LEGISLATIVE VICTORIES, COMPROMISES SET THE STAGE FOR 1998.

If nothing else, 1997 was a busy year in Washington, D.C. With dozens of proposed laws, regulations, and amendments to existing laws and regulations, apartment industry professionals had plenty to worry about on Capitol Hill. From occupancy standards, to capital gains, to new amendments to the Fair Credit Reporting Act, it seemed that a new idea popped up about everyday, and each one needed its own response from the industry. With so much going on legislatively, not to mention their own individual businesses, what was a professional to do to stay on top of it all?

Rely on the National Apartment Association/National Multi Housing Council (NAA/ NMHC) Joint Legislative Program, that's what. In its sixth year of providing industry representation and lobbying on Capitol Hill, the staff and volunteers of NAA/NMHC spent a busy year at the Capitol and offices of United States Congressmen and Senators ensuring that the industry's concerns were heard and addressed.

Legislative activity has grown more important to industry professionals in the past few years and their concern shows. NAA's Capitol Conference, the annual legislative meeting held in March in Arlington, Virginia, hosted a record number of apartment professionals who met to discuss their thoughts upcoming legislative session and plan their lobbying strategies. Members made a record 113 visits to representatives on Capitol Hill. There, they discussed pending legislation that would affect the industry and their individual businesses.

THE ISSUES

Occupancy Standards

It's been talked about for several years now and probably will continue to be a hot topic for several more. Occupancy limits of two persons in each bedroom of an apartment are endorsed by the industry for their potential to ensure residents a well-maintained, peaceful, orderly community in which to live.

For several years, the U.S. Department of Housing and Urban Development (HUD) has pushed to eliminate these standards and impose a unit-by-unit rule based on square footage of apartments and the number of rooms in each. A proposal to that effect was stopped in 1995 by a coalition of organizations led by NAA/NMHC but no nationwide law was enacted to enforce the two-persons-per-bedroom rule throughout the industry.

During the 1997 legislative session, NAA/NMHC pushed for legislation that would limit fair housing lawsuits that challenge the accepted two-persons-per-bedroom standard. While the proposal took some beating from opponents in early 1997, it was not resolved by the end of the 1997 session of Congress and experts say a strong foundation was laid for further action in 1998. "It's certainly something we will continue to pursue and that requires additional attention," says Gary Blumberg, NAA Legislative Committee chair.

Fair Credit Reporting Act

NAA/NMHC successfully stopped an interpretation of the new amendments to the federal Fair Credit Reporting Act that would have imposed new reporting requirements on owners and managers who rejected prospective residents because of information obtained from third party sources such as former rental owners and managers, neighbors, and the police. In addition, NAA/NMHC produced several memoranda to assist multifamily professionals in interpreting and understanding new requirements imposed on them by the recent amendments to the Act.

Bankruptcy Reform

Due to a loophole in the U.S. Bankruptcy Code, residents of apartments may delay pending evictions and remain rent free in their apartments by filing for bankruptcy. NAA/NMHC has advocated that the National Bankruptcy Review Commission (Commission) recommend that Congress close that loophole. While the Commission did not endorse all the aspects of the NAA/NMHC proposed language, it did make several recommendations that benefit the industry, such as limiting serial filings. Moreover, a strong minority of the Commission recommended that Congress include all NAA/NMHC proposed language in any forthcoming reform legislation.

"We've been working diligently on that issue," says Clarine Nardi Riddle, NAA/NMHC senior vice president. "There will be hearings held next year and there are promises of a bankruptcy reform bill being filed then. Bankruptcy is very much on the agenda of NAA/NMHC and the 1998 Congress."

Resident-Based Section 8

Once again legislation was introduced this year, after successful lobbying by a coalition led by NAA/NMHC, to make several temporary deletions of requirements of the resident-based Section 8 program. Successfully eliminated for fiscal year 1998 were:

* The "take one, take all," provision which forces owners who accept a single Section 8 recipient to accept all such applicants;

* The "endless lease" provision, requiring owners to renew leases of all Section 8 assistance recipients;

* The "90 day notice" provision regulating notification of program participation; and

* The "federal preferences" provision which mandates the use of federal criteria for awarding Section 8 vouchers.

Permanent repeal of these requirements is included in the public housing reform bills currently pending in Congress.

Environmental Issues

Among the most significant actions for the multifamily industry in the environmental arena was a lawsuit filed by NAA/NMHC against the U.S. Environmental Protection Agency (EPA) to clarify the extent to which Title X can regulate lead from sources other than paint. For example, at issue is whether lead-containing dust on the surfaces of miniblinds can be regulated as a lead-based paint hazard even though the blinds have not been painted with lead-based paint. EPA filed for dismissal of the lawsuit; NAA/NMHC successfully fought the challenge off and the D.C. Court of Appeals will consider the case in 1998.

