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Affordable Housing News and Views - February 2017


A Bi-Partisan Olive Branch: Hatch Speaks on Tax Reform Measures 

The Ways and Means Committee's Tax Reform Blueprint has been in the news for a while now, but until this week we have not heard from Senate Finance Chairman Orrin Hatch about his views on the direction the Senate will take on tax reform measures. 

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Today’s LIHTC Deals: What Are Your Options? 

If you are working on transactions in the LIHTC space, you have seen the impact that the prospect of tax reform has had on pricing for many deals. There are some 2016 deals that were not closed with an investor that now have funding gaps. The current climate also changes the outlook for 2017 deals that are applying for credits now. In this article, we discuss some of the options available. 

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Insights Video – Cost Containment

Beth Mullen (CohnReznick), JP Delmore (National Association of Home Builders), and Joe Purcell (The Michaels Organization) discuss the issue of cost containment related to LIHTC property development.

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Innovation In Action: Accounting Today Profiles CohnReznick

CohnReznick is creating a culture of innovation via our innovation lab. The collaborative solution is integral to the many services we can provide clients in the lab, including strategic planning, mergers and acquisitions strategy, new products and services creation, financial and operational improvement analysis, software selection and technology architecture design, cybersecurity testing, and CFO advisory solutions.

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Mark your calendar. We hope to see you at these events.

CohnReznick Featured Events

Post-Election Affordable Housing City Forums: Our Final Stop!

Our national and local leaders have toured select cities across the U.S. providing a relevant and timely discussion on post-election results and the issues impacting affordable housing development in our country and your market. Join us in New York for our final forum!

February 27: New York, NY

NLHA Mid-Year Meeting – February 1-3
CohnReznick Speaker: Bob Moss
 
CAHP Meeting – February 2
 
 
 
CohnReznick Speaker: Winell Belfonte
 
CohnReznick Speakers: Joel Cohn, Marshall Phillips
 
NH&RA Annual Meeting – February 22-25
CohnReznick Speaker:s Bob Moss and Marshall Phillips
 
TDHCA Board Meeting – February 23
 
PAHRA Capitol Conference – February 26
 
 
 
CDFI Coalition Institute – February 28-March 1
 
 
 
 
CohnReznick Speakers: Ken Baggett, Wendy Langlais-Tillery, Bob Moss, Dan Worrall
 
TDHCA Board Meeting – March 23
 
CAHP Meeting – March 23
 
 
CohnReznick Speakers: Bob Moss and Linda Rowland
 
 
CohnReznick Speakers: Nick Ratti and Matthew Barcello
 
News stories and headlines from the previous month

National News

President Trump's $1 trillion infrastructure plan overlooks one crucial component: housing, says Terri Ludwig, president and CEO of Enterprise Community Partners in a guest commentary in The Hill.  Admittedly, housing isn’t what comes to mind when most people think about infrastructure, but it should be. 
 
Affordable housing developments are typically not designed to generate rich cash flows by nature, due primarily to rent restrictions. The standard cash-flow metric is defined as total net operating income net of operating expenses, required replacement reserve contributions, and mandatory debt services on the so-called hard debt. “Per studies produced by CohnReznick based on a survey of approximately 20,000 low-income housing tax credit (LIHTC) projects, the median per-unit per-annum cash flow reported on the national LIHTC portfolio was $597 in 2014, which represented a steady increase from prior years,” says Cindy Fang, of CohnReznick. 
 
There’s a huge, scary disparity between the types of homes growing numbers of older Americans will need over the next 20 years and their availability and affordability, according to a recent Harvard Joint Center for Housing Studies report.  During that time period, the 65+ population is expected to grow from 48 million to 79 million. But for many, their homes will be physically unsuitable and financially precarious. 
 
A number of state housing finance agencies (HFAs) are making moves to help developers through dramatic changes in the low-income housing tax credit (LIHTC) market.  The action comes as some affordable housing deals face unexpected funding gaps this year as investors and syndicators have grown increasingly cautious following the recent election.  
 
From NYCHA’s $17 billion repair backlog to the deficit of rental assistance in a city with soaring housing costs, New Yorkers have long suffered from the federal government’s reduced spending on housing, which remains far below pre-Reagan era levels. In the country as a whole, the unmet needs are momentous, with only one fourth of eligible low-income households receiving the rental assistance they need to afford a home.  
 
2016 marked the 50th anniversary of the Historic Preservation Act of 1966. This act of federal legislation helped to codify and to standardize historic preservation in the United States, and it laid the groundwork for additional legislation that was passed 15 years later: the federal Historic Rehabilitation Tax Credit (HRTC). Passed in 1981, it provides an incentive to real estate developers to adaptively reuse certain existing historic structures.  
 
President Donald Trump had a busy first few days in office. Trump hasn’t yet acted on his plan to slash the business tax rate from 35 percent to 15 percent, but the campaign pledge alone is already reshaping how affordable housing developers fund their work. The Low-Income Housing Tax Credit (LIHTC) has financed millions of rental housing units that are affordable to low-income Americans — and the promise of lower corporate tax rates has reduced its value in the eyes of investors.
 
As is customary, members of the Senate Finance Committee submitted written questions to Treasury Secretary Steven Mnuchin following his confirmation hearing on January 19th. Senators Wyden, Cardin, Cantwell, and Brown probed the Trump Administration's interest in the NMTC in the context of both tax reform and Trump's interest in revitalizing low income urban neighborhoods and rural towns. 
 
With the election behind us, we ask builders what five things government should be doing at the local, state, and federal levels to get the housing market moving at full capacity. Their answers touched on all levels of government. 
 
As we head into the new year, Affordable Housing Finance asked its Editorial Advisory Board members to weigh in with their predictions for the affordable housing industry for 2017. Overwhelmingly, the responses focus on the potential for tax reform and the unsettled low-income housing tax credit (LIHTC) market post-election.  
 
It has now become clear that the surprising outcome in the recent presidential election is having significant adverse impacts on the role of tax-exempt private-activity bonds and 4% low-income housing tax credits (LIHTCs) to finance affordable housing projects. While it is difficult to assess the ultimate scope of these impacts, patterns have begun to emerge on both the equity and debt side of these financings.
 
Some people have been taking the president-elect to task for naming you, Dr. Ben Carson, as his nominee to head the U.S. Department of Housing and Urban Development (HUD). Deborah VanAmerongen, strategic policy advisor, Nixon Peabody says: “I am not going to join in that criticism.”
 
Boston Capital has announced the closing of a $260 million low-income housing tax credit (LIHTC) fund that features 32 affordable housing communities in 15 states.  Boston Capital Corporate Tax Credit Fund XLIII includes 22 properties for families and 10 properties for seniors.  
 

© 2017 CohnReznick LLP

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

 

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