Notes from Novogradac

Published by Annette Stevenson on December 2, 2019

With the Dec. 31 deadline to realize the maximum benefits for opportunity zone (OZ) investments nearing, interest in the OZ incentive continues to rise. Developers are continually looking for ways to make use the OZs incentive to drive investment to their projects. Among them, historic tax credit (HTC) developers are exploring ways to combine the OZs incentive with HTC investments for their often difficult to finance projects. Many HTC projects are located in OZs, which makes considering the potential to raise OZ capital a worthwhile exercise for these developers.

Published by Peter Lawrence on November 26, 2019

The shortage of affordable housing is well documented and there are many causes.

Published by Thomas Stagg on November 20, 2019

Using the American Community Survey (ACS) and the Congressional Budget Office’s (CBO) CPI estimate Novogradac is able to estimate area median income and very low income for 2020 and 2021, and those estimates also provide some insight into overall income limit trends.

Published by Peter Lawrence on November 19, 2019

In its 2018 Annual Housing Report the Federal Housing Finance Agency’s (FHFA) declared that the housing government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac

Published by Peter Lawrence on November 14, 2019

The number of cost-burdened households (those paying more than 30 percent of their income on housing) aged over 65 has reached a new high of 10 million, according to "Housing America's Older Adults 2019," a supplemental report to the State of the Nation’s Housing Report, released by Harvard’s Joint Center for Housing Studies (JCHS).

Published by Michael Novogradac on November 5, 2019

Housing finance agencies issued $14.7 billion in tax-exempt multifamily rental housing bonds in 2018, a 3.7 percent decrease in multifamily issuance from last year, according to the Council of Development Finance Agencies (CDFA).

Published by Thomas Stagg on November 4, 2019

Novogradac estimates the U.S. median income will increase by just under 4 percent in 2020 and 3.4 percent in 2021. The change in U.S. median income is especially important as increases in low-income housing tax credit (LIHTC) and Section 8 income limits are limited to the greater of 5 percent or two times the change in U.S. median income. Based on this formula, the cap for 2020 will be just under 8 percent and the cap for 2021 will be just under 7 percent. This is a slowdown in median income growth from the last couple of years, however, it is still very robust growth in median income. 

Published by Peter Lawrence on October 31, 2019

The U.S. as a whole has lost nearly 4 million low-cost (see definition below) rental homes since 1990, according to a recent working paper released by the Harvard Joint Center for Housing Studies (JCHS). “Documenting the Long-Run Decline in Low-Cost Rental Units in the U.S. by State” looks at the loss of affordable housing supply nationally and through an individual state analysis to view the magnitude of the loss, as well as the timing of the loss, variance across states.

Published by Mark Shelburne, Michael Novogradac on October 30, 2019

The Internal Revenue Service (IRS) published Revenue Procedure 2019-41, announcing $2,709,998 of unused low-income housing tax credit (LIHTC) allocated from the national pool to 31 qualified states for calendar year 2019. (Note that the term state includes a possession of the United States and constitutional home rule cities Chicago and New York City.)

Published by Michael Novogradac on October 24, 2019

Investment in opportunity zones (OZs) continues to grow, with qualified opportunity funds (QOFs) focused on residential development leading the way.

Published by Peter Lawrence on October 22, 2019

In 2018, the Federal Home Loan Banks (FHLBanks) awarded approximately $458 million in Affordable Housing Program (AHP) funds, approximately a 15 percent increase from 2017, according to the Federal Housing Finance Agency’s (FHFA) recently released 2018 Low-Income Housing and Community Development Activities of the Federal Home Loan Banks.

Published by Mark Shelburne on October 15, 2019

On Feb. 26, 2019 the Internal Revenue Service (IRS) published final regulations regarding low-income housing tax credit (LIHTC) allocating agencies’ responsibilities for monitoring properties’ compliance. The provisions replaced temporary requirements contained in Rev. Proc. 2016-15 and represent a significant departure from current practices.

Published by John Sciarretti, Michael Novogradac on October 14, 2019

The Treasury Department is widely expected to release updated opportunity zones (OZ) regulations in the near future–with the regulations first going to the Office of Information and Regulatory Affairs, perhaps this month, for clearance before being released to the public 30-plus days later.

