News

A. J. Johnson Partners with Mid-Atlantic AHMA for February Training Series

During the month of February 2021, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association in a series of live webinars for real estate professionals, particularly those in the affordable multifamily housing field. On February 11, A.J. will present "Principles of Successful Site Management." This full-day course provides an A-Z introduction to residential site management. The course is designed for site managers and supervisory property managers and covers management styles, recruiting and hiring of staff, affordable housing ownership entities and regulatory bodies, security and emergency procedures, basic landlord/tenant issues, unique leases and addendums for affordable housing programs, professional ethics, on-site maintenance requirements, property financial management, marketing, and leasing. The purpose of the course is to provide a broad overview of sound property management practices and principles, to complement the technical program expertise required of affordable housing managers. This will be followed on February 18 with "Basic Low-Income Housing Tax Credit Compliance." This training is designed primarily for site managers and investment asset managers responsible for site-related asset management and is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of the LIHTC related to on-site management, including the applicant interview process, the determination of resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions designed to ensure that students are fully comprehending the material. The series will conclude on February 24 with "Sexual Harassment in Affordable Housing." No one should ever have to choose between housing and sexual harassment. The U.S. Department of Justice (DOJ) is undertaking an initiative to combat sexual harassment in housing, in an effort to protect individuals from harassment by landlords, property managers, maintenance workers, security guards, and other employees and representatives of rental property owners.This three-hour session is designed to assist attendees in their understanding of fair housing laws relating to sexual harassment, as well as review examples of sexual harassment - including case studies of recent court decisions. The training will offer substantive and specific examples of policies that owners may establish to prevent sexual harassment and, when harassment occurs, a detailed description of the investigative process will be provided. The provision of a sample Fair Housing Code of Conduct for Maintenance and Leasing Staff will enable attendees to immediately begin implementing policies at the property level to prevent and deal with sexual harassment in affordable housing.The session is intended for anyone involved in the affordable housing industry, including site staff (leasing and maintenance), property managers, and owners. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA that is designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Democratic Control of Executive and Legislative Branches Increase Chances for Affordable Housing Initiatives

