Industry secures victory in wetlands case: NAA/NMHC has long asserted that the current regulatory system is overly broad, unevenly applied and excessively burdensome with costs involved in the permitting process.

Real estate owners secured a tremendous victory on June 19, when the U.S. Supreme Court ruled that the U.S. Army Corps of Engineers (Corps) exceeded its authority under the Clean Water Act after it denied two Michigan developers permits to build on isolated wetlands that are linked only to larger bodies of water through man-made drainage ditches. (Rapanos v. United States, U.S., No. 04-1034, 6/19/06, and Carabell v. U.S. Army Corps of Engineers, U.S., No. 04-1034, 6/19/06.) By a 5-4 decision, the Court ruled that a simple hydrological connection between a wetland and navigable water does not justify federal jurisdiction. NAA/NMHC and a coalition filed a "friend of the court" brief in the case that asserted that there is no basis in science and law for extending federal jurisdiction to isolated wetlands.

Other signatories include NAREIT, the Real Estate Roundtable, Associated General Contractors, International Council of Shopping Centers, National Association of Industrial and Office Properties and American Resort Development Association.

NAA/NMHC has long asserted that the current regulatory system is overly broad, unevenly applied and excessively burdensome with respect to the time and costs involved in the permitting process. Efforts during the past decade to obtain an administrative or legislative solution to the issues proved unsuccessful.

Although the Court reaffirmed the rights of property owners, it did not fully clarify the Corps' authority under the act, ruling instead that the Corps can regulate wetlands that have a "significant nexus" with water quality in adjoining wet-lands. This case-by-case approach will likely force the Corps to revise its regulations and force Congress to clarify the ongoing ambiguities and uncertainties present in the act.

Apartment Mailbox Standards Change

Apartment firms are reminded that as of Oct. 5, they must comply with new rules that govern the size of wall-mounted mailboxes. The new rules were published Sept. 3, 2004, (69 FR 171) and were the result of nearly two years of negotiations between NAA/NMHC and the U.S. Postal Service (USPS).

The regulations, which were widely disseminated by NAA/NMHC after they were finalized, represented a significant victory for the apartment industry. Thanks to NAA/NMHC involvement, the USPS abandoned plans to require existing communities to retrofit to the new standard. It also extended the phase-in period from its initial proposal of six months to more than two years, giving developers sufficient time to design to the new standard.

The new standard, referred to as USPS Standard 4C, applies only to communities with building permits issued on or after Oct. 5, 2006, and to existing buildings that undergo a "substantial renovation," including structural alterations to the mailbox area. Standard 4C requires horizontally oriented mailboxes that are at least 12 inches wide by 15 inches deep by 3 inches tall. It also requires new communities with more than 10 units to install one parcel locker for every 10 mailboxes for packages and other oversized mail. Communities that offer concierge or other means of accepting packages may apply for a waiver.

After Oct. 5, owners of existing buildings who replace mailboxes without undergoing a substantial renovation to the mailbox area must comply with Standard 4B+, which maintains the current size requirements but includes security enhancements. Current indications suggest that there will be an adequate supply of that type of mailbox. The regulations are available at www.naahq.org/govern_affairs/Issues/. NAA/NMHC will issue a guidance memorandum with more information in the near future.

Telecom Access Brings Regulatory Issues

Now that video and data can be transmitted via phone wires and voice can be carried via cable wires, telephone and cable companies are engaged in a titanic battle to be the sole provider of voice, video and data services. The all-out effort both industries are making to attract customers may leave apartment owners caught in the middle.

To help apartment firms understand how this emerging issue could affect them, NAA/NMHC have published a new white paper titled "The 2006-2007 Telecommunications Regulatory & Legislative Outlook." The paper reviews state-level mandatory access action in the first half of 2006 and discusses potential federal and state telecommunications-related activity in 2007. It can be downloaded at www.naahq.org/govern_affairs/Issues/.

Telephone companies are asking Congress and the states to grant them the right to provide video service without having to obtain a local cable franchise. In mandatory access states, such approvals may also give telephone companies the right to not only provide video services at communities, but also voice and data services. Another challenge for apartment firms is the possibility that state legislatures and regulators may limit exclusive or preferred marketing relationships between apartment owners and telecom providers. These agreements may also impact the obligations of "carriers of last resort" (COLR); apartment communities may be caught in a situation in which a telephone company refuses to be the COLR if it is not granted access.

Bill Includes Hurricane Relief

In mid-June, President Bush signed into law a $94.5 billion supplemental appropriations bill (HR 4939) for the wars in Iraq and Afghanistan and hurricane recovery for 2006.

The final bill contains several provisions that could benefit apartment firms. One would grant FEMA the authority to cover utility costs, solving the problem of evacuees losing utility assistance as FEMA transitions them from FEMA-funded city voucher programs (Section 403 assistance) to FEMA's individual assistance program (Section 408). The measure also appropriates $5.2 billion in Community Development Block Grant funds and specifies that at least $1 billion be used to repair, rehabilitate and reconstruct affordable rental housing.

FEMA's Disaster Relief Fund (DRF) is allocated $6 billion, $400 million of which is to be used by FEMA for a pilot program to identifyy alternative sources of emergency housing. This provision will allow FEMA to expand beyond the exclusive use of trailers to include modular housing or the rehabilitation of rental housing.

IRS Posts Energy Tax Credit Guidance

The Internal Revenue Service (IRS) in June issued an advance copy of a notice on how commercial building owners or leaseholders can qualify for the tax deduction for making their buildings energy efficient. The notice establishes a process to certify the required energy savings needed to claim the deduction.

The commercial building deduction, which was enacted in the Energy Policy Act of 2005, allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is as much as $1.80 per square foot of building floor area for buildings that achieve a 50 percent energy savings target. The notice provides that buildings below the 50 percent threshold may, nevertheless, qualify for a deduction of up to 60 cents per square foot of building floor area if they meet a 16.67 percent energy savings target.

Before claiming the deduction, the taxpayer must obtain a certification that the required energy savings will be achieved. The notice prescribes the content of that certification and the qualifications that must be met by the person providing the certification.

The notice also announces that the Department of Energy will create and maintain a public list of software that must be used to calculate energy savings for purposes of providing the certification. It also provides a process that software developers must use if they want to have their software included on that list. Visit www.irs.gov/pub/irs-drop/n-06-52.pdf.

Congress Moves Several Housing Bills Forward

The House Financial Services Committee passed four bills of interest to apartment firms on June 14. The first is a bipartisan Section 8 voucher reform bill (HR 5443) that would update the voucher renewal formula and simplify the process of determining rents. The bill, which NAA/NMHC support, would reform the burdensome inspection process to make it more user-friendly for property owners.

The second bill (HR 5527) would extend the Section 8 mark-to-market program through fiscal 2011. In a letter to Congress, NAA/NMHC urged lawmakers to not only extend, but also to improve the program, in particular, giving it the flexibility needed to respond to dramatic increases in property operations costs.

The third bill (HR 5393) would make HUD the lead federal agency for housing assistance in connection with disasters that will result in long-term housing needs and would amend current law to explicitly allow FEMA dollars to be used for security deposits, utility costs and rental housing repairs.

The final bill (HR 5039) would preserve and revitalize aging Section 515 rural housing communities, while also allowing owners with pre-1989 loans to prepay their mortgages and convert their projects to market-rate housing. NAA/NMHC testified in support of the bill during an April 25 Congressional hearing. All four bills now move to the full House for consideration.