The Housing Advisory Group (HAG) held its annual Congressional Forum in Washington D.C. on June 8, 2016. The turnout was the largest to date with attendees from across the country representing every aspect of the affordable housing community. HAG Chairman Bob Moss opened the Forum by welcoming all the participants. He thanked HAG members for their ongoing efforts to make sure that Members of Congress visit properties in their districts and states, and he thanked our congressional champions – Senator Maria Cantwell (D-WA) and Rep. Pat Tiberi (R-OH) – for their continued support for and commitment to affordable housing. Bob also put in a plug for using social media to promote the LIHTC and affordable housing programs. For future reference our HAG Twitter handle is @HousingAdvGroup. Please follow us on Twitter to get updates and news of interest.
HAG Executive Director David Gasson outlined the schedule for the Forum and especially encouraged attendees to take the opportunity at the Capitol Reception to meet and thank Members of Congress for their support for affordable housing. Photos from the reception and meeting can be viewed here.
The program began with a Hill staff panel moderated by Barbara Pate, Davis & Harman LLP and HAG Counsel. We then were honored to hear from Senator Maria Cantwell (D-WA) followed by a presentation by Senator Jack Reed’s (D-RI) banking and housing Legislative Assistant and by professional staff from the Senate Appropriations Committee. Senator Reed was scheduled to speak to the Forum, but was tied up on the Senate floor managing the defense authorization bill. We were very appreciative that his staff could step in and give us an excellent legislative update on the status of HUD appropriations and the outlook for housing finance reform.
The Forum concluded with an industry panel discussion moderated by Bob Moss. Attendees then adjourned to the Capitol for the Congressional Reception, which was well-attended by Members of Congress and staff.
Congressional Staff Panel — Harold Hancock, Tax Counsel, House Ways and Means Committee; Nick Wyatt, Tax and Nominations Professional Staff Member, Senate Finance Committee; Artie Mandel; Policy Advisor, Senator Maria Cantwell
Harold Hancock provided an overview of activities in the House of Representatives, and discussed the work of the House Republican policy agenda task forces charged with crafting a unified House GOP pro-growth agenda. Harold said the task forces had begun unveiling their proposals, and noted that the Tax Reform Task Force, chaired by Ways and Means Committee Chairman Kevin Brady (R-TX), would likely be the last of the groups to unveil its blueprint. He said the blueprint, expected the last week in June, would include specific details on pro-growth tax reform, but would not be presented in legislative text. Moderator Barbara Pate noted that the Task Force on Poverty, Opportunity, and Upward Mobility had released its blueprint on June 7 and asked how the LIHTC might fit into that agenda. Harold said it might offer the opportunity to “rethink” the credit to make it work better and help more people. Harold invited the group to meet with him to offer suggestions for how to accomplish that.
Nick Wyatt discussed the Senate Finance Committee’s efforts to prepare for tax reform and reported that Finance Committee Chairman Orrin Hatch (R-UT) was preparing to release a corporate integration proposal designed to address the double taxation of corporate income. He indicated the proposal would provide for a deduction for corporate dividends paid to shareholders. Nick said the Joint Committee on Taxation was still preparing revenue estimates on the corporate integration proposal so timing for release is uncertain. Barbara mentioned that there might be some concern about how such a proposal would affect investor interest in the LIHTC, and said the industry would be studying the details once the proposal is released. Regarding the outlook for LIHTC legislation this year, Nick mentioned that there likely would be few tax vehicles available during the remainder of the session, but said the reauthorization of the Federal Aviation Administration was a bill that some Members of Congress hope could carry tax amendments. In response to a question regarding the importance of bonds for affordable housing, Nick suggested that there might be greater interest in prioritizing the use of bonds for infrastructure than for housing.
Artie Mandel discussed S. 2962, LIHTC legislation introduced on May 19, 2016, by Senator Cantwell and Chairman Hatch. Artie described the provisions – a 50 percent increase in the credit allocation cap, a permanent 4 percent minimum credit rate, and the income averaging proposal. Artie noted that the increase in the cap is phased in over 5 years which helps with the revenue estimate – a $4.1 billion loss over 10 years versus a $10.1 billion loss over 10 years for an immediate increase. Artie said Senator Cantwell is looking for every opportunity to move the bill this year and said she does not agree with those who suggest it should wait for tax reform. Artie also discussed a second bill that is being drafted that would make a number of other changes to the credit, and thanked the industry for its suggestions for appropriate measures to include. He mentioned, among other provisions, simplifying the student rule; a basis boost for developments serving the homeless; making the credit more compatible with energy efficiency tax incentives; clarification of the ability to claim the credit after casualty losses; and encouraging development of affordable housing in Native American communities. When asked about the bond conversion proposal, Artie said they made the decision that the best way to get more resources for affordable housing is through the increase in the cap. He said the bond conversion could be helpful in some states and said there are Senators interested in that approach.
