News

December 2017

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Sometimes it is nice to just connect with others to help out in a pinch. This is just what AACSC did in light of the hurricanes in Puerto Rico and Florida. I must begin by thanking a very special member, Bonnie Stern, and Steve Shaw, who is a Board Member and Rotarian. Bonnie’s idea was born at the library, who said that even reading something to take your mind off of the devastation can be a good thing. She could not be more correct and now boxes and boxes of books, many for children, are headed to a new home. Thank you Bonnie, Steve and the Rotarians for helping us connect. And a BIG thank you to Sylvia Hopper from Friends of Signal Hill Library for the offer—it is a great way to give back.

As we end the year, this is also the best time to talk about how you are going to approach 2018. What are your goals, what NEW things do you want to achieve and how will you be a better owner, manager or supervisor at the end of 2018 than you are today? Moving forward in your career takes time and thought. I love a good journey, but I have always had in mind the direction I want to go. As the Cheshire Cat said, “If you don’t know which way you want to go, then it doesn’t much matter which road you take.” Well said, but you are still following a path—the question now is “to where”?

One determining factor to consider is this: do you want to attend live classes or do you want to take online classes? This is where our NAA Visto Courses can help you even when you cannot attend a live course. In fact, I mention this now because you can receive 20 percent off of online courses when you go to www.GoWithVisto.org. Use the code AFF20 to get your 20 percent discount. Buy one course or buy in bulk and start enhancing your career today. The offer can also be found in the NAA Units magazine.

But the final entry to this year is unfortunately not ending with a bang, that is, unless the words Rent Control are being uttered. We don’t know how this will end but we do know that this is not in the best interest of our tenants. Too bad that the tenant groups are sending an uninformed message. So it is up to us to make sure that our tenants know that a rent control ordinance will not help them but will do just the opposite. It is our responsibility as multi-family owners to protect our industry. NOW is the time to get involved, to support this industry — YOUR industry, YOUR investment and YOUR retirement. 2018 will be a year in which our industry will correctly inform and educate about the realities of and the cost of rent control. My wish for 2018 is that we bring EVERY OWNER to the table to fight this fight. It is not for others to do, but for each of us to contribute to the industry we love.

I wish you peace for the holidays, safety for your loved ones in their travels and the spirit of grace and understanding for those who are not as fortunate.

Hard Work and Commitment

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Happy Holidays everyone! I’m writing you my last letter as Board President for AACSC. Contrary to rumors, it’s not because I’ve run out of ideas—I’ve just run out of time! My term ends in December and I’m excited to welcome our new President for next year, Michael Pollack.

Michael will do a great job, will bring us new ideas and new energy. I think it’s very important for leadership to evolve through the membership to get more people involved and to give us the opportunity to take advantage of the efforts and motivation that our members bring to this organization.

It has been both an honor and privilege to serve these past two years. I was fortunate to be part of a fantastic Board with many committed individuals that put in hours of hard work on your behalf. Our Staff, led by Executive Director Johanna Cunningham, has updated the operations of AACSC and pushed us forward with new ideas and more opportunities to reach and help apartment owners. Our State Lobbyist Ron Kingston spends hundreds and hundreds of hours every year analyzing countless pieces of proposed legislation and appealing to our elected officials to either promote or kill the legislation that affects us.

I wish I could tell you that after my two years as Board President that we had solved all our problems and that it’s never been easier to be a landlord, but I can’t. In fact, if anything, our issues and challenges are getting more complex and difficult to manage.
I did learn as a young man not to get panicked or stressed out when faced with a difficult problem. So I can tell you that our businesses will not be derailed by misguided threats like rent control, REAP, or just cause eviction if we take them piece-by-piece and work the problem. We didn’t become successful landlords without hard work and commitment. That philosophy will help us move forward. It will work for our new Board President, our new Board and Staff, and most importantly...it will work for you.

Thank you for these two years. Thank you to the AACSC Board and Staff, and most importantly — Thank You!

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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