Published by John Sciarretti, Michael Novogradac on October 7, 2019

Treasury is expected to release updated opportunity zones (OZ) regulations in the coming weeks, and we expect that the updated regulations will merge the first two tranches of regulations into one and provide more clarity on many remaining issues, as well as some outright changes. Before their release, however, Treasury must first send the updated regulations to the Office of Information and Regulatory Affairs (OIRA) for their review and comment, after which, the regulations can be released.

Published by Peter Lawrence on October 7, 2019

It is systematic barriers, not pure preference, that prevent lower-income families from moving to areas of high opportunity, according to research released by Brookings at a Sept. 19 event. This new research from Harvard University’s Opportunity Insights serves as a reminder of the importance of affordable housing in areas of high opportunity.

Published by Peter Lawrence on October 2, 2019

Harvard’s Joint Center for Housing Studies recently released a working paper that argues that a national response to exclusionary land zoning practices is needed to effectively resolve not only the affordable housing crisis, but to improve the declining rates of economic mobility and productivity as well.

Published by Dirk Wallace, Michael Novogradac on September 30, 2019

Since the enactment of the opportunity zones (OZ) tax incentive, which was designed to increase private capital investment in low-income communities and low-income community businesses, there has been great interest in using the new incentive to create more affordable rental housing. Participants in the OZ incentive are not limited to investing in affordable rental housing, but the incentive has aspects that are attractive to affordable housing developers and investors. For example, OZs aren’t subject to an allocation limit such as the low-income housing tax credit (LIHTC).

Published by James R. Kroger, Thomas Stagg on September 24, 2019

California lawmakers passed A.B. 1482 this month that would impose a statewide limit on rent increases and require just cause for eviction or termination of tenancy on many rental properties. While this new law will likely have little to no impact on low-income housing tax credit (LIHTC) and tax-exempt bond (TEB) properties, it is still important to understand the mechanics and potential issues on market rate units.  The legislation will take effect in January 2020 and sunset in 2030, however, rent restrictions under the new law are retroactive to March 15, 2019.

Published by Michael Novogradac on September 20, 2019

As the opportunity zone (OZ) incentive continues to gather momentum and interest, Novogradac has been tracking and compiling data on opportunity funds and their plans. In June, a post in this space provided the results of an initial survey of funds raised and related information. Since that writing, activity in the OZ community has continued and based on Novogradac research the amount of capital raised by qualified opportunity funds (QOFs) is nearly $2.5 billion.

Published by Thomas Stagg on September 11, 2019

On Aug. 30 the U.S. Department of Housing and Urban Development (HUD) published fair market rents (FMRs) for fiscal year (FY) 2020 in Federal Register Vol 84 No. 169. While HUD continuously strives to provide the most accurate FMRs, it is constrained by the data that is available. Occasionally, a user will believe that the FMRs calculated by HUD do not accurately reflect the rents for the area.

Published by Thomas Stagg on September 9, 2019

As more and more developers are exploring the average income minimum set-aside, one of the looming questions is how income limits should be calculated for units that are not using the 50 percent and 60 percent limit that are published by HUD for low-income housing tax credit (LIHTC) and tax-exempt bond developments.

Published by Peter Lawrence on September 9, 2019

The need for affordable rental housing nationwide is obvious. However, the cause of this shortfall is multifaceted. A recent survey and accompanying report produced by the National Apartment Association (NAA) provides more insight into some of those factors by examining what is preventing multifamily housing–both market-rate and affordable–from being built. 

Published by Kevin Wilson on September 6, 2019

In July, California Gov. Gavin Newsom signed Assembly Bill 91, Loophole Closure and Small Business and Working Families Tax Relief Act of 2019 (A.B. 91). A.B. 91, authored by Assemblywoman Burke, Chair of the Assembly Committee on Taxation, selectively conforms California law to certain changes introduced in the 2017 federal tax reform bill (H.R. 1).  It is estimated that A.B.

Published by Mark Shelburne on September 5, 2019

According to anecdotal reports, in 2018 many low-income housing tax credit (LIHTC) developers opted for their properties to use the average income minimum set-aside (AI). The number doubtless has increased dramatically in 2019. Some buildings may be under construction or have even been placed in service.

