News

January 2018

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Welcome to 2018!! Whether you celebrated the holidays at the beach, with friends, family or as a volunteer, I hope that it was a peaceful and happy time.

With each passing year I am grateful for my family and this year was no exception, but the one thing that touched me most was the realization that my kids are growing up fast. My son will be a senior next year and my daughter will begin her high school experience. As a mother, of course, I still think of them as “little ones” and can’t imagine a time when I will not have them with me. It is at the very least a bittersweet thought, but one I celebrate as I watch them grow up.

As for AACSC, I am thinking about much the same thing. What does the future hold for us, how will we come together to respond to ongoing threats that pervade our industry? The simple solution is to allow builders the opportunity to build, to let supply and demand do the job it is intended to do, and to educate our tenants that regulations and government are not the way to a positive solution. Building takes time and educating our tenants is just one way we can inform them of the unintended consequences that they are not aware of. Until then, AACSC will stay on top of the ongoing issues and just ask for your participation and involvement when called for. Thank you for your membership and keep the calls coming so we can remain informed.

But what is in store for 2018 you might ask. Well, be ready for more education classes and more opportunities to get involved. This is also the best time of year to let us know where and how you would like to connect with AACSC. We have our Ambassadors team, Golf Committee, Education Committee, Social Media team and our Local Legislative team all waiting for new members to join and help AACSC get even more connected within our territory. We are also adding a new location for AACSC meetings in Whittier and continue to meet each month in Redondo Beach so be sure to check our weekly newsletter, The Beacon, for all the latest news.

We hope that you will join us this year at the Virginia Country Club on January 26 for our Annual Installation for our 2018 Board of Directors and President, Michael Pollack. This must-attend event is a great opportunity to have a wonderful night out at a beautiful location—call Jeannie in our office for more information and to make your reservations.

Finally, I want to thank my staff and partners whom you speak to whenever you call AACSC: Donna, Terri, Tom, Rachael, Jeannie, Sophia, Brenda and Oliver. Every single one of them is dedicated to helping you get the answers you need for your business. We hope you are telling all your multifamily friends that AACSC is the only place to join and get involved. See you soon and may your month be filled with joy as we begin a brand new year.

A Fresh Page

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Wow — what a great, but fast year 2017 was! It is hard to believe all that has happened last year, and we expect even more, bigger and crazier things again for this great year we have ahead of us. Like my mentor once explained, starting the New Year (or even a new day) with a fresh page and a clean slate, people can put what we want on the pages of our futures, which gives us unique opportunities that other animals on this planet are not offered—a goose must fly south for the winter. Why? Because it’s a goose! If a tree doesn’t like where it lives, it cannot pack up and move. We, on the other hand, have been given the dignity of choice.


It is my hope that all of us have taken the time to reflect upon last year and then create a new and improved plan for this year—not just a wish list, but sound goals that are achievable, and at the same time will stretch and grow us. When we do this with our own lives, we can do it in our businesses, communities and beyond. A great way to learn how to better plan and execute new plans in our own lives and communities is to get involved with our AACSC Committees that are run by our all-volunteer Board of Directors. Not only is this a great way to get plugged into the community and to help others as well as to really learn how to “preserve, protect, and enhance” the rental housing industry in Southern California, but also a way to show you how a focused group of people come up with and execute great ideas! Luckily, we are not trees who are stuck somewhere in the snow year ‘round, stuck in a constant lightning storm—or even stuck as a restroom for a pack of wolves in a forest—we are all here by choice in beautiful SoCal and each of us has a responsibility to leave everything better than how we found it, and we do that by becoming part of a great team complete with leaders and mentors.

One great lesson I have learned about uniting on the same front and becoming a team, is that as neighbors — especially in this country—we always want to do what is best and what is right, but we tend to differ on how we define that or get there. I want to reassure everyone that things that will make ourselves, and our industry, businesses and region better are your ideas, your courage to stand up and respectfully say something if it doesn’t feel right, and your involvement in your community.

