Washington Update
By NMHC

Educating Lawmakers That An Expanded Credit Is An Ineffective and Costly Stimulus Measure

FAIR HOUSING
Post Properties Scores a Victory over ERC in Accessibility Lawsuit

In a major Fair Housing decision, on September 28, the U.S. District Court for the District of Columbia dismissed a lawsuit filed against Post Properties for alleged violations of the Fair Housing Act’s accessibility requirements. The suit was filed by the Equal Rights Center (ERC), a non-profit civil rights organization that has previously sued several large apartment owners.

The court ruled that ERC lacked standing to bring the lawsuit because any injuries the organization suffered were due to its own decision to investigate Post and were thus self-inflicted.

The lawsuit, which was filed in November 2006, alleged that 58 of Post’s properties are not accessible or usable. In April 2007, the court rejected a request by ERC to block Post from selling any of the contested properties until litigation was resolved.

In that ruling the court said that ERC had failed to prove the likelihood of success on the merits and further noted that the standards to which ERC sought to hold Post “do not constitute mandatory requirements upon builders, and, although compliance with the (Safe harbors) are sufficient to satisfy the FHA’s requirements, they are not the ‘exclusive means of doing so’”.

As in any lower court decision, the ERC may appeal the ruling. In addition, the Department of Justice, which filed a brief in support of the ERC, can also bring suit against any apartment firm that it believes has violated the Fair Housing Act or the Americans with Disabilities Act.

The full ruling is available at: www.nmhc.org/goto/5416

CAPITAL MARKETS
Treasury Rules Ease Restructuring of CMBS Loans

At the urging of a real estate coalition that includes NMHC, the Treasury Department issued guidance on September 15 making it easier for CMBS servicers to begin loan restructuring talks with borrowers before the loans go into default. This guidance, Revenue Procedure 2009-45, will be published in Internal Revenue Bulletin 2009-40, dated October 5.

Prior to the guidance, CMBS servicers triggered severe tax penalties if they began discussions before borrowers fell behind on their payments. The Treasury guidance relaxes these rules so CMBS borrowers, like traditional bank borrowers, will be able to negotiate loan workouts to avoid defaults.

In addition, the guidance allows servicers to modify loans regardless of when they mature. The servicer only has to believe there is a “significant risk of default,” even if the loan is performing. This revenue procedure applies to loan modifications effected on or after January 1, 2008.

The Treasury Department also released final regulations (T.D. 9463) that took effect September 16. The regulations expand the types of modifications that may be made to loans held by real estate mortgage investment conduits (REMICs). They also include new rules relating to appraisals, lien releases and loan guarantees. It also issued Notice 2009-17, which requests comments on whether tax flexibility should be extended to loan revisions for properties held by other types of investment trusts.

NMHC welcomes these steps as necessary to deal with the refinancing crisis facing the commercial real estate sector.

All three notices are available at: www.nmhc.org/goto/5398

Apartment Market Conditions
NMHC Apartment Market Update Available

Members who were unable to participate in this week’s Apartment Strategies Update Teleconference can listen to the call at www.nmhc.org/goto/5415. The one-hour call provides an overview of both key economic developments and apartment market trends.

Speakers included:
Peter Donovan, Senior Managing Partner, CBRE; David Fitch, President and CEO, Gables Residential; and Mark Obrinsky, Chief Economist, NMHC, and NMHC President Doug Bibby.

NMHC
Fall Meeting Addresses Capital Crisis and Apartment Market Conditions

The industry’s leading executives gathered in Austin, TX last week for NMHC’s Board of Directors and Advisory Committee meeting. In committee meetings preceding the general session, attendees discussed sustainability, preparing for a pandemic, operating in a down market, taxation of the Promote (Carried Interest), student housing and credit market volatility.

During the main meeting, four leading CEOs shared their strategies for dealing with the down market. Analysts, including NMHC’s Chief Economist, also offered an informative presentation on “where is the light at the end of the tunnel?” Another panel of experts focused on finding debt and equity in today’s marketplace.

A limited number of the presentations, including the economists’ outlook for the future, are available on our web site at: http://bit.ly/dld9n.

HOUSING POLICY
Homebuyer Tax Credit Extension/Expansion Urged

Congress is being pressured by the National Association of Home Builders and the National Association of Realtors to extend and even expand the existing $8,000 homebuyer tax credit. Without action, the credit will sunset on November 30.

A pending measure (S. 1230) would extend the program through the end of 2010, almost double the credit to $15,000 and make it available to all buyers; the current credit is available only to firsttime buyers who earn less than $75,000 ($150,000 for couples).

NMHC is educating lawmakers that an expanded credit is an ineffective and costly stimulus measure. Economists have estimated that the current tax credit has cost taxpayers more than $40,000 for each additional home sold because 1.7 million of the 2 million who have taken the credit would have bought a house without the tax break.

At this time, an expansion of the credit seems unlikely given the high price tag (the current credit is expected to cost $15 billion) in an age of exploding budget deficits. Lawmakers may, however, elect to extend the credit without modifying it—perhaps through the end of 2009 and possibly into 2010. There is also discussion of a legislative fix to allow buyers who have a sales agreement in place by November 30 to take the credit instead of requiring the purchase to have closed by then as well as a variety of provisions that will make the credit more usable by military members.

More on NMHC’s advocacy efforts related to the homebuyer tax credit is available at: http://bit.ly/N3dgH.

STUDENT HOUSING
Oversupply in Some Markets, Enrollment Trends and Stalled Capital Markets Dominate NMHC Student Housing Conference

More than 450 student housing professionals gathered last week in Austin, TX for NMHC’s 7th Annual Student Housing Conference.

Panelists stressed the need for more transparency and better data metrics to avoid the oversupply that is damaging the sector in selected markets.

And they covered changing enrollment demographics— more graduate and international students— that will affect the types of student housing that is demanded.

Presentations from the event, covering everything from capital markets to enrollment trends to the transactions market are available at: www.nmhc.org/goto/09SHPresentations.

In addition, NMHC has published an updated version of its annual Student Housing Directory. It is available at: www.nmhc.org/goto/4486.

Mark your calendars for the 2010 NMHC Student Housing Conference & Exposition, September 15- 16, 2010 in Washington, DC.