Started June 15, 2017 287
The Housing Advisory Group (HAG) held its annual Congressional Forum in Washington D.C. on June 7, 2017. We are very appreciative of the record turnout with attendees from across the country representing every aspect of the affordable housing community convening in Washington. HAG Chairman Bob Moss opened the Forum by welcoming all the participants and noted that for over 25 years, the Housing Advisory Group has been dedicated to protecting and improving affordable housing programs. He paid tribute to the founding members of the HAG — Herb Collins, Dave Reznick, Chuck Edson, and Jack Manning – who were among the key architects of the Low-Income Housing Tax Credit (LIHTC).
Bob noted that in this Congress, affordable housing credit bills, H.R. 1661 and S. 548, have been introduced in both the House and Senate. Bob thanked our congressional champions, Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT) and Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA), for their leadership and commented that there is a good chance to move forward on the legislation with or without tax reform.
During the course of the Forum, HAG members heard from Senator Cantwell, Representative Katherine Clark (D-MA), key congressional staff, and industry representatives from the affordable housing tax reform working group. At the conclusion of the program, attendees adjourned to the historic Lyndon Baines Johnson room in the Capitol building for the congressional reception with Members of Congress and staff, followed by our annual closing dinner.
Introductions and Reports on Hill Visits
The program began with attendee introductions and reports on morning visits to congressional offices in support of S. 548 and H.R. 1661. HAG members made over 40 visits while in D.C. for the Forum, inviting Members and their staffs to visit properties in their districts and asking for cosponsorship of the Cantwell-Hatch and Tiberi-Neal bills. HAG members also discussed potential cuts to HUD programs, and the impact those cuts would have on affordable housing production.
While the visits were generally very positive, HAG members reported that some staff expressed concern that cosponsorship of the LIHTC bills might undermine congressional efforts to overhaul the tax code. Bob Moss responded that there are varying points of view about tax reform and its outlook for enactment, but support for tax reform does not preclude support for the Low-Income Housing Tax Credit program or efforts to enhance it. He noted that cosponsorship of S. 548 and H.R. 1661 sends a strong signal of support for retaining and enhancing the program in tax reform. Bob discussed the challenges for enacting tax reform, including whether or not a tax reform package should be revenue neutral or should instead be a package of tax cuts. He also discussed growing opposition to some of the revenue raising components currently in the House tax reform blueprint.
HAG Executive Director David Gasson reiterated the importance of the Hill visits and the need for follow-up with additional information and invitations to visit properties. He noted that HAG would let our Hill champions know about the many positive meetings HAG members had with Members and staff during the Congressional Forum. In a related bit of good news, we are excited to let you know that Senator Johnny Isakson (R-GA), a senior member of the Senate Finance Committee, has come on board as a cosponsor of S. 548. Efforts to secure Senator Isakson have been ongoing but much of the credit for this accomplishment goes to our HAG member, the Georgia Affordable Housing Coalition and their executive director, Maureen Mercer.
Tax Reform Working Group Panel – Emily Cadik, Director of Public Policy, Enterprise Community Partners, Inc.; J.P. Delmore, Assistant Vice President, Government Affairs, National Association of Homebuilders; Mike Novogradac, Managing Partner, Novogradac & Company LLP; Moderator Bob Moss, Principal, National Director of Government Affairs, CohnReznick LLP
Moderator Bob Moss reported that the industry was very fortunate to have been invited by the House Ways and Means Committee to discuss the LIHTC and tax reform — particularly with respect to how affordable housing production could be maintained in the context of reform, cuts, or lower rates. He asked Emily Cadik and J.P. Delmore if the meetings with the Ways and Means Committee staff were productive. Emily noted the significance of having an invitation to discuss the LIHTC and a seat at the table. She said the industry had an opportunity to walk through the Tiberi bill and to underscore with staff the importance of the legislation in the absence of tax reform. She said the industry message was clear that if tax reform happens, then adjustments are needed to maintain at least the current level of affordable housing production.
Emily noted that there are new Ways and Means Committee staff who are not as familiar with the tax credit. She reported that questions were raised by the new staff about the credit and the appropriate role for the federal government in the production of affordable housing. Emily noted that members of the Ways and Means Committee support the LIHTC program and like the public-private partnerships it provides. She said half of the full Committee has cosponsored the Tiberi bill, and half of the Republicans on the Committee are cosponsors.
