Housing Policy Plenary. Michael Novogradac, CPA Novogradac & Company

Transcription

1 Housing Policy Plenary Michael Novogradac, CPA Novogradac & Company

2 Recent Presidents Who Had Major Tax Bills the Year of their Inauguration? CARTER REAGAN BUSH CLINTON BUSH OBAMA TRUMP

3 INTRODUCED NOVEMBER 2, 2017 TAX CUTS AND JOBS ACT

4 Tax Cuts and Jobs Act Business 20% Top corporate rate 25% Passthrough rate For 30% of business income FULL Expensing eligible effective 9/27/2017, not applied to buildings

5 Tax Cuts and Jobs Act LIHTC and R&D explicitly retained Tax exemption for private activity bonds repealed effective 12/31/17 Historic Tax Credits and New Markets Tax Credits Terminated Deduction of interest expense for corporations limited to 70 percent of net interest expense Not applicable to real estate Business

6 Tax Cuts and Jobs Act Individual rates of 12%, 25%, 35% and 39.6% Mortgage interest deduction retained but capped at $500,000 Charitable giving deduction retained but limited Municipal bond income exemption retained State & local property tax deduction retained, state and local income tax deduction repealed Most other itemized deductions repealed Individual AMT repealed Individual Estate tax exemption increased and then repealed in 2024

7 More LIHTCs via Affordable Housing Credit Improvement Act 50 percent increase CANTWELL HATCH Incomeaveraging TIBERI NEAL Minimum 4 percent rate

8 More LIHTCs via Affordable Housing Credit Improvement Act 50 percent increase CANTWELL HATCH Incomeaveraging TIBERI NEAL Minimum 4 percent rate

9 More LIHTCs via Affordable Housing Credit Improvement Act 50 percent increase CANTWELL HATCH Incomeaveraging TIBERI NEAL Minimum 4 percent rate

10 More LIHTCs via Affordable Housing Credit Improvement Act Note these assumptions: Assumed that states will increase their tax-exempt bond issuance for multifamily by 25% Assumed the absolute amount of soft subsidies going to tax exempt bond properties would remain unchanged To the extent that there is less deferred developer fee, that is offset with more taxable bond financing CANTWELL Approximately 131,000 more units over 10 years 50 percent increase HATCH Incomeaveraging Minimum 4 percent rate TIBERI NEAL

11 More LIHTCs via Affordable Housing Credit Improvement Act Additional Resources Give states discretion to provide 30% basis boost for bondfinanced projects Increase DDA designation from 20 to 30% Repeal QCT population cap Relocation costs included in eligible basis No basis reduction for certain energy tax incentives Indian areas generally treated as DDAs

12 More LIHTCs via Affordable Housing Credit Improvement Act 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

13 More LIHTCs via Affordable Housing Credit Improvement Act Other Modify voucher rent-setting rule in LIHTC Clarify the community revitalization plan Prohibit local approval or contribution requirements Add selection criteria for Native American areas Restriction of planned foreclosures Clarify casualty loss rule Convert ROFR to purchase option Change the official name of the LIHTC to Affordable Housing Tax Credit

14 Oct. 5 Senate Budget Committee marked up its FY18 budget resolution House voted on its FY18 resolution Week of Oct. 16 Full Senate consideration of FY18 Budget resolution House and Senate resolve differences The Plan Week of Oct. 31 Ways and Means markup of Tax Reform Full house takes up tax reform Tentative week of Nov 13 Senate Finance Committee considers tax reform Full Senate considers tax reform Dec. 8 CR expires Dec. 14/15 Currently scheduled to adjourn for the holidays OCT NOV DEC SENATE IN SESSION: 22 days HOUSE IN SESSION: 18 days

15 Everyone has a plan until they get punched in the mouth.

16 Housing Policy Plenary Michael Novogradac, CPA Novogradac & Company

17 Where we are going Ohio Housing Conference Greater Columbus Convention Center Columbus, OH 9:00 am Tuesday, 7 November 2017 David A. Smith dsmith@recapadvisors.com +1 (617)

18 Approaching turbulence (Assume brace positions?) Board chair retiring after 40 years Someone I ve known for 30+ years Developer, lender, policy maker, non-profit Within the next years in affordable housing Things are going to be done much differently from the past May impact directly on programs that we use Big impact on the people/ households that our activities and programs serve Programs will change Be run by different people and entities We need to be part of that change Anticipate it, care for it, adjust our business and business plans accordingly Challenges will occur on parallel track in our company [agency] Change in composition of board/ ownership Change in CEO and senior leadership [gray reaper] Change in mindset of people who run the company [agency] Slide 1, 11/5/2017

