All posts by Thom Amdur

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Lame Duck Session Update: Tax Bill and Appropriations

Congress returns this week after its Thanksgiving break with a full agenda.  Priorities include extending funding for most federal agencies for FY 2019, which expires on Dec. 7, and a potential tax package. Chairman of the House Ways and Means Committee Kevin Brady (R-TX) released a tax bill that Congressional Republicans hope to pass during the lame-duck. The bill makes corrections to the Tax Cuts and Jobs Act of 2017, extends several expiring tax measures, includes disaster tax relief and makes changes to retirement and savings tax provisions. 

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FHFA releases final rule on AHP; Schedules Webinar

The Federal Housing Finance Agency (FHFA) published a final rule amending the Federal Home Loan Banks’ (FHLBanks) Affordable Housing Program (AHP) regulations. FHLBanks are required to allocate 10 percent of prior year’s income to fund the AHP, which helps subsidize the purchase, construction and rehabilitation of affordable rental and owner-occupied housing for moderate-, low- and very low-income households.

The rule authorizes the FHLBanks to establish competitive funds that target specific affordable housing needs, with demonstrated need, in their districts. The rule also removes the requirement for retention agreements for owner-occupied units where the AHP subsidy is used solely for rehabilitation.

The owner-occupied retention agreement requirements must be implemented by Jan. 1, 2020 and all other changes must be implemented by Jan. 1, 2021. FHFA will host a webinar at 2 p.m. EST on Dec. 13, 2018, to describe the final rule and answer questions.  Questions may be submitted in advance to DHMG.HCI@fhfa.gov.  Register here for the webinar.

Economic and Fixed Income Insights, November 14, 2018

Housing remains a soft spot in the economy as mortgage applications continue to drop with rising rates and slumping stocks deterring potential homebuyers. According the Mortgage Bankers Association, volume is down 22% from the year prior. Tech and crude oil prices are weighing on equity markets and driving haven demand, even while the overall tone of the economy remains upbeat. The stock selloff saw debt yields retreat, and the benchmark 10-year UST sits at 3.14%, down 9 basis points from the week prior.  Municipal bonds also trended lower and were down 3-6 basis points along the curve.

Interest Rate Observations

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of November 13, 2018.

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018

2018 Elections: Housing Ballot Measure Highlights

Housing was on the ballot in many communities last week.  Below are links to some notable highlights from around the country:

  • San Francisco voters approved a tax on big business to fund permanent housing, emergency shelters and mental health services for the city’s homeless people. Economists said it would raise $250 million to $300 million. 
  • Portland-area voters on Tuesday approved a $652.8 million bond measure to build thousands of homes affordable for low-income residents.
  • Charlotte voters approved  a $50 million affordable housing bond.
  • Austin voters approved a $250 million affordable housing bond.
  • California voters defeat ballot measure that would have expanded rent control.

Harvard Joint Center Publishes New Report on Housing Older Americans

More than half of the nation’s households are now headed by someone at least 50 years of age. These 65 million older households are highly diverse in their living situations, financial resources, health and functional abilities, and life stages, and thus require different types of housing to meet their needs and preferences. Affordable, accessible housing located in age-friendly communities and linked to health supports is in particularly short supply. Demand for these units will only increase when the baby boomers start to turn 80 in less than a decade. And whether they own or rent, millions of older households struggle to pay for their housing and other basic necessities, and their numbers are rising. Households now in their 50s to mid-60s are especially at risk of having insufficient resources to manage rising healthcare and housing costs in their later years.

