CREF Policy Update Feb. 8: House Passes Tax Package With MBA-Supported LIHTC Enhancements
House Passes Tax Package With MBA-Supported LIHTC Enhancements
Last Wednesday, the U.S. House of Representatives passed the bipartisan “Tax Relief for American Families and Workers Act of 2024” (H.R. 7024) by a significant margin (357-70).
• The package, agreed upon earlier this year in negotiations between House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR), includes important LIHTC program enhancements, an extension of the Research and Development tax credit, a revised Child Tax Credit, disaster relief, tax relief to help facilitate commerce between the U.S. and Taiwan, as well as provisions that favorably address business interest deductibility, small business expensing, and bonus depreciation.
Go deeper: MBA strongly supported the bill’s housing provisions that are targeted towards the increased production of affordable rental units nationwide in letters to Capitol Hill, various coalition letters, and in Mortgage Action Alliance (MAA) Call to Actions.
Why it matters: H.R. 7024 restores a LIHTC ceiling increase from 9% to 12.5% for calendar years 2023 through 2025, thereby allowing states to allocate more credits for affordable housing projects, and temporarily lowers the Private Activity Bond (PAB) threshold test from 50% to 30% for 4% LIHTC property projects with an issue date before 2026.
What they’re saying: In a press statement, MBA President and CEO Bob Broeksmit said, “MBA is pleased the House has passed this bipartisan bill that increases the availability of LIHTC. The enhancements to the LIHTC program will improve the supply and affordability challenges in the rental market by producing an estimated 200,000 additional rental units over the next two years.”
What’s next: Though timing for Senate action is uncertain, MBA is engaged with lawmakers on both sides of the aisle and will continue to lobby for the bill to advance in the Senate as soon as possible. It is currently unclear if Senators will try to amend the bill in the Senate Finance Committee or during an eventual floor debate. MBA will utilize MAA Alerts to keep members actively engaged in support of the LIHTC changes.
For more information, please contact Ethan Saxon at (202) 557-2913, George Rogers at (202) 557-2797, Rachel Kelley at (202) 557-2816 or Bill Killmer at (202) 557-2736.
Federal Reserve Maintains Federal Funds Rate
The Federal Reserve held the federal funds rate at a target range of 5.25-5.50% last Wednesday.
Why it matters: The FOMC emphasized that, “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”
What they’re saying: MBA’s SVP and Chief Economist Mike Fratantoni noted, “To no surprise, the FOMC held rates steady at its January meeting. However, the statement did indicate some fairly significant changes regarding the expected direction of future policy, confirming that the next move will likely be a cut.”
Go deeper: “The statement also indicated that the Fed expects to continue trimming its balance sheet, allowing for the same pace of passive runoff of their Treasury and MBS holdings,” Fratantoni noted. “This is despite the fact that some Fed officials have recently indicated a desire to begin to slow the pace of runoff. The combination of strong consumer demand and somewhat lower mortgage rates should support a more robust spring housing market this year.”
For more information, please contact Mike Fratantoni at (202) 557-2935.
HUD Delays Implementation of E-Closing Protocol
Last Wednesday, the Department of Housing and Urban Development (HUD) delayed implementation of its recently announced Electronic Closing Protocol (ECP) until March 4, 2024.
• HUD announced the new protocol in early January, stating it was effective Jan. 31, 2024. MBA’s FHA Closing Committee protested, arguing that the industry needed more time to get up to speed and to review the new requirements before they became effective.
Why it matters: The new protocols make some changes to the temporary guidance that has been in place since 2020. This delay will be helpful in providing the industry time to become familiar with the changes, for training, and to receive clarity on lingering questions.
What’s next: MBA will continue its dialogue with HUD on all new and existing policies and procedures.
For more information, please contact Megan Booth at (202) 557-2740.
FHFA Releases Annual Scorecard for the GSEs and Common Securitization Solutions
Last Tuesday, the Federal Housing Finance Agency (FHFA) released its 2024 Scorecard for Fannie Mae and Freddie Mac (the GSEs) and Common Securitization Solutions. The 2024 Scorecard builds on progress made last year and focuses on two equally weighted areas: promoting equitable access to sustainable and affordable housing, and operating in a safe and sound manner.
• The 2024 Scorecard highlights several specific multifamily initiatives, including enhancing tenant protections, strengthening multifamily asset management capabilities, and expanding focus on workforce housing.
Why it matters: The Scorecard outlines FHFA’s expectations for the GSEs’ priorities in the coming year. In line with FHFA’s announcement made in November 2023, the Scorecard sets the 2024 multifamily loan purchase caps at $70 billion per GSE and maintains the requirement that 50 percent of the GSEs’ business be for mission-driven affordable housing (with certain workforce housing properties being exempt from the cap).
• The focus on tenant protections will continue throughout 2024. FHFA recently released a report summarizing the responses it received on its May 2023 Request for Input (RFI), in which it noted that a significant amount of work will be required to further resident-centered practices at GSE-backed properties.
