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Regulatory Bills Affecting New and Existing Housing

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On April 5 your Association leadership joined with leaders of other independent California NAA affiliates to meet with their legislators in Sacramento to discuss several important bills of special interest to owners and managers of residential rental housing. The largely unspoken underlying theme, of course, is what legislative action may be taken to address the obvious and growing California “housing crisis”—too few homes for too many people with too few private or public resources to address current needs as well as a gigantic backlog of unmet need. The repeal of the redevelopment law—both cursed and praised—left a huge billion dollar hole in tax pro ceeds dedicated to construct and improve low and moderate income housing. The disappearance of that sustainable source of funding has fostered a number of proposals for replacement, some modest and others bold. It also has generated a call from some quarters for more and severe regulation of ren tal housing. It is with that backdrop that your leader ship approached this year’s Lobby Day in Sacramento.

Legislators and their staff members were very cordial in making limited time available to address these important issues both in generality and specificity. We grouped to oppose several regulatory bills affecting both new and existing housing in juxtaposition with funding measures deserving of support notwithstanding their effect on taxes—a tough sell! As one might expect, we received mixed signals on the tax issue but largely favorable reactions on bills that we opposed.

At the top of bills to oppose was AB 1506 (Bloom), which would repeal the Costa-Hawkins Act, a significant 22-year old housing measure that excluded from rent control single-family homes and all developments built after 1995 (or earlier if a rent control ordinance exempted new construction from a specific point in time), while giving owners of existing housing stock in rent controlled communities the right to establish initial and subsequent rental rates. That 1995 Act was approved by the Legislature to put the brakes on local governments’ overreaching and strict rent control ordinances that were spreading throughout the State and negatively impacting the economy and the housing industry. Its repeal would usher in a new wave of local ordinances adopting the strictest forms of price and rent controls. The result would be catastrophic.

Following a similar regulatory trend are measures that would require inclusionary housing for moderate, low and very low income levels in all new develop ments. These include in varying degrees of specificity and detail: AB 1505 (Bloom), AB 915 (Ting) and SB 277 (Bradford). In many respects, the in clusionary housing requirements imposed on new construction are more onerous than a typical rent control ordinance because they require deed restricted occupancies based on income for up to 55 years or more.

In total, the regulatory approach to the housing shortage by keeping rental rates artificially below market necessarily reduces the income stream for improvements, maintenance and repair of existing units while, at the same time, negatively affecting the investment and development of much needed rental housing.

Money, money, money. Where to get the funds necessary to address all of California’s many needs? State funding priorities are like shifting sands in the desert.

Thanks to Proposition 98 and the education community, K-12 education funding takes the lion’s share right off the top of each year’s state budget. Everything else scrambles for second- or third-fiddle with barely more than a half of a loaf left. At this writing, the Senate is poised to vote and send to the Assembly a multi-billion dollar transportation mea sure to “fix” degraded highways and roadways through out the State. It constitutes a huge funding boost on top of an already very expensive State Department of Transportation. Where does housing fit in?

Without question, California needs more housing.

According to a recent report from the Assembly Housing and Community Development Committee, California has a housing shortage—we simply are not building enough homes to keep up with the high demand. This is particularly true for low-income rental units while middle-income households are priced out of buying homes. Over regulation, high development and permitting costs and a lack of consistent public funding have contributed to California’s housing shortage.

SB 3 and ACA 11 will help address California’s housing problems.

SB 3 (Beall) would authorize issuance of bonds in the amount of $3 billion to finance various existing housing programs. Bonds add more debt and are costly one-time affairs, not long-term sustainable, but certainly satisfy a near-term need.

ACA 11 (Caballero) would impose a 0.25 percent tax on all retailers to be placed in a newly created “California Middle Class Affordable Housing and Homeless Shelter Account” in the State General Fund for the support of local and state programs that assist in the development or acquisition of housing.