The report’s analyses of demographic, financial, and geographic data highlight several other notable trends, including:
  • Many older Americans are burdened by housing costs: Nearly a third of households age 65 or older (9.7 million) pay at least 30 percent of their income for housing, and more than half of these pay over 50 percent. [INTERACTIVE MAP]
  • There is a large wealth gap between older homeowners and renters: Median homeowners aged 50–64 had a net worth of $292,000 in 2016—almost 60 times that of the same-age median renter. The difference in wealth between owners age 65 and over and same-age renters is nearly as large.
  • While median incomes rose in the last five years for older adults, gains were uneven. From 2011-2016, median incomes rose 9.6 percent for those 65-79 and 5.2 percent for those 80 and over, while those 50-64 saw an increase of only 2.6 percent.
  • There is an historically high gap in homeownership rates for older whites and blacks: 81 percent of white households age 50 and over own their homes compared to only 57 percent of older black households. This 24-percentage point gap is the largest disparity since recordkeeping began in 1976.
  • Growing numbers of older adults live in low-density areas:Between 2000 and 2016, the share of older adults living in low-density tracts in 95 of the 100 largest US metros rose from 24 to 32 percent, an increase of almost 6 million adults. Providing services and transportation alternatives is more difficult in locations with more dispersed housing. [INTERACTIVE MAP]
  • There aren’t enough accessible units to serve the growing number of those with physical challenges: In 2016, 17 percent of households age 50 and over included someone who had difficulty climbing stairs or walking (including 43 percent of those age 80 and over). However, according to the most recent estimates available, only 3.5 percent of US homes had three key features for those with mobility challenges: single-floor living, no-step entries, and extra-wide halls and doors.
  • Many of the most vulnerable live alone: The share of households 80 and over that are single-person reaches 57 percent. Among renters of the same age, 77 percent live alone. Single-person households in need of support or care must rely on non-resident or paid caregivers, yet also have lower incomes than larger households.

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Rep. Brady Announces Draft Tax Measure; Text to be Circulated Soon

House Ways & Means Chairman Kevin Brady (R-TX) has announced he has completed a draft tax measure to fix the “retail glitch” in the new tax law and address many tax extenders.  The draft measure is expected to be circulated in the next few days. It is unclear at time of press whether any affordable housing, historic rehabilitation or New Markets Tax Credit provisions are included in Chairman Brady’s draft, which is said to include between 70-80 alterations to last year’s the tax law, HR 1.  The measure is a potential vehicle for several NH&RA priorities including fixing the 4 percent LIHTC rate, basis adjustment provisions for the historic credit and an extension of the NMTC, which is set to sunset next year.  We will update this story as it develops.

Economic & Fixed Income Insights, November 7, 2018

Mortgage applications dropped to a 4-year low as rising interest rates are now clearly taking their toll on potential homebuyers. Total mortgage application volume fell 4% last week from a week earlier and plunged 16% from a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Higher borrowing costs have come as the Federal Reserve raised interest rates eight times since December 2015, part of a strategy to keep a strengthening labor market from overheating.  Turning to the debt markets, yields trended upward along the curve. The benchmark 10-year UST finished 11 basis points higher while the 30-year UST yield was up 7 basis points.  Municipals also trended upward with the 10-year MMD 7 basis points higher to 2.77% and the 30-year MMD 12 basis points higher to 3.46%.

Interest Rate Observations

Source: Thomson Reuters, Bloomberg. The table above reflects market conditions as of November 6, 2018.

Important Disclosures

This material was prepared by Stifel, Nicolaus & Company, Incorporated (“Stifel”). This material is for informational purposes only and is not an offer or solicitation to purchase or sell any security or instrument or to participate in any trading strategy discussed herein. The information contained is taken from sources believed to be reliable, but is not guaranteed by Stifel as to accuracy or completeness. Past performance is not necessarily a guide to future performance. Stifel does not provide accounting; tax or legal advice and clients are advised to consult with their accounting, tax or legal advisors prior to making any investment decision.

Stifel, Nicolaus & Company, Incorporated is a broker-dealer registered with the United States Securities and Exchange Commission and is a member FINRA, NYSE & SIPC. © 2018

UPDATE: Mid-Term Elections & Its Impact on Affordable Housing

Like many of you, I was up late watching the returns from yesterday’s mid-term elections.  As I write this we are still waiting for final results  on several races, but a few things are becoming clear. The following are some of my first impressions on what the elections could mean for affordable housing and tax credit developers:

To start, the Democrats will take back control of the US House of Representatives in January and as a result committee leadership will also shift back to Democrats.

