Property and asset management.

The growing professionalism and technological sophistication of today's multifamily property and asset management yield great benefits for apartment residents. Apartment managers possess a wide range of professional management skills and benefit from enhanced customer service training programs that reflect the best practices of related industries. Increasing industry competition has for ther expanded the range and quality of resident services provided by managers of market-rate and affordable apartments. Apartment investors and owners ale employing new technologies to enhance security and provide new conveniences that, in some cases, can be found only at apartment properties. The result: Today's apartment residents receive a variety of new services and conveniences from management professionals who better understand their needs.

While large, publicly owned apartment owners and operators are a major presence, the vast majority of residential property management enterprises are small enterprises operating principally under state and local law. Under Small Business Administration guidelines, 99 percent of the operators of residential rental housing qualify as small businesses (with total "annual receipts" of no more than $5 million). Although many important decisions affecting both large and small stakeholders in the residential property, management industry are matters of state law, federal legislation and regulation significantly affect market-rate and subsidized apartments alike.

As the second session of the 108th Congress begins this year, a number of federal legislative and regulatory issues under consideration affect the residential property management industry. In "addition to the priority issues detailed below, NAA/NMHC will keep close watch on judicial, regulatory and legislative developments that significantly affect the interests of apartment owners/managers.

Class Action Reform

NAA/NMHC Position NAA/NMHC strongly support legislation that would reduce frivolous class action lawsuits and promote the prompt resolution of legitimate claims. Existing laws promote class action abuse that can cause harm to both plaintiffs and firms forced to defend abusive and frivolous lawsuits.

Background The present legal system's rules for class certification, jurisdiction and settlement procedures force apartment firms, the vast majority of which are small businesses, to absorb the cost of defending class action lawsuits and pass costs along to consumers in the form of increased rents. Existing class action rules have forced real estate firms to absorb the high costs of defending such frivolous and abusive class action claims and pass them along to consumers. Real estate firms have been recent targets of costly class action litigation, involving facsimile transmissions, lease termination fees and mold.

Recent Activity Congress has recognized that both businesses and consumers are harmed by abusive class action lawsuits. Late last year, the House passed comprehensive class action reform legislation (H.R. 1115) that would move large, multi-state class action lawsuits from state to federal court thereby reducing the opportunity for "forum shopping." The measure also contains important consumer protections, including prohibitions on unfair settlements. The Senate failed to consider its version of the bill before adjourning last year because of continued disagreements over certain aspects of the bill. However, intense negotiations among key Senate Democrats and Republicans resulted in a compromise agreement that is expected to be considered early this session.

Action Requested NAA/NMHC strongly urge Congress to approve meaningful class action reform legislation that will protect responsible businesses from abusive suits.

Bankruptcy Reform

NAA/NMHC Position NAA/NMHC strongly urge Congress to remove loopholes in the U.S. Bankruptcy Code that currently permit resident debtors who no longer have a right to remain on the premises to stay after declaring bankruptcy.

Background Apartment operators, particularly small business apartment owners, continue to suffer economic loss because of unscrupulous attorneys and others who market the U.S. Bankruptcy Code to residents as a means to live "rent-free" for months at a time. This "free ride" is all abuse of the Bankruptcy Code's "fresh start" principle. The widespread bipartisan support for bankruptcy reform reflects strong public opinion that the loopholes in the Bankruptcy Code that permit abusive behavior should be eliminated.

Recent Activity The House-passed version of the Bankruptcy Reform Act, which was approved March 19, 2003, addresses the issue of the automatic stay. Generally, those reforms would expedite the resolution in bankruptcy court of eviction actions involving residents who lacked a valid lease, while preserving resident protections already found in existing law. The Senate failed to act during the first session of the 108th Congress. It is hoped that Congress will enact bankruptcy reform tiffs session.

Action Requested NAA/NMHC call on Congress to adopt the House version of Section 311 of H.R. 975, the landlord-tenant automatic stay reform provision approved last year.

HUD Fair Housing Enforcement Practices

NAA/NMHC Position NAA/NMHC encourage the U.S. Department of Housing and Urban Development (HUD) to increase funding for programs designed to promote the understanding of fair housing and federal accessibility requirements by all sectors involved in the multifamily design and construction process.

Background NAA/NMHC continue to lead the multifamily industry in monitoring the U.S. Department of Justice's (DOJ) fair housing enforcement activities. NAA/NMHC will also monitor HUD to ensure that the department meets its obligations under the Small Business Regulatory Enforcement Fairness Act (SBREFA) to provide clear guidance to help small businesses comply with federal fair housing enforcement standards.

Recent Activity The fiscal year (FY) 2004 HUD budget for fair housing enforcement increased to $48 million. In the area of accessible design, NAA/NMHC continue to monitor and generally support HUD's commitment to expand technical assistance to the industry and move away from an accessible design policy that had been focused almost exclusively on enforcement by advocacy groups. NAA/NMHC will also be monitoring HUD and DOJ accessible design enforcement activities for any changes affecting member firms.