We support these bills not only because their passage will lead to a much needed boon in housing development, but also because these bills focus on building homes through bond and sales tax money instead of targeting the rental housing industry for regulation such as rent control and just cause for tenancy.

The State must continue to address the housing shortage problem through investing in affordable home development and rehabilitation, rental and homeownership assistance and community development. Targeting our industry with more regulations and eliminating rental property owner rights and protections such as under the Costa-Hawkins Act and Ellis Act will serve to drive up costs, force rental property owners out of business and reduce incentives to build, maintain and invest in more badly needed housing.

Our industry representatives did an outstanding job presenting compelling reasons to oppose AB 1506 and AB 1505 (Bloom), AB 915 (Ting) and SB 277 (Bradford) and support SB 3 (Beall) and ACA 11 (Caballero).

May 2017

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There are a few things that are true when it comes to legislation—it is always a moving target, you never know what will pass until the vote is taken and the most important thing of all is that YOUR voices count. Each and every one of your voices counted. Case in point is AB 1506, the bill that would repeal the Costa-Hawkins Act. This is a perfect example of our industry, along with the Realtors, CalRHA and all of our California partners making sure that the message regarding the oppo sition to this bill was heard. Now, this certainly does not mean that the fight is over, not by a long shot, and we will certainly see this effort again next year. So while we can take a breath that this bill was pulled for this year, let’s also take time to thank those who helped in this effort. But stay tuned—part two is still to come.

I also want to acknowledge the following members for taking their own time to attend and participate in our Sacramento Legislative visits in early April: Gary DeLong (VP and Chairperson for Statewide Legislative Committee), Steve Schiro, Curt Knabe, Keith Kennedy, Malcolm Bennett and Elaine Hutchison. Along with our other California partners, we had over 100 members who lobbied on behalf of the rental housing industry—THANK YOU!

I also want to thank Ron Kingston, our AACSC State Lobbyist, who organized and made all of our appointments, created the leave behind documents for our Legislators and provided us with the important facts and talking points to address at our meet ings. AACSC was professional and prepared — thank you Ron for making us look good.

In other news, AACSC showed support at the April 4th Long Beach City Council meeting and to Vice Mayor Rex Richardson as he proposed a few considerations to help landlords/owners who accept Section 8 Housing Vouchers. There is still work to be done on what that will ultimately look like, but AACSC was brought in to the discussion and provided much needed input and background regarding the issues that have long stifled the program. Working together we hope that we can come to some agreement on how we can work to make the program better, and we have worked hard to establish these relationships.

In a final note I want to thank all of our golfers and members who attended our 11th Annual AACSC Golf Classic. With Interval House as our charity of choice, it is always a great day on the links and a great dinner to end the day. Our vendors, golfers and members have supported this event, and each year it just gets better and better. So, hope you all had a “birdie” kind of day, were able to stay away from the “bogey”-man, and that you enjoyed the view along the way. See you next month.

Potential Section 8 Program Changes

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I am excited to share with you all the great news regarding the legislative successes that we’ve had so far this year. Let’s begin on the local front. We are tackling the local problem with the Section 8 Housing Voucher Program, and working closely with Long Beach Vice Mayor Rex Richardson to streamline the program to make important changes. The current recommendations include the following: streamlining the Housing Choice Voucher inspections, waiver of certain permits and inspection costs for apartment owners who accept the Housing Choice Vouchers, and creating a damage mitigation fund to provide financial assistance to landlords to mitigate damage caused by tenants during their occupancy under the Housing Choice Voucher Program. The last and maybe best improvement is to make vacancy payments to landlords to hold units while the landlord is going through the approval process.

These potential changes will make the Section 8 program one that all landlords should be looking at. Here’s why this is such an important achievement. The Housing Choice Voucher Program (Section 8) has been struggling for years and has desperately needed some attention. The staff and Board of AACSC helped to identify issues that have sidelined the program. AACSC worked with the City and together are working on resolutions that will help both landlords and tenants. More important than this is that it demonstrates once again that AACSC can be very effective in improving the business environment for landlords and will continue to do so for the foreseeable future.