What’s next: MBA will continue to work with the GSEs as they implement the Scorecard initiatives and, over a longer term, pursue the necessary conditions to exit conservatorship.
For more information, please contact Stephanie Milner at (202) 557-2747.
FHFA Releases Report on GSEs’ Support of Areas of Concentrated Poverty
Last week, FHFA released a report summarizing Fannie Mae and Freddie Mac’s 2022 financing of multifamily properties located in Areas of Concentrated Poverty (ACPs). ACPs are defined as geographical areas where a high proportion of residents live below the poverty line.
• Financing of multifamily housing by the Enterprises in these areas reached a five-year high in 2022. Investment in ACPs has been part of the Enterprises’ Duty to Serve Plans since 2018.
Why it matters: The GSEs financed 3,700 properties located in ACPs in 2022, up from 3,000 properties in 2021. The properties are located in almost all 50 states, with the highest concentration of properties located in Arizona, California, Georgia, Florida, Maryland, New York, and Texas.
• The GSEs also increased financing of mixed-income properties in ACPs in 2022, however, mixed-income properties remain a very small portion of their aggregate financing in ACPs.
What’s next: MBA will continue to monitor reports from FHFA and communicate all relevant information to members.
For more information, please contact Stephanie Milner at (202) 557-2747.
REGISTER: MBA’s National Advocacy Conference on March 19-20; Separate CREF Track!
Join us in Washington, D.C., to meet with key policymakers, network with colleagues across the industry, and hear from policy experts on the topline issues impacting the industry–including a dedicated CREF track exclusively for our commercial/multifamily members. An exclusive reception will be held on Tuesday, March 19, at the National Museum of Women in the Arts. Lend your voice to our efforts and bring your expertise and experiences to the table.
• Register here. Check out MBA’s group passes pricing.
Why it matters: Your participation at NAC ensures that members of the 118th Congress and other policymakers understand how proposed legislation affects your employees, your end users, and the communities you (and they) serve.
What’s next: MBA will continue to advocate on issues that impact the commercial/multifamily sector of the real estate finance industry.
For more information, please contact Jamey Lynch, AMP, at (202) 557-2818.
Rare Bipartisan Agreement: Basel III “Endgame” Proposal’s Lack of Analysis Is Troubling
Last Wednesday, the House Financial Services Committee’s Subcommittee on Financial Institutions and Monetary Policy held a hearing on the lack of economic analysis accompanying the Biden Administration’s overhaul of bank capital requirements, also known as the Basel III “Endgame” proposal. Considering the proposal’s significant impact on the availability of affordable credit for families, small businesses, housing, farmers, and municipalities, lawmakers on both sides of the aisle made clear the lack of inadequate economic analysis points to the need to re-examine and potentially alter the proposed rule.
• The full hearing summary can be found here; a recording can be found here.
Why it matters: MBA and its members have substantial concerns that, without significant changes, the proposed rule will undermine real estate finance market stability and diminish housing affordability.
Go deeper: MBA’s comment letter on the proposal is here.
What’s next: Several Democrats have continued to raise the need to re-examine the proposed rule’s mortgage-related provisions. Several Republicans have asked the Government Accountability Office (GAO) to examine the role U.S. federal banking agencies played with the Basel Committee on Banking Supervision to develop the proposal. MBA will continue to engage with regulators and elected officials.
For more information, please contact Rachel Kelley at (202) 557-2816, Bill Killmer at (202) 557-2736 or Stephanie Milner at (202) 557-2747.
Senate Budget Committee Holds Housing Affordability Hearing
Last Wednesday, the Senate Budget Committee held a hearing titled, “A Blueprint for Prosperity: Expanding Housing Affordability” to review federal housing programs and their impact on both affordability and the federal budget. A summary of the hearing can be found here.
Why it matters: Senators engaged with the witnesses regarding the delivery of federal and state housing programs through grants, tax credits, and federal regulations to better understand their economic and budgetary impact. Several Senators cited legislation they are working on to combat housing costs and increase supply. Republicans emphasized the rising cost of housing programs and the lack of oversight of federal spending, while Democrats mentioned the need to protect renters and promote access to housing.
What’s next: While timing on a vote has yet to be determined, Senate passage of the “Tax Relief for American Families and Workers Act of 2024” would enhance the LIHTC program. The other legislative proposals mentioned at the hearing are unlikely to be voted on by the Senate.
For more information, please contact George Rogers at (202) 557-2797 or Ethan Saxon at (202) 557-2913.
Key Senate Subcommittee Holds Hearing on AI and Housing
Last Wednesday, the Senate Banking Committee’s Subcommittee on Housing, Transportation, and Community Development held a hearing titled, “Artificial Intelligence (AI) and Housing: Exploring Promise and Peril.” A summary can be found here.
Why it matters: Senators on both sides of the aisle stated their belief that the use of AI can help to improve access to credit and housing. However, there also was bipartisan agreement that there are risks and concerns that should be examined, including: (1) the potential for bias and discrimination; (2) the need for transparency and accountability; (3) understanding decision-making; (4) data privacy; and (5) competition.