Other lead-related activities included:

* NAA/NMHC's opposition of a proposed rule that would allow increased lead emissions from waste-burning cement kilns. These emissions contribute to the deposition of lead on residential properties;

* The defeat of proposals incorporating stricter lead-based paint standards in model building codes;

* The preparation of guidance materials to assist NAA/NMHC members in complying with the Residential Lead-Based Paint Hazard Reduction Act (Title X); and

* The preparation of an updated package to help NAA/NMHC members plan legislative strategies to address lead issues at the state level.

While lead was a hot issue during the year, experts say it is far from over. "In 1998, HUD will be issuing new regulations on lead-based paint hazards in federally assisted properties and EPA is expected to publish health-based standards for lead levels in dust and soil," says Riddle.

The tax reconciliation bill enacted during 1997 gave property owners tax advantages for helping clean up contaminated urban areas covered under Brownfields legislation.

Riddle looks ahead to 1998 and sees more environmental action to come. "Superfund and some endangered species issues still have to be resolved," she says. "Those will definitely come up again this year. Also coming up will be the Clean Water Act, wetlands, and nonpoint source pollution from the runoff of lawn chemicals and other pollutants. These environmental issues have all been working their way through Congress for two, three, or four years and are ripe for consideration."

Property Rights

"There's been a lot of activity during the 104th Congress and some hearings during the 105th Congress on some kind of property rights bill," Riddle says. "The House passed a bill on property rights and we expect the matter to come up before the Senate next year. This area incorporates issues of governmental takings of property by regulations or laws that affect the value or use of a multifamily property. How far can they go in regulating the use of your property without compensating you?"

Tax

Capital gains tax changes made national headlines this year. NAA/NMHC was a leader in lobbying for the legislation to reduce capital gains taxes. The result was a lowering of the top rate to 20 percent from a previous tax level of 28 percent. Included in the tax reduction is a provision to tax previously taken depreciation reductions at 25 percent for the portion of any gain that is attributable to a building. Congress had originally pushed for a depreciation recapture provision of 28 percent or higher, while NAA/NMHC endorsed a capital gains cut with no depreciation recapture provision. A white paper was released by NAA/NMHC and other real estate trade associations entitled, "Tax Policy Arguments for Full Capital Gains Tax Relief for Real Estate," which helped advocate that the recapture provision be reduced. Major provisions of the Taxpayers Relief Act of 1997 were explained in a memorandum released to NAA/NMHC members in 1997.

Again, the issue is far from over. "We'd like to have the recapture provision totally eliminated," Riddle says. "We're looking at the 1998 tax debate and seeing what our options are going to be."

Other tax activity included:

* Successful NAA/NMHC lobbying efforts to prevent the proposed sunset of the Low-Income Housing Tax Credit program;

* Initiatives to provide information to Members of Congress on tax reform proposals, including the flat tax, and how they will affect multifamily professionals; and

* The successful defeat of efforts to tighten "like-kind" exchange rules.

"Front and center this year will be IRS reform issues and other tax reform issues," Riddle says. "I think we're going to first see them looking at the IRS management issue, and then get back to the issue of simplification of the tax code and what that means--do we want a flat tax, consumption tax, or what? It won't be resolved this year, but we'll have hearings and activity in that area."

LOOKING AHEAD

Blumberg says that he anticipates a year of increased involvement by NAA/NMHC members to continue pushing for victories on Capitol Hill. "We didn't seem to have a lot of wins this year." he said, citing a few victories and more compromises. "That's not for a lack of effort or a lack of expertise."

"1998 is an election year, and it's a big year with the House members all up for election and a third of Senators up," Riddle says. "Many times, elections dictate how the congressional agenda will be looked at. The big talk now in Washington is that according to projections and unless there are unforeseen circumstances, there will be a tax revenue surplus. Members of Congress are already looking at that surplus."

She said NAA/NMHC plans to push for a more favorable resolution to the issue of depreciation recapture and work to bring the rate closer to an overall rate of 20 percent. Additionally, she would like to see Section 8 reform issues and occupancy standard legislation reach resolution.

"In terms of a general mood, I think you have to look at it issue by issue" she continued. "I think we did very well with the tax reconciliation bill, being heard and getting a reasonably good compromise. We also moved a lot of other issues closer to resolution."

"Clearly," she says, "Members of Congress will have their eyes on the voters and what they think should be on their list of accomplishments before their names come up on the ballot again. In other words, some action may simply have to wait until after the election before receiving any significant attention from lawmakers."

"We're very involved with the housing reauthorization bill and I would hope that would get done in 1998. Environmental issues can be rather controversial and our issues may be put off for another day because they don't want to or can't resolve some of those controversies before they adjourn for the 1998 elections," she added

Blumberg looks ahead with guarded optimism at the year to come. "We did seem to lose a lot of battles this year," he says. "But, we haven't lost the war on any of these issues."

Riddle agrees. "I think it will be a favorable year for us," she says. "But it will be a question of whether or not our issues are among the finite issues addressed before the 1998 elections."

Fernandez is managing editor of Units.