By Jim Arbury, National Multi Housing CouncilThis will be a very challenging year for multifamily housing, full of minefields and opportunity. We have a new President, a new Congress, and a global credit crisis.The apartment sector is financially healthier than other commercial real estate sectors. Yet despite this relative good health, credit to our sector from banks, life insurance companies, pension funds and the commercial mortgage-backed securities (CMBS) market is in turmoil.There is an estimated $400 billion in commercial real estate loans maturing this year, so clearly, a new credit facility for commercial real estate debt is needed. We have recommended to the Treasury Department that it use funds from the $700 billion Troubled Assets Relief Program to either directly purchase CMBS with an “AAA” rating or to provide a guarantee for investors in the securities. This would provide liquidity to borrowers who accessed the CMBS market to finance existing properties and would expand the availability of debt capital. Economic StimulusA massive new stimulus package—possibly exceeding $850 billion over two years—is very likely to pass soon. NMHC is working to educate the new Congress so that when it allocates these funds it doesn’t repeat failed housing policies. We are encouraged by the nice balance between rental and single-family incentives in last summer’s Housing and Economic Recovery Act stimulus package, and we expect that this stimulus package will be similarly balanced.Congress should not try to re-inflate the housing bubble or artificially prop up house values. Some members are calling for legislation reinstating seller-financed downpayments and for a federally financed interest rate buydown. These are short-sighted props for single-family, which triggered this global economic crisis—and would only lead to future bailouts. A few have suggested new homebuyer tax credits, but it makes little sense to use taxpayer dollars to subsidize the purchase of an asset that is likely to continue to deteriorate or for house purchases that would occur even without a tax credit.TaxesCarried interest is presently taxed at the Capital Gains tax level, to recognize the risk the general partner takes, the value they bring and the long-term nature of real estate investing. Some seek to double the tax on carried interest, but this would have numerous unintended consequences, including worsening the affordable housing shortage. Another issue is the federal estate tax. If Congress does nothing, in 2011 the top estate tax rate will revert back to 55 percent. It is therefore extremely important that Congress acts to retain the current law as it is in effect for 2009—especially the provision for “stepped-up” basis at time of death. Finally, we support an emergency housing voucher program that enables another 400,000 families to live in decent, affordable rental housing. This would also help Low-Income Housing Tax Credit properties that have seen their expenses escalate far faster than their rental revenues, which are capped.Green BuildingExpect efforts to reduce greenhouse gases. Apartments are by far the greenest housing by virtue of their construction, location and compact nature. NMHC helped develop the National Green Building Standard, which—unlike other “green” standards—includes apartment-specific language. We also advocate for tax incentives to encourage more energy-efficiency, but are against national mandates or “one-size-fits-all” solutions. LaborProposals to give labor unions virtual free reign to organize many different segments of the workforce in the so-called “card-check” legislation will easily pass the House, but we expect more debate in the Senate, where Democrats need 60 votes to move the bill. This bill is extremely troubling for any company wanting to bargain in good faith with employees; all the power will be with the unions. It may take one or two Democrats to help sustain a filibuster in the Senate. Jim Arbury is senior vice president of government affairs at the National Multi Housing Council.
NMHC Washington Outlook 2009
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