Barbara noted that the industry is eager to help get support for Senator Cantwell’s bill (and the LIHTC in general) and asked how the group could best help. All the panelists agreed that getting Members of Congress out to see properties in their districts and states is the most effective way to convince them of the importance of the credit.
The Honorable Maria Cantwell (D-WA)
Senator Cantwell urged the group to communicate the need for the Cantwell-Hatch bill, S. 2962. She noted that an increase in the credit allocation cap is a win for the economy and suggested that the increase is stimulative, and as such, will not lose revenue, but instead would be a net plus.
Senator Cantwell stated that she does not want to wait for tax reform as some have suggested, and hopes to move the bill this year. She said we have a crisis now, and need to act now. Senator Cantwell noted that she launched the effort two months ago to get additional resources for affordable housing with events in Washington State and in New York, and commented that she would travel anywhere to help make it happen. Senator Cantwell suggested that the group should help get Chairman Hatch more out front on the bill, and noted that there is a story to tell because Utah has an initiative to get every veteran in a home. She noted that Chairman Hatch is concerned about the increase in the allocation cap.
In discussing the 50 percent increase in the allocation cap, Senator Cantwell acknowledged that it is not enough to meet the need for affordable units, but said she did not think anyone would support a 100 percent increase.
In response to a question about which Members of Congress the industry should focus on, she said that she and her staff have been communicating with Reps. Pat Tiberi (R-OH), Tom Reed (R-NY) and Richard Neal (D-MA). She also urged the industry to focus on Senate Republicans and mentioned Senators Tim Scott (R-SC), Dean Heller (R-NV) and Johnny Isakson (R-GA). She suggested contacting Finance members with large urban centers, and said it would be helpful to get estimates on the cost of not doing affordable housing to show elected officials that the credit produces many indirect benefits such as reduced costs in social services.
Senator Cantwell noted that the growing rental housing crisis has been exacerbated by veterans returning home from Iraq and Afghanistan, a growing aging population, the impact of crushing student loan debt on the ability to buy a home, and the need for workforce housing because people can’t drive for hours to get to work. She again noted that action cannot wait, and said there likely will be a year-end bill that can carry tax items, and Congress needs to be convinced that S. 2962 fits.
Congressional Staff Panel – Dabney Hegg, Minority Clerk, Senate Appriopriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies (THUD); Christina Monroe, Professional Staff Member, Senate Appriopriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies (THUD); James Ahn, Legislative Assistant, Senator Jack Reed.
Dabney Hegg discussed the Senate appropriations process for Transportation, Housing andUrban Development and Related Agencies (THUD) and said the development of the package went well in the Subcommittee with a good bipartisan relationship between Subcommittee chair Senator Susan Collins (R-ME) and Senator Reed, the ranking member. She said out of a $58.6 package, $39.6 billion was for HUD-related activities. She noted the FY 2017 package included a $1.5 billion increase for housing-related programs over FY 2016. Dabney discussed the Senate approach of combining the THUD appropriations bill with the military construction appropriations bill as a way to expedite the process, but reported that the House stripped the THUD appropriations bill from the military construction bill leaving timing for reconciliation with the House very much up in the air. She said there was no silver bullet on how to proceed. She noted that there are a lot of significant initiatives in the bill, so they really do not want to fund THUD under a continuing resolution. She said that would be a major loss.
Dabney said she expects a barebones continuing resolution to fund the government from October 1 through mid-November. After that, she hopes Congress can complete some “minibuses.” A minibus bill is very similar to an omnibus appropriations bill. The difference lies primarily in the scope of the legislation — an omnibus will include a larger number of the appropriations measures, while a minibus will only encompass a handful.
