Congress to Return to Session.

As this issue of Capital Beat went to press, the 106th Congress remained at an impasse in its budget negotiations with the Administration but had voted to adjourn until November 14 so members could return to their districts for the final days of the campaign. Already long past its target adjournment of early October and with six of the 13 annual spending bills still unsigned, Congress will have to return after the election for a lame-duck session. A tax relief package containing several real estate provisions and a bankruptcy reform bill are also still pending. The following is a summary of the unresolved as well as already enacted bills most relevant to the apartment industry.

Taxpayer Relief

Taxpayer relief was one of the most controversial items as the 106th Congress dragged on. The U.S. House of Representatives passed legislation (H.R. 2614) supported by NAA/NMHC that would, among other things, increase the low-income housing tax credit from $1.25 per capita to $1.50 in 2001 and to $1.75 in 2002 and increase the private activity bond cap from $50 per capita, with a minimum of $150 million per state, to $75 per capita and a $225 million minimum effective 2001. Both programs would be indexed to inflation thereafter. The bill also reinstates the ability of accrual basis taxpayers to use the installment method of accounting for sales or other dispositions, reversing provisions enacted last year in P.L. 106-170. Finally, the bill extends to Dec. 31, 2003, the provision allowing for the immediate deductibility of costs incurred to clean up contaminated sites. It also expands the provision to cover all contaminated sites and not just those located in empowerment zones. The package faces a filibuster by Senate Democrats and an explicit veto threat by the President. There it still a remote possibility, however, that Congress could include some of the items above in a final tax and spending package when policymakers return after November 14 for a lame-duck session.

Bankruptcy Reform

NAA/NMHC's five-year effort to close a loophole in the U.S. Bankruptcy Code that allows residents to abuse the system in order to live rent free came very close to success this year. In a major victory for NAA/NMHC, both houses of Congress passed a version of bankruptcy reform (H.R. 2415/S. 3186) that included industry-sought language. On October 12, the House approved a House-Senate conference committee compromise version of the bill, but as of this writing, the Senate has not finished its consideration of the final bill. The measure did come up before the full Senate on November 1, but was six votes short of the 60 votes needed to limit further debate. Senate Majority Leader Trent Lott (R-Mich.) indicated he would persist in his effort to pass the bill in this Congress by bringing it back to the floor when more Senators were present. Even if the measure ultimately passes the Senate during the lame-duck session, it still faces a veto threat by the President who says he wants to see balanced bankruptcy legislation enacted this year, but cannot sign the bill as it is currently written because of issues unrelated to the apartment industry. If bankruptcy reform is not enacted this year, NAA/NMHC will again take up the industry's cause on this issue when the 107th Congress convenes.

Housing Policy Initiatives

Two housing-related bills that could impact the apartment industry were introduced late in the legislative session but failed to get enacted. They are expected to be taken up again when the new 107th Congress convenes. The first was a Senate bill (S.2997) that would establish a National Housing Trust Fund to fund the development of affordable housing, including multifamily rental housing. The bill was cosponsored by both Republicans and Democrats and would generate funding from the surplus generated by the Mutual Mortgage Insurance Fund. The second, the Community Character Act (S. 2995), would provide grants to states that create and/or update their comprehensive land use plans in ways that lower the cost of infrastructure development and preserve the environment. NAA/NMHC have long asserted that apartments are vital to meeting these goals while allowing communities to accommodate growing and shifting population, most recently incorporating this position in our summer publication, Toward A More Balanced Housing Policy, which we will continue to use as an advocacy tool in the next Congress.

HUD Funding

Fortunately for housing advocates, the FY2001 spending bill for the U.S. Department of Housing and Urban Development was not one of the unsigned bills left behind for the lame-duck session. President Clinton signed the a $30.6 billion House-Senate compromise version of the HUD appropriations bill on October 28. The bill boosts the Departments funding $4.6 billion over its FY1999 level. It also includes the largest increase in new housing vouchers in 15 years - $435 million for 79,000 new Section 8 vouchers. The bill also includes $13.74 billion to fund all expiring Section 8 contracts and a slight increase in funding for private and local government fair housing enforcement, from $44 million to $46 million. NAA/NMHC's call for reforms in the Section 8 voucher program received support from the U.S. Senate's HUD Appropriations Subcommittee on September 12 when it released a new report suggesting that the current state of the program discourages private sector participation. Empty Promises--Subcommittee Staff Report on HUD's Failing Grade On The Utilization Of Section 8 Vouchers finds that one in five vouchers is returned unutilized. It summarizes reasons why the program has failed to adequately house voucher recipients and calls for programmatic reforms. The Senate Appropriations Committee also expressed its belief that HUD is not capable of properly financially administering the Section 8 voucher program, and authorized a new production program using excess voucher funds, but this program was not included in the final compromise bill.