J.P. Delmore stated that the industry’s effort to educate Members and staff has paid off because there now is serious discussion on how to make the credit work even more effectively. He said he was very encouraged by the Committee staff’s interest in better understanding how the program works. He commented that the industry’s goal is to make the LIHTC legislation a part of tax reform, or to advance it in another vehicle if tax reform does not happen. J.P. noted that more education about the credit needs to take place with the Administration, but said the Administration’s messaging regarding economic development, community development, and workforce development offers a promising avenue to engage the White House on the LIHTC.
Bob Moss asked about next steps after the recent meetings with the Ways and Means Committee staff and Joint Committee on Taxation (JCT) staff. J.P. said education remains a key component and said the staff wants to understand the mechanics and economics of housing deals. He noted that the JCT staff is a silent force, providing technical expertise and revenue estimates to the Ways and Means and Finance Committees. J.P. reported that the JCT questions were geared around how the overall tax reform package impacts affordable housing and whether or not the industry has correctly dialed in the impact of the proposed tax code changes. On timing for tax reform, J.P. commented that it would be September before the Administration sends details of its tax reform plan to the Hill. He said there is an effort to unify the Administration and House and Senate Republicans on a tax reform plan.
Bob Moss asked Emily to discuss the ACTION Campaign, of which HAG is a member of the steering committee. She said the Campaign started around five years ago when the industry was told by lawmakers that it needed to be on the same page before approaching Congress about any potential changes to the credit. She noted that initially there were about 200 members of the Campaign and now there are more than 2000.
Bob thanked Mike Novogradac for taking the lead on running numbers regarding the impact of the House tax reform blueprint proposals on affordable housing production. Mike said he had undertaken the analysis of the House tax reform blueprint because it currently is the only plan out there and has to be dealt with. He said it was comforting that the House Ways and Means tax staff had reached out to the industry because if the House blueprint passes as is, there would be a negative impact on LIHTC pricing.
Mike noted that his modeling covered the reduction in corporate rates and also layered in the blueprint provisions providing for 100 percent expensing and denial of the interest expense deduction. He said that his modeling estimated the impact of dropping corporate rates from the current 35 percent rate to 28 percent, 25 percent, 20 percent, and 15 percent. At a 25 percent rate, Mike noted that the investor equity price per credit necessary to achieve the same yield as current law drops from $1.00 to $.89. But with the benefit of immediate expensing (except for land) the price per credit would be back to $1.00. But Mike cautioned that full expensing probably is not in the cards because of the cost. Mike suggested that depending on the details of the plan, the amount of LIHTC equity raised annually would be reduced if tax reform were passed, resulting in a loss of affordable housing production at a time when there is critical need.
Mike suggested a two-step approach to make up for the loss of LIHTC equity under a lower corporate tax rate in order to stay even with current production of affordable housing:
- Increase tax credit allocation
- Modernize the credit percentage formula
Mike commented that there is no legislative language on the modernized formula, but said it has been discussed with the Ways and Means Committee and JCT staffs. In response to a question regarding adequate demand for more credits, Mike responded that there is plenty of demand.
U.S. Representative Katherine Clark (D-MA)
Citizens’ Housing and Planning Association (CHAPA) CEO Rachel Heller introduced Rep. Katherine Clark, noting that the Congresswoman serves on the House Appropriations Subcommittee on Transportation, Housing and Urban Development (THUD) which is tasked with funding federal housing programs. Rachel described Rep. Clark as “gutsy, bold, and a champion on many causes,” including women’s health care, child care, paid leave, and housing.
In her remarks, Rep. Clark noted that she is new on the Appropriations Committee and had requested a seat on the subcommittee with jurisdiction over funding for housing programs. She said the budgets are blueprints of our values, and described her strong commitment to affordable housing and access to it. Rep. Clark noted that the LIHTC is one of the most powerful tools for providing affordable housing, and announced that she cosponsored H.R. 1661, the Tiberi-Neal Affordable Housing Credit Improvement Act. She commented that 100,000 people in Massachusetts have been able to gain housing because of the credit.