Since Senators-elect Reverend Raphael Warnock and Jon Ossoff won the January 5 Georgia run-off elections, the Senate will be evenly divided between 50 Republicans and 50 Democrats. Vice-President-elect Kamala Harris will decide the outcome of any tied votes through her role as President of the Senate, giving Democrats the majority. With Democrats winning control of the Senate, 2021 offers a good chance for advances in affordable housing legislation. The majority status of the Democrats means they will have the leadership of the full Senate and all committees, the ability to set the Senate floor agenda and more easily confirm Biden administration nominees, and the ability to take advantage of the budget reconciliation process. This allows the controlling party to bypass filibuster rules (which require 60 votes to pass legislation) and pass certain types of legislation with a simple majority. The control of the Senate also means the Biden administration will have an easier path to enacting components of its comprehensive housing plan that calls for a $640 billion investment over ten years, including strengthening and expanding the Low-Income Housing Tax Credit (LIHTC) program, provision of Housing Choice Vouchers to all eligible families, creating a new renter s tax credit, and providing a new $100 billion affordable housing fund. With regard to the LIHTC program, the Biden Affordable Housing Plan calls for expanding the LIHTC with a $10 billion investment. This will be designed to make the credit more efficient, dramatically increasing the number of new or rehabilitated affordable housing units. The Plan will also ensure that urban, suburban, and rural areas all benefit from the LIHTC. Following are some of the major elements of the Biden Housing Plan that now stand a much greater chance of moving forward: End redlining and other discriminatory housing practices. The Biden Plan includes a Homeowner & Renter Bill of Rights that will expand protections for renters, including a law prohibiting landlords from refusing to accept vouchers. The mechanism for this would be a revision to the Fair Housing Act, adding "Source of Income" as a new protection.Tenant eviction protection will be pushed with the passage of The Legal Assistance to Prevent Evictions Act of 2020. This will assist tenants facing eviction in obtaining legal assistance. The elimination of local and state housing regulations that perpetuate discrimination - specifically exclusionary zoning. Biden s proposed legislation would require any state or locality receiving Community Development Block Grant (CDBG) funds or (more significantly) Surface Transportation Block Grants to develop a strategy for inclusionary zoning and will fund states to assist them in eliminating exclusionary zoning policies. This is a particularly important proposal, especially the withholding of transportation funds. While not all localities use CDBG money, virtually every city and state want to share in the federal transportation funds. The inability to build new roads or improve highways would be a major issue for localities and the potential withholding of such funds would be a serious "stick" in the push for inclusionary zoning. This could open up substantial new urban areas for the development of affordable rental housing.Strengthen the Community Reinvestment Act (CRA) to ensure that non-bank financial service institutions (e.g., mortgage and insurance companies) serve all communities.Provide downpayment assistance through a refundable and advanceable tax credit of $15,000 and fully fund the Housing Choice Voucher and Project-Based Rental Assistance (PBRA) programs. Under this proposal, Housing Choice Vouchers would be made available to every eligible household. Currently, 75% of eligible families do not receive assistance. This, along with fully funding the PBRA programs, would provide assistance to 17 million households.Creation of a new renter s tax credit, designed to reduce rent and utilities to 30% of income for families who make too much money to qualify for rental assistance.Expand housing benefits for first responders, public school teachers, and other public and national service workers who commit to living in persistently impoverished communities. This program would provide additional down-payment assistance and low-interest rehab loans.Establish a $100 billion Affordable Housing Fund to construct and upgrade