On the State front, members of AACSC’s legislative committee and our Executive Director, Johanna Cunningham, traveled to Sacramento and with our lobbyist, Ron Kingston, spent several days meeting with and educating members of the State Senate and Assembly on the merits of various proposed bills they will be considering this year that will directly affect the rental housing industry. The most egregious bill that we lobbied against was AB 1506, a bill to repeal the Costa-Hawkins Act, which is our main legislative protection against runaway statewide rent control laws. Our efforts helped force the bill’s author (Bloom) to remove the bill from consideration for this year. (He plans to reintroduce it again and we will need to continue to be ready to respond.)

I also think it’s important for you to know that the AACSC members who made the trip to Sacramento did so at their own expense. These passionate individuals feel so strongly about our industry that they are willing to sacrifice their time and money for your benefit. We all owe them a sincere Thank You! One of the main reasons that we were successful was that our lobbyist, Ron Kingston, had us so well prepared. Ron provided us with concise summaries of every bill that we discussed in our meetings. He arranged all the appointments with the legislators and gave us detailed background information on every legislator we met with. We knew our stuff in those meetings and it paid off. Ron did a terrific job for us, and we’re lucky to have him. That’s all for now. Thanks for your continued support.

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.

A Tribute to Nancy Ahlswede

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As I stepped into my new office in September of 2013, I began to look around the office to get a sense of who was here before. It was a surreal feeling to walk among binders and binders filled with memos, emails and past magazines that were once under the authority of someone I knew had the hearts of this membership. After a few days of getting to know the staff and talking with some of the board members it suddenly dawned on me that I was not alone in this process. I was about to walk into the footsteps of a legend in the multifamily industry.

As the months went by and I began to meet more and more people, the comments started with this statement, “Oh, you are the new Nancy”. But I knew immediately that there was more to this Association than just being the “new Nancy.” Nancy left a legacy that will never be matched. She was a force to be reckoned with. It was clear that her devotion to this industry went beyond her position as Executive Director—it was her passion. When I finally met Nancy, we talked for close to two hours and when I left that meeting with her, I knew that I could always go to her to ask questions and get advice. As with anything in life, when the opportunity is not there any longer you always wish you had more time to ask just one more question or learn just one more tidbit that will help your organization.

Over the next few pages it is only fitting that we share some thoughts that come directly from those who loved and admired her the most. So, in her memory, we share these tributes.

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Ron Kingston was honored to give the eulogy at Nancy’s funeral. Here are a few excerpts from the eulogy:

Nancy—

Was a master collaborator who was result-driven. People from all walks of life would conclude that the solution that was reached when Nancy was involved in negotiations of an issue was always the best possible.

Had organizational skills that assured success. Just a few years ago, she was hospitalized during the annual trade show. That did not interfere with making the trade show extremely successful. This skill was passed on to her daughter, Katherine.

At times, I wondered if they should have considered installing a hide a bed or futon in the office due to the number of hours they would work.

Was the eternal optimist. Just three weeks ago she and I talked about her plans for her 70th birthday party which would be on a boat in the Long Beach harbor. And during that same conversation she was planning on how she would resume being with her family, Larry, Katherine, Chip, Jennifer and the three grandchildren—Cooper (who loves video games), Donovan (who loves sports such as flag football) and Nixon (who was just baptized).

Has a legacy that can never be forgotten. Each one of us should always remember that she would push forward during extremely difficult and challenging times.

Michael D. Pintek, Board Emeritus
We in the legal profession would refer to Nancy as a “Force Majeure” (a superior or irresistible force). The small acorn that was the Association 28 years ago, through the work and efforts of the officers, board of directors and membership, who were the roots, under the guidance, administration and dedication of Nancy, who was the lignin that held it all together, has grown into a mighty oak tree. Nancy’s star shined bright on all of us while enriching our lives and illuminating the path in front of us.