Published by Mark Shelburne on September 5, 2019

Low-income housing tax credit (LIHTC) allocating agencies have their work cut out in implementing the average income minimum set-aside (AI). The Internal Revenue Code (IRC) leaves many aspects unresolved. One of the most important is Section 42(g)(1)(C)(ii)(I): The provision uses the word “designate” but does not define what it means.

Published by Mark Shelburne on August 7, 2019

In June 2018 the Department of Housing and Urban Development (HUD) requested comments on amendments to the disparate impact rule issued under the previous administration.

Published by Bob Ibanez, Peter Lawrence on July 31, 2019

The new markets tax credit (NMTC) has been subject to reauthorization since 2006-most recently through the Protecting Americans from Tax Hikes Act (PATH Act, 2015) that extended the credit through calendar year 2019.

Published by Peter Lawrence on July 31, 2019

Congress last week moved closer to finalizing H.R. 3877, the Bipartisan Budget Act of 2019, a two-year $2.7 trillion budget deal that would raise spending caps for fiscal years (FY) 2020 and 2021 and suspend the debt limit until July 31, 2021. The bill raises nondefense spending by $25 billion (4 percent) in FY 2020 compared to the FY 2019 spending cap, and $79 billion (15 percent) more than current law FY 2020 spending cap as mandated by the Budget Control Act of 2011 (BCA), but $9 billion less than the amount set by the House earlier this year when drafting its FY 2020 spending bills.

Published by Dirk Wallace, Michael Novogradac on July 26, 2019

Two bills recently introduced in Congress would retroactively alter rights of existing owners of low-income housing tax credit (LIHTC) properties; one bill changes the terms of rights of first refusal (ROFR) and the other alters qualified contract exit price calculation. Part I of this blog post reviewed rights of first refusal. Part II below reviews qualified contracts.

Published by Peter Lawrence on July 26, 2019

Harvard’s Joint Center for Housing Studies released its State of the Nation's Housing report last month, and among its most salient points was the decline in number of affordable homes being built.

Published by Dirk Wallace, Michael Novogradac on July 24, 2019

Two bills recently introduced in Congress would retroactively alter rights of existing owners of low-income housing tax credit (LIHTC) properties: One bill changes the terms of rights of first refusal (ROFR) and the other alters qualified contract exit price calculation. Part I of this blog post reviews rights of first refusal. Part II will address qualified contracts.

Published by Mark Shelburne on July 22, 2019

The Affordable Housing Credit Improvement Act of 2019 (AHCIA) proposes an unprecedented expansion and modification of the low-income housing tax credit (LIHTC).

Published by Michael Novogradac on June 28, 2019

In May, Novogradac began surveying the funds listed on Novogradac’s Opportunity Funds Listing as to dollars raised and investment plans. The opportunity funds are listed as a free service to potential community development funding recipients. The information listed is based on information provided to Novogradac by the listed contact person for each company.

Published by Dirk Wallace, Michael Novogradac, Peter Lawrence on June 5, 2019

One of the most important provisions of the Affordable Housing Credit Improvement Act (AHCIA) of 2019 is the proposal to increase 9 percent allocations. This provision is justified by the tremendous unmet need for more affordable rental housing production.

Published by Dirk Wallace, Michael Novogradac, Peter Lawrence on June 5, 2019

Novogradac projects nearly 66,000 additional rental homes could be financed from 2020 to 2029 if a provision is enacted to establish a minimum 4 percent floor for low-income housing tax credits (LIHTCs) generated by tax-exempt private activity bonds issued for multifamily housing. This would greatly enhance the LIHTC, an incentive that the National Council of State Housing Agencies’ 2017 Factbook reports is already responsible for the creation of more than 1 million affordable rental homes from 1987 through 2017.

Published by H. Blair Kincer on June 5, 2019

Last year Congress enacted a new tool to extend the reach of the low-income housing tax credit (LIHTC) to meet the country’s varied affordable rental housing needs: the average income test. Since its enactment, the option has generated a lot of discussion and raised many questions about its implementation. Now, as developers and states have started using the average income test option, its applicability can be better assessed.

Background

Published by H. Blair Kincer on June 5, 2019

In 2017, LIHTC properties’ overall expenses grew 2.3 percent while their revenue grew 2.7 percent, according to the Novogradac 2019 Multifamily Rental Housing Operating Expense Report-Survey and Analysis of LIHTC Properties. This difference in growth resulted in the largest year-over-year NOI increase (3.3 percent) seen in eight years.

