The affordable housing industry is rapidly evolving due to the changing demographics of residents, the ups and downs of the economy, new advances in technology, and more. To say the least, there are a lot of exciting things happening. However, you don’t know where you’re headed if you haven’t looked at where you’ve come.
Here is what to look forward to in the very near future of affordable housing. Plus, here’s what to remember that got us where we are now.
- Republicans reworked the tax code with House members narrowly clearing a budget blueprint that would allow a tax bill to pass Congress without any Democratic votes.
- On July 29, 2016, the Housing Opportunity Through Modernization Act was signed into law (Public Law 114–201, 130 Stat. 782). HOTMA made numerous changes to statutes that govern HUD programs, including section 8 of the United States Housing Act of 1937.
- The House passed a new tax bill that permits deductions for interest accrued on a business. However, it requires an extension of a building’s depreciation period from 27.5 years to 30 years.
- Lawmakers extended several tax provisions that expired at the end of 2017 including one that had been introduced in the Senate (S. 2256). The tax provision would renew the Energy Efficient New Homes Tax Credit and Energy Efficient Commercial Buildings Deduction through 2018.
- President Trump announced he will impose tariffs on imports of steel and aluminum, sparking fear of a trade war with China.
Impact on affordable housing: The tariffs raised concerns about the impact on construction and development for the real estate industry. Considering the costs that already go into a multifamily development, policies that lead to higher costs add extra stress on the industry. The tariffs could also slow building construction and worsen the nation’s housing affordability crisis.
- President Trump signed a $1.3 trillion Omnibus Spending Bill that included increased HUD funding, expansion of the Low-Income Housing Tax Credit program, tax policy changes for real estate investment trusts, and a short-term extension of the National Flood Insurance Program.
Impact on affordable housing: The Omnibus Spending Bill will increase Low-Income Housing Tax Credit allocation by 12.5% through 2021.
- President Trump signed the Consolidated Appropriations Act of 2018. The bill allowed for affordable housing companies to move in residents at 20% through 80% median income. The goal was that any combination of units can be identified as intended to satisfy your minimum set-aside, as long as the average affordability of the units is 60%.
- The FAST ACT interim final rule went effect on March 12, 2018. The rule implements FAST Act provisions that allow public housing agencies (PHAs) and multifamily housing owners to conduct full income recertification for families with 90% or more of their income from fixed-income sources every three years instead of annually.
- House Republicans passed the Transitional Housing for Recovery in Viable Environments Demonstration Program (THRIVE) Act which was designed to help people with substance abuse disorders obtain affordable housing. The bill will set aside thousands of rental assistance vouchers for low-income people suffering from opioid addiction.
- As part of the Omnibus Spending Bill, the National Flood Insurance Program was extended through July 31, 2019, offering lawmakers the opportunity to work on a reform of the program. Long-term extension and reform of the program have been a key policy goal for the multifamily industry.
- Oregon becomes the first to enact statewide rent control.
Impact on affordable housing: Economic and multifamily professionals generally agree that rent control exacerbates the affordable housing crisis.
- On March 20, 2019, HUD doubled down on its inspection criteria in order to protect the health and safety of residents. The Standardization of REAC Inspection of Notification Timelines says property owners and agents should adopt year-round maintenance practices instead of undertaking “extraordinary just in time repairs” to meet compliance thresholds. Now owner/agents will only have a 14-day notice of an on–site inspection.
Impact on affordable housing: While efforts are welcomed to overhaul HUD’s inspection system, HUD failed to recognize the bigger reforms needed, like a chronic lack of funding, unfairly burdening property managers.
- The White House Opportunity and Revitalization Council published its implementation plan, outlining to President Trump a detailed plan explaining the various subcommittees of the council, the strategy to implement administrative reforms and initiatives that will target, streamline, coordinate, and optimize federal resources in economically distressed communities, including Opportunity Zones.
- HUD is currently reviewing a draft notice proposed by industry leaders that sets up a framework on how the affordable industry can use e-signatures and e-storage.
Impact on affordable housing: Electronic signatures in affordable housing have the potential to revolutionize the way property managers work and how tenants interact with their communities. This draft notice would allow on-site staff to focus on other ways to interact with their tenants as opposed to spending their days sorting through heaps of paper.
- On April 24, 2019, HUD updated the income limits. HUD’s income limits determine eligibility for assisted housing programs including Public Housing, Section 8 project-based, Section 8 Housing Choice Voucher, Section 202 housing for the elderly, and Section 811 housing for persons with disabilities programs. HUD develops income limits based on median family income estimates and fair market rent area definitions for each metropolitan area, parts of some metropolitan areas, and each non-metropolitan county.
Impact on affordable housing: Property managers using ResMan or any property management software will need to update their income limits for each one of their affordable properties so that certifications are updated properly.
- HUD expects to release an update to TRACS in the summer of 2019. TRACS 203A will feature expanded race and ethnicity categories, additional data collection from repayment agreements, RAD conversions, among other things. During that transition time, HUD and contract administrators will accept TRACS files that are in either version up until the declared cutoff date.
Impact on affordable housing: Affordable professionals will see changes on things like the 50059 and the 50059A, the voucher form, particularly part 6. You’ll also see new fields for FSS escrow accounting. Work with your software vendor when you are ready to switch over to the new TRACS version.
2020 and Beyond
- While HUD isn’t quite ready to release TRACS 203A, it is already looking ahead to TRACS 203B. This release is going to be even larger than 203A. The affordable industry won’t see this update until 2020 at the earliest.
- Affordable housing is poised to become a more prominent issue in the 2020 presidential race, with several potential Democratic candidates already having released proposals on the topic. Political strategists and housing experts say affordable housing could be a bigger part of the debate as concern grows about how housing costs have increased faster than wages.
- President Donald Trump’s fiscal year 2020 budget proposes to drastically cut low-income affordable housing benefits by slashing federal investments in affordable homes, by increasing rents, and “imposing harmful work requirements on America’s struggling families,” according to the National Low Income Housing Council (NLIHC).
Impact on affordable housing: The administration proposes to cut HUD by $9.6 billion or 18% below 2019 enacted levels. If enacted, the budget could leave even more low-income people without stable homes.
- By 2020, the massive backlog of unmet capital needs at public housing properties is likely to reach $70 billion, according to the National Association of Housing and Redevelopment Officials (NAHRO).
- By 2030, nearly half a million current LIHTC units, or nearly a quarter of the total stock, will reach the end of all federally mandated rent-affordability and income restrictions. Some of these units will be lost from the affordable housing supply as they convert to market-rate rents. Others may be lost to physical deterioration.