the bright outlook of affordable housing
TRANSCRIPT
Affordable Updates The Bright Outlook of Affordable Housing
September 8, 2016 www.novoco.com
1
Michael J. Novogradac Novogradac & Company LLP
@novogradac
Agenda
Unused Bonds – An Opportunity for Rental Housing
The Affordable Housing Credit Improvement Act Potential Impact
Presidential Election
Outlook After the Election
September 8, 2016 www.novoco.com
2
September 8, 2016 www.novoco.com
3
$65 billion in private activity tax-exempt bond (PAB) cap went unused
In 2015, approximately
- $10.5 billion could not be carried forward and was forfeited.
$54.5 billion was carried forward to 2016 and is theoretically available for residential rental housing
+ ~$35 billion in approximate 2016 new cap
But…
Blog post coming soon to www.novoco.com/blog
$89.5 billion in 2016 resources that could be used to finance affordable rental housing.
S. 2962 Affordable Housing Credit Improvement Act of 2016
Announced May 19, 2016
Sen. Cantwell D-Washington
Sen. Hatch R-Utah
Sen. Wyden D-Ore.
Sen. Schumer D-N.Y.
September 8, 2016 www.novoco.com
4
S. 2962 Affordable Housing Credit Improvement Act of 2016
Announced May 19, 2016
Sen. Cantwell D-Washington
Sen. Hatch R-Utah
Sen. Wyden D-Ore.
Sen. Schumer D-N.Y.
September 8, 2016 www.novoco.com
5
Affordable Housing Credit Improvement Act of 2016, part 2
September 8, 2016 www.novoco.com
6
S. 3237
Affordable Housing Credit Improvement Act of 2016, part 2
New, expanded bill includes:
• 50 percent increase
• Income-averaging
• Minimum 4 percent rate
September 8, 2016 www.novoco.com
7
Sen. Maria Cantwell D-Washington
S. 3237
Affordable Housing Credit Improvement Act of 2016, part 2
Additional Resources
• Give states discretion to provide 30% basis boost for bond-financed projects
• Repeal QCT population cap
• Relocation costs included in eligible basis
• No basis reduction for certain energy tax incentives
• Indian areas generally treated as DDAs
September 8, 2016 www.novoco.com
8
Sen. Maria Cantwell D-Washington
S. 3237
Affordable Housing Credit Improvement Act of 2016, part 2
Financial Feasibility
• 50% basis boost for ELI units
• Modify student occupancy rules
• Codify increased tenant income guidance
• Modify 10-year rule – Limits apply to acquisition basis
• Adopt uniform income eligibility for rural projects
September 8, 2016 www.novoco.com
9
Sen. Maria Cantwell D-Washington
S. 3237
Affordable Housing Credit Improvement Act of 2016, part 2
Other
• Simplify the LIHTC student rule
• Clarify the ability to claim LIHTCs after casualty losses
• Replace the ROFR with a purchase option
• Add Native American projects as QAP selection criterion
• Modify the rent-setting rule
September 8, 2016 www.novoco.com
Sen. Maria Cantwell D-Washington
S. 3237
10
Affordable Housing Credit Improvement Act of 2016, part 2
Other
• Clarify the community revitalization plan
• Prohibit local approval or contribution requirements
• Change the official name of the LIHTC
September 8, 2016 www.novoco.com
Sen. Maria Cantwell D-Washington
S. 3237
11
Largest impact on equity for bond deals: • Minimum 4 percent
• State discretionary boost of up to 30% in areas outside of DDAs/QCTs
• Repealing population cap on QCTs
• Automatic DDA for Indian areas
September 8, 2016 www.novoco.com
12
Sen. Maria Cantwell D-Washington
Affordable Housing Credit Improvement Act of 2016, part 2 S. 3237
September 8, 2016 www.novoco.com
13
Total Project Costs Housing Credit Eligible Costs Basis Boost Housing Credit Eligible Costs Housing Credit Rate Calculated Annual Housing Credit Total Tax Credits for Syndication Tax Credit Price per Credit Dollar Housing Credit Equity Debt Equity Gap: Soft Loans & Deferred Developer Fee Total sources
Without the 4 Percent Minimum
With the 4 Percent Minimum
$25,000,000
$21,650,000 100%
$21,650,000 4%
$866,000
$8,660,000 $1.00
$8,660,000
$25,000,000
$21,650,000 100%
$21,650,000 3.15%
$682,000
$6,820,000 $1.00
$6,820,000
$12,270,000 $5,910,000
$25,000,000
x x x + +
x x x + +
*
Financing a LIHTC Property With and Without the 4 Percent Floor 160-unit property with all units at 60% AMI
About $1.8m more equity available
* Housing Credit Rate based on September 2016 30% PV percentage
September 8, 2016 www.novoco.com
14
Total Project Costs Housing Credit Eligible Costs Basis Boost Housing Credit Eligible Costs Housing Credit Rate Calculated Annual Housing Credit Total Tax Credits for Syndication Tax Credit Price per Credit Dollar Housing Credit Equity Debt Equity Gap: Soft Loans & Deferred Developer Fee Total sources
Without the 4 Percent Minimum
With the 4 Percent Minimum
$25,000,000
$21,650,000 100%
$21,650,000 4%
$866,000
$8,660,000 $1.00
$8,660,000
$12,270,000 $4,070,000
$25,000,000
$25,000,000
$21,650,000 100%
$21,650,000 3.15%
$682,000
$6,820,000 $1.00
$6,820,000
$12,270,000 $5,910,000
$25,000,000
x x x + +
x x x + +
*
Financing a LIHTC Property With and Without the 4 Percent Floor 160-unit property with all units at 60% AMI
Therefore, about $1.8m less of a gap
* Housing Credit Rate based on September 2016 30% PV percentage
