Property Compliance News Briefs – November 2018

Monday, November 5, 2018

The Government Accountability Office (GAO) released its study on development costs for low-income housing tax credit (LIHTC) properties Sept. 18. “Low-Income Housing Tax Credit: Improved Data and Oversight Would Strengthen Cost Assessment and Fraud Risk Management” measured development costs of LIHTC properties in 10 states between 2011 and 2015. The GAO report found that the median total development cost per unit in its survey was $204,000–higher than the same number in another recent report by Abt Associates, which is largely attributable to the fact that the Abt Associates report is national and includes 4 percent developments while the GAO report is focused on 10 states including some of the highest-cost cities in the nation. The report calls for the IRS to require general contractor cost certifications for LIHTC projects, encourage allocating agencies and other stakeholders to collaborate on more standardized cost data and communicate to allocating agencies on how to collect information and review information on LIHTC syndication expenses. The GAO report recommended that Congress designate an agency to collect and maintain cost-related data from allocating agencies and periodically report on LIHTC development costs.

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Novogradac & Company estimates the U.S. median income will increase by more than 5 percent in 2019 and almost 4.4 percent in 2020. That came after the U.S. Census Bureau released 2017 American Community Survey (ACS) data Sept. 13. The 2018 ACS data will be used by the U.S. Department of Housing and Urban Development (HUD) to calculate the 2020 income limits for LIHTC and Section 8 properties. Novogradac was able to estimate the national median income, state median incomes, as well as LIHTC income limits for many areas through 2020. More information is available at www.novoco.com/notes-from-novogradac.

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The fair market rents (FMR) for fiscal year (FY) 2019 for HUD programs were effective Oct. 1. FMRs increased by 2.5 percent ($23) on average. This is slightly less than the increases in 2018 of 3 percent ($26). More than 70 percent of the areas saw an increase in FMRs. Although the general trend was up, around 29 percent of the areas had a decrease, whereas in 2018 only 22 percent of the areas had a decrease. Metropolitan areas tended to have larger increases in 2019 than non-metropolitan areas. The average increase for metropolitan areas was 3.6 percent whereas non-metropolitan areas had an average increase of 1.7 percent.

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