Published by Dirk Wallace, Michael Novogradac, Peter Lawrence on June 4, 2019

Today, Sens. Maria Cantwell, D-Wash.; Johnny Isakson, R-Ga.; Ron Wyden, D-Ore.; and Todd Young, R-Ind. introduced S. 1703 the Affordable Housing Credit Improvement Act of 2019 (AHCIA). This comprehensive low-income housing tax credit (LIHTC) legislation builds on a similar bill introduced in 2017 during the last Congress, S. 548.  Reps. Suzan DelBene, D-Wash.; Kenny Marchant, R-Texas; Don Beyer, D-Va.; and Jackie Walorski, R-Ind.

Published by H. Blair Kincer on May 30, 2019

As noted in this space last month, overall expenses for low-income housing tax credit (LIHTC) properties in 2017 grew by 2.3 percent, a return to previous norms. However, while the overall LIHTC operating expense growth was more in line with the trend previous years, the Novogradac 2019 Multifamily Rental Housing Operating Expense Report-Survey and Analysis of LIHTC Properties found that one category of expenses for LIHTC properties saw a sizable increase in 2017: real estate taxes.

Published by H. Blair Kincer on May 29, 2019

As part of a research effort focusing on underserved markets, Freddie Mac last year published a paper studying why Middle Appalachia is one of the hardest-to-serve housing markets, particularly for renters. Middle Appalachia is a rural region stretching from southern Ohio to western North Carolina on both sides of the Appalachian Mountains. As Freddie Mac reports, market factors facing the region are part of the reason Middle Appalachia is an underserved housing market, including population losses, low median incomes and the prevalence of persistent poverty counties.

Published by Peter Lawrence on May 23, 2019

The House Appropriations Transportation-HUD (THUD) Subcommittee released its $75.8 billion fiscal year (FY) 2020 spending bill May 22, which was approved by the subcommittee earlier today.

Published by Kevin Wilson on May 21, 2019

The budget for California’s next fiscal year is expected to be completed in the next month and through the budget process, leadership will determine the extent to which the state will provide state income tax opportunity zones (OZ) incentives to encourage investment in distressed communities. This process is an important opportunity for California to leverage this new community development tool to enhance the efficiency of other state, county or city programs that have limited resources.

About Conformity

Published by H. Blair Kincer on May 20, 2019

After some volatility in 2015 and 2016, the year-over-year change in overall expenses for low-income housing tax credit (LIHTC) properties in 2017 was more in line with the previous norms: an increase of 2.3 percent, according to according to the Novogradac 2019 Multifamily Rental Housing Operating Expense Report-Survey and Analysis of LIHTC Properties.

Published by Peter Lawrence on May 13, 2019

Previous posts in this space have discussed the oft-overlooked housing needs of rural America and the need to shine a light on how rural areas, just like their urban counterparts, are struggling to meet the affordable housing needs of their residents.

Published by Bob Ibanez on May 10, 2019

This month, Inclusiv, formerly known as the National Federation of Community Development Credit Unions, will present the third of three webinars for its members about the New Markets Tax Credit (NMTC) program.

Published by Matt Meeker on May 6, 2019

The second tranche of opportunity zones (OZ) regulations have provided renewable energy tax credit (RETC) investors additional clarity. This is particularly welcome for investors wishing to claim an investment tax credit (ITC) for a solar property in conjunction with the OZ inventive and it’s possible this additional clarity will help some investors move off the fence.  

About the OZ Incentive

Published by Michael Novogradac on April 26, 2019

As investors, business owners and fund managers, and their tax advisors, continue to review the recently released proposed opportunity zones (OZ) regulations, a number of issues and likely effects have been identified, and many continue to be discussed and evaluated. Additional guidance and clarification will be needed from Treasury and the Internal Revenue Service on many of these issues and possible effects.

Published by Michael Novogradac on April 17, 2019

The second tranche of opportunity zones (OZ) guidance released today brings added regulatory clarity for investors, fund managers and others seeking to bring much needed equity capital to operating and real estate businesses in OZs. The 169 pages of proposed regulations include updates to portions of previously proposed regulations. The 169-page volume of regulations necessitates a two-part blog post.

