President signs comprehensive meth legislation.

In a significant victory for apartment firms, President Bush signed into law comprehensive legislation dealing with methamphetamine labs on March 9.

The Combat Meth Act (S 103) was attached to the USA Patriot Act Reauthorization bill (HR 3199), which passed Congress on March 8. During the signing ceremony, the president specifically talked about the meth provisions, noting that "meth is mining too many lives across our country. The bill introduces common-sense safeguards that would make many of the ingredients used in manufacturing meth harder to obtain in bulk and easier for law enforcement to track."

Among other things, the legislation attacks meth manufacture by restricting public access to certain precursor chemicals, such as the common over-the-counter cold medication pseudoephedrine. The federal bill was modeled after an Oklahoma state law that led to an 80 percent drop in meth busts; however, the Combat Meth Act is far broader. It also addresses international meth precursor sales and smuggling and provides $99 million over five years for increased law enforcement efforts, prosecution and environmental cleanup. This is the most comprehensive anti-meth legislation ever passed by Congress. The measure does not address the cleanup of clandestine meth labs beyond designating by-products of meth production as hazardous materials.

Late last year, the U.S. House of Representatives passed a bill (HR 798) calling for federal research to determine effective meth remediation strategies; the Senate has yet to act, however.

Calif. Unsolicited Fax Law Overturned

California cannot impose stricter requirements on interstate commercial faxes than federal law, according to a federal judge's ruling Feb. 27. The court left unanswered whether the state can impose its law on faxes sent within its borders. (Chamber of Commerce of the United States v. Lockyer, E.D. Cal., No. 2:05-CV-2257, memorandum and order 2/27/06.)

At issue is a California law (SB 833) originally scheduled to go into effect Jan. 1, 2006, which would require prior consent from all recipients of unsolicited commercial faxes. The judge ruled that the Junk Fax Prevention Act of 2005, signed into law last July, pre-empts the state law; the federal law allows commercial faxes as long as the sender has an established business relationship with the recipient. The judge said he may rule on the question of whether the law can apply to intrastate faxes after a full hearing on the merits of the issue.

The U.S. Chamber of Commerce hailed the ruling, saying it will "spare businesses the unnecessary cost and bureaucracy of navigating what would have been grossly conflicting federal and state laws." Apartment firms are reminded, however, that federal law bans unsolicited faxes sent to recipients with whom the sender does not have an established relationship. The law also allows recipients with an established relationship to opt out of receiving further messages.

Bush to Protect Mortgage Deduction

On Feb. 17, President Bush said he will not support the recommendations made by the President's Advisory Panel on Federal Tax Reform to repeal the mortgage interest deduction. The panel's final report, issued Nov. 1, 2005, suggested replacing the deduction with a tax credit equal to 15 percent of mortgage interest paid during the tax year and capping the credit at $412,000 depending on where a taxpayer lived.

Currently, the deduction is available for interest on up to $1.1 million of mortgage debt. The panel said the proposal would help pay for Alternative Minimum Tax repeal. The panel's recommendations were widely criticized, and tax reform was notably absent from Bush's State of the Union address and his budget submissions to Congress. Although Congressional hearings on the general subject of tax reform are likely this year, no legislative action is forecast, and the subject appears to be relegated to general discussion without the full support of the administration.

Ruling issued Against Lead-Based Paint Manufacturers

In a first-of-its-kind ruling, on Feb. 22, a Rhode Island jury found three former lead paint manufacturers guilty of creating a public nuisance by continuing to market and sell lead-based paint until it was banned in 1978, despite the knowledge that it was toxic. (Rhode Island v. Lead Industries Association, R.I. Super. Ct., No. 99-5226, 2/22/06.)

In a subsequent hearing, the presiding judge declined to award punitive damages, but the earlier ruling holds Sherwin-Williams Co., NL Industries Inc. and Millennium Holdings liable for the cost of abating lead paint in an estimated 240,000 homes in the state. Analysts estimated that remediation could cost billions. A ruling on the details of the abatement program is expected later. Rhode Island was the first state to file a suit against the lead paint industry in 1999; the first trial ended in a mistrial in 2002. Similar lawsuits are pending in New Jersey and in Milwaukee, Wisc. NAA/NMHC are following these developments to determine how they will affect housing providers.

Congress Addresses Immigration 

Immigration reform, an issue with serious implications for apartment firms, has quickly become a hot topic in Congress and a priority issue for NAA/NMHC. Not only do immigration rules greatly influence the industry's ability to hire qualified people to construct, maintain and operate properties, they also feed a diverse consumer pool that creates demand for apartments. The controversial issue requires lawmakers to balance border security with the nation's economic growth and to come to a consensus on how to handle the approximately 11 million undocumented workers already in the country.

