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Home / Articles / Elections, renewable energy shape affordable housing into 2015

Elections, renewable energy shape affordable housing into 2015

December 5, 2014

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While the affordable housing industry isn’t as heavily regulated as the financial services sector, it does depend on state and federal assistance for financing, tax credits and other economic benefits.

These are a few reasons why affordable housing developers, contractors and real estate owners have closely watched the recent mid-term elections – the shift in power may have a direct effect on housing in the U.S., including potential tax reform. In fact, several changes could be coming in 2015 that will impact the affordable housing industry.

As a member of this industry, you know how important it is to stay up-to-date with these trends and other developments. At Clark Schaefer Hackett, we dedicate a portion of our time to be actively involved with current events, so we can provide the best tax and accounting advice to our clients.

To help shed some light on the current affordable housing climate, we’ve compiled several news stories that may be of interest to you:

Elections can affect affordable housing
While there are a number of trends affecting affordable housing at the moment, one of the biggest stories so far this year has been the mid-term elections. There was a shift in power following the results, with Republicans gaining more control in both the U.S. Senate and House of Representatives.

In an article for the National Housing & Rehabilitation Association, David Gasson, of the Housing Advisory Group, explained several of the potential changes that could be coming due to the election results. One is the new chairman of the Senate Finance Committee – Sen. Orrin Hatch (R-UT). The Banking Committee has also undergone a change, with Sen. Richard Shelby (R-AL) regaining the chair.

On a broad scale, the shifts in power mean that many members of both the House and Senate will be able to impact affordable housing. For example, Sen. Shelby has strong opinions on government-sponsored enterprises (GSEs) and other key economic issues. While the true impact has yet to be seen, it is worth watching Washington, D.C. for future developments related to affordable housing.

Positive outlook for HFA sector
As the election results prepare to shape the affordable housing industry in 2015, a report from Moody’s Investors Service has outlined the potential outlook for the Federal Housing Finance Agency (HFA) next year.

Overall, Moody’s noted that the HFA is expected to be stable in 2015. This forecast is related to improving margins experienced during 2014, with an increase predicted over the next 12 months. While Moody’s is confident in its report, the outlook could change if margins swing higher than 15 percent or drop below 10 percent.

State HFAs are responsible for many different affordable housing programs and other resources, and the stability of this sector can be seen as good news for real estate owners, developers, contractors and other professionals.

More developers turn to renewable energy
Affordable housing developers across the country are always on the hunt for financing options and other resources to ensure the economic sustainability of their projects. One such direction is renewable energy, with many developments incorporating “green” trends, like solar panels, into construction.

At a recent Greenbuild panel on green retrofits in affordable housing, a number of industry experts discussed the obstacles that developers have to deal with when turning to renewable energy, as reported by Multi-Housing News. One problem is access to capital, with professionals needing to rely on government assistance, state programs and other tax breaks, in addition to loans, in order to finance the project.

Another obstacle relates to utilities and cost savings. In some cases, an owner cannot take on any debt from his or her properties, so they assume the financial risk of a green building while the tenants can pay less due to lower utility bills.

“Rents are set on budgets,” said Rebecca Shaaf, vice president of the energy division at Stewards of Affordable Housing for the Future, according to MHN. “If owners reduce their own utility costs, that means a reduction in budget and thus savings on rent that are ultimately passed on to HUD. Well HUD is now offering options for owners through the Better Buildings Challenge to access those savings.”

Despite the challenges, many developers are incorporating renewable energy into their affordable housing projects, in an attempt to keep rents low and to keep these developments solvent moving forward.

At Clark Schaefer Hackett, our experts are well-versed in the affordable housing industry. We can offer tailored, comprehensive accounting and tax services for developers, owners and other professionals. If you are interested in learning more, please contact us today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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