In order to age in place older adults may need to make modifications to their homes.  AARP and others have developed checklists and tools for making homes “universally accessible” for people regardless of age or abilities.  More information is available at: http://www.aarp.org/home-garden/livable-communities/info-07-2011/aarp-home-fit-guide-aging-in-place.html

In some cases it may be advantageous to consider co-housing options where a group of older adults (usually not all the same age) live together in a home (think “Golden Girls”) or where a younger person is provided a room at low or no rent in exchange for assisting with household tasks that are challenging for the elder.  Organizations have been forming across the country to be the “matchmaker” for these arrangements.  These models are for people who are well and generally able, they are not necessarily part of the medical model of care like home care or hospice.

Other models include a number of single-family homes clustered around a common building where meals are shared in common and decisions about the common life of the group are made collectively.

Thinking outside of the standard nursing home/assisted living/continuum of care community model is going to be needed to accommodate the large population of aging Boomers over the next few decades.  How is your community responding to these needs?

In Indiana, there are reportedly 30 units of available affordable rental housing per 100 households at or below the extremely low-income threshold; this figure matches that of the national average. For very low-income and low-income households in Indiana, the figures are less daunting, and even promising. According to the report, there are 71 and 110 available affordable units of rental housing per 100 households at the very low-income and low-income thresholds, respectively.

To read the entire report, go to the NLIHC’s February 2012 Housing Spotlight.

On February 13, 2012, the Obama Administration unveiled its FY 2013 Budget Request.  While IACED supports many of the President’s funding requests for programs within the Department of Housing and Urban Development, we strongly oppose some of the cuts made to programs that are critical to serving low-income, vulnerable populations.

We believe these decisions to scale back key programs aimed at helping families and individuals most in need are extremely ill-advised at the beginning of what was already likely to be a bleak appropriations cycle.  That said, there were some bright spots within the funding request.  We applaud the Administration’s request to increase funding for Homeless Assistance Grants at $2.2 billion.  That figure was the amount authorized under the enacted Homeless Emergency Assistance and Rapid Transition to Housing Act (HEARTH) and the final appropriations bill for FY12 failed to meet that level, resulting in inadequate implementation of broad program changes.

We also are pleased the proposal increased Section 202 funding for Housing for the Elderly after the program was slashed in the enacted FY12 budget.

IACED Opposes the following cuts:

The budget provides $8.7 billion for project-based rental assistance, down from about $9.3 billion in fiscal year 2012. The proposed savings would be generated by providing less than 12 months of funding up front on some contracts that overlap funding years.  Secretary Donovan claims the move will not lower the number of families served or delay payments to landlords, but HUD has tried this accounting technique before and it did not work.  A similar gimmick was employed under the Bush Administration about five years ago and it simply created a budget shortfall and created more instability in the lives of hundreds of thousands of vulnerable people.

The FY13 request for the Sec. 811 program is only $150 million, down from $165 million in 2012.

The Administration proposes cutting the Community Development Fund from $3.308 in FY12 to $3.143 in FY13. 

The Administration only maintains requests for funding for Community Development Block Grants and HOME funds.  In FY2012, these programs saw drastic funding cuts when communities needed those funds to continue rebuilding distressed communities.  These programs are highly leveraged and extremely effective tools in helping and communities reduce blight and expand affordable homeownership.  We support an increase in allocation to both of these programs.

In addition to the funding guidelines, the Administration’s HUD request included several policy provisions. One of those proposals would increase minimum rents paid by the lowest income HUD-assisted households to a mandatory level of $75.  In a time where there are so many cost-burdened families on the verge of homelessness, introducing a mandatory rent requirement of $75 (up from $25-$50) would only serve to further destabilize the lowest-income families and individuals.  Funding for homelessness cannot keep pace with demand and emergency shelters do not have the capacity to serve new individuals that could be forced out of assisted housing programs after failing to meet this requirement.

Finally, we support the Administration’s proposal to finally invest in the National Housing Trust Fund.  While it was not part of the HUD-specific request, we support the Administration’s request of $1 billion for the NHTF.