Recently, the Senate Judiciary Committee began to consider Committee Chairman Arlen Specter's (R-Pa.) proposal. Specter's draft bill would give legal status to undocumented individuals that have continuously resided and worked in the United States since Jan. 4, 2004. It would also create a new category of "H-2C" guest workers who would be permitted to work in this country for up to six years and then require them to return home for at least one year before re-applying. Meanwhile, another Senate bill (S 1003) introduced last year would allow undocumented workers to stay in the United States under a guest worker program, pay a fine and wait six years before applying for permanent legal status.

The U.S. House of Representatives passed its version of immigration reform (HR 4437) in December. That bill does not include a guest worker program, and it includes a NAA/NMHC-opposed provision that would require all employers to verify the legal status of all new and existing employees using a federal electronic employment verification system.

It would also raise the fines on employers for hiring undocumented workers from the current range of $250 to $2,000 to $40,000. Specter's bill would require employers to check not only the legal status of new hires, but it would also double existing fines to range between $500 and $4,000 for first-time violations and as much as $20,000 for subsequent offenses. NAA/NMHC will continue to follow this issue and will strongly urge Congress to approve legislation that includes border security and a phased-in, cost-effective employment verification system as part of a comprehensive package that may also include a guest worker program.

HUD Should Lead Disaster Response

The White House released its report on Feb. 23 evaluating the federal response to Hurricane Katrina and identifying 125 suggested changes. Among other things, the report echoes NAA/NMHC's frustrations, noting that "the federal government's capability to provide housing solutions to the displaced Gulf Coast population has proved to be far too slow, bureaucratic and inefficient."

"The Federal Response to Hurricane Katrina: Lessons Learned" criticizes the administration for not engaging the U.S. Department of Housing and Urban Development (HUD) in the housing response early enough and recommends that HUD be designated the lead agency for the provision of temporary housing. It also recommends that the Stafford Act be revised to allow FEMA to pay the costs of security deposits or utility fees.

The White House report follows one issued by a special House of Representatives' Committee on Feb. 15. The 520-page report, titled "A Failure of Initiative," did not make recommendations, but did issue findings in 14 areas, including housing. The committee said housing plans were haphazard and inadequate and that FEMA "failed to take advantage of HUD's expertise in large scale housing challenges." The report criticized FEMA's rental assistance program for failing to give guidance on how money should be used for days, and sometimes weeks, after the checks were issued. It concludes that "use of a voucher system similar to the one administered by HUD could have prevented this mistake."

HUD issues Hurricane Housing Adjustments

HUD published a revised list on Feb. 24 of the "difficult development areas" (DDA) for 2006 for the Low-Income Housing Tax Credit (LIHTC) program, adding additional areas affected by hurricanes Katrina, Rita and Wilma. DDAs are eligible for up to 30 percent more LIHTC subsidy. The hurricane-affected DDAs will remain in effect through the end of 2008 and are exempt from the 20 percent population cap on regular DDAs. The notice is at www.huduser.org/Datasets/QCT/DDA2006_go_zone_Notice.pdf.

Additionally, as a result of the loss of housing and tighter rental markets, HUD has increased the Fair Market Rents (FMR) in New Orleans by 35 percent, from $696 to $940 for a two-bedroom and in Baton Rouge by 25 percent, from $576 to $720. The department said it believes the new FMRs are sufficient to cover current rent levels and at least part of the increases expected to result from higher insurance costs in the coming year. HUD said it will continue to monitor the situation in other Gulf Coast markets and currently is conducting rent surveys in Dallas; Houston; San Antonio; Little Rock, Ark.; Jackson, Miss.; and Shreveport, La., to determine if FMR increases are needed.

Harvard Releases New Analysis of Rental Sector

Harvard University issued valuable new research on March 8 analyzing the dynamics of the rental housing sector. The report, "America's Rental Housing: Homes for a Diverse Nation," reviews current conditions and the outlook for rental housing demand, renter demographics, rental housing production, the spatial patterns of rental housing and affordability challenges.

A press conference to release the report focused on the declining stock of affordable housing. According to the report, some 200,000 rental housing units are demolished or otherwise removed from the housing stock every year, nearly twice as many as are produced annually by the Low-Income Housing Tax Credit program and other initiatives.

NAA/NMHC's Senior Vice President of Government Affairs, Jim Arbury, participated in the media briefing and used the opportunity to urge policymakers to adopt a more balanced housing policy that more explicitly values rental housing. He also highlighted the need for exit tax relief to encourage owners of older properties to sell those communities to new owners who can modernize them and preserve them as part of the nation's affordable housing stock. The report, which is the cornerstone of a new research agenda on rental housing at Harvard's Joint Center on Housing Studies, is available at www.jchs.harvard.edu.

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.