We need you and we need your voice, your help, and your ideas. Please reach out and let us know your interests — we have so much to choose from. From our local and state legislative committees, trade show and membership committees, to education, golf tournament fundraising, and Political Action committees—we have a little something for all interests. Pick one of interest to you and let’s partner up. Everyone here will be heard, respected, listened to, and given a chance.

As a great help to your training, remember that there is no better way to school yourself and your teams than to get into the top of the line classes that AACSC offers. The prices are right, and the info is priceless. Learn how to keep compliant of the law and still be able to care for your residents and properties.

Regularly check AACSC’s website and your email for announcements on the upcoming courses.

Before finishing up here, we want to thank all of our vendors who continue to sponsor our events and continue giving us the best workmanship in the business — we could not do it without you!

Thank you so much for giving me this opportunity to lead the AACSC—please, come work alongside us — we can really help each other a lot in 2018!

Cheers!

It Was A Jungle Out There, But The Industry Heard Us Roar

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With over 100 vendor booths and exhibits and educational seminars through out the day, the 49th Annual Trade Show provided a roaring good time for all in attendance! The show was once again held at the Long Beach Convention Center, but in a new location. AACSC was excited to be in the Arena/Pacific Ballroom!

Thank you to the following companies that were so generous in sponsoring the day. King of theJungle Sponsor, Optimum Seismic; Tote BagSponsor, California Safety Agency; Parking Sponsor, V&S Carpet and Flooring Services;Rainforest Refresher Sponsor, Jim’s Floor Covering; Music Sponsor, Royal Roofing; Monkey Maze Bingo Card Sponsor, CBRE, Dan Blackwell; and finally our Sign Sponsor, Perfect Circle Design. Perfect Circle Design provides all signage used by AACSC from the trade show, Golf Classic, meetings, lunches and all special events. They are an AACSC Affinity Partner as well. Thank you again to all of our sponsors for your continued support of AACSC! Remember to support AACSC’s vendor members when you have a service need.

We look forward to 2018 when we will be celebrating our 50th Annual Trade Show! Watch for details coming soon! AACSC’s trade show will still be “Nifty at 50!!”

Pet Policy Gone Wild

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New “assistance animals” regulations proposed by the Fair Employment and Housing Council (FEHC) will likely cause heartburn in the rental housing community. The attempt to bring clarity in the murky area of service and support animal needs versus fraud is fraught with ambiguity. It is understandable why rental property owners are confused about the law, existing and proposed. Unless you’re a lawyer who regularly studies these issues, it is hard to know where one assistance animal law begins and another one ends. When does “reasonable accommodation” become unreasonable? Ultimately, rental property owners are scared of being sued and, therefore, often choose to allow support animals onto their property, even when they suspect fraud is being perpetrated on them.

But owners have very important, reasonable and necessary reasons for having a no-pets policy. Animals can be dangerous, spread disease, interfere with the quiet enjoyment of others, and damage property. An owner’s right to keep animals off a property, unless to accommodate a person with a real need, therefore, must be protected. Unfortunately, current laws, including future laws under this Proposal, fail to protect owners from those fraudulently gaining access for their animals to rental properties.

Rental housing owners and managers support and understand the need for providing reasonable accommodations to those who legitimately need an emotional support animal, as these animals (or “comfort animals”) can provide a therapeutic benefit to those with a mental or psychiatric disability.

We also recognize that service and support animal fraud is rampant and easily perpetrated under our current laws and regulations. More and more individuals are pretending their pets are legitimate service or emotional support animals when, in fact, the person has no legitimate need for the animal or the animal itself is not legitimately a service or support animal. Ultimately, that is the main concern we have expressed in regard to FEHC’s Proposal: the proposed regulations do little to protect rental property owners from fraudulent requests for support animals.

Support and service animal fraud is widespread in our society. Fake assistance animals are everywhere. Multiple news reports suggest that it is more than a few bad apples that are perpetrating the fraud. Rental property owners should not be forced to accommodate people who are perpetrating fraud on them, nor should laws and regulations facilitate such fraud. Unfortunately, this Proposal does just that, because it contains few, if any, effective anti-abuse mechanisms to prevent people from gaming the system.

