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Affordable Housing News & Views - April 2017


Housing Tax Credit Monitor: 2016 Housing Credit Equity Volume Survey

Based on data collected by CohnReznick from 36 active syndicators and direct investors, we estimate that investors collectively funneled approximately $16 billion of equity into housing credit investments in 2016, making it a record volume year in the history of the housing credit program. Read more about total equity volume, a housing pricing update, and current multi-investor regional and national funds.

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Tax Talk Triggers Pricing Drop for LIHTCs (National Real Estate Investor) 

Potential tax reforms ahead that could reduce corporate tax rates have created a “speedbump” for the low income housing tax credits (LIHTC) market. Investors are lowering bids on price per credit, which has slowed deal flow and sent sponsors scrambling to find alternative solutions to bridge the financing gap.  The LIHTC market is a bit “unsettled” in the wake of the presidential election, adds Beth Mullen, CohnReznick partner and Affordable Housing Industry Practice – National Director.

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Make Room: Advocating for Bold Solutions to End Housing Insecurity

The start of 2017 has brought with it great traction in terms of advocating for more affordable rental housing. As one of the first sponsors of Make Room, a national nonprofit exposing the human suffering and societal costs of the rental housing crisis and advocating for bold solutions that will end housing insecurity, CohnReznick has gotten to see first-hand what the organization is capable of, and we’ve already participated in two events this year.

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

CohnReznick Featured Events

16th Annual New Markets Tax Credit Summit - May 16-18: Miami Beach, FL

Annual Affordable Housing ConferenceSeptember 6-8: Las Vegas, NV
 
News stories and headlines from the previous month

National News

In some ways, 2016 couldn’t have been a better year to lend money to affordable housing developers. The AHF Top 25 affordable housing lenders last year lent a total of $27 billion to affordable housing properties with formal income restrictions, including permanent and construction loans. That’s a big increase from the $22.9 billion in 2015 and the $18.7 billion in 2014.  
 
U.S. Senate Finance Committee member Maria Cantwell (D-WA) released a new report on the nationwide affordable housing crisis March 6, 2016. Cantwell’s report details the exploding demand for affordable housing and the dramatic decrease in affordable units. 
 
As the Trump administration prepares to tackle tax reform, many bankers hope that a new tax policy will respect the important role of tax-assisted community development programs in encouraging business investment in distressed neighborhoods. 
 
The U.S. is facing an affordable housing crisis. Maintaining housing options to meet a variety of incomes and mobility needs is a quality of livable communities but a challenge for many. More than 19 million low-income households are housing cost burdened — meaning they pay more than 30 percent of their income toward housing. These 19 million households represent nearly one of every six occupied housing units in the United States.  
 
Community Development Block Grants, the HOME program, and the Choice Neighborhoods initiative are all eliminated in President Donald Trump’s budget proposal released today.  The new administration’s fiscal 2018 blueprint slashes funding for the Department of Housing and Urban Development (HUD) by $6.2 billion, or 13.2%, from current levels, with the agency receiving $40.7 billion in gross discretionary funding.  
 
One-third of baby boomers report experiencing anxiety at least once a month about being able to afford where they live, according to a new survey of 1,000 Americans 55 and older from The NHP Foundation.  The worry is more severe for retirees, with 42% reporting having such anxiety at least once daily. The concern causing the greatest anxiety for 45% of the respondents is “the ability to afford desirable retirement living.”  
 
Last week, we saw the current administration’s first budget proposal, which calls for a $54 billion increase in military spending, funded by cuts to nonmilitary programs.  The New York Times reported that, as part of these cuts, the U.S. Treasury’s Community Development Financial Institution (CDFI) Fund (“the Fund”) will be “all but eliminated.”  While it is unlikely that the budget proposal will be finalized in its current form, these reports still concern us.  If we “all but eliminate” the Fund, we “all but eliminate” countless opportunities for people living in poverty.  Without the Fund, CDFIs across the country will lose a valuable source of funding. Communities nationwide will lose the affordable homes CDFIs provide, the jobs they create, and the businesses they help flourish.
 
What is the value of affordable housing? It goes beyond simply finding homes for people.  Two new reports released by the National Low Income Housing Coalition (NLIHC) explore both why affordable housing is essential to our economy and how the grave lack of it may put many at risk. 
 
Both Fannie Mae and Freddie Mac posted big multifamily financing volumes in 2016, with a significant amount of business coming in affordable housing.  The activity is attributed to strong market conditions as well as product innovation from the government-sponsored enterprises (GSEs).  
 
Many affordable housing developments suddenly have deep holes in their construction budgets. That’s because of higher interest rates for loans and lower prices for low-income housing tax credits (LIHTCs) – developers can’t borrow as much money as they used to and their tax credits aren’t worth as much.  Housing trust funds are one of the few funding sources left that make up the difference – if they can keep their funding, or even increase the resources they provide.  
 
The possibility of a tax-code overhaul is casting a shadow over the $10 billion affordable-housing industry, which receives tax credits so valuable they often determine whether or not projects get off the ground.  Members of Congress and President Donald Trump have proposed reducing the corporate tax rate to 15% to 20% from the current 35%, dimming the allure of a credit investors such as big banks and insurance companies receive to offset income taxes. Affordable housing, which represents about one-quarter of all new apartment construction in the U.S., relies on the credit for capital.  
 
All states and U.S. territories have some form of incentive for developing supportive housing in their low-income housing tax credit (LIHTC) programs, reports CSH (Corporation for Supportive Housing.)  A review of qualified allocation plans (QAPs), the documents that outline how housing finance agencies (HFAs) will award their housing credits, found that 54 plans included supportive housing incentives, up from 52 the prior year.  
 

© 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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