To review the Administration’s HUD proposal, click here: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/housing.pdf

The bill, sponsored by the chair of the committee, Rep. Judy Biggert, (R-Ill.), amends the U.S. Department of Housing and Urban Development’s (HUD) definition of homelessness to include children, youth and their families who are verified as homeless by designated school district liaisons, Head Start programs, and Runaway and Homeless Youth Act programs.

Further, the bill was amended during the Committee markup to require local homeless counts to include those children classified under the definitions listed in the bill.

The legislation was contained in the original version of the Homeless Emergency and Rapid Transition to Housing introduced by the late Congresswoman Julia Carson (D-Ind.) in the 110^th Congress.  While the HEARTH Act was eventually signed into law, negotiations in the House and Senate yielded weaker language regarding the definition of homeless children.

The enacted law does address children and youth, but includes restrictive and burdensome documentation that effectively denies HUD assistance to many vulnerable children, even though they meet the definition of homelessness as defined by other federal agencies.

H. R. 32 would streamline this qualification process by clarifying that all children and youth who are verified as homeless by other government agencies would be counted by HUD and eligible for shelter and supportive services.

On December 15, 2011, the Subcommittee held a hearing on the legislation and included testimony from children and youth who experienced homelessness, but were not eligible for assistance under HUD’s current regulations.  IACED will keep you updated when the bill will moves to the full committee for markup.

We ask that our members who support this expansion call their Representative to ask them to cosponsor the bill and support its final passage in the House.  Currently, none of the members of Indiana’s congressional delegation have signed on as a cosponsor.  Both Rep. Andre Carson (D-Indianapolis) and Rep. Joe Donnelly (D- South Bend) serve on the Financial Services Committee that has jurisdiction over this legislation.

You may call (202)225-3121 for the U.S. House switchboard operator.

For a link to the archived video of the December 15 hearing, click here. http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=271819

To read an analysis by the National Association for the Education of Homeless Children and Youth on the barriers to service HUD’s current regulations present, click here. http://www.naehcy.org/dl/NAEHCYAnalysisTestimony.pdf

For a list of advocacy and trade organizations that support this legislation, click here. http://www.naehcy.org/dl/nationalgroups.pdf

H.R. 1743 requires this commission to identify properties and make sale recommendations to the administration. The president would then approve or disapprove these sales then Congress would have to pass a resolution approving of the recommendations before they take effect.  Rep. Jeff Denham (R-Calif.), the sponsor of the legislation stated that both parties reached an agreement on this provision in the bill that would allow for review of properties suitable for homeless providers, but House Democrats homeless advocate organizations widely expressed dissatisfaction with the amendment’s review process.  Senator Scott Brown (R-Mass.) introduced a similar bill, S. 1503 , but it has yet to move forward in the Senate committee process.

To read the National Law Center on Homelessness and Poverty’s statement on the bill’s passage, click here.

The U.S. General Services Administration (GSA) notes that under current law, the GSA and the Department of Health and Human Services(HHS) make suitable surplus properties available to private nonprofit organizations, units of local government, and States for use as facilities to assist the homeless. These properties are leased, deeded, or made available on an interim basis at no cost to approved homeless assistance providers.  (To read more on this process, click the following link for the HHS Program Support Center’s notes:  http://www.psc.gov/administrative/federalprop/titlev.html).

The Obama Administration also weighed in on the legislation through a Statement of Administration Policy(SAP) on issued yesterday.  The administration expressed concern regarding the legislation’s exemption for several large categories of property that the commission could not propose for sale and its limits on the ability to review the environmental impact of property sales.  Further, the administration took issue with the bill’s provision to require congressional approval of the commission’s recommendations. To read the full SAP, click here.

A number of partner organizations have come together to author the letter below. This letter advocates for leaving Indiana law as it stands today for valuing Section 42 Low Income Housing Tax Credits for multifamily properties. Please lend your organization’s name to list of partners opposed to this change in state law. Sign your organization’s name in the comment field below or email afraizer @ iaced.org.

INDIANA SENATE BILL 344 WILL CREATE FINANCING IMBALANCES AND UNCERTAINTY FOR AFFORDABLE HOUSING IN INDIANA – DEPRIVING AFFORDABLE HOUSING TO THOUSANDS OF INDIANA FAMILIES AND JOBS TO THOUSANDS OF INDIANA WORKERS

On February 1, 2012, the Indiana Senate adopted Engrossed Senate Bill 344 (“ESB 344”). SECTION 3 of ESB 344 requires county assessors to include the value of Federal low-income housing tax credits (“LIHTC”) in the assessed value of LIHTC property.