affordable housing - primarily in areas with a short supply of affordable housing.Increase funding for the HOME program by $5 billion.Increase funding for the Housing Trust Fund (HTF) Program by $20 billion.Expand the Low-Income Housing Tax Credit Program (LIHTC) by $10 billion.Increase funding for repairs to the Rural Development Section 515 Program. Most of these proposal will require Congressional action, so the issue of who controls Congress is no small thing. Now that the Democrats control the Senate, the chance for passage of Biden s plan increases. Impact on Agencies As with any change in administrations, the top leadership of both HUD and Agriculture will change. An additional factor is that during the past four years, many agency professionals have retired or resigned; these positions are harder to replace than the political appointees. Having said that, the appointment of qualified leadership can go a long way in attracting qualified professionals and retaining those that are there. President-Elect Biden has named his choices to head HUD and Agriculture. Secretary of Housing & Urban Development (HUD) President-elect Biden has nominated Rep. Marcia Fudge (D-OH) to lead HUD. HUD will play a key role in the incoming administration s response to the COVID-19 pandemic, which has caused millions of people to fall behind on rent and mortgage payments. If confirmed, which is highly likely, Rep. Fudge will take over amid an acute housing crisis, as millions of tenants walloped by the pandemic-driven economic crisis face eviction and massive back-rent bills. The Biden administration is expected to push for Congress to pass a relief package dedicating billions of dollars to rent relief, and HUD will likely seek additional funding to address homelessness. Fair housing will also be a priority. The Biden transition lists "racial equity" as a Day One priority, alongside COVID-19, the economic crisis and climate change. The gap in homeownership rates between white and Black Americans has never been wider, a key driver of the persistent racial wealth gap. Among the new secretary s first tasks will be restoration of the 2015 Affirmatively Furthering Fair Housing (AFFH) rule, which outgoing HUD Secretary Ben Carson revoked this past summer. The original rule - which the Obama administration introduced as a way to beef up enforcement of the Fair Housing Act - would have required local governments to track patterns of segregation with a checklist of 92 questions in order to gain access to federal housing funds. The AFFH was not the only fair housing rule that the Trump administration has tried to gut. Carson s HUD also introduced a regulation revamping the Agency s 2013 "disparate impact" rule to make it harder to prove unintentional discrimination. A federal judge in October issued a preliminary injunction to stop HUD from implementing the new rule, which would have required plaintiffs to meet a higher threshold to prove unintentional discrimination, known as disparate impact, and given defendants more leeway to rebut the claims. It is likely that HUD, under Fudge, will return to a more neutral disparate impact test. The naming of Fudge has resulted in an immediate improvement in the morale at HUD, which has deteriorated under the leadership of Ben Carson. Under Fudge, other initiatives of the Trump/Carson era will certainly be rolled back, including (1) the anti-Transgender rule changes to the Equal Access Rule, and (2) elimination of the proposal to force mixed-status immigrant families to separate or face eviction from HUD-assisted housing. As for the Department of Agriculture, which oversees the rural housing programs, Biden has selected Tom Vilsack, who was the Agriculture Secretary under President Obama. Vilsack served as governor of Iowa from 1999 to 2007 and served as Agriculture Secretary for both of Obama s terms. Since then, he has been a lobbying executive for the dairy industry. While not a popular choice among environmentalists, Vilsack was supportive of the RD housing programs, although he was not an aggressive advocate. His presence is unlikely to slow down the current push to roll RD housing programs into HUD. In the not-to-distant future, the efforts to revise America s approach to affordable housing will begin. It is certain that greater priority will be given to affordable housing over the next four years than during the most recent four years.

