Apartment Industry Scores Major Tax Win.

On its last day in session, Dec. 15, the 106th Congress overwhelmingly passed a $31.5 billion tax relief bill (H.R. 4577) designed to spur investments in economically distressed areas. The bill has since been singed into law by President Clinton. Thanks to NAA/NMHC and several other real estate trade organizations, the bill represents a tremendous victory for the apartment industry. NAA/NMHC have spent months, and in some cases, years on these issues educating various members of Congress and the administration in an effort to pass the following provisions.

The passage of H.R. 4577 brings to a close the affordable housing industry's four-year campaign to expand the low-income housing tax credit program. The legislation increases the LIHTC from the current funding level of $1.25 per capita to $1.50 in 2001, $1.75 in 2002, and it indexes it for inflation starting in 2003. The bill also provides, for the first time, a LIHTC allocation for small states, assuring $2 million in 2001 and 2002 and indexing that amount for inflation beginning in 2003. The bill also accelerates an already scheduled increase in the state volume limits on tax-exempt private activity bonds to the greater of $62.50 per resident or $187 million in 2001, $75 per resident or $225 million in 2002, and it indexes the program for inflation beginning in 2003. The legislation also extends until Jan. 1, 2004, the current law, which allows the immediate expensing of brownfields cleanup costs, and it expands the number of eligible sites by eliminating the requirement that sites be located in a federal empowerment zones in order to be deducted.

In separate legislation (H.R. 3594), Congress voted to repeal a 1999 law (P.L. 106-170) that prevented accrual basis taxpayers from using the installment method of accounting. The 1999 law required taxpayers to pay all capital gains on the sale of a business or property in the first year, rather than over the period when actual payments are received. With H.R. 3594, the use of the installment sales method by accrual taxpayers was reinstated effective back to the 1999 date when it was originally eliminated by P.L. 106-170.

Accessibility

Another hard-fought effort also came to fruition at the end of 2000--NAA/NMHC's eight-year campaign to have the federal accessibility requirements written into building code language. At the end of last year, the International Code Council (ICC) published the long-awaited Code Requirements Housing Accessibility (CRHA). For the first time since the federal accessibility requirements were enacted in 1988, apartment professionals now have an easy-to-follow guide explaining how to meet the standards. Moreover, the U.S. Department of Housing and Urban Development (HUD) has endorsed the guide as a "safe harbor" design standard, meaning that builders who follow the provisions in the CRHA will automatically comply with the Fair Housing Act and will have an affirmative defense against alleged noncompliance.

Since 1993, NAA/NMHC have worked with the code organizations to revise the building codes so they better reflect the federal accessibility requirements. In 1997, we led the coalition effort to develop a matrix comparing the federal requirements and the model code provisions. When HUD's approval of the matrix was not forthcoming, NAA/NMHC had language inserted in the 1999 HUD appropriations bill requiring the department to expedite its review. Most recently, we have worked with the National Association of Home Builders (NAHB) to consolidate all of the relevant building code and standards provisions into the new CRHA. The CRHA can be ordered from any of the three model code organizations: BOCA (708/799-2300); ICBO (562/699-0541); or SBCCI (205/591-1853).

Forced Telecom Provider Access

NAA/NMHC have issued new guidance covering frequently asked questions related to the Federal Communication Commission's (FCC) recent order governing telecom provider access to privately-owned multi-tenant properties. The guidance covers such topics as exclusive contracts, minimum entry points, rights-of-way and satellite dishes and antennas. The document is available by contacting Amy Tubbs at NAA at [e-mail] or at 703/518-6141, Ext. 127.

Building Codes Lobbying Saves $1 Billion Annually

Wins achieved by NAA/ NMHC over the last eight years in the codes and standards development process will yield big savings for both new and existing apartment properties far into the future. NAA/NMHC's successes translate into a per unit savings of approximately $3,280 for properties with five or more units and $2,380 per unit for properties with less than five units. Assuming approximately 300,000 units are built each year (as was the case in 1999), that adds up to almost $1 billion in annual savings.

In some instances, cost savings were achieved by defeating proposed changes that would have harmed the apartment sector, including proposals to: require multiple carbon monoxide detectors in every unit, increase unwarranted energy conservation requirements, and require laundry trays/washer hook-ups or even washers and dryers in every unit. In other instances, we led efforts to remove onerous provisions already in the codes, such as temperature rise requirements for exit and unit entry doors in sprinklered buildings, slab edge insulation requirements, and limitations on the use of nonmetallic sheathed (Romex) wiring and the 13R sprinkler system.