On housing finance reform legislation, James Ahn noted that concerns have been raised about jeopardizing 30-year fixed rate mortgages, and also regarding the fact that multifamily is doing well, and Congress should not “mess it up” in housing finance reform. He said trying to do housing finance reform in a safe way is tricky, and suggested that a lot of issues have not been fleshed out. He said Congress should not “roll the dice” with 30-year fixed rate mortgages. James said there is a stalemate on how to proceed on housing finance reform. He said they need to move forward, but Members do not know how.
James also discussed the National Housing Trust Fund and the Capital Magnet Fund and noted that this is the first year both will be funded. James said HUD announced that $174 million will be allocated to states through the National Housing Trust Fund, and said at least 80 percent of the state’s grant must go toward rental housing while 10 percent must go toward home ownership.
Industry Panel — Peter Lawrence, Novogradac & Company LLP; Andrea Traudt Inouye, Illinois Housing Council; Steve Wallace, Nixon Peabody LLP
Turning first to Peter Lawrence, moderator Bob Moss asked about the Government Accountability Office (GAO) report that had been released earlier in the day. Peter explained that this was the second of three GAO reports on the LIHTC, and noted that the reports were requested by Senator Charles Grassley (R-IA). Peter explained that the first report, released in July 2015, focused on the federal administration of the credit. He said the report recommended that HUD share administration of the credit with the Internal Revenue Service. The second report focused on state administration of the credit, and suggested that IRS and HUD could work with the state allocating agencies to improve the administration of the credit. Peter noted that GAO found that more than half of qualified allocation plans reviewed did not mention all selection criteria and preferences required by law. He said that GAO found some allocation agencies required letters of support from local governments for proposed developments, which raises fair housing concerns. Peter commented that a third GAO report, expected in early 2017, will focus on costs per unit and the role of investors and syndicators. Peter suggested that this was the report that would be the most worrisome, and said the industry needs to be ready to respond.
Bob Moss asked Steve Wallace to comment on the HUD appropriations process. Steve said some have suggested there may not be a Lame Duck session after the election and said it is possible that Congress might punt to March of 2017 to fund the government. He said the Senate tied HUD appropriations to the military construction appropriations bill with the thought that this would be an easy pathway for the HUD bill. He noted, however, that the House stripped the HUD appropriations section from the military construction bill. Steve noted that both the House and Senate proposed to fund Project-Based Rental Assistance at $10.9 billion. He commented that the Senate bill made changes to the Rental Assistance Demonstration (RAD), including an increase in the cap to 250,000 on the number of public housing units authorized to convert under RAD. In response to a question regarding presidential candidates and their housing plans, Steve suggested that if Hillary Clinton is elected there could be a major reform of HUD that could tie in housing, services, transportation and jobs.
In his introduction, Bob Moss noted the enormous success that Andrea and the Illinois Housing Council have had in garnering support from the Illinois Delegation for affordable housing and the LIHTC. He then asked her to talk about the budget problems in the State of Illinois, and the impact on affordable housing. Andrea described the battles between the Speaker and the Governor resulting in an impasse over the budget. She said that was problematic because the state portion of federal HOME funds was caught up in the stalemate since the state is the grantee of the funds. Fortunately, she noted, the Illinois Housing Council was able to educate the Governor’s office and the HOME funds were released.
Following the Congressional Forum, HAG members and guests convened in the Lyndon Baines Johnson Room in the U.S. Capitol for our annual reception with Members of Congress. Joining us this year were Senators Jack Reed (D-RI); Ben Cardin (D-MD); Mike Crapo (R-ID); Roger Wicker (R-MS); Jeff Merkley (D-OR); Ed Markey (D-MA); Elizabeth Warren (D-MA); Susan Collins (R-ME); Dean Heller (R-NV); and Jeanne Shaheen (D-NH) and Representatives Joe Kennedy (D-MA); Ann Kuster (D-NH); Patrick Murphy (D-FL); Katherine Clark (D-MA); and Todd Young (R-IN). In addition, Senators Brian Schatz (D-HI); Rob Portman (R-OH); and Michael Bennet (D-CO) met separately with HAG members.
The annual dinner, following the Capitol Reception, was a great success, and we are most grateful for our sponsors: Boston Financial Investment Management, City Real Estate Advisors, Inc., CohnReznick LLP, Holland & Knight LLP, Mayfair Management Group, McCormack Baron Salazar, Inc., Nixon Peabody LLP, Novogradac & Company LLP, The NRP Group, The Richman Group and Boston Capital.