Rep. Clark said the good news is that H.R. 1161 is bipartisan, an issue that both sides support. But she said the bad news is that the Administration’s budget for housing is problematic and is a setback for the ability to build and provide affordable housing. She noted that it takes more than the LIHTC to produce affordable housing. She said that the Administration’s budget calls for $6 billion in cuts to HUD programs and calls for the elimination of the CDBG and HOME programs. Rep. Clark commented that it is a struggle to meet housing needs and said that will only intensify. She said Congress must be thoughtful with respect to HUD cuts, and said HUD Secretary Ben Carson was scheduled to appear before the THUD Subcommittee the next day. Rep. Clark remarked that the HAG Forum was very timely in that regard. She discussed the benefits from various HUD programs in her district, and stated that when people have a safe and affordable home then other pieces of life build on that.
Rep. Clark noted that the interaction of the LIHTC with HUD programs is complicated and thanked the group for its expertise. She commented that her office is always open and she wants to learn how she can be helpful. She assured the attendees that their trip to D.C. makes a difference and said they should not to be deterred by the sentiment of some that Congress is too broken to help. She urged the industry to tell Members and staff how the credit and HUD programs have helped people back home. She said to let Members of Congress know what they are doing right and what they are doing wrong.
During the question and answer period, Bill Hinga, with Wallick Communities, noted that Secretary Carson spent 2 ½ days in Ohio as part of his listening tour, and visited some 6-7 LIHTC properties. When asked about the outlook for the HUD programs, Rep. Clark said that on its face the Administration’s budget is a disaster. But she noted that some of the recommended cuts are non-starters and said similar cuts were rejected in the current funding cycle by Members from both sides of the aisle. She said she hopes that this same spirit will prevail with this budget. She noted that she is surprised that there are not more champions in Congress for housing, and said it needs to move up as a priority for Members. When asked about the need to raise the debt ceiling, Rep. Clark said she does not believe the Members will put our credit at risk, and also noted that she does not believe there will be a government shutdown over funding for the new fiscal year that begins in October.
Nick Wyatt, Tax and Nominations Professional Staff Member, Senate Finance Committee
Nick Wyatt discussed the Senate Finance Committee’s schedule, but suggested there is no way to predict a timeline for when tax reform might be debated by the Committee. He noted that the Finance Committee has jurisdiction over a substantial portion of the health care bill, and that is a major focus of the Committee and the Senate at the moment. He also mentioned that the Committee has a number of the Administration’s nominations to process, which also takes time.
Nick reported that work is ongoing on tax reform and said the Senate is meeting on a regular basis with the House and the Administration. He said Chairman Hatch is meeting with his Committee members and would like to see a bipartisan approach, which has traditionally been the way the Finance Committee operates.
Nick reported that the Chairman continues to work on a corporate integration proposal designed to address the double taxation of corporate income. He indicated the proposal would provide for a deduction for corporate dividends paid to shareholders. In response to a question regarding the impact of the proposal on the investment in affordable housing properties, Nick said the Chairman is a strong supporter of the LIHTC as indicated by his sponsorship of S. 548, and said he will continue to work with the industry on issues of concern with respect to the corporate integration proposal.
Regarding the outlook for LIHTC legislation this year outside of tax reform, Nick mentioned that there likely would be few tax vehicles available during the remainder of the session. He said the reauthorization of the Federal Aviation Administration must be done this year, but said it is unclear if it could carry unrelated tax amendments. Nick encouraged the industry to keep educating Members of Congress about the credit and the affordable housing crisis.
Whitney Daffner, Executive Director, Joint Economic Committee and Legislative Director to Rep. Pat Tiberi (R-OH)
Whitney Daffner, filling in for her boss, Rep. Pat Tiberi, who was chairing a Ways and Means Committee hearing, said they are pushing hard to find the right opportunity to move H.R. 1661. She noted that it is the companion bill to S. 548, but said for strategic reasons the House bill does not include the cap increase. Whitney thanked the group for helping with cosponsors and noted that several Members had signed on within the past few days.
Whitney commented that Rep. Tiberi is a strong supporter of the credit and has been since visiting properties in his district. She noted that the LIHTC program is a great program and has strong support in the House, especially with Ways and Means Committee members and within the leadership. She said Rep. Tiberi is working hard with the Ways and Means Committee staff and with the Joint Committee on Taxation to make sure that the LIHTC remains a strong incentive for affordable housing production.
When asked about prospects for tax reform this year, Whitney said it will be an uphill climb, but said that is the plan for the House and the Administration. If tax reform does not happen in 2017, she commented that despite what many believe, it is not impossible to do a tax bill in an election year – especially if momentum is building. But she said ideally the bill would be completed this year. Whitney noted that there are differences in views about components of the House tax reform blueprint, but said there is an ongoing effort to get on the same page – something, she said, that did not happen with the health care bill.