These estimated cost savings do not include the many code changes we have influenced but for which it is difficult to place a dollar value on, such as our victory in getting the new international codes to incorporate a series of design options (tradeoffs) for properties that install the 13R sprinkler system or our success in getting the federal accessibility regulations incorporated into the model codes. Collectively, all of these wins make new apartment construction more affordable. In 2001, NAA/NMHC will continue to serve as the voice of the apartment industry in the building codes and standards development process.

Privacy Guidance

NAA/NMHC have produced a guidance memo advising members of their obligations under broad new privacy regulations adopted by the Federal Trade Commission (FTC). The new rules require a wide range of real estate companies to devise a privacy policy, to periodically inform customers of that policy, and to obtain a consumer's permission before sharing his/her information with unaffiliated third parties. Any firm significantly engaged in a "financial activity" as defined by the Federal Reserve Board (FRB) is covered by the regulations. (NAA/NMHC successfully urged the FTC not to expand the rule beyond the FRB's traditional definition.) Companies specifically required to comply include those who: (1) provide insurance and financial products to residents, (2) "significantly engage" in credit bureau and collection activities services; or (3) invest in certain affordable housing and community development activities. The rule was effective Nov. 13, but the FTC has delayed compliance until July 1, 2001. A copy of the NAA/NMHC guidance memo, as well as our original comment letter and the final rule, are available by calling Amy Tubbs at NAA at [e-mail] or at 703/518-6141, Ext. 127.

Ergonomics Rules

The Occupational Safety and Health Administration (OSHA) published a final version of its highly controversial ergonomics rule (65 FR 68262) on Nov 14. The regulations, which take effect Jan. 16, 2001, require work sites to establish program:; to reduce muscoloskeletal disorders (MSD), such as carpal tunnel syndrome and back sprains. The final rule covers a much broader group of employers than the draft rule published in November 1999. Under the final rule all general industry employers, including rental housing providers, are covered. (The construction industry is exempt, however.) In contrast, the proposed rule covered manufacturing and manual handling jobs and general industry jobs only when a "covered MSD" was reported. The new rules require employers to establish ergonomics training programs and to investigate the causative factors of any MSD that is reported.

Business groups and insurance firms have already filed major lawsuits challenging the rules and accusing OSHA of violating procedural standards, underestimating the cost of implementation and issuing a regulation that is unsupported by scientific evidence. In February 2000, NAA/NMHC issued a members-only guidance to help apartment owners/managers plan for the final regulations by familiarizing them with OSHA's regulatory intentions. That guidance is available by contacting Amy Tubbs at NAA at [e-mail] or at 703/518-6141, Ext. 127. The memo will be updated in the coming weeks to reflect differences between the draft and final regulations.

New Floodplain Elevations

In a move that could make apartment construction more expensive, local community planning boards, especially in coastal areas, are beginning to implement new elevation standards based on updated floodplain mapping information from the Federal Emergency Management Agency (FEMA). The new elevation standards generally require higher foundations and more extensive waterproofing. FEMA announced the conversion to the new data in 1993 but has not, as of yet, actively required communities to switch. The National Flood Insurance Program, however, has begun using the new standards when issuing flood insurance. NAA/NMHC have learned of at least one instance where a developer was unaware of the new standards and was forced to make costly changes. A guidance memo on the topic is now available by contacting Amy Tubbs at [e-mail] or at 703/518-6141, Ext. 127.

Non-Metallic Sheathed Cable

NAA/NMHC's six-year effort to amend the National Electrical Code (NEC) to allow the use of non-metallic sheathed cable (Romex) in all properties regardless of height took a huge leap forward in 2000. (Current NEC provisions limit the use of Romex wiring to buildings with three stories or less.) First, in early October the ICC voted to allow the use of Romex wiring in multifamily buildings up to four stories high. This change will save developers of such properties more than $1,000 per unit. Our victory is the result of a new strategy that involved pursuing the change through the model codes instead of directly through the NEC. While other groups have been able to modify national standards through the building code process, no one has been able to modify the NEC through such an approach given the National Fire Protection Association's (NFPA) tight control over the standard. In another substantial victory, at NAA/NMHC's urging, the NFPA's Special Toxicity Advisory Committee ruled last month that Romex wiring is no more toxic than other wiring, effectively removing one of the primary objections to our proposals. Both of these victories create new opportunities for NAA/NMHC in our ultimate objective of modifying the NEC itself and not just through reference by the model codes. Earlier this year, NAA/NMHC submitted detailed comments to the NEC's Panel 7, the group with jurisdiction over this issue, and the same committee that has previously rejected our proposals to modify the Romex restriction. In those comments, we refute every concern previously raised by committees within the NFPA to our proposal. The issue is scheduled to be discussed by Panel 7 in December, and will be voted on by the full NFPA membership in May 2001.