Forced Access

Two bills that would have mandated "forced access" for all telecom providers are also expected to die in this Congress. A Senate bill (S. 1301) would have required open access to all federal properties as well as properties with federal leases. On the House side, H.R. 3487 would have granted forced access to at least six telecom providers per building and would have allowed rooftop access for wireless providers. Relatedly, the Federal Communications Commission (FCC) took up the issue of telecom provider access to multi-tenant buildings in an October 25 Order (99-172). The Final Order (99-217) represents a substantial victory for the real estate industry thanks to efforts by NAA/NMHC and the Real Access Alliance. In its new rules, the FCC did not give competitive carriers the right to demand access to buildings. Outside providers still need an owner's permission to enter a building. In its press release, the FCC specifically recognized the steps the real estate industry and the Real Access Alliance, of which NAA/NMHC is a member, have taken to facilitate tenant choice of telecom providers.

According to NAA/NMHC analysis, nothing in the Order prohibits apartment owners from entering into exclusive agreements with telecom providers. (The ruling does, however, ban future exclusive contracts in commercial office buildings.) The Order amends the FCC's satellite regulations (see below) to allow residents to use individual satellite dishes to receive fixed wireless communications signals (e.g., Internet access) as well as TV programming. Under the ruling, an apartment owner can require the incumbent telecom provider to move the "ownership line" (demarcation point) between inside wiring owned by the building and incumbent's wiring to the Minimum Point of Entry. Finally, it appears the right of way that the existing telecom provider owns or controls is subject to negotiation between the utility and other providers.

A Further Notice of Proposed Rulemaking issued at the same time seeks comments on whether the ban on exclusive contracts should be extended to apartments and whether the definition of "rights of way" should be expanded. NAA/NMHC will continue to urge for a market-based resolution of the building access issue, citing overwhelming evidence that the telecom market is thriving, that exclusive contracts in the residential area foster the viability of competitive firms, that government intervention is neither necessary nor appropriate, and that any expansion of the rights-of-way concept would be unconstitutional.

On a related issue, on October 16, NAA/NMHC and a coalition of real estate organizations filed a brief in the industry's lawsuit seeking to have the Federal Communication Commission's (FCC) satellite dish regulation (Order 98-273) overturned by the U.S. Court of Appeals for the District of Columbia. Despite prior FCC rulings that required residents of leased property to obtain an owner's consent before installing such devices, the FCC's Order granted apartment residents the right to install an individual satellite dish one meter or less or antenna on their balconies or patios without the approval of the building owner/manager. NAA/NMHC argue that: (1) the FCC lacks the authority to issue such a rule given that the courts have repeatedly held that the Commission has no authority over the real estate industry or property owners; and (2) the FCC Order violates the Fifth Amendment by authorizing a resident to install physical facilities--antennas and cables--without the owner's permission and without compensation. NAA/NMHC's brief is posted online at www.nmhc.org/media/press/releases/ 001016.html. Oral arguments in the case will be heard by the Court on March 5, 2001.

Brownfields

The bipartisan-sponsored Brownfields Revitalization and Environmental Restoration Act (S. 2700), once touted as the brownfields bill most likely to pass the 106th Congress, stalled in the closing days of the session. Among other things, the bill would have authorized $150 million in grants per year over the next five years to state and local governments to inventory, assess and cleanup contaminated brownfield sites. Most important to the real estate industry, the bill would offer liability protection for prospective purchasers, innocent landowners and contiguous property owners. The bill was supported by NAA/NMHC, other real estate groups, the U.S. Conference of Mayors and several environmentalist organizations.

Electric Utility Deregulation 

Time also ran out for comprehensive electric utility deregulation in the 106th Congress. While deregulation is proceeding on the state level, there are issues related to transmission and interstate commerce which can only be resolved by the federal government. To date, most apartment firms have focused their attention on potential cost savings, but the volatility in supply and price of electricity seen in the last couple of years has raised new concerns over reliability. California, one of the first states to deregulate its markets, has confronted significant reliability problems this summer, including rolling blackouts, mandatory power cutoffs of some big customers and higher electric bills in some areas. Illinois has also endured numerous rolling blackouts as the transition to the free market continues. Supporters, however, remain confident that in the long-run deregulation will produce more efficiency and lower costs once there is certainty over how deregulation will proceed. NAA/NMHC generally support a more comprehensive approach to deregulation, but a bill on reliability may be all that is possible in the near term.