for non-bond financed projects

The U.S. Department of the Treasury’s General Explanation of the Administration’s Fiscal Year 2015 Revenue Proposals (the “Greenbook”) can be found here.

Versions of many of the FY 2015 budget proposals were included in previous budgets, and in general the FY 2015 budget seems to be getting less buzz in tax reform circles than either Chairman Camp’s proposal or the EXPIRE Act, which is actually moving through Congress. In any event, the FY 2015 budget is significant in that it adds another voice to the tax reform debate, and signals Presidential support for the renewal of the NMTC program.

“Housing is experiencing a calm before the storm”, is how National Housing Conference CEO Chris Estes described how housing programs fared in the President’s Fiscal Year 2015 budget request during a presentation at the Ballard Spahr Best of the West Housing Conference this past Friday in San Francisco. While many of the rental assistance programs received increases over last year’s appropriations levels after 2 years of what seemed like a free fall, almost every account remains short funded. Of particular concern is the effort to “re-baseline” the project-based rental assistance account by seeking only 8 months of funding this year, which means this account will require a significant increase in 2016 to ensure a full year of funding for all existing contracts. Chris invited anyone interested in learning more about this topic to participate in the April 16th webinar NHC is sponsoring with HUD.

The audience was particularly attentive to Chris’s perspectives on the recently released bi-partisan proposal to reform the GSEs. The Johnson-Crapo bill would wind down Fannie Mae and Freddie Mac over a number of years, but continue the successful work both organizations do in the multi-family space, ensure focused attention on rural communities, and limit government risk. While this proposal followed many months of hearings and input from a broad spectrum of parties, Chris reiterated that there will be continued discussion and modifications before GSE reform will be enacted.

Chris also talked about how the recent discussion paper regarding tax reform proposals issued by House Ways and Means Chairman, David Camp, could impact the low income housing tax credit (LIHTC). The proposal would continue a modified version of the 9 percent tax credit, however, it would eliminate the 4 percent credit used with private activity bonds. Given that tax reform is no longer as pressing an issue on the national agenda, it is not likely that the LIHTC will be revisited in the very near future. This discussion could be renewed, however, in the next couple of years.

Other topics batted around included the National Housing Trust Fund (good chance for funding this year), the Rental Assistance Demonstration Program (good chance of further expansion this year) and funding for CDBG and HOME (continue to be susceptible to more cuts).

Lots of heads in the room nodded as Chris discussed the importance of continued advocacy by all corners of the housing world to preserve and expand programs that support affordable housing. “We have to characterize ourselves not as an industry which is interested only economic gains for itself, but as a movement,” Chris said. Continuing to emphasize how affordable housing investments yield cost savings in other government programs, including Medicare/Medicaid, criminal justice, education, foster care, and many others is an important part of telling our story effectively to lawmakers.

Many thanks to Chris for taking the long plane ride to be with us at the Best of the West. I, for one, am looking forward to coming back to the Bay Area to attend NHC’s Solutions Conference November in Oakland. Ballard was a proud sponsor of this event last year in Atlanta that provided an impressive interactive format that fostered great discussions among participants. We are looking forward to this innovative event again this year. Hope to see you there!

PenniesPresident Obama’s fiscal year 2015 budget for the U.S. Department of Housing and Urban Development (HUD), released on March 4, 2014, proposes increased funding for many programs compared to the fiscal year 2014 appropriation. The budget proposes language that would change some aspects of the public housing program, and provides a preview of HUD legislative proposals.

The budget suggests the following funding for HUD programs:

  • It calls for $1.925 billion for the public housing capital fund, a slightly higher amount than the $1.875 billion funded in fiscal year 2014.
  • The Public Housing Operating Fund would be funded at $4.6 billion, a 4.5 percent increase over the fiscal year 2014 funding amount of $4.4 billion.
  • Renewal funding of $18 billion for housing choice vouchers is intended to support renewal of all vouchers in use in 2014 and is intended to restore reductions that resulted from the 2013 sequestration funding cut.

Read Ballard Spahr’s legal alert summarizing the public housing portions of the President’s budget.

View the President’s detailed proposal for the FY 2015 HUD budget.