What’s next: As Congress – and several state legislatures – wrestle with the potential costs and benefits of AI – particularly generative AI – MBA will continue to actively monitor the debates and provide real estate finance industry insights to help forge sound policy developments.
For more information, please contact George Rogers at (202) 557-2797 or Ethan Saxon at (202) 557-2913.
Trade Groups File Lawsuit on CA Corporate Climate Data Accountability Legislation
Last Tuesday, the U.S. Chamber of Commerce, California Chamber of Commerce, American Farm Bureau Federation, Los Angeles County Business Federation, Central Valley Business Federation, and Western Growers Association filed a lawsuit against the California Air Resources Board over its recently enacted California Corporate Climate Data Accountability legislation (SB 253 & SB 261).
• SB 253 mandates a Scope 3 “value chain” reporting requirement, which far exceeds the U.S. Securities and Exchange Commission (SEC) proposed rule on climate disclosure released in March 2022.
• The lawsuit states, “Both laws unconstitutionally compel speech in violation of the First Amendment and seek to regulate an area that is outside California’s jurisdiction and subject to exclusive federal control by virtue of the Clean Air Act and the federalism principles embodied in our federal Constitution.”
Go deeper: The case has been filed in Federal court, with an argument that centers on the worldwide reach of these bills, noting that a California Assembly member stated that the objective of the bill was to regulate conduct “not just in California, but around the world.”
• In September, MBA and the California MBA issued a MAA call to action to urge Governor Gavin Newsom to veto these bills. Despite enacting these bills, Governor Newsom did include a signed letter citing the need to watch for the cost to California businesses, which may provide an avenue to reign in the cost of these efforts before the implementation of Scope 3.
Why it matters: This new type of data tracking will be costly to comply with as it is not based on known data, known industry averages or reliable secondary data.
• This lawsuit will inform other states who have been discussing this type of legislation as the reach of these bills should be within their jurisdiction.
What’s next: MBA will continue to support CMBA’s efforts to mitigate the risk associated with these bills, specifically Scope 3 of SB 253, and will follow this complaint closely.
For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.
MBA and NY MBA Support Governor Hochul’s Affordable Rental Housing Agenda
Following the recent release of New York Governor Kathy Hochul’s Fiscal Year (FY) 2024 executive budget, MBA and the New York MBA conveyed in a letter support for her encouraging positions to create a much-needed expansion of affordable rental housing in the state. Specifically, the letter supported the Governor’s proposals to:
• Extend the deadline to 2031 for the expired 421a tax abatement program and for the Legislature to create a long term replacement.
• Authorize New York City (NYC) to legalize existing basement and cellar apartments.
• Adjust the cap on the residential floor area ratio to enable NYC to create more affordable rental housing.
• Provide tax incentives for office conversions.
Why it matters: The Legislature is currently conducting budget hearings, and it is vital to support industry issues during this process.
What’s next The Legislature will propose its own version of a FY 2024 budget before the statutory due date for a new state budget on April 1. The differences between legislative and gubernatorial views are often where industry issues have surfaced.
• MBA will continue to work with the NYMBA and other industry partners to support member interests.
For more information, please contact William Kooper (202) 557-2737 or Stephanie Milner (202) 557-2747.
REGISTER: MBA’s State and Local Workshop on March 18-19
Join us in Washington, D.C. the day before the National Advocacy Conference begins to collaborate with industry peers on shared challenges and priorities and receive actionable advice to grow your state or local association’s member base.
Why it matters: In today’s challenging market, it’s more important than ever that state and local associations are helping members not just survive but grow.
What’s next: Register before February 5 and save $100. Take advantage of savings and maximize your impact when you register for both the State and Local Workshop and the National Advocacy Conference.
For more information, please contact Anthony Siller at (202) 557-2944.
REGISTER: MBA’s mPact Summit on April 4 in Texas
Meet us in Texas for a full day of career development and networking on Thursday, April 4, 2024. Back by popular demand, this event is built by – and for – young professionals in the real estate industry who are focused on helping you get to the next level.
Why it matters: Event topics include developing leadership skills, learning how to navigate your career, and building and practicing networking skills. You don’t want to miss this opportunity.
What’s next: Early bird registration ends on Feb. 29. Register now and save!
For more information, please contact Jacky Salazar at (202) 557-2746
Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:
• Revisiting Your Servicing Retained Versus Released Decision – Feb. 15
• Private Credit Finance 201: A Deep Dive into Debt Funds and Their Impact to Commercial Real Estate Lending – March 6
• A Crisis of Identity in Lending – Best Practices for Securing the Borrower Experience – March 12
• Who Are Today’s Borrowers? A Look at the Lending Preferences and Expectations of Today’s Consumers – March 14
• Making Sense of Multifamily Finance – March 14
• Builder’s Risk Insurance: Analysis & Perspectives – March 20
MBA members can register for any of the above events and view recent webinar recordings by clicking here.
For any questions, please contact David Upbin at (202) 557-2931.