Generally, assessors are required to assess the value of LIHTC property using the income approach to valuation. To further clarify this methodology, the General Assembly in 2004 enacted Indiana Code § 6-1.1-4-40, which prohibits assessors from considering the value LIHTCs in the assessed value of LIHTC property. In 2006, the General Assembly set a floor for the assessed value of LIHTC property, imposing a minimum property tax liability on LIHTC properties of no less than 5% of the annual total gross rents for those properties.

The requirement imposed under SECTION 3 of ESB 344 to include the value of LIHTCs in the assessed value of LIHTC properties will result in an imbalance and uncertainty in financing for future affordable housing development, making Indiana less competitive for such financing and depriving affordable housing to thousands of Indiana families and construction and management jobs to thousands of Indiana workers.

The change from “may not” to “shall” will have a direct impact on future affordable housing production in Indiana

.
Most LIHTC properties in Indiana have fewer than 90 units. Project size as well as affordability restrictions, amenities (including green building requirements) and scope of services provided at LIHTC properties in Indiana is generally directed by the “qualified allocation plan” adopted and administered by the Indiana Housing and Community Development Authority (“IHCDA”). Financing for LIHTC properties generally includes some level of conventional debt financing, combined with equity generated by the availability of LIHTCs to project partners. Due to the affordability restrictions imposed at LIHTC properties, the amount of conventional debt financing supportable by property operations is limited, and much lower than the per unit debt carried by market rate properties or by properties with operating subsidies. Even with minimal debt, most LIHTC properties do not generate significant cash flow due to their affordability restrictions, and owners have almost no ability to pass operating cost increases to their low-income tenants.

The increase in the assessed value required under SECTION 3 of ESB 344 will increase annual property taxes substantially. A review of numerous LIHTC property portfolios in Indiana demonstrates significant financial stress created by increasing properties taxes by as little as $100 per unit per year. The resulting decrease or complete elimination of positive net operating income for LIHTC properties will prevent owners from securing even the historically minimal amount of conventional debt financing which is necessary to fund project development. An increase in property taxes on rental units that provide safe, decent and affordable housing to low-income Indiana families, at a time of growing need for affordable rental housing, would deprive those families of a basic human need.

The proposed change will result in fewer construction and management jobs for Indiana workers.

The LIHTC program is a proven job producer. Since 2006, IHCDA has awarded LIHTC allocations for 12,568 affordable rental housing units. In 2011, those awards created 1,620 units. According to a 2010 study by the National Association of Home Builders, the one-year local impact of building 100 units of LIHTC-financed housing results in 122 jobs related to the construction of the property. Moreover, every 100 units of LIHTC property produces $7.9 million in local income tax revenue and $827,000 in property tax revenue for local governments. It also results in an additional 30 jobs on an ongoing basis. In Indiana this is an annual impact of 15,322 construction jobs.

The current legislation regarding the assessment of LIHTC properties provides consistency needed for equity partners and lenders to finance thousands of affordable housing units for Hoosiers. With the financial collapse in 2008 and 2009, LIHTC equity and debt financing nearly vanished, leaving most LIHTC owners struggling to find necessary financing for their projects. Since 2009, the supply of LIHTC equity and debt financing has been concentrated almost exclusively in the coastal regions of the country. In true Hoosier fashion, LIHTC developers, IHCDA, Midwest-based LIHTC syndicators and Midwest-based lenders have worked collaboratively and diligently to ensure that Indiana has continued to compete for the scarce equity and debt financing needed to create the construction jobs that LIHTC projects bring. The proposed legislation will create not only an immediate imbalance in development budgets, but will also result in more stringent underwriting for such projects by LIHTC equity investors and lenders. At a time when equity and debt financing remains scarce and concentrated outside of the Midwest, and with unemployment continuing to be unacceptably high, it would be a mistake for Indiana to create such an imbalance and uncertainty and to make itself less attractive and competitive with other states for such scare resources.

