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Affordable Housing News & Views - July 2017


From CohnReznick’s Tax Credit Investment Services Group: 

CohnReznick’s Next Housing Performance Study Nears Release

Set to release another comprehensive and in-depth report of affordable housing performance, the 2017 study will bring industry track record data current through 2016. The initial “slim” version of the study will release in August whereas the full version with detailed underwriting and asset management trends will be released in the fall. The study captures the performance and operating expense data of over 20,000 surveyed housing credit properties in 92 percent of the U.S., MSAs and 50 U.S. states, Guam, Puerto Rico, and the U.S. Virgin Islands. CohnReznick estimates the study’s data pool represents approximately 70 percent of all “actively managed” housing credit properties. The report will be shared through our web site, this newsletter, and our social media channels (Twitter, LinkedIn). CohnReznick has been involved in producing track record information on affordable housing tax credit investments for over a decade.

Housing Performance: July 2017 Housing Credit Pricing Update

More from CohnReznick’s Tax Credit Investment Services Group, the July 2017 analysis of tax credit pricing (including current national funds and state/regional funds) can be found in HousingOnline.com’s latest Tax Credit Advisor. In summary, on an equity-weighted average basis, participants in our latest survey (May-June 2017) reported a $0.91 net equity price and a 5.48 percent IRR among surveyed national multi-investor funds. Most IRRs were based on a hypothetical corporate tax rate of 25 percent. Participants in our May-June 2017 survey reported $0.91 net equity price and a 5.15% IRR among surveyed regional multi-investor funds (excluding California funds). More detail can be found through the link showing graphs highlighting the distribution of lower tier pricing for participating syndicators in the last 60 days based on 150 properties. The median reported housing credit price in the last 60 days was $0.94 across the 150 deals, which is consistent with the median reported credit price in our March-April 2017 survey.
From The Washington Post: Trump’s budget plans have already cut financial support for low-cost housing
A recent Washington Post article explains that President Trump's proposal to slash the tax rate for corporations has had the side effect of weakening a federal tax-credit program that supplies the main flow of money for apartment buildings for low-income people in the Washington area and nationwide. According to Beth Mullen, CohnReznick partner and Affordable Housing Industry Practice National Director, who was interviewed for the article, “The uncertainty of what tax rates might be in the future immediately caused investors to take a step back.” She and other experts said it was the biggest disruption in the market since the housing market collapse nine years ago.
 

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We will be attending and/or speaking at these events. We hope to see you!

CohnReznick Featured Events

Annual Affordable Housing Conference - September 6-8: Las Vegas, NV

 
 
CohnReznick Speakers: Beth Mullen, Quinn Gormley, Mike Celkis, Katy Breazeale, Dan Worrall 
 
 
Arizona Housing Forum – August 23-25
 
News stories and headlines from the previous month

National News

After a reserved first quarter, low-income housing tax credit (LIHTC) investors are looking toward the rest of the year. Major investors remain in the market after being jolted by the prospect of tax reform late last year. They say they’re committed to buying housing credits in the months ahead, but they’re going to be cautious.  
 
The National Low Income Housing Coalition (NLIHC) held a Housing Policy Forum in Washington, DC. The Forum included very timely and informative plenary sessions. Read our previous report on the Policy Forum: Advancing Solutions in a Changing Landscape. For those who were unable to attend the NLIHC 2017 Housing Policy Forum, video recordings of all the plenary sessions are now available online.  
 
Here’s a way to bring down high housing prices by 10 percent nationwide: Eliminate the mortgage interest tax deduction. Okay, that wasn’t exactly the point that Lawrence Yun was trying to make during a homeownership forum at the U.S. Department of Housing and Urban Development on Thursday. The chief economist for the National Association of Realtors, Yun came out strongly in favor of the mortgage interest deduction when a question touched on the subject. In fact, he said that eliminating the deduction would lead to “home value destruction of 10 percent.” 
 
Since 2012, US homebuyers in some of the largest metro areas earning the median household income have been priced out of their housing markets. National wage growth has been lagging while home prices have been steadily rising, widening the housing affordability gap. The widening affordability gap has been especially hard on minorities, virtually pricing them out of some markets, according to a report released earlier this week by the brokerage Redfin.
 
Brian Coate, a vice president at Lancaster Pollard, digs into the uncertainty that has surrounded the low-income housing tax credit (LIHTC) market this year. Affordable housing developers were hit with a dramatic drop in LIHTC pricing after the 2016 election, which increased concerns about tax reform.  
 