September 8, 2016 www.novoco.com
15
Total Project Costs Housing Credit Eligible Costs Basis Boost Housing Credit Eligible Costs Housing Credit Rate Calculated Annual Housing Credit Total Tax Credits for Syndication Tax Credit Price per Credit Dollar Housing Credit Equity Debt Equity Gap: Soft Loans & Deferred Developer Fee Total sources
Without the 30% Basis Boost
With the 30% Basis Boost
$25,000,000
$21,650,000 130%
$28,145,000 4%
$1,126,000
$11,260,000 $1.00
$11,260,000
$25,000,000
$21,650,000 100%
$21,650,000 3.15%
$682,000
$6,820,000 $1.00
$6,820,000
$12,270,000 $5,910,000
$25,000,000
x x x + +
x x x + +
*
Financing a LIHTC Property With and Without the 30% Basis Boost
* Housing Credit Rate based on September 2016 30% PV percentage
160-unit property with all units at 60% AMI
About $4.4m more equity available
September 8, 2016 www.novoco.com
16
Total Project Costs Housing Credit Eligible Costs Basis Boost Housing Credit Eligible Costs Housing Credit Rate Calculated Annual Housing Credit Total Tax Credits for Syndication Tax Credit Price per Credit Dollar Housing Credit Equity Debt Equity Gap: Soft Loans & Deferred Developer Fee Total sources
Without the 30% Basis Boost
With the 30% Basis Boost
$25,000,000
$21,650,000 130%
$28,145,000 4%
$1,126,000
$11,260,000 $1.00
$11,260,000
$12,270,000 $1,470,000
$25,000,000
$25,000,000
$21,650,000 100%
$21,650,000 3.15%
$682,000
$6,820,000 $1.00
$6,820,000
$12,270,000 $5,910,000
$25,000,000
x x x + +
x x x + +
*
Financing a LIHTC Property With and Without the 30% Basis Boost
* Housing Credit Rate based on September 2016 30% PV percentage
160-unit property with all units at 60% AMI
Therefore, about $4.4m less of a gap
Recent Presidents Who Had Major Tax Bills the Year of their Inauguration
September 8, 2016 www.novoco.com
17
OBAMA BUSH CLINTON BUSH REAGAN CARTER
September 8, 2016 www.novoco.com
18
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Includes housing as part of her policy platform
• Calls to increase supply of affordable rental homes by expanding annual LIHTC allocations for areas most in need
• Plans to create incentives at state and local level to enact effective land use rules and other regulations to promote development of new rental housing
September 8, 2016 www.novoco.com
19
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Includes housing as part of her policy platform
• Calls to increase supply of affordable rental homes by expanding annual LIHTC allocations for areas most in need
• Plans to create incentives at state and local level to enact effective land use rules and other regulations to promote development of new rental housing
September 8, 2016 www.novoco.com
20
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Includes housing as part of her policy platform
• Calls to increase supply of affordable rental homes by expanding annual LIHTC allocations for areas most in need
• Plans to create incentives at state and local level to enact effective land use rules and other regulations to promote development of new rental housing
September 8, 2016 www.novoco.com
21
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Includes housing as part of her policy platform
• Calls to increase supply of affordable rental homes by expanding annual LIHTC allocations for areas most in need
• Plans to create incentives at state and local level to enact effective land use rules and other regulations to promote development of new rental housing
September 8, 2016 www.novoco.com
22
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Includes housing as part of her policy platform
• Calls to increase supply of affordable rental homes by expanding annual LIHTC allocations for areas most in need
• Plans to create incentives at state and local level to enact effective land use rules and other regulations to promote development of new rental housing
September 8, 2016 www.novoco.com
23
Presidential Candidates and Affordable Housing
SECRETARY HILLARY CLINTON DONALD TRUMP
• Has not stated a position • However, his father developed a
substantial amount of unsubsidized affordable rental housing in NYC
September 8, 2016 www.novoco.com
28
The “Defensive” Path The “Offensive” Path
November 2016
PROTECTING OURSELVES
SEEKING RESOURCES
September 8, 2016 www.novoco.com
29
The “Defensive” Path The “Offensive” Path
Low-Income Housing Tax Credits
Ensuring LIHTC is retained in all future
tax reform bills
Pushing for a 50 percent increase and Cantwell-Hatch
improvements
September 8, 2016 www.novoco.com
30
The “Defensive” Path The “Offensive” Path
HUD
Minimizing cuts Trying to restore more
HUD funding and eliminating RAD unit cap
September 8, 2016 www.novoco.com
31
The “Defensive” Path The “Offensive” Path
GSEs
Retaining some form of government involvement in
mortgage finance
Increasing GSE multifamily activity
September 8, 2016 www.novoco.com
32
The “Defensive” Path The “Offensive” Path
NMTC
Ensuring the NMTC is not repealed before 2019 and at
least gets extended beyond that
Permanence, increase in authority, inflation adj.