IRS Extends COVID-19 Relief

In response to the COVID-19 pandemic, the IRS issued Notice 2020-53 in July 2020.  This Notice provided temporary relief from certain requirements under 42 of the Internal Revenue Code and 142(d) and 147(d) of the Code for properties with tax-exempt bonds. In response to the continuing presence of the pandemic, the IRS has issued Notice 2021-12, extending that relief and also providing temporary relief from additional 42 requirements not previously addressed in 2020-53. Background On March 13, 2020, the President issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing COVID-19 pandemic. This emergency declaration instructed the Treasury Department "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate " The emergency declaration applies to all 50 states, Washington DC, and the five territories. Revenue Procedure 2014-49 provides temporary relief from certain requirements of 42 for Agencies and Owners of LIHTC projects. Revenue Procedure 2014-50 does the same thing for properties financed with tax-exempt bonds. Prior Relief Actions On April 9, 2020, the IRS issued Notice 2020-23, which provided certain relief to low-income housing projects and postponed due dates until July 15, 2020, with respect to certain tax filings and payments, certain time-sensitive government actions, and all time-sensitive actions listed in Revenue Procedure 2018-58 that were due to be performed by April 1, 2020, but before July 15, 2020. These time-sensitive actions include, among others: The time to show that 10% of project basis has been established;The 24-month rehab period; andAnnual Owner Certifications to the HFA. Scope of Relief Granted in This Notice The 10% Test for Carryover Allocations: If the last day for an Owner of a building with a carryover allocation to meet the 10% test is on or after April 1, 2020, and before September 30, 2021, the last day for the owner to meet the 10% test is postponed to the earlier of one year from the original due date or September 30, 2021.The 24-Month Rehabilitation Expenditure Period: If the 24-month minimum rehabilitation expenditure period for a building originally ends on or after April 1, 2020, and before September 30, 2021, the last day for the owner to incur the minimum rehabilitation expenditures test is postponed to the earlier of one year from the original end date or September 30, 2021.Placed in Service Deadline: if the deadline for a low-income building to be placed in service is the close of calendar year 2020, the last day for the owner of the building to place the building in service is postponed to December 31, 2021.Reasonable Period for Restoration or Replacement in the Event of Casualty Loss: If a low-income building has suffered a casualty loss and the reasonable period to restore by reconstruction or replacement ends on or after April 1, 2020, and before December 31, 2020, the last day for the Owner of the building to restore the loss by reconstruction or replacement is December 31, 2020.Reasonable Restoration Period in the Event of Prior Major Disaster: if a low-income building, not due to a pre-COVID-19-pandemic Major Disaster, has suffered a casualty loss that would have reduced its qualified basis and if the reasonable restoration period determined by the Agency for the building ends on or after April 1, 2020, then the last day of the reasonable restoration period is postponed by a period of one year from the original end date but not beyond December 31, 2021. The allocating agency may require a shorter extension or no extension at all.Extension to Satisfy Occupancy Obligations: If the close of the first year of the credit period is on or after April 1, 2020, and on or before June 30, 2021, then the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the six-month period following the close of that first year.E.g.: assume the deadline for meeting a project s minimum set-aside and qualifying all low-income units to avoid the "2/3" unit rule was December 31, 2020. The revised deadline is June 30, 2021.Correction Period: If a correction period for non-compliance that was set by the HFA ends on or after April 1, 2020, and before September 30, 2021, then the correction period is extended by a year, but not beyond December 31, 2021.E.g.: The HFA discovered noncompliance on March 1, 2020, and gave the owner until June 1, 2020, to correct the noncompliance. The non-compliance was not corrected and the HFA reported it to the IRS as non-corrected noncompliance. The owner now has until June 1, 2021, to correct the noncompliance. The HFA may submit an amended 8823 to the IRS, citing this Notice and providing for the extended correction period. Keep in mind that the HFA may require a shorter extension or no extension at all.The 12-Month Transition Period to Meet Set-Aside for Qualified Residential Rental Projects: the last day of a 12-month transition period for tax-exempt bond projects that ends on or after April 1, 2020, and before September 30, 2021, is postponed to September 30, 2021.The 147(d) Two-Year Rehabilitation Expenditure Period for Bonds Used to Provide Qualified Residential Rental Projects: If a bond is used to provide a qualified residential rental project and if the two-year rehabilitation period for the bonds ends on or after April 1, 2020, and before September 30, 2021, the last day of that period is postponed to the earlier of one year from the original due date or September 30, 2021.Grant of Relief Pursuant to 1.42.13(a):Income Recertifications: An owner of a low-income building is not required to perform income recertifications in the period beginning on April 1, 2020 and ending on September 30, 2021. The owner must resume the income recertifications as due after September 30, 2021.E.g., a recertification that is due on September 1, 2021 does not have to be performed. The next recertification will be due on September 1, 2022, keeping in mind that HFAs may have their own requirement in this area.Compliance Monitoring: An agency is not required to conduct compliance monitoring inspections or reviews in the period beginning on April 1, 2020 and ending on September 30, 2021. The Agency must resume compliance monitoring inspections or reviews as due under 1.42-5 after September 30, 2021.Common Areas & Amenities: If an amenity or common area in a low-income building or project is temporarily unavailable or closed during some or all of the period from April 1, 2020 to September 30, 2021, in response to the COVID-19 pandemic, and not due to other 42 noncompliance, this temporary closure will not result in a reduction of the eligible basis of the building.Guidance Permitting Agencies to Conduct Telephonic Hearings: QAP hearings due on or after April 1, 2020, and before September 30, 2021, may be held by teleconference. The teleconference must be accessible to the residents of the locality where the Agency has jurisdiction by calling a toll-free telephone number.Emergency Housing for Medical Personnel & Other Essential Workers: If individuals who are medical personnel or other essential workers (as defined by State or local governments) provide services during the COVID-19 pandemic, then, for purposes of providing emergency housing from April 1, 2020 to September 30, 2021, for both LIHTC and tax-exempt bond projects, HFAs, Owners, and Operators of low-income housing projects may treat these individuals as if they were Displaced Individuals under Revenue Procedures 2014-49 or 2014-50. Owners and operators of LIHTC and tax-exempt bond projects should consult with their HFAs or Issuing Agencies in order to determine if any requirements in addition to those outlined in this Notice will be implemented.

