SHCM Newsbriefs

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Trump 2020 Budget Proposal Would Drastically Cut Housing Programs

Work on the federal budget for fiscal 2020 kicked off on March 11 when President Donald Trump submitted his administration’s proposals to Congress. For the budget category of domestic discretionary programs, the 2020 Trump budget invokes the harsh spending caps imposed under the Budget Control Act of 2011. LeadingAge, among other associations, has a number of concerns about the impact the president’s proposals would have in housing and other areas of aging services. To learn more, click on the Web Link below.

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Industry Trends

"Seniors Housing Industry Needs Solutions for Serving Middle-Income Seniors, NIC Research Shows"

Tax Issues and Tax Reform

"HUD Expands Low-Income Housing Tax Credit Program to Encourage Opportunity Zones Investment"

HUD-Related Activity

"Ben Carson Says HUD Will Give Preference to Developers Who Build Affordable Housing in Opportunity Zones"

State and Local Activities

"Low-Income Housing Tax Credits Closer to Being Revived"

Management and Compliance

"IRS to Publish Final Utility Allowance Regulations for LIHTC Properties"

Green Building

"New York City Tries Modular Construction for Affordable Homes"

Association News

Join LeadingAge for the Senior Housing NOW Rally!
HUD Reforming REAC Physical Inspection Process
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Industry Trends

Seniors Housing Industry Needs Solutions for Serving Middle-Income Seniors, NIC Research Shows
National Real Estate Investor (02/26/19) Yamshon, Lyndee

The National Investment Center for Seniors Housing & Care (NIC) expects to release a study in April on the housing needs of middle-income seniors. The objective of the study is to bring into focus the gap in affordable housing availability for middle-income seniors, and "to allow the private and public sector to discuss solutions" based on the findings, says NIC’s chief economist, Beth Burnham Mace. The data will be based on a study called the HRS, the Health and Retirement Study, a long-term report sponsored by the National Institute on Aging and the Social Security Administration and conducted by the University of Michigan. Ely Razin, CEO of financial data provider CrediFi, notes that there is ample capital available for the development of senior housing facilities, including loans sponsored by Fannie Mae and Freddie Mac, but those facilities may not necessarily be affordable. Razin notes, "The supply is there, meaning the availability of housing may be sufficient, but affordability is a different question." However, there are several government programs that currently provide loans to private companies to build or redevelop properties that would qualify as affordable seniors housing, Razin adds. One example is the Low-Income Housing Tax Credit (LIHTC) program, which grants developers tax credits for building seniors housing facilities. Among public entities, the Federal Housing Administration and related groups also inject money into the development and financing of affordable seniors housing facilities.

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Tax Issues and Tax Reform

HUD Expands Low-Income Housing Tax Credit Program to Encourage Opportunity Zones Investment
The Real Deal (02/25/19) Larsen, Keith

Investors and developers have reacted favorably to federal Opportunity Zones, but critics say the tax incentive program has not benefited areas most in need. The Department of Housing and Urban Development (HUD) has announced an initiative to encourage affordable housing investment within the thousands of designated Opportunity Zones nationwide. The Federal Housing Administration’s (FHA) Low-Income Housing Tax Credit financing pilot program will now include "new construction" and "substantial rehabilitation" of multifamily projects, according to HUD Secretary Ben Carson. Opportunity Zones development can cover a wide range of property types, so the provision could speed up the application process for developers looking to use the low-income tax credit to build new ground-up apartment projects, or for those seeking to redevelop old buildings in Opportunity Zones. HUD says the average processing time for low-income credit deals is currently 90 days, but under the FHA pilot, this time could potentially be reduced to 30 days. Meanwhile, real estate developers are waiting for the U.S. Treasury and the Internal Revenue Service to release more guidance and rules regarding Opportunity Zones. In recent months, companies that have launched Opportunity Zone funds include Youngwoo & Associates, Fundrise, RXR Realty, and EJF Capital. SkyBridge Capital is targeting a $1 billion fund, which was rolled out in December with EJF as a subadviser; SkyBridge eventually dissolved the partnership and found a new subadviser.