The vagueness of the wording of SECTION 3 of ESB 344 will lead to confusion among county assessors and investors. SECTION 3 of ESB 344 states that the assessor shall include the value of the LIHTCs in the assessed value. Under generally accepted appraising principles, assessors must use the income approach to determine the assessed value of LIHTC property. The monetization of the LIHTCs provides equity to finance the development of the property. The equity generated by the LIHTCs is not income of the property and does not finance the operation the property. The amount of equity required to finance a development project has no relevancy to the project’s market value. The LIHTC equity is generally paid in during the development of the project and within a year thereafter, while the LIHTCs are claimed over a 10-year period following lease up. Combining income valuation based on project operations with an equity valuation that decreases over time is counterintuitive.

As written, SECTION 3 of ESB 344 will result in years of costly litigation to determine how it is to be applied. Following the enactment of the current legislation, it took several years of appeals and litigation before the current legislation was applied with relative consistency throughout the State. To once again create years of uncertainty and inconsistency, causing LIHTC equity providers and lenders to place their limited financial resources in other states, would cost Indiana families thousands of affordable housing units and thousands of construction and management jobs – a significant mistake when Indiana must compete for its economic recovery.

The changes proscribed in SB 344 SECTION 3 are harmful to the creation of affordable housing for low and moderate income families, complicates the financing of Section 42 properties in the future, and at a minimum, risk the stability of the more than 46,000 units of housing developed across Indiana with the Section 42 program during the last 15 years.

We thank you for your attention to this matter and respectfully urge you to remove SECTION 3 from ESB 344.

Respectfully submitted,

Biggs Development
City Real Estate Advisors
Englewood Development Company, Inc.
Great Lakes Capital Fund
Ice Miller
Indiana Affordable Housing Association
Keller Development
Kuhl & Grant LLP
Pedcor Investments, LLC
The Sterling Group
The Woda Group
Vasil Management Company, Inc.

Include your organization name in the comments below or email afraizer @ iaced.org.

Lately there has also been much discussion around the Legacy Projects from the Super Bowl on the neareastside of Indianapolis.  Many of the Legacy Projects grew from the vision and energy of the Quality of Life plan that the neighborhood did as part of the Great Indy Neighborhoods Initiatives (GINI) project.

The crossroads of the two is the home ownership incubator at the Jefferson Apartments.  The program is designed to help families become permanent stakeholders in the neighborhood by providing financial and social support for 3-5 years with the intent of the families then purchasing an affordable home in the neighborhood.  The project consists of 18 rental units and 2 condominiums with recreational space and is located across the street from the John H. Boner Community Center.  The $4.2 million investment was completed in 2010.  Families in the incubator receive assistance in finding jobs, cleaning up their credit, and learning skills related to owning a home.

Do you know of a project that is incubating home ownership and/or addressing the investment of renters in a neighborhood?

The White House estimates the plan would cost between $5 billion and $10 billion to be paid for through an off-set described as a “financial crisis responsibility fee.”  The fee would be collected from the nation’s largest financial institutions.  The legislation is unlikely to move in the House where leaders already dismissed the proposal as costly and “not serious.”

President Obama also referenced several new initiatives that will be implemented through an Executive Order.  One of those initiatives is the creation of a task force aimed at investigating predatory lending that took place during the height of the financial crisis.  This order also instructs the new Consumer Financial Protection Bureau (CFPB) to draft simple mortgage disclosure forms as part of a broader “homeowner’s bill of rights.”

Another key program the President outlined is a program to sell foreclosed properties that will be turned into rental housing.

To read CFPB Director Richard Cordray’s response to the proposal, click here.  For the full White House Fact Sheet outlining the programs, click here.

As you read in an IACED action alert in mid-January, Section 3 of SB 344 repeals the prohibition against using the value of Section 42 tax credits in calculating the assessed value for property tax purposes.  As amended in the Indiana Senate yesterday, SB 344 now requires inclusion of the credit value in the assessed value:

SECTION 3. IC 6-1.1-4-40 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2013]: Sec. 40. The value of federal income tax credits awarded under Section 42 of the Internal Revenue Code after December 31, 2012, shall be considered in determining the assessed value of low income housing tax credit property.