  • House Ways & Means Committee: Rep. Richard Neal (D-MA) is expected to take over the committee gavel and we are optimistic that given his past leadership sponsoring bipartisan LIHTC and NMTC legislation (including HR 1661, the current LIHTC vehicle in the House) we can expect some positive attention from the Ways & Means on community development issues in the coming Congress.  At least five Ways & Means Committee Republicans lost their reelection bids, including Rep. Carlos Curbelo (R-FL), who is the current lead Republican sponsor in the House of Representatives of the Housing Credit Improvement Act.  Educating and recruiting new members of congress and particularly new Ways & Means Committee members about the LIHTC, HTC and NMTC will be one of our highest priorities in the coming months.  Current Ways & Means Chair Kevin Brady (R-TX) is expected to serve as Ranking Member in the coming Congress.
  • Housing Financial Services Committee: Rep. Maxine Waters (D-CA) is expected to lead the Financial Services Committee in the next Congress.  With current Committee Chair Jeb Hensarling (R-TX) retiring, there is still some uncertainty as to who will serve as Ranking Member.  In terms of seniority, Rep. Peter King (R-NY) is next in line to serve as Committee Chair and is a likely candidate.  There will be many new Republicans serving on the Committee in the next Congress — seven current members are retiring at the end of this Congress and at least three more lost their reelection bids.

Republicans built on their majority in the US Senate.  Several races are still too close to call at the time that I am writing this so the exact margin remains unclear

  • Senate Finance Committee:  The Senate Finance Committee will have new leadership in the Congress with the retirement of Chairman Orrin Hatch (R-UT) at the end of this term.  Since Hatch is the lead Senate Republican sponsor of the HCIA, advocates will be focused on identifying a new Republican Lead Sponsor.  Leadership of the Committee will transition to Sen. Charles Grassley (R-IA).  Sen. Grassley currently serves as Chairman of the Senate Judiciary Committee, and he will have to give up this Chairmanship to take over Senate Finance.  Republican Committee Member Sen. Dean Heller (R-NV) lost his reelection bid, opening up at least one new spot on the Majority.  Sen. Ron Wyden (D-OR) is expected to continue on as Ranking Member on the Finance Committee.  Democrat Committee Members Claire McCaskill (D-MO) and Sen. Bill Nelson (R-FL) also lost their reelection races.  Notably, Senator Maria Cantwell (D-WA) also one reelection.
  • Senate Banking Committee:  With Senator Grassley opting to become Chair of the Senate Finance Committee, Sen. Mike Crapo (R-ID) is likely to continue on as Chairman of the Banking Committee.  Sen. Sherrod Brown will almost certainly continue on as Ranking Member on the Banking Committee.  Democrat Committee Members Heidi Heitkamp (D-ND) and Joe Donnelly (D-IN) both lost their reelection bids so there will likely be at least one new Democratic Member on the Committee as did Sen. Dean Heller (R-NV).  With Sen. Corker’s (R-TN) retirement we can expect at least two new Republican Members in the next Congress.

With the election over, our attention turns to the Lame Duck session of Congress.  There are still several must-pass legislative vehicles that Congress needs to address including several appropriations bills and tax extenders.  We are hopeful that one of these measures will prove to be a vehicle to pass additional provisions from the HCIA including the flat 4% LIHTC for TEB financed transactions.  These could also be potential vehicles for critical historic tax credit legislation and/or the extension of the the NMTC.

What will the tenure of the next Congress look like?  One election result  that may shape things is that many of the more ‘moderate’ voices from both parties retired or lost their reelection bids.  Historically, split government has led to great compromises, like the deal making in the 1980s that led to the 1986 Tax Act.  But it just as often results in more partisanship and gridlock.  As they say, the proof will be in the pudding.

We will continue to update this story as we learn more information.  Stay tuned and please feel free to reach out to me at tamdur@housingonline.com with your questions and observations!

Thomas Amdur
Executive Director