Work Patterns Will Never Be the Same Again - Long Term Planning & Preparation is Key

Despite the death grip COVID-19 has had, the global economy is on the threshold of a burst of growth driven by technology. If long-gestating technologies like Artificial Intelligence (AI) and automation fulfill their potential, we ll have the chance to escape the current stagnation, and will be much more insulated against the employment impact of future pandemics - which there will surely be. Largely hidden by the pandemic s human suffering, 2020 saw some remarkable breakthroughs, including the COVID vaccine and advances in AI language generation, as well as the growth in affordable solar power and remote work. A new term has emerged - total factor productivity (TFP) - which takes into account the effect of technological and strategic progress. In 2021, the TFP will be remarkably high - perhaps the highest ever. The United States has been suffering from a certain stagnation for years - even as the Internet transformed our daily lives. This prolonged period of little or no growth in our economy has been highlighted by periods of high unemployment and involuntary part-time employment. In October 2020, the World Economic Forum found more than 80% of global firms plan to accelerate the digitization of business processes and increase remote work. Half plan to accelerate automation and 43% expect to reduce the overall size of their workforces, which implies an expected increase in productivity. However, there is a catch. If those gains don t filter down to workers - or worse, end up eliminating jobs without replacing them with better ones - even a faster, more productive economy will not ease America s inequality; it could actually worsen it. A closer look at some of the World Economic Forum findings is worthwhile. The workforce is automating faster than expected, displacing 85 million jobs worldwide in the next five years. This disruption will occur in medium and large businesses across 15 industries and 26 economies. Roles in areas such as data entry, accounting, and administrative support are decreasing in demand as automation and digitization in the workplace increase. More than 80% of business executives are accelerating plans to digitize work processes and deploy new technologies, and 50% of employers are expecting to accelerate the automation of some roles in their companies.In contrast to previous years, job creation is now slowing while job destruction is accelerating.The robot revolution will create 97 million new jobs, but communities most at risk from disruption will need support from businesses and governments.In 2025, analytical thinking, creativity, and flexibility will be among the top skills needed; with data and AI, content creation, and cloud computing the top emerging professions.The most competitive businesses will be those that choose to reskill and upskill current employees. Due to COVID-19, the changes have come faster than expected. What used to be considered the "future of work" has already arrived. By 2025, work between humans and machines will be divided equally. Roles that leverage human skills will rise in demand, while machines will be primarily focused on information and data processing, administrative tasks, and routine manual jobs. The Need for Reskilling is Urgent As the economy and job markets evolve, 97 million new roles will emerge across the care economy, in industrial revolution technologies such as AI, and in content creation fields. The tasks where humans are set to retain their comparative advantage include managing, advising, decision-making, reasoning, communicating, and interacting. There will be a surge in demand for workers who can fill green economy jobs, roles at the forefront of the data and AI economy, as well as new roles in engineering, cloud computing, and product development. For those workers set to remain in their roles in the next five years, nearly 50% will need reskilling for their core skills. Despite the current economic downturn, most employers recognize the value of reskilling their workforce. An average of 66% of employers surveyed expect to see a return on investment in upskilling and reskilling of current employees within one year. They also expect to successfully redeploy 46% of workers within their organization. It is almost certain that going forward, the most competitive businesses will be those that invest heavily in their human capital - the skills and competencies of their employees. Those At Highest Risk The individuals and communities most negatively impacted by the unprecedented changes brought about by COVID-19 are likely to be those that are already the most disadvantaged. In the absence of proactive efforts, both by industry and government, inequality is likely to be exacerbated by the dual impact of technology and the pandemic recession. The ADP Research Institute found that between February and May 2020, displaced workers in the United States were, on average, mostly female, younger, and had a lower wage. Comparing the impact of the 2008-09 global financial crisis on individuals with lower education levels to the impact of the COVID-19 crisis, the impact today is far more significant and more likely to deepen existing inequalities. Any recovery must include a coordinated reskilling effort by institutions to provide accessible and job-relevant learning that individuals can take from anywhere in order to return to the workforce. The Role of the Public Sector Currently, less than a quarter of businesses are able to make use of public funds for reskilling and upskilling programs. The public sector will need a three-tiered approach to help workers. This includes (1) stronger safety nets for displaced workers, (2) improving education and training systems, and (3) creating incentives for investments and markets for these new jobs. Remote Working is Here to Stay but Requires Adaptation Approximately 84% of employers are set to rapidly digitize working processes, including a significant expansion of remote working. Employers say there is the potential to move 44% of their workforce to remote operations. The downside to this is that 78% of businesses expect some negative impact on worker productivity. This suggests that some industries and companies are struggling to adapt quickly enough to the shift to remote working caused by COVID-19. This will be addressed through AI advances relating to remote workers and employers will work to create a sense of community, connection, and belonging among their employees. Career pivots are also becoming more common. More people than ever are making career changes to entirely new occupations. Based on LinkedIn data gathered since 2015, about 50% of career shifts into data and AI are from different fields. The figure is even higher for sales roles (75%), content creation and production positions, such as social media managers and content writers (72%), and engineering roles (67%). LinkedIn research shows that the majority of transitions into future jobs come from non-emerging jobs, demonstrating that many of these new jobs are more accessible than workers may think. Leaders who are directing workforce funding and investment need to identify the small clusters of skills that will have an outsized impact on opening up more sustainable career paths. This will make a significant difference in addressing the unprecedented levels of unemployment that we are now seeing. 2021 will be the test of whether the systemic changes we saw in the workplace in 2020 will continue. It will be instructive when we get to the end of 2021 to see which companies call their employees back to the office and which ones embrace remote work for the long haul.