People requesting a reasonable accommodation for a support animal should have a legitimate disability that requires them to have a support animal. They should have a real diagnosis and prescription for a support animal by a real medical or mental health professional with expertise to give an opinion about the disability at issue and the need for a service or support animal. The disability diagnosis and need for a support animal should also be current. Any one with a real disability and a real need for a sup port animal should have this kind of documentation. Without these standards, there are no standards. Anyone could self-diagnose, tell their friends or “peer support group” they have a disability and a need for a support animal, and then use that friend or group as a source to verify their disability. Alternatively, a person who was diagnosed with a disability five years ago, and who might not currently have a disability or need for an accommodation, could use that stale prescription to game the system. We are sure that this is not the way the law is supposed to work.
We submitted, on behalf of the Association, detailed comments on the FEHC’s Assistance Animal Proposal, including a number of ways the Proposal is deficient in preventing fraud and subject to abusive conduct:

  • Diagnosis or assessment by a licensed medical or mental health professional is not required.
  • The need for a support animal is not required to be a current need.
  • The person verifying a person’s disability or need for an accommodation does not need to be a medical or mental health professional or need to have specific training or education about support animals.
  • When an owner knows about a disability but not the need for an accommodation, the owners should still be able to request reliable information describing the needed accommodation and the nexus between disability and accommodation.

A meaningful review of a requested accommodation should allow rental property owners to make reasonable requests for certain reliable documents from reliable sources that are specifically defined. The following is a list of provisions that should be contained within the regulation to prevent fraud and abuse, and to ensure that reasonable accommodations are provided to those with legitimate needs:

  • Owners should be able to require disability and need for accommodation verification documents to come from a licensed medical or mental health professional.
  • The documentation should describe the nature, severity and duration of the disability.
  • The disability, need for the accommodation, and verifying documentation should be current (i.e., not more than one year old), and on letterhead from a mental health professional.
  • The medical or mental health professionals must have expertise to give an opinion about the person’s medical condition and the need for the accommodation.
  • Owners should be able to request new verification documents if the previous “doctor’s note” was not described as permanent.
  • The person seeking the accommodation must be under the current care of the prescribing medical or mental health professional.
  • Verification from a “letter mill” should be prohibited entirely.

Our comment letter to FEHC on assistive animals high lighted all the ways in which the Proposal represents an unbalanced approach to addressing the issue of assistive animals in rental housing. We discussed the failure of the Proposal to consider the quiet enjoyment of other tenants, nuisance issues, the safety and health of other tenants, pet fraud, and the need for rental housing providers to be able to establish reasonable rules for tenants who are provided a reasonable accommodation. In short, the needs of property owners and other tenants are not properly accounted for or taken into consideration, and the Proposal should be amended to better reflect the realities of landlord tenant relationships and the respective needs of each group.

Tax Reform

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Tax reform is front and center on the congressional agenda, and there is a real chance it will become law this year. The last comprehensive tax reform legislation was the Tax Reform Act of 1986 (TRA 1986) signed into law 30 years ago by President Ronald Reagan. We all remember how that bill devastated the industry for years, so it is imperative that we engage with policymakers to ensure a more positive outcome.

In the years since TRA 1986, legislation has changed the tax code—mainly at the margins—focusing on rate changes and other targeted pro visions while comprehensive reform has eluded policymakers.

The election of Donald Trump and continued Republican control of the Congress has changed the outlook for tax reform. One-party rule where reform is a priority for all of the key players has increased the odds that broad-based legis lation can become law.

At this stage of the process, House Republicans are taking the lead on reform. While President Trump made a number of proposals during the 2016 campaign, it is House Republicans who have put forward the most detailed plan. Entitled “A Better Way Forward for Tax Reform,” the House GOP released a “blueprint” for reform last summer, which is the starting point for their internal discussions. The blueprint would:

• Reduce the top tax rate on LLCs, partnerships, S Corporations and other pass-thru entities to 25 percent from 39.6 percent;
• Tax capital gains, dividends, and interest at a maximum rate of 16.5 percent;
• Replace depreciation with immediate expensing of all investment except for land;
• Eliminate the deduction for business interest;
• Eliminate like-kind exchanges;
• Eliminate the Low-Income Housing Tax Credit; and
• Repeal the estate tax while retaining stepped-up basis for inherited assets.

