New white paper outlines mold-resistant building techniques.

Continuing a leadership role on the issue of healthy indoor environments in apartment communities, NAA/NMHC have published a new white paper to acquaint property developers with construction materials and techniques that will maximize a building's potential to resist damage by excessive moisture and mold growth. While it is impossible to make a building "mold proof," building owners, designers and construction professionals can minimize the risk of mold growth through proper planning and the use of appropriate building materials and construction techniques.

NAA/NMHC's white paper, "Best Practices for Reducing Moisture Intrusion and Excessive Mold Growth During Construction and Renovation," offers comprehensive guidance from preconstruction considerations to selecting building products and designing building components, such as wall systems, foundations, heating and air conditioning and much more. It includes chapters on new mold- and moisture-resistant building materials as well as sophisticated new computer modeling programs that can be used to analyze the moisture potential of a particular property given its design, height, location, exposure to wind and other factors.

Because efforts to control moisture and mold must be part of the initial building planning and design phase, the white paper includes a "Discussion Checklist" that property owners can use with their architects and contractors to make sure all the possible risk mitigating practices have been considered. The new white paper complements NAA/NMHC's "Operations and Maintenance (O&M) Plan for Mold and Moisture Control," which helps apartment owners develop formal mold and moisture control procedures and integrate those practices. Both documents are posted at www.naahq.org/govern_affairs/.

Katrina Impacts Legislative Agenda

Hurricane Katrina and the Supreme Court vacancies are causing Congress to reorganize its priorities for the rest of the year. This change in priorities will affect several apartment sector priorities.

Estate Taxes. One of the first actions by the Senate upon returning from recess was to postpone a planned vote on eliminating the estate tax. NAA/NMHC have been urging the Senate to reform, not repeal, the estate tax since repeal proposals also eliminate the ability of commercial property heirs to step up the basis of inherited property to market value. Congress is unlikely to take up the issue this year because the temporary phase out does not end until 2011.

Tax Reform. Legislative prospects for federal tax reform are dimming. The date for the President's Advisory Panel on Federal Tax Reform to submit its recommendations to the Treasury Department was delayed until Nov. 1. A combination of unexpected events, including Supreme Court vacancies, the need to respond to recent hurricanes and a swelling budget deficit, are forcing the administration and Congress to re-prioritize the legislative agenda. Many lawmakers are backing away from once-assured tax cut extensions and are instead examining credits to stimulate growth in economically disadvantaged communities

Terrorism Insurance. This summer, Congress held a series of hearings on the Terrorism Risk Insurance Act (TRIA), which is scheduled to expire on Dec. 31. While the hearings raised several questions about the program and the government's long-term role in the terrorism insurance market, most participants agreed that something needs to be done before the end of the year.

Congressional staff spent the summer developing several proposals to revise the program. Specifically, the House Financial Services Committee is considering two alternatives designed to address concerns by lawmakers who oppose a straight extension of the existing TRIA law. The first would create a program with higher retention levels, a higher trigger level, a mandatory repayment provision and a limitation on the length of the program. The second would encourage the development of multiple private reinsurance pools to help insurers cover their exposures as the federal backstop is ultimately phased out. Incentives to encourage private insurers to write coverage for catastrophic events are also envisioned.

While these proposals may help win support of lawmakers who oppose a straight-line extension of the existing TRIA program, it is unknown whether Congress will now have enough time to consider such comprehensive changes. NAA/NMHC will continue to work within the Coalition to Insure Against Terrorism (CIAT) to urge Congress to take action before the program expires at year's end.

GSE Reform. Legislation to establish a new regulator for the government-sponsored enterprises, Fannie Mae and Freddie Mac, may be the most likely to be pushed off the legislative agenda this year. A House bill (H.R. 1461) easily passed the Financial Services Committee May 25, with a controversial provision that would require the GSEs to set aside 5 percent of their profits for an affordable housing fund. The Senate version, which excluded the affordable housing provision and imposed additional restrictions on the GSEs, passed on party-line vote. Crafting a bipartisan compromise will be difficult with the new demands on lawmakers' time.

Energy Legislation. Hurricane Katrina will have an effect on the recently enacted energy bill (P.L. 109-58), signed into law on Aug. 8. Recent events have spurred renewed congressional attention to several key policy areas. Lawmakers have pledged to address the petroleum and natural gas shortages brought about by the storm.

While it is too early to tell which proposals will move, it is clear that Congress will need to take a second look at some of the issues dropped from consideration in the last energy bill. Proposals addressing environmental regulations limiting the construction of new refineries, the need to open new regions for oil drilling and conservation measures are all being discussed. Severe disruption in fuel supply is expected to have a significant price impact on the cost of heating fuels this winter. How Congress will address this issue in the context of the existing programs that assist low-income households with heating bills is uncertain given that Congress is attempting to reconcile a budget bill that has significant cuts in discretionary spending.

Federal Government Provides Disaster Tax Relief

The federal government is providing tax relief to individuals and businesses affected by the recent hurricanes, including apartment and commercial property owners. In a notice issued Sept. 8 (IR-2005-69), the Internal Revenue Service (IRS) announced that it will provide issuers of tax exempt bonds affected by Hurricane Katrina with additional time to file certain information returns and arbitrage rebate returns.

On Sept. 9, in response to a request from NAA/NMHC to expand the availability of housing for disaster victims and their families, the Department of the Treasury and IRS issued formal guidance waiving roles that would otherwise prohibit owners of Low-Income Housing Tax Credit (LIHTC) properties from housing Katrina evacuees who do not qualify as low income under Section 42 of the Internal Revenue Code (IRC). Specifically, it gave states the authority to temporarily suspend income limitation requirements and non-transient requirements for qualified LIHTC communities.

NAA/NMHC continue to press the IRS to extend the LIHTC waiver to tax-exempt bond properties as well. In addition, we are urging Congress to pass legislation that would waive many of the Section 8 housing program requirements to also open those units to hurricane evacuees.

On Sept. 23, President Bush signed into law a $6.1 billion package of tax breaks (The Hurricane Katrina Relief Act of 2005, H.R. 3768) to help individuals and businesses affected by Hurricane Katrina. Of interest to property owners, Section 405 of the bill extends the time from two years to five years that businesses with damaged property, including apartment owners, have to invest their insurance proceeds in repair or replacement property to avoid having the proceeds taxed as long as the replacement property is located within the disaster area. The bill also extends the Work Opportunity Tax Credit to encourage employers, including apartment firms, to hire individuals who lived in the disaster area prior to the hurricane.

The IRS has additional information on special tax law provisions that may help taxpayers recover financially from the impact of a presidentially declared disaster on its Web site at www.irs.gov/charities/ charitable/article/0,,id=141008,00.html. The site includes specific information on the relief available to hurricane victims. This fall, Congress was expected to take up a broader package of tax bream to encourage rebuilding.

Information compiled by NAA/NMHC Joint Legislative Staff: Senior Vice President for Government Affairs Jim Arbury; Lisa Blackwell, Vice President of Housing Policy; Vice President of Capital Markets and Technology David Cardwell; Vice President of Property Management Jeanne Delgado; Vice President of Communications Kim Duty; Vice President of Environment Eileen Lee; Tax Advisor Howard Menell; Vice President of Building Codes Ron Nickson; Chief Economist Mark Obrinsky; and Director of Property Operations Betsy Feigin Befus.