Fixed Four Percent Credit - When Does it Apply?

The COVID-19 relief legislation that was recently signed into law included a provision fixing the four percent LIHTC at an actual four percent rate. This floor applies both to properties with tax-exempt bonds and acquisition credits.  However, there are transition rules and some properties that are in development and under construction will not be able to use the 4% floor. In order to use the 4% fixed-credit, a building has to: Be placed in service after 2020, and - if the building has tax-exempt bondsThe bonds must be issued after December 31, 2020. One issue is whether a project with bonds issued in 2020 but not fully disbursed until 2021 can use the 4% floor. The truest answer is we don t know. Guidance from the IRS or a Congressional Committee would be helpful in this area. Until such guidance is received, using the 4% credit for 2020 bond issues that have not been fully used until 2021 is risky. Some tax attorneys may be willing to provide a legal opinion stating that the 4% floor may be used when a project has 2020 bonds, but some or all of the bond proceeds are not used until after 2020. This is an aggressive position, but some years ago the IRS took the position that they would define "issuance" as the date when the proceeds are drawn down. However, many tax professionals believe the IRS took this position to prevent taxpayers from avoiding new tax rules relating to bonds issued after a certain date. There is no way of knowing whether the Service will take the same position with regard to the 4% floor. In other words, will the IRS permit the date the bond funds are drawn-down to be considered the "issue" date? It is very possible that the IRS will apply a traditional reading (i.e., literal) of the law and apply the fixed rate only to bonds actually "issued" after December 31, 2020. Ultimately, investors will have to make the choice with regard to the risk level to be accepted. At this point, I am not advising my clients to use the 4% floor unless the bonds are actually issued after 2020. However, I am not a tax attorney, and I recommend reliance on opinions from tax counsel in these cases. One other element to keep in mind is that Housing Finance Agencies (HFAs) may only allocate the amount of credit necessary for deal feasibility. If a deal is closed with an applicable percentage of less than 4% - and the deal works - claiming a 4% floor would very likely result in some deal adjustments. The agency could require additional amenities, reject some secondary ("soft") financing source, earlier payoff off a deferred developer fee, etc. My recommendation in this area is that if a deal works at the "floating 4% level," just stick with it and don t get too adventurous. Another scenario is a "split" bond issue - where some bonds are issued in 2020 and there is another issue in 2021. In this case, because the project has bonds issued after 2020, it seems clear that the 4% floor may be used. My confidence here is based on the wording in the Code. The rule applies to any building if any portion is financed by tax-exempt bonds, provided any such building is financed by any such obligation issued after 2020. This language indicates that as long as any bonds are issued after 2020 for a project, the taxpayer is entitled to use the 4% floor. Be aware though that this applies only to an "issuance" of bonds - not a "refunding" of bonds. In other words, this would have to be a fresh bond issue, in addition to the amount received under a 2020 issue. The most interesting aspect of this 2020/2021 concept relates to acquisition/rehab projects. If a project was acquired in 2020 and the buildings were either occupied or occupiable as of the date of acquisition, the acquisition date is the placed-in-service date and even if bonds are issued for the project in 2021, the acquisition credit would have to be a floating credit (the building fails the first test noted above by not being placed in service after 2020). However, for purposes of Section 42, the rehab expenditures are treated as a separate new building. Therefore, assuming the bonds are issued in 2021, and the rehab is completed in 2021 (i.e., the rehab expenditure placed-in-service date would be in 2021), the rehab credit may be based on the 4% floor. In summary, until and unless favorable guidance is forthcoming either from Congress or the IRS, I recommend a conservative approach to using the 4% floor with tax-exempt bonds. In other words, unless a building is placed in service after 2020 and the bond issue is also after 2020, the 4% floor should not be used.