Action Requested NAA/NMHC encourage Congress to direct a greater percentage of Fair Housing Initiatives Program (FHIP) funding now going almost exclusively for enforcement to industry-directed education instead.

Consumer Privacy

NAA/NMHC Position Recently enacted and proposed consumer privacy laws that apply to marketing activities and the use of consumer data by apartment firms should fairly balance intended consumer protections with the operational burdens that the regulations impose. NAA/NMHC are unopposed to reasonable measures that will provide privacy protections to consumers. However, NAA/NMHC urge Congress and administrative agencies to meaningfully review the cost impact of last year's changes in federal consumer privacy law on business operations before undertaking any addition al consumer privacy regulation this year.

Background To ensure resident and employee safety and property economic viability, apartment firms perform credit and criminal history background checks when screening resident and employee applicants. Real estate companies are subject to consumer privacy laws thin restrict disclosure of private consumer and customer information, and require the development and communication of consumer privacy policies. These requirements under Section V of the Gramm-Leach Bliley Act apply to real estate companies engaged in certain activities that the Federal Reserve Board has previously defined as permissible for bank holding companies.

As part of the recent legislative and regulatory wave of new consumer privacy laws, the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) issued new rules that strictly limit the way apartment finns, trade associations and other finns use the telephone and fax to communicate and market themselves. The FTC role (16 CFR 310) established the enormously popular National Do Not Call (DNC) Registry, which allows consumers who wish to avoid telemarketing calls to register their residential telephone numbers on the list. The FCC role (47 CFR 64 and 68), along with the FTC rule, regulates the DNC Registry and addresses fax marketing. Also last year, the president signed into law the Controlling the Assault of Non Solicited Pornography and Marketing Act of 2003 (P.L. 108-187), a measure that prohibits certain unsolicited commercial e-mail messages (spam) and creates criminal penalties for violations of the prohibition. Finally, the Fair and Accurate Credit Transactions Act (PL. 108-159) provides important new privacy and accuracy protections on the use of consumer data by housing providers and other businesses, as well as expanded access for consumers to access their data history. Together these laws signal Congress' continued interest in enacting consumer privacy measures with significant implications for the apartment industry.

Recent Activity It is expected that Congress will consider several consumer privacy measures this year that would further regulate apartment firms use mad maintenance of personal information. It is also expected that Congress may consider additional measures covering electronic data collection and e-mail communications.

Action Requested NAA/NMHC urge Congress and administrative agencies to analyze carefully the cost burden that any proposed laws intended to protect consumer privacy would impose on the operations of apartments and other businesses.

Telecommunications Policy

NAA/NMHC Position NAA/NMHC are strongly in favor of a healthy and competitive telecommunications industry so apartment residents will receive service that meets their needs for reliability, technical capability' and cost. Federal telecommunications policy should be based primarily on a free and open market, without legal restrictions and requirements that impair the management of a multi-unit dwelling.

Background NAA/NMHC are dedicated to ensuring that legislation, rulemakings and other judicial decisions are in the best interests of those who live in apartments.

Telecommunications services are in great demand today, and new technology brings new products such as voice over Internet provider (VOIP) service. Multifamily housing residents are requiring newer, faster and more sophisticated telecommunications capabilities. Property" owners and managers, in response to such demands, rely on advanced systems and services to both satisfy resident needs and establish an edge in real estate's highly competitive marketplace. The rapid change in technology of competitive telecommunications providers serves as an important example of the success of market forces in delivering high quality communications services to residents at a reasonable cost.

Efforts by either federal or state governments and agencies to mandate physical access to various telecommunications technologies, presumably in the interest of individuals who reside in apartments, more often than not result in higher prices and less competition. In addition, they lead to forced investment in technologies that soon become obsolete.

Recent Activity Near the end of each session of Congress, some providers of telecommunications services will attempt to have amendments included in appropriations bills that give added powers to providers that ignore the normal service negotiations that must take place between property owners mad providers. Each time such legislation has been introduced in the process, it has been successfully rejected when subjected to further scrutiny.

Additional problems have been created by the recent wave of bankruptcies of various telecommunications providers. These bankruptcies and disruptions in service clearly demonstrate why apartment dwellings should not be subjected to intrusion by any telecommunications service that seeks entry without being thoroughly analyzed by a person owning, controlling or managing a multi unit building.

Action Requested Members of Congress should reject any efforts by a few telecommunications providers who seek legislation that would give them special access privileges to private property

Rent Control and Barriers to Affordable Housing

NAA/NMHC Position NA/NMHC encourage affordable housing production and voucher assistance instead of rent control to address the national challenge of "affordable housing availability'.