The steady stream of Executive Orders, the ongoing promise of sweeping budget cuts to many parts of government and the ongoing lack of cohesion in Congress are creating anxiety for many safety-net programs that rely on federal funding. Will there still be dollars coming in fiscal year 2018? Should local programs reduce their services in anticipation? These are the hard questions facing many agencies, including those focused on affordable housing.  
 
More than 800 builders from across the nation marched on Capitol Hill today for the annual National Association of Home Builders (NAHB) Legislative Conference to call on Congress to make housing and homeownership a national priority and to support policies that will keep the housing recovery moving forward.  
 
America has a deep shortage of affordable housing, and, every year, the situation seems only to worsen. That makes it more important than ever to preserve the homes we already have in affordable housing programs. But affordable housing developers can’t buy every affordable housing property that’s up for sale in order to keep these buildings in stock, or repair every affordable building burdened with deferred capital needs. What the industry can do, however, is ensure the best chances of preserving affordable housing by following six recognized best practices. 
 
Nearly 39 million households can't afford their housing, according to the annual State of the Nation's Housing Report from Harvard's Joint Center for Housing Studies. Experts generally advise budgeting about 30% of monthly income for rent or mortgage costs. But millions of Americans are far exceeding that guideline.  
 
HUD has developed a 2017 Housing Trust Fund (HTF) Allocation Sample Form that HTF grantees (i.e., States) may use to submit their 2017 HTF allocation plans. States may opt to use this sample form or to submit their allocation plans in a different format, provided that all required elements are addressed. Please visit the HTF website for more guidance on the HTF program and Notice CPD 17-05 Guidance for HTF Grantees on FY 2017 HTF Allocation Plans for more information on HTF allocation plans. FY 2017 HTF allocation plans are due August 16, 2017. For FY 2017, a copy of the HTF allocation plan must be submitted to both the local HUD CPD Field Office and to HUD's Office of Affordable Housing Programs. 
 
Leon N. Weiner & Associates (LNWA) has finalized plans to acquire and modernize Cedar Run Apartments phases I & II located in Ocean County, New Jersey. The community features 72 affordable apartments for seniors with 69 of the units benefiting from United States Department of Agriculture (USDA) Rural Development program rental assistance. The development is a joint venture between Rural Housing Preservation Associates, a LNWA company and Hudson Valley Property Group. Tax Credit equity investment was provided by Enterprise Community Partners. New Jersey Housing & Mortgage Finance Agency facilitated the transaction by issuing the bonds and tax credits. USDA provided the permanent mortgage financing.” 
 
It is being anticipated that post July 1, 2017, homebuyers will pay a uniform rate on their purchase under the Goods and Services Tax (GST) regime. Experts feel that the move will bring down property prices in the country. While buying a house may or may not become cheaper, living in a gated society is surely going to burn a big hole in your pocket in the coming months, courtesy GST. Magicbricks explains why living in a housing society is set to get costlier.  
 
Just before he departed the House last week to become a Fox News contributor, Utah Republican Jason Chaffetz proposed a housing stipend for members of Congress. “I think a $2,500 housing allowance would be appropriate and a real help to have at least a decent quality of life in Washington,” he said. “You shouldn’t have to be among the wealthiest of Americans to serve properly in Congress.” It’s refreshing to have a prominent Republican lawmaker decry housing costs and the difficulty of making ends meet. But Chaffetz should recognize the significant housing subsidy that members of Congress and other wealthy Americans already receive, and the millions of struggling low income seniors, people with disabilities and families with children who receive none. As a member of Congress, Chaffetz earned at least $174,000 per year, putting him in the top 8% of earners in the country. In 2008, his net worth was around $5.6 million (although it seems to have declined significantly in recent years), putting him in the top 3% of households in the US. 
 
Despite the lawsuits, media spotlight and conventional wisdom, affordable housing developments built in poor, heavily black communities can lead to greater racial and income integration, according to new research by Stanford economists. Such housing, funded by federal tax credits, also raises property values and lowers crime in surrounding neighborhoods as higher-income white residents move in, the researchers found. “When a corporate developer comes in and builds nicer, new housing, it makes the neighborhood more desirable as a potential place to live,” said Rebecca Diamond, a professor at Stanford’s Graduate School of Business who authored the study with her colleague Tim McQuade. 
 
With the implementation of goods and services tax (GST) from 1 July, the numerous sectors in the Indian market are to be affected. Real estate is one among them. GST has brought all indirect taxes (service tax, excise duty and value added tax which apply to the procurement of goods and services during construction) under one unified tax structure; leading to a scenario where there will only remain the direct taxes (capital gains tax and wealth tax), stamp duty and GST for all property-related transactions.  
 

© 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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