Virginia Landlord Settles Sexual Harassment Case

On September 29, 2020, the U.S. Department of Justice (DOJ) announced that Gary T. Price, a manager of rental properties in and around Harrisonburg, VA, together with owners of the properties, Alberta Lowery and GTP Investment Properties, LLC, will pay $335,000 to resolve allegations that Price sexually harassed multiple female tenants and discriminated in housing on the basis of race in violation of the federal Fair Housing Act. The case is U.S. v. Gary Price, GTP Properties, and Alberta Lowery. The federal government alleged that Price made unwelcome sexual comments and advances toward female tenants, offering housing benefits in exchange for sexual acts, and took or threatened to take adverse action against women who refused his sexual demands. The complaint also alleged that Price violated the Act by using racial slurs with respect to tenants and tenants guests, and by prohibiting or attempting to prohibit tenants from entertaining African-American guests in their homes because of the guests race. Alberta Lowery and GTP Investment Properties, LLC were named as defendants in the case because they own the properties at which the discriminatory conduct took place and Price was acting on their behalf as their agent when he engaged in the illegal acts. The properties involved were single-family homes and mobile homes. Under the Consent Decree, the defendants will pay $330,000 to compensate eight victims of discrimination already identified by the DOJ, together with any additional individuals who have been harmed by the defendants discriminatory conduct. In addition, the defendants must pay a $5,000 civil penalty. The decree also bars Gary Price from participating in the management of rental properties in the future and requires the defendants to take other steps to prevent future discrimination. Among the actions required of the owners it that all properties they own must be managed by a professional, independent property manager, and the owner and all employees of the owner will attend professional fair housing training. This case makes it clear that owners of rental properties may not escape liability for discrimination even when the discriminatory acts are perpetrated by an Agent of the owner. This is why only professional property management companies should be used for management, and all employees of both owners and management companies should receive regular, professional fair housing training and proper supervision.

New York Passes Comprehensive Anti-Eviction Law

The New York State Legislature convened an unusual special session just after Christmas to pass one of the nation s most comprehensive anti-eviction laws, which will ban landlords from evicting most tenants for at least another 60 days. Some studies show that as many as 1.2 million New Yorkers are currently at risk of losing their homes. In addition to protecting renters, the law will also protect some small landlords from foreclosure and automatically renew tax exemptions for homeowners who are elderly or disabled. Nationally, up to 14 million households are at risk of eviction and owe anywhere from $11 to $20 billion in rent. It is very possible that other states will follow New York s lead and pass similar laws in the weeks ahead. In order to use the protections of the law, tenants will have to submit documents outlining their financial hardships, and the hardship must be related to COVID-19. For eviction cases that are already working their way through the courts, the law will halt proceedings for at least 60 days. Landlords will not be allowed to begin new eviction proceedings until at least May 1. Some New York landlords opposed the measure, arguing that the law does not adequately distinguish between tenants with resources and those without. Also, the law provides little relief for landlords who are suffering from diminished financial resources, as tenants fall farther behind on rent and ground-floor retail tenants go out of business. The legislation tries to address those concerns by making it harder for banks to foreclose on smaller landlords who are themselves struggling to pay bills. This emergency action follows the $900 billion relief package enacted at the federal level, which included $1.3 billion in rental relief for New Yorkers and extended the CDC eviction moratorium until the end of January.

