National Multi Housing Council News

Lawsuit filed against HUD


NMHC and the National Apartment Association (NAA) have filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD), asking a federal judge to strike down HUD’s recently issued Limited English Proficiency (LEP) Guidance (National Multi Housing Council v Jackson). HUD’s Guidance, which went into effect on March 7, requires apartment owners who receive HOME, CDBG and project-based Section 8 assistance to translate a broad array of documents in multiple languages and provide verbal translations for those who do not read in their native language.

The lawsuit claims that HUD has exceeded its statutory authority in issuing the Guidance, which is also illegal because it effectively rewrites federal anti-discrimination law and makes it illegal to communicate only in English. They further argue that the requirements are unlawfully vague and unduly burdensome since the Guidance fails to say which documents must be translated.

The Council believes it unreasonable to delegate that burden to housing providers who are not qualified to ensure the competency of translators and interpreters. NMHC/NAA have opposed the rules since HUD first issued the proposed Guidance in late 2003, arguing that they are nothing more than an attempt by HUD to shift its responsibility for translating documents. NMHC/NAA will continue to call on HUD to withdraw its Guidance, to act proactively to translate important rental documents and to create a hotline to handle inquiries from LEP persons.

NMHC market conditions recap
Consumer demand for apartments grew for the 15th consecutive quarter according to NMHC’s Q1 survey. Although both owners and managers are aware of the “shadow rental market”–condos and single-family homes originally intended for sale but being rented instead–any supply spillover from the for-sale market has so far not exceeded the growing demand for apartments.

The survey’s Market Tightness Index, which measures changes in occupancy rates and rents, edged up slightly to 56. A reading above 50 indicates that conditions are improving; below 50 indicates that conditions are worsening.

Equity capital for investment in apartments also remains widely available as evidenced by the 71 percent of respondents who considered conditions unchanged in Q1. The Equity Financing Index’s reading of 53 is also the 15th straight over-50 reading. A slight drop in the Debt Financing Index (from 56 in January to 54 in April) suggests that lenders may be tightening credit terms since interest rates are a bit lower than they were three months ago. Even so, only
eight percent of respondents regarded debt finance conditions as worse now than three months earlier; the vast majority (70 percent) thought conditions were unchanged.

The one index that remains below 50 is the Sales Volume Index, which slipped to 38 from 41 and the sixth straight sub-50 reading. With sales of apartment properties to condo converters essentially out of the picture, the sub-50 reading suggests modest slowing in sales to apartment buyers. Nevertheless, the share of respondents who noted higher sales compared with three months earlier grew slightly, to 13 percent in April from 10 percent in January.

Congress reviews carried interest
Members of the House Ways and Means and Senate Finance Committees are examining a proposal that would tax carried interest at ordinary income tax rates rather than treating it as long-term capital gains.

This has implications beyond the fact that ordinary income can be taxed as high as 35 percent while long-term capital gains are taxed at a maximum rate of 15 percent. If treated as ordinary income, additional tax obligations could also include FICA and Medicare taxes. This issue appears to appeal to tax policymakers because of the potential revenue to be raised from changing the tax characterization as well as the wider policy debate over possible abuses of the use of hedge funds. Under the new PAYGO rules for tax legislation, any tax reductions must generally be offset by tax increases.

Lawmakers have set forth a number of tax priorities for this year, including a one-year “fix” to the Alternative Minimum Tax that carries a price tag as high as $50 billion. NMHC/NAA continue to urge policymakers to fully examine carried interest to ensure that any changes reasonably address possible abuses without having unintended consequences on legitimate transactions and partnership arrangements.

Lead-based paint regulations
NMHC/NAA continue to press the U.S. Environmental Protection Agency (EPA) to rework a proposed rule that would require anyone, including apartment maintenance workers, engaged in renovation, repair and painting activities that disturb lead-based paint in housing built before 1978 to be trained in the use of lead-safe work practices. Firms would have to be certified, and providers of renovation training would have to be accredited. When the proposal was first published, NMHC/NAA submitted comments concluding that the draft rule was cumbersome and expensive. Last month after the Agency requested additional comments, NMHC/NAA responded with a letter taking it to task for seemingly ignoring the data submitted last year.