Background Forbes magazine lists rent control as one of the 10 worst economic ideas of the 20th century, writing, "Here we have a policy initiative that has done huge damage to cities around the globe. It is very hard today to find an economist supporting rent control."

"[M]ost of the benefits produced by rent controls aid moderate, middle and upper-income households, rather than the poor households they may have been adopted to help," concluded Anthony Downs of the Brookings Institution in his definitive academic research work, "A Re-evaluation of Residential Rent Controls." HUD concurs: "The benefits of rent control are poorly targeted ... Significant numbers of well-to-do renters live in rent-controlled apartments and enjoy substantial benefits, while many lower-income renters receive little or no benefit."

The Advisory Commission on Regulatory Barriers to Affordable Housing, a blue-ribbon panel of experts, wrote, "as a means of redistributing income to the poor ... rent control is extraordinarily inefficient, if not counterproductive."

The multifamily industry operates under a host of local, state and federal policies that substantially increase the cost of construction and ultimate rental costs for apartment residents. Late in 1998, a state by state survey found that apartment residents pay substantially more property tax yet require fewer public resources than their counterparts in other forms of housing. Inflated local permit and impact tees drive up demand for very limited public subsidies for low-cost apartment housing. Systematically lower fees would, instead, make affordable apartment housing more widely available and lessen the demand for subsidies in a tight budget environment. Further, federal environmental mandates, which are often based on skewed cost-benefit analyses, reduce land availability and increase land costs for newly built apartments and increase remediation and rehabilitation costs for already-built properties.

Recent Activity At the end of 2002, aggressive efforts were taken to reinstate rent control in Boston, which failed following an intense lobbying effort by the Greater Boston Real Estate Board, with support from NAA/NMHC. In 2003 similar action on this issue occured in New York City, Massachusetts and California. In coalition with state and local apartment associations, NAA/NMHC helped defeat a ballot initiative to reinstate rent control in Cambridge, Mass., as well as an effort to dramatically expand New York City's rent control laws. NAA/NMHC helped postpone action oil a California bill (S.B. 178) that would subject all new properties to rent controls.

In addition, on the federal front, NAA/NMHC are encouraged to see that HUD is responding to pressure from NAA/NMHC to pursue a more balanced housing policy, by taking concrete steps to remove barriers to multifamily housing. In November 2003, the department published a notice seeking comments on two HUD initiatives to reduce federal, state and local regulatory harriers to the production or rehabilitation of "affordable housing.

Action Requested NAA/NMHC urge Congress to take appropriate action to reduce the many substantial barriers to affordable apartment housing.

Insurance

NAA/NMHC Position NAA/NMHC urge Congress to expand the Liability Risk Retention Act of 1986 (LRRA) to permit the formation of Risk Retention Groups (RRGs) for property coverage. NAA/NMHC also urge continued attention to the implementation of the Terrorism Risk Insurance Act of 2002 (TRIA) to ensure that terrorism insurance rates and deductibles do not negatively affect the cost and availability of rental housing, especially affordable housing.

Background In response to skyrocketing insurance costs in the 1980s, Congress passed LRRA to facilitate the formation of RRGs that would promote affordable liability coverage within individual industries by spreading risk exposure among group members. RRGs can provide a solution to availability and affordability problems that disrupt the traditional insurance market. The formation of numerous successful RRGs since 1986 signifies the law's success; however, that success is limited by the law's scope. LRRA must be expanded to include property coverage to fully realize Congress's goals of reducing insurance costs and increasing insurer competition. This expansion would provide alternative coverage opportunities for property owners that would reduce policyholder costs and promote greater competition among insurers.

TRIA's implementation will be monitored closely by NAA/NMHC and other members of the Coalition to Insure Against Terrorism (CIAT). In particular, NAA/NMHC will be watching to see if all appreciable change in terrorism insurance rates and deductibles follows TRIA--particularly for small business apartment owners and affordable housing providers. Also, NAA/NMHC will be monitoring multifamily capital providers' insurance requirements to ensure the flexibility necessary to permit apartment providers in less-risky areas to operate without expensive terrorism coverage.

Recent Activity It is expected that Congress will consider amendments to the LRRA. The Treasury Department has begun to survey the real estate industry to determine whether TRIA-certified insurance has become more 'affordable and whether firms are purchasing the coverage. The results of the survey will be used by Congress to assess the need for an extension of the federal backstop program. Recent comments by senior Treasury Department officials indicate that the Department would oppose reauthorizing TRIA. Given the ongoing Treasury Department survey, NAA/NMHC believe it premature to prejudge the results of the survey.

Action Requested NAA/NMHC urge Congress to advance insurance availability" and decrease exorbitant premiums by amending LRRA to permit RRGs for property coverage. NAA/NMHC also urge continued monitoring of the effect of TRIA on terrorism insurance premiums and the cost of providing affordable housing.