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HUD-Related Activity

Ben Carson Says HUD Will Give Preference to Developers Who Build Affordable Housing in Opportunity Zones
The Real Deal (03/12/19) Larsen, Keith

In an effort to make federal Opportunity Zones more competitive for builders, Housing and Urban Development (HUD) Secretary Ben Carson says HUD will give added weight to proposed affordable developments in Opportunity Zones. In February, Carson notes the Federal Housing Administration's Low-Income Housing Tax Credit financing pilot program has been expanded to include Opportunity Zones projects. Carson says HUD is now working with other federal agencies and programs to coordinate efforts to enable developers to combine the Opportunity Zone tax benefits with other tax credits, such as the New Market Tax Credit. He explains, "If you are doing a project within an Opportunity Zone and you are applying for one of our grants, you get some preference. So that, along with the tax advantages, will drive people to look at those (areas). We are also offering very specific technical assistance to help them coordinate their efforts." The preference point system marks one of the first Opportunity Zones initiatives by HUD, and could have a significant impact toward pushing developers to build affordable housing in the program. Meanwhile, Carson confirms that a new round of guidance will be issued in the coming weeks that may help investors and developers better deploy capital.

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State and Local Activities

Low-Income Housing Tax Credits Closer to Being Revived
News-PressNOW.com (03/10/19) Zinn, Mark

Missouri state Sen. Dan Hegeman (R) is sponsoring legislation to restore the Low-Income Housing Tax Credit (LIHTC). The state's tax credit program was halted by former Gov. Eric Greitens in 2017. Affordable housing funds, including the Low-Income Housing Tax Credit, are administered by the Missouri Housing Development Commission, which is led by the governor. Hegeman observes, "When Gov. Parson came into office, he decided to keep that program stopped until we get some reforms to the program." Those reforms included a cap on the number of credits the state would issue. Under Senate Bill 28, the LIHTC would be capped at 72.5 percent of the federal rate, which would remain unchanged in terms of the number of federal dollars allocated to Missouri. Hegeman says he hopes the changes reflected in the bipartisan legislation will prompt Parson to restore the tax credits. As for the governor, his office said the measure would allow the state to restore the program while saving close to $1 billion over the next decade. "I believe the Senate had a productive debate and ultimately came to a compromise that addresses housing needs, while ensuring greater accountability and an increased return on the investment of taxpayer dollars," Gov. Mike Parson said in a statement applauding the Senate's approval in February of the cap. The reforms now sit in the House, which has held two readings on the legislation.

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Management and Compliance

IRS to Publish Final Utility Allowance Regulations for LIHTC Properties
National Law Review (03/02/19) Went, Alicia M.

The IRS has published final utility allowance regulations, which became effective on March 4, for Low-Income Housing Tax Credit (LIHTC) properties under Section 42 of the Internal Revenue Code. Under section 42(g)(1) and (2) of the code, a residential rental unit may qualify as a low income unit eligible for LIHTCs only if it is "rent-restricted." For purposes of determining if a unit is rent-restricted, gross rent includes any "utility allowance" if the cost of any utility for a residential rental unit is paid directly by the tenant, which reduces the amount of rent the building owner may collect. Current regulations may require a building owner of a submetered building to reduce its maximum gross rent by the utility allowance because a tenant could potentially be treated as having made the utility payments directly to the utility company in some instances. Temporary regulations extended this principle to situations in which a building owner sells to tenants energy that was produced from a renewable energy source. The final regulations clarify that the rate the building owner charges for such energy cannot exceed the highest rate at which the tenants might have obtained energy from a local utility company. The owner may rely on the rates published by local utility companies to make this determination. Whether energy is produced from a renewable energy source is determined by cross reference to the definitions of a "facility" and "energy property" in sections 45 and 48 of the code, respectively. The building owner does not need to otherwise qualify or receive energy-related credits, the regulations say.

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Green Building

New York City Tries Modular Construction for Affordable Homes
Wall Street Journal (03/03/19) Morris, Keiko

New York City will use modular construction to see if it saves on construction time and costs of low-cost housing. The construction technique will be used on a proposed apartment complex that has 167 units in East New York. The $70 million project will see factory produced apartments stacked on top of each other. The building will have a mix of studio to four-bedroom apartments for low-income and formerly homeless families. Modular construction is relatively new in the city, but it has been used before to build hotels and other apartments. Officials believe modular construction can lower the project's construction time by 25 percent to 30 percent. If the project is approved, construction could begin in 2021 and be completed in 2022.

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Association News

Join LeadingAge for the Senior Housing NOW Rally!

On May 8, the west lawn of the U.S. Capitol will come alive with the voices in support of older adults and affordable housing. Speakers will include members of Congress, residents and other supporters. Make a plan for your community to join LeadingAge as it fills the Capitol lawn with this simple message: Senior Housing NOW. For more information, click on the Web Link provided below.