SB 344 is on third reading in the Senate today. It is expected to pass the Senate, as the first of two legislative chambers required to vote on the bill before it becomes law.

Now is the time for all IACED members who are concerned about the availability of affordable housing in Indiana to contact their member of the Indiana House of Representatives and tell them you are opposed to this provision of SB 344 dealing with the Section 42 program . Use the following link to find your elected Representatives’ phone and/or email address:  http://district.iga.in.gov/DistrictLookup.

When the legislation moves to the Indiana House of Representatives, it is expected to be assigned to the Ways and Means Committee for consideration.

If your elected Representative is any of the following, your timely outreach is even more important: Jeff Espich, Suzanne Crouch, Bill Crawford, Jim Baird, Mara Candelaria Reardon, Bob Cherry, Ed Clere,Tom Dermody, Terry Goodin, Mike Karickhoff, Clyde Kersey, Shelia Klinker, Rebecca Kubacki, Dan Leonard, Rich McClain, Win Moses, Scott Pelath,Phyllis Pond, Cherrish Prior, Milo Smith,Jeff  Thompson, Randy Truitt, Eric Turner, Matt Ubelhor, and Peggy Welch. (Those members in bold italics are Republican members who are in the majority.)

Your message should talk about LIHTC as the most successful affordable rental housing production program in U.S. history. As the fundamental housing resource used to transform communities, the Section 42 program creates quality affordable housing for working families and people with special needs including the elderly, the disabled, and the homeless in urban, suburban, and rural communities throughout Indiana. This provision of SB 344 increases significantly the costs of producing affordable housing with Section 42 leading to foreclosed properties and displaced tenants.

Virtually every housing tax credit property operates on a paper-thin cash flow margin. The level of cash flow that housing tax credit properties generate is artificially constrained by federal statutory rent restrictions, which do not provide flexibility for rent increases to compensate for the proposed tax increase proposed by SB 344. Since properties can not flexibly increase rents and additional funds are not available, property managers may be forced to close housing communities, thereby displacing the residents.

There is a clear rationale for the prohibition of the value of the tax credits in calculating the assessed value of the property. The awarded tax credits are converted into equity in the property, the credits are not income. The tax credits are not part of the property itself. Once they are transferred to the investors, they are gone. Tax credits are intangibles and should not be assessed. Indiana does not include any other type of federal or state income tax credits in the assessment of real property.

Studies of the housing tax credit program have documented the program’s favorable record of serving income-qualified tenants at restricted rents, an exceedingly low number of properties being lost to foreclosure, and maintaining high levels of occupancy. Through construction of new apartments, preservation of existing affordable housing, and rehabilitation of older multifamily buildings, the LIHTC adds to Indiana’s supply of housing opportunities.

According to national data from the National Council of State Housing Agencies (NCSHA), approximately 90 percent of all affordable apartments are financed using the Section 42 program. In 2010, half of all multifamily starts were financed using the Section 42 program according to the National Association of Home Builders (NAHB).

In Indiana, the LIHTC has provided critical financing for the development of 45,655 affordable apartments through 2009. The LIHTC has a direct economic impact within the community through both the development of infrastructure and job creation, as substantiated by economic analyses conducted by the NAHB. Since 1987, the LIHTC has created 55,699 direct jobs and 13,697 permanent jobs in Indiana.  

The impact of construction and the expansion of the tax base from the ongoing operations of the affordable apartment communities attract significant private investment and generate substantial tax revenue as currently configured. Indiana has allocated more than $3.3 billion in credits to affordable housing projects throughout the state. During this period, investment has led to a return of $4 billion in local income for Indiana communities and $393 million in state and local tax revenue for Indiana.

Call your elected representative today and tell them you opposed Senate Bill 344′s provisions dealing with the Section 42 program.

Training locations include:

• February 28, The Montage, Indianapolis, IN
• March 1, Holiday Inn, Evansville Airport, Evansville, IN
• March 13, Anway Grand, Grand Rapids, MI
• March 14, Hilton Garden Inn, South Bend, IN
• March 28, Treetops Resort, Gaylord, MI
• March 29, Embassy Suites, Troy, MI

Registration links are available on the Events and Training page on fhlbi.com.  For the calendar, click here.