National Legislative Issues

January 27, 2010

Federal Issues• Housing Finance• Tax Matters• Environment• Draft FCC IssuesState and Local Issues• Budget & Taxes• Energy and Green Building• Building Codes• Bed Bugs• Additional Issues

NAA Tracking Info

Housing Finance

1. Capital Markets Initiative• Goal is to restore apartment industry’s access to

capital

• 11/30/09 NAA/NMHC met with HUD Deputy Assistant Secretary to encourage HUD to streamline its operations and increase volume.

• 12/15/09 NAA/NMHC met with Treasury Secretary Geithner to discuss a future model for CRE lending.

Housing Finance2. Government Sponsored Enterprises Reform

• Senate Banking Committee trying to determine the future of Fannie and Freddie

• Obama Administration developing its own plan (Feb 2010)

• NMHC/NAA working with committees to make sure that they understand the multifamily perspective

• Treasury Department announced it will provide unlimited financial support beyond the $100 billion per institution limit for Fannie & Freddie

Housing Finance• At 9/30/09, $51 billion provided to Freddie and $60

billion to Fannie• Treasury announced conservatorship extended

through 2012• NMHC Task Force developing a policy for GSE Reform

that includes the needs of the apartment sector• At the March 2010 NAA Legislative Committee

meeting, I will push for NAA/NMHC to lobby for Fannie and Freddie to remain separate institutions and get leverage back to at least 80%

3. CRE Loan Modifications

• Policy statement issued 10/30/09• Gives banks more flexibility to extend or refinance CRE

loans without adverse classification• Loans to good borrowers will not be adversely classified

solely because value of collateral has declined to less than loan balance

• Will make it easier to renew loans• Will allow banks to begin to move distressed assets from

their balance sheets• Relies more on ability to pay rather than value of

collateral

Housing Finance

4. Financial Regulatory Reform exempts CMBS from Risk Retention Requirements

• House has passed a bill exempting CMBS for risk retention by issuer

• Bill requires companies selling mortgage backed securities to retain 5% of credit risk but can use a third party investor for this “B” piece.

• Senate has not considered a bill yet.

Housing Finance

Housing Finance5. Apartment related tax incentives allowed to

expire

• Senate failed to pass tax extension bill• Tax credit exchange program• New markets tax credit• Credit for new construction of energy efficient

homes• 50% bonus depreciation provision• Increase in small business expensing limits

(Section 179)

Tax Matters1. Carried Interest

• On 12/9/09 House passed HR4213 which, among other things, taxes carried interest at ordinary income tax rates instead of capital gain as in current law.

• This has been a top priority for NMHC/NAA for several years

• Senate has not considered the measure• NMHC/NAA will work with other real estate

organizations to educate lawmakers of consequences including slowing recovery and hindering affordable housing shortage.

• Carried Interest tax change has passed House 3 times but never been considered by the Senate

Tax MattersCarried Interest• In January 2010 the Executive Committee of

the U. S. Conference of Mayors unanimously adopted resolution to keep capital gains treatment of carried interest.

• Intense lobbying effort by NAA/NMHC and other real estate groups.

• NAA/NMHC now engaging National Association of Counties, National League of Cities and various governor's associations.

Tax Matters2. Estate Tax

• On 12/3/09 House passed HR4154 to permanently extend the 2009 Estate Tax Law (3.5 million per person exemption and 45% tax rate) and preserved stepped up basis

• Senate did not take up this legislation before adjournment

• 1/1/2010 Estate Tax is repealed completely• As a part of the repeal (no estate tax) stepped up

basis will be replaced by roll over basis

Tax Matters3. Net Operating Loss

• New law – (11/6/09) – NOL carryback expanded from 2 years to 5 years.

• Applies to losses incurred in 2008 and 2009• Applies to all companies regardless of

revenue (cut off was $15 million or less)• Can only offset 50% of taxpayer income in

year 5.

Environment 1. Climate Change Bill

• House passed its Climate Change Bill on 6/26/09. • Includes a provision requiring a building code 30%

more efficient by 2010 and 50% more efficient by 2016.

• NMHC/NAA has opposed this provision for some time

• Senate has passed a bill thanks to NMHC/NAA that eliminates specific energy efficiency building code targets and timelines, leaving those decisions to EPA rulemaking

Environment 2. Lead Based Paint Renovation, Repair and

Painting Rule

• In effect in April 2010 • Creates new compliance obligations for pre-

1978 properties not certified lead free.• Requires workers who disturb lead coated

surfaces to complete an EPA certified training course on lead safe work practices

Draft FCC Order• A draft before the FCC would allow exclusive

contracts between apartment properties and cable providers and satellite operators

• In 2008 FCC banned exclusive access agreements

• Draft is expected to allow bulk billing and exclusive marketing arrangements

• Unclear when FCC might vote on this draft• NAA and NMHC lost the exclusive access

banning case in Federal Court in 2008

State and Local Issues

1. Budgets and Taxes

• Fiscal pressure on state budgets• States looking at increased income taxes,

excise, property and business taxes.• Several states looking at goods and services

not currently taxed.

2. Energy / Green Building• Green Building Mandates, energy

auditing/reporting and incentives for green building are hot topics

• NAA currently tracking 172 green building related bills at state level alone

• EPA declared carbon dioxide a pollutant• Governments are starting to regulate the

factors in development that cause it to be emitted into the atmosphere

• Some governments have created “carbon taxes”

3. Retroactive Building Code Requirements

• Many state and local governments considering building codes to contain expensive retrofit requirements (especially relating to health and safety)

• These codes, if adopted, will cost members many thousands of dollars per property

• NAA currently tracking over 100 building code proposals at state level

• Cover carbon dioxide and smoke detectors, sprinkler and elevator mandates (Hoover example)

• Accessibility proposals also under review

4. Bed Bugs• Bed bugs are becoming an area of concern• Very costly to eradicate• Legislation being considered to shift responsibility for

remediation onto property owners and managers• If passed will result in rent abatement and sometimes legal

and punitive damages• Bed bug lawsuits becoming more commonplace, including

claims for overexposure of pesticide, gross negligence, battery, breach of warranty and emotional distress.

• Some cities have set forth strict protocols governing extermination and disposal procedures and subjecting non-compliant properties to fines, inspection costs and even jail time.

5. Additional State and Local Issues

• Apartment community registration and inspections• Smoke free housing required• Adding new groups to protective classes such as

sexual orientation, applicants with criminal histories, mandatory Section 8 and victims of domestic violence

• Foreclosure reform – policy makers misunderstand apartment operations and believe tenants would be unexpectedly removed from their units in the case of a foreclosure. Due to this, several states are considering proposals that provide tenants with notice and hold over rights.

NAA Tracking Information

New Information for 2010 from NAAIssues / Bill Tracking for 2010

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