Published by Peter Lawrence on April 4, 2019

In August 2018 the Office of the Comptroller of the Currency (OCC) released an advanced notice of proposed rulemaking (ANPR) soliciting public comment on reform of Community Reinvestment Act (CRA) regulations.  Nearly 1,500 national, state and local organizations and businesses submitted comments to OCC in response to the ANPR, a sample, comprised of key affordable housing and community development associations and sta

Published by Bob Ibanez on March 25, 2019

Recently, community development financial institutions (CDFIs) from around the country meet for a two-day conference in Washington, D.C. It was the first public appearance for new CDFI Fund Director Jodie Harris, who replaced Annie Donovan when she stepped down in early January. In addition to Harris’s keynote address, there was also a CDFI Fund panel comprised of the new deputy director for policy and programs as well as staff from certification, compliance monitoring and evaluation, financial strategies and research, the grant-based programs and bond guarantee program offices.

Published by Michael Novogradac on March 21, 2019

Five months ago, the Treasury department issued its first tranche of proposed regulations concerning the opportunity zones (OZ) tax incentive, releasing 74 pages of regulations, a revenue ruling, an updated Q&A docum

Published by Michael Novogradac on March 19, 2019

The Internal Revenue Service (IRS) released 2019 population figures in Notice 2019-19, indicating the 2019 low-income housing tax credit (LIHTC) ceiling and tax-exempt private activity bond (PAB) cap for all states will increase. From 2018-2019, the U.S. population increased by 1,448,256 people to 327,167,434 in total, representing a 0.4 percent gain.  U.S. territories lost more than 140,000 people, a 3.8 percent decrease.

Published by Peter Lawrence on March 18, 2019

On March 12, House Ways and Means Committee Members Terri Sewell, D-Ala.; Tom Reed, R-N.Y.; Jason Smith, R-Mo.; and Senators Roy Blunt, R-Mo.; and Ben Cardin, D-Md., introduced the New Markets Tax Credit Extension Act of 2019 (H.R. 1680, S. 750).

Published by Peter Lawrence on March 11, 2019

The Trump administration today released its $4.7 trillion fiscal year (FY) 2020 budget request, which includes $750 billion in defense spending including overseas contingency operations and other adjustments and $567 billion for nondefense spending including adjustments.  The proposed base nondefense discretionary spending cap is $543 billion, a cut of $54 billion from FY 2019 spending cap.

Published by Michael Novogradac on February 19, 2019

Any question about the level of interest in proposed Internal Revenue Service (IRS) regulations concerning the opportunity zones (OZ) incentive was answered last Thursday.

Published by Peter Lawrence on February 15, 2019

On Feb. 14, Congress passed H.J. Res. 31, the Consolidated Appropriations Act, 2019 including fiscal year (FY) 2019 funding for Homeland Security, the Agriculture; Commerce, Justice, and Science; Financial Services and General Government, Interior and Environment; State and Foreign Operations; and Transportation-HUD (THUD) annual spending bills, averting another partial federal government shutdown that would have begun after the temporary stop-gap funding bill, the continuing resolution was scheduled to expire on Feb. 15.

Published by Nicolo R. Pinoli on February 15, 2019

As part of tax reform signed into law on Dec. 22, 2017, a new tax, the base erosion and anti-abuse tax (BEAT), was implemented on international corporate taxpayers. The BEAT is intended to provide a new minimum tax for international taxpayers who make payments to overseas affiliates.

Published by Peter Lawrence on February 14, 2019

After a delay related to the 35-day partial government shutdown, the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund awarded more than $142 million in Capital Magnet Funds (CMF) during its fourth funding round for fiscal year (FY) 2018 on Feb. 13. The 38 awardees were selected from 116 applications, which requested more than $570 million in awards this CMF round.

Background

Published by Peter Lawrence on February 11, 2019

As changes to Community Reinvestment Act (CRA) regulations are considered and developed, it is imperative to consider how those changes could affect regulated financial institutions and their investment and lending activities.

Published by Peter Lawrence on January 28, 2019

In the affordable housing community, the concept of opportunity areas has drawn increasing interest and consideration, particularly in recent research. For housing advocates, understanding what constitutes a high opportunity area and how living there can benefit low-income residents will inform decisions on where to locate affordable rental housing so that the best possible outcomes are realized by residents.  

Background