Trump Finally Signs Funding and Relief Bills

On December 27, 2020, President Trump finally signed the FY 2021 Omnibus Spending and COVID-19 Relief Bills. Passage of these two pieces of legislation will impact the affordable housing industry in some significant ways, primarily by setting the 4% LIHTC at a floor of 4 percent and providing $25 billion in emergency rental assistance. Highlights of the COVID-19 relief relating to housing include: $25 billion in emergency rental assistance;Extension of the CDC eviction moratorium to January 31, 2021 (it was set to expire on December 31, 2020);$600 stimulus checks for income-qualified single taxpayers and $1,200 for joint filers and an additional $600 per qualifying child (this should not be counted as income for affordable housing purposes); and$300 per week in enhanced unemployment insurance benefits starting after December 26 and ending March 14, 2021 (since this is temporary income, it should not be counted as income for affordable housing purposes). Rental Assistance The $25 billion in emergency rental assistance will be split among the states and territories, with no state receiving less than $200 million. Current estimates for unpaid rent are as high as $70 billion. The CDC eviction moratorium only delays the payment of rent - it provides no relief to renters or landlords. The only solution is actual money to assist with the payment of rent. The funds will be distributed to states, tribes, territories, the District of Columbia and local governments with population in excess of 200,000. Agencies that receive the funds must expend at least 90% to pay Rent;Rental arrears;Utilities and home energy costs;Utilities and home energy costs arrears; andOther housing expenses caused by the pandemic. The assistance may last up to 12 months, plus an additional three months if needed to ensure housing stability. The remaining ten percent of the funds may be used for other services relating to the pandemic (e.g., case management) and/or agencies administrative costs. To be eligible, tenant households must meet each of the following criteria: One or more individuals has -Qualified for unemployment benefits, orExperienced a reduction in household income, incurred significant costs, or experienced other financial hardship due, directly or indirectly, to the pandemic (the applicant must attest to this in writing).One or more individuals must demonstrate a risk of experiencing homelessness or housing instability, which may include -A past due utility or rent or eviction notice,Unsafe or unhealthy living conditions, orAny other evidence of such risk.The household income may not exceed 80% of the Area Median Income based on either -Total income for calendar year 2020, orConfirmation of monthly income at the time of application. When documented by tenant confirmation, the administering agency must re-determine eligibility every three months. This assistance will not count as income for purposes of determining eligibility under any federally funded program. Among eligible households, priority will be given as follows: Incomes less than 50% of AMI, orAt least one member of the household is unemployed as of the date of the application and has not been employed for the preceding 90 days. Agencies may add their own criteria. Agencies will make payments directly to landlords or utility providers on behalf of eligible households. Payments may be made directly to the household only if a landlord or utility provider refuses to participate. Landlords may either assist renters in applying for assistance or apply on behalf of the renters. If applying on behalf of the renters, the landlord must - Obtain the signature (wet or electronic),Provide a copy of the application to the tenant, andUse any payments received to satisfy the tenant s rental obligation. Agencies will be required to collect - and submit to Treasury - the following information: Eligible households receiving assistance,Acceptance rate of applicants,Type of assistance provided to each household,Average amount of funding provided per household,Household income level categorized as (1) less than 30% of AMI, (2) 30% to 50% of AMI, and (3) 50% to 80% of AMI, andThe average number of monthly rental or utility payments covered. Before beginning the collection process, agencies will need to establish data privacy procedures that provide - All information is used only for the purpose of submitting reports, andConfidentiality protections for survivors of domestic violence, sexual assault, or stalking. Agencies will also have to provide documentation of payments to households. 4% Credit After pushing for a floor to the four percent credit for many years, the passage of the spending bill makes a 4% credit a reality. This set 4% will apply to both acquisition credits and credits allocated with tax-exempt bond financing. This will make as many as 130,000 additional tax credit units feasible between 2021 and 2030 that would not otherwise have been built. The provision is effective for acquisition tax credits allocated after December 31, 2020, and for bond-financed properties placed in service and receiving allocations from private activity tax-exempt bonds issued after December 31, 2020. Guidance from the IRS will be needed to determine if properties that receive allocations or bond drawdowns prior to December 31 but receive subsequent allocations or drawdowns after December 31 will be eligible for the 4% credit. Disaster Relief The COVID-19 relief also includes $1.2 billion in ten-year credits in disaster LIHTCs for 11 states and Puerto Rico. These credits will be available for non-COVID-19 related disasters. Congress also granted LIHTC properties in disaster zones an additional 12 months to satisfy the 10% spending test and placed-in-service deadline, as well as providing more flexibility to allocating agencies by allowing disaster credits to be carried over to 2022. States and territories to receive the additional credit are: Alabama;California;Florida;Iowa;Louisiana;Michigan;Mississippi;Oregon;Puerto Rico;South Carolina;Tennessee; andUtah As noted above, the rental assistance component of the legislation will be the most complex. States and localities will have to designate the agencies to receive the funds. In most cases, this is likely to be state Housing Finance Agencies and large Public Housing Agencies. These agencies will already have the mechanisms in place for distributing the money and providing the required tracking and reporting. Landlords experiencing rent delinquencies should be proactive and reach out to state and local agencies to begin the process of obtaining the relief. There is not going to be nearly enough money to go around, so landlords who move quickly are likely to be those who benefit from the emergency funds. Landlords should also notify residents who may qualify for the relief and determine whether the residents will apply themselves or if landlords will make application on behalf of the residents. Again, moving quickly may be a key to obtaining relief under the bill.