Bob Luskin
I had the pleasure of working with Nancy for over 20 years. Nancy wan an amazing person. She has made the Apartment Association what it is today. Nancy will be missed.

Allen & Mary Ann Wood
Nancy lives on in our hearts and memories. Not only as a great lady who led the Apartment Association for so many years, but also as a very dear friend.

Sharon Coughlin
Nancy was definitely destined to be a leader of this organization that so generously devotes their time and energy in fighting for the rights of people in the rental housing industry both for owners as well as for tenants. Her amazing knowledge provided anyone interested in seeking a career in property management the understanding of how great it truly is to SERVE people. I was always amazed by her as a woman, a great mother and most of all a great leader to be inspired by.

Pat Thornton
I was shocked and saddened by this news. Brian and I always felt so welcome at the monthly meetings. She always had a ready smile and enthusiasm and the ability to spread hope and joy!

Grace Velazquez, GGB Properties, Inc.
Despite being a “new-comer” to the industry, Nancy took the time to get to know me and showed genuine care. Nancy’s passion was contagious and I hope that her legacy will live on.

Rebecca Moffett, A Better Property Management, and Past Board President, and Board Emeritus
Nancy was dedicated to landlords and their property rights and she always put them first. She was smart, well known, connected and knew how to work a crowd or a council meeting. She had intuitive gifts that were unparalleled with anyone I have ever known. She had great command of her job, of legislative bills and happenings, of other Asso ciations’ trials and tribulations, etc. Nancy knew everyone, never forgot a name and was a brilliant strategist. When Nancy spoke, you listened. She made sure everyone was well informed on all the issues and she listened to people to make sure that the board members could arrive at a consensus on most issues. She held everyone to a high standard which everyone wanted to meet and it was easy as we followed the lead of Nancy and the high bar she set for herself. She praised everyone on their good deeds, thanked volunteers with certificates and personalized plaques and paperweights. No matter what you volunteered for, you were acknowledged in many ways.

Sandra Feliciano, Broker
She was the reason I attended the CAM courses and received my designation. I appreciate all that she did for our industry. She will truly be missed.

Wendy Henning
What a “gal”...she made me feel like a long-time friend. I will miss her personality and gracious nature.

Virginia (Ginny) Ball
I so appreciate Nancy’s help in coming to Whittier on many evenings to help me start the Whittier Apartment Association. It is still going strong, but it is with her help that we got it “off the ground!”

Alejandra Kostuch
Nancy, the lady that always had answers no matter what it was about.

Coy Herring, Past President and Director Emeritus Through Nancy’s tireless and brilliant leadership we endured, survived and flourished. Through her abundant friendship we all were rewarded.

John & “Bub” Pratt, Past
Board President (1993-1994) I remember when the Board asked her to be Executive Officer. I believe that was 1991 when Phil Dauk was President of the Board and I was Vice President. Nancy was a tremendous help to our Association. She wore many hats for us as editor of the magazine, legislative advocate and executive officer. I don’t know how she did it all. Not to mention herding 20 or so cats (Board of Directors). She is certainly missed by all. Our sympathy to Larry and the family.

Evelyn Arnold
What a loss to our industry and to the world! Nancy was one of a kind who was always fighting for the rights of the small apartment owners and others. May she rest in peace.

Kelly Geonetta,
R.E.M.S., Inc. To all the people that she touched with her smile. To her family and friends. Thank you.

Gina Trinidad
Thank you Nancy for all of what you have done and for all the times you fought for us. You will be remembered and prayed for.


This has been a wonderful 28 years journey with you. It has been said that a person who is passionate about what they do, never works a day in his/her life. I thank you for the opportunity to be one of those people.”
Nancy Ahlswede, 2012

When you wake up tomorrow and each day following think of what you learned from Nancy. Think of what you will do that she taught you that you will continue to do. Let her inspire us to do better. Let her energy, ability, and forward movement not wane.

Larry would often times say “One of the things that I loved about Nancy was that she was the smartest woman that I ever knew.” – Ron Kingston

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