In response to a question about Members expressing reluctance to cosponsor H.R. 1661 while the tax reform effort is underway, Whitney said Rep. Tiberi is a strong supporter of tax reform. She said one purpose of H.R. 1661 is to show support for including it in tax reform, and said cosponsors help do that. When asked if Members are aware that tax reform discussions have caused uncertainty for investors and has affected the ability to raise capital, Whitney encouraged the industry to let their elected officials know what is happening.
Whitney closed by saying that the industry’s effort to educate new Ways and Means Committee staff and the staff of the Joint Committee on Taxation is very important and helpful.
U.S. Senator Maria Cantwell (D-WA)
Senator Cantwell opened her comments with the news that she had asked Finance Committee Chairman Orrin Hatch (R-UT) for a hearing on the affordable housing credit bill (S. 548), and that he agreed to her request. She said she looks forward to the hearing and to getting the bill considered by the Committee. She said since she had last talked to the group she has visited many LIHTC properties and continues to be amazed at the uniqueness of the properties. She said she always learns something new at each property visit.
Senator Cantwell noted that the affordable housing crisis is no exaggeration, and is of epic proportions not only in the Pacific Northwest, but throughout the country. She said the credit is a bipartisan program that has had great success, producing 90 percent of affordable housing. But she said Members do not understand that just retaining the credit is not enough, and commented that nothing will get us out of the housing crisis unless the credit is increased. She noted the adverse impact that tax reform discussions have had on the supply of capital for affordable housing and suggested that this needs to be addressed soon.
Senator Cantwell thanked the group for its work in support of her bill. She said the public-private partnership is a very efficient model for producing housing. Senator Cantwell said she is willing to do whatever it takes to get the bill done. She encouraged the group to keep inviting Members of Congress to see properties, and to get them there as soon as possible. In response to a question regarding the outlook for the Cantwell-Hatch bill, Senator Cantwell said she believes it will get done, but said it will take Members of Congress acknowledging that there is a crisis and that the bill is a solution. Senator Cantwell said Members also will have to be convinced that the credit will save the federal government money, and noted that the $4 billion estimate on the cap increase would be more than covered by the economic stimulus it would generate. She said there is nothing more stimulating to the economy than housing, and said she thinks most Members understand that.
When asked about tax reform, Senator Cantwell said it could happen, but noted there is no agreement yet. She said if Congress considers an infrastructure bill, housing will be a part of it. In the absence of a tax reform bill, she said an extenders package at year-end might be considered. Senator Cantwell said at the very least, the 4 percent minimum credit should be done this year, but commented that she does not want to settle for that. Senator Cantwell said considering the Cantwell-Hatch bill as a stand-alone bill would be more difficult, but said it is a possibility.
In closing, Senator Cantwell said Congress will get something done when it recognizes housing as a crisis that needs attention. She referenced action on the opioids crisis as an example, and said the housing crisis is every bit as real. She said when Members realize this, there will be a move to fix it.
Following the Congressional Forum, HAG members and guests convened in the Lyndon Baines Johnson Room in the U.S. Capitol for the annual reception with Members of Congress. Joining us this year were Senators Ron Wyden (D-OR); Ben Cardin (D-MD); Jeff Merkley (D-OR); Ed Markey (D-MA); Elizabeth Warren (D-MA) and Patty Murray (D-WA). House Members who attended included Democratic Leader Nancy Pelosi (D-CA) and Representatives Richard Neal (D-MA); and Joe Kennedy (D-MA). In addition, Senators Brian Schatz (D-HI), Marco Rubio (R-FL), Roy Blunt (R-MO) and Cory Gardner (R-CO) met separately with HAG members.
The annual dinner following the Capitol Reception was a great success, and we are most grateful for our sponsors: Boston Capital; Boston Financial Investment Management;City Real Estate Advisors, Inc.; CohnReznick LLP; Holland & Knight LLP; McCormack Baron Salazar; Nixon Peabody LLP; Novogradac & Company LLP; The NRP Group; Pennrose; and The Richman Group.
We greatly appreciated the record number of HAG members that joined us this year in Washington, D.C., including those that participated in advocacy meetings. As we have said many times, the success our industry has had in promoting affordable housing and the LIHTC is due to the efforts in the states and districts where our members work and provide housing. We cannot thank you enough for your support and participation in these endeavors and for the Housing Advisory Group.