When both House and Senate officials announced mark-ups for tax reform would be forthcoming this fall in July, the industry was put on high alert.
Panelists, who took part in a discussion at AHF Live: The Affordable Housing Developers' Summit in Chicago on Nov. 21, said there's been little progress from government leaders.
Robert Rozen described how slow moving elected officials have been in addressing tax reform on the Hill and how that has caused tension for affordable developers.
Rozen, principal at the Washington Council Ernst & Young, noted how the early hopes of the Senate Finance Committee and the House Committee on Ways and Means have been squandered over the last six months.
Neither committee has been able to produce a tax reform mark-up as they had once promised.
“I think it’s very clear that anybody who works on tax issues, certainly those members of Congress, that deep down— they know there’s no way in the world this Congress is going to pass tax reform,” Rozen said.
Rozen noted a bill would also likely be stalled in the Senate, and he believes the constant bickering among elected officials is the main reason.
However, Rozen has no doubt that tax reform will happen in the future, it just may not be exactly what the committee chairmen are trying to work toward.
Denise Muha, National Leased Housing Association’s executive director, discussed the concerns over the federal budget and how affordable housing communities may suffer in the upcoming year if officials fail to come to an agreement.
In the wake of the government shutdown and the disagreements over the budget, the Sec. 8 Housing Choice Voucher program is not being fully funded.
The Department of Housing and Urban Development is funding the program for less than 12 months and asking affordable owners to save their receipts. However, while this is a short-term solution, it will have to be fixed later down the line, Muha said.
“What has to happen as we go along with this insufficient funding, is, at some point in time, there has to be an infusion of money to make up the difference,” she said. “And the appropriators understand this. But they just don’t have a lot of flexibility.”
As a result of budget woes, housing authorities are being conservative with housing vouchers and not reissuing some when they come back into the mix in order to meet their budgets. Eventually, the fix could cause long-term problems since housing vouchers are distributed based on numbers from the previous years, Muha said.
“It’s not a crisis yet,” she said. “I’m not telling you don’t go out and buy a project with Sec 8. I’m not telling lenders to be concerned because I think we still have a lot of faith that our Congress will honor the government contracts. But, again, we have to be mindful of them. But, again, it comes back to education; we have to explain these things to people on the Hill.”
Stephen Whyte, managing director of Vitus, says he hasn’t seen an immediate impact on his business but worries if policy makers cannot fix the budget that the industry will face more difficulties in getting deals done.
“The thing I’m watchful for, as a developer, is the dark cloud effect,” he said. “And we’ve seen this before where the willingness of lenders and investors to make the assumption that the program is going to be there 5, 10 years down the road and these Sec. 8 contracts are secure for a long period of time. If they lose their faith in that, whether or not [there] actually has been a cut, that’s just the same as having a cut. It’s very detrimental to the business.”
Sharon Dworkin Bell, senior vice president at the National Association of Home Builders, said the Senate has made a legitimate effort to work on the future of the government-sponsored enterprises, or GSEs.
The filing of the Corker-Warner bill, a bipartisan bill suggesting a restructuring of the government’s role in housing finance, was a good start for housing reform since it will lay the groundwork for movement in the Senate, she said.
In the House of Representatives, a bill was introduced by Congressman Jeb Hensarling (R-TX), proposing the elimination of Fannie Mae and Freddie Mac and heavy restrictions on the Federal Housing Finance Authority. Industry officials were floored by the proposal and vowed to fight against it, Dworkin-Bell said.
“We don’t think the Hensarling bill is going any place,” she said. “Once again, this is a long conversation that isn’t going to get resolved until after the Presidential election.”
Lindsay Machak is an associate editor for Affordable Housing Finance. Connect with her on Twitter @LMachak.