19 Three scales of affordable-housing forces Affordable housing is a stage, the people in it merely players A. Prevailing winds ( Yesterday, today, tomorrow ) 1. Aging of housing challenges 2. Immigration (capital, entities, people) 3. Death of as-of-right zoning 4. Dematerialization of information-based work 5. Downsizing of government s spend envelope 6. Broadband Infinity = Privacy Zero B. Bending branches ( Not if they ll crack, but when ) 1. Aging Boomer fiscal drain ( die when you re broke ) 2. Finding new things to tax (carbon, marijuana, sex) 3. CRA is obsolete 4. Resident services necessary but non-sustainable 5. Small owners, small properties scale entropies C. Meteor strikes ( Didn t see that coming, did you? ) Financial crisis Homeownership myth Airbnb Disruption of zoning Twitter The 140-character flash mob President Trump The daily jolt ????? Slide 2, 11/5/2017

20 Urgent affordable housing challenges: 3 types, 16 examples Social savers 1. Elderly retrofit 2. Permanent supportive housing 3. Veterans recovery campus 4. Formerly incarcerated 5. Aging out of foster care Economic aspirants 6. Workforce housing 7. Employer-assisted housing 8. Off-campus dormitories 9. Entrepreneurial rooming houses WeLive 10.Refugee landing pads Community health 11. Orphan properties 12.Mobile home parks resident co-op s 13.Foreclosure homesteading 14. Flats over shops 15.Accessory Dwell-ing Units (ADUs) 16.NOAH s Naturally occurring affordable housing What is the Federal role in addressing these housing needs? What is the state/ local role? Slide 3, 11/5/2017

21 The housing policy inversion Politics, policy, and innovation In 30 years, housing s magnetic field reversed 1966 (HUD) 1986, top down 1986 (LIHTC) 2008, side to side 2009 (crash) now, bottom up Housing influenced by 3 levels of government National: Income tax, interest rates State: State tax, LIHTC allocation Local: Sales tax, zoning, development barriers Cities, states compete to attract mobile jobs-creating entities The big four of clean cool jobs Education 21 st century tech Health care Government Law of sustainable cities: 1=1+1 Add +1 job Add +1 housing and +1 daily commute Result: America does not have national affordable housing crisis National epidemic of distinct state/ local affordable housing crises Slide 4, 11/5/2017

22 Summarizing ( Hey, wake up and write these down ) 1. Winter is coming a. Anticipate it, care for it, guide it b. Policy level and your own entity level 2. Watch the winds, branches, and meteors a. Aging, immigration, downsizing, broadband b. Fiscal drains, new things to tax, complexity and scale c. Crisis, Airbnb, Twitter, Trump and more meteors are coming 3. Ohio s challenge constellation differs from other states a. Prioritize within the 16 challenges b. Create solutions that don t depend on Washington DC 4. Housing policy innovation is bubbling up a. Laws + money + idea = Impact 5. Design the solution and the money will come Slide 5, 11/5/2017

23 Questions? For more from the Guru,

24 Closing the Affordable Housing Gap November 7, 2017 Diane Yentel President and CEO National Low Income Housing Coalition

25 TEXAS FLORIDA PUERTO RICO U.S. VIRGIN ISLANDS

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30 FY18 Budget Chart for Selected HUD Programs HUD Programs (in millions) FY17 Enacted FY18 President FY18 House FY18 Senate Tenant Based Rental Assistance Project-Based Rental Assistance Public Housing Capital Fund Public Housing Operating Fund Community Development Fund HOME Investment Partnerships Program Homeless Assistance Grants Housing for the Elderly (202) Housing for Persons with Disabilities(811) Healthy Homes & Lead Hazard Control 20,292 10,816 1,942 4,400 3, , ,318 20,487 21,365 10,351 11,082 11, ,950 1,945 3,900 4,400 4, ,960 3, ,250 2,383 2,

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33 The Solution Lower Mortgage Cap: Reduce the amount of a mortgage eligible for tax write-off from $1 million to $500,000; Convert to Tax Credit: Turn the MID into a tax credit to benefit millions of lower income homeowners who currently do not benefit from the MID; and Reinvest in Affordable Rental Housing: Reinvest the savings generated more than $241 billion over 10 years in housing that serves families with the greatest needs.

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36 Diane Yentel, President and