It is important to note that while the Blueprint appears to eliminate the Low-Income Housing Tax Credit (LIHTC), there are good indications it may be put back into the House GOP proposal.

As the most developed tax reform product in circulation at the moment, the Blueprint is the centerpiece of conversation around tax reform. However, it is not yet legislation, and there could be significant changes made before an actual bill is introduced.

Moreover, the White House and Senate still need to flesh out their own proposals. There is much time to go before a reform agree ment is reached, if at all, and we can expect the details of any agreement to change several times along the way.

For our part, the apartment housing industry’s primary objective in reform is to support legislation that promotes economic growth and investment in rental housing without unfairly burdening apartment owners and renters relative to other asset classes. To this end, we are pushing lawmakers to ensure the following priorities are reflected in any bill that moves forward.

Tax reform must protect “flow-through entities” (e.g., LLCs, partnerships, S Corporations, etc.), which are the dominant business structure in our industry.

Under this model, a firm’s earnings are passed through to the partners who pay taxes on their individual tax returns. Accordingly, Congress must not reduce corporate tax rates financed by forcing flow through entities to pay higher taxes by subjecting them to a corporate-level tax or by denying credits and deductions.

It is also a priority for the apartment housing industry to maintain “like-kind exchanges” where property owners can defer tax on the gain on sale of an asset if, instead of selling their property, they exchange it for another comparable prop erty. These rules encourage property owners to remain invested in the real estate market. Such an important tool for investment must be maintained in a reformed tax code. Notably, with the exception of land, the expensing proposal in the House Republican Blueprint provides for de facto like-kind exchanges.

Tax reform should also take care to preserve investment incentives. Borrowing is a central part of how apartment housing is financed (a typical development project could be financed with 1/3 capital and 2/3 debt and the tax code has long provided a full deduction for interest). Indeed, without business interest deductibility, the cost of debt financing would increase and shift many real estate business models. This would inhibit devel opment activity at a time when we face significant affordability challenges.

Policymakers should also take care when making changes to cost recovery rules like depreciation so they do not harm real estate investment. Apartment buildings are currently depreciated on a 27.5-year schedule. While House Republicans are proposing to allow buildings to be immediately expensed, others have suggested extending the current law depreciation period. This would surely lead to reduced development and invest ment and ultimately undermine real estate values and stifle job creation.

Finally, protecting the Low-Income Housing Tax Credit (LIHTC) is a priority for the apartment housing industry. The LIHTC is the central vehicle producing housing for moderate- and low-income families. We are in a period of crisis in housing affordability and need stronger incentives like the LIHTC to effectively respond. This program must remain a vital part of the strategy to address our nation’s housing needs.

You will notice some overlap between what is being proposed, at least in the House GOP Blue print, and the apartment housing industry’s priorities. It is important to remember that policy makers are truly looking to reshape how taxes are levied in this country and that perhaps what they propose could effectively replace what is in the tax code now and keep the apartment housing industry whole. We remain open minded on this point as we continue to press for our top priorities and evaluate in detail what tax reform proposals mean for our business.

Every member of the apartment housing industry must be engaged in the advocacy campaign on tax reform. That means contacting your members of Congress and communicating our message.

Changes to the tax code will impact all of us, and it is our responsibility to ensure whatever reform is passed does not harm our ability to provide housing to one-third of the nation. To learn more about how you can get involved in shaping the debate, contact Peter Fromknecht at This e-mail address is being protected from spambots. You need JavaScript enabled to view it and take our Advocacy Interview at http://re.spon.se/OTmUtG to see who you might know on Capitol Hill! Your relationships with lawmakers and your willingness to act on those relationships will make the difference between success and failure on tax reform.

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333 W. Broadway St., Suite 101
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(562) 426-8341

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