Fall 2009 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Production Tax Credit and the Investment Tax Credit — but benefits provided by the ITC are no longer reduced by project costs funded with grants or tax- exempt bond proceeds. Also, the green initiative has gained a stronger foothold within the industry with the approval of the National Green Building Standard earlier this year. As the only green rating system specifically drafted to be compatible with existing building codes and regulations, the NGBS provides guidelines on green building practices that are applicable for a variety of apartment types. A Credential for Green Property Management also has been launched in conjunction with the NGBS. This credential is designed for property managers, supervisors and maintenance personnel and can be viewed as competitive advantage within the marketplace as energy initiatives continue to grow. The RubinBrown Real Estate Services Group recently released its 2009 Apartment Statistics. Below is some commentary related to the industry and market trends of 2008, as well as a few statistical trends and highlights that our group would like to share. As initially noted in 2007, the multifamily housing market began to slow, and this trend has continued through 2008 and into 2009. With unemployment rates climbing to levels not seen in years and declining economic conditions overall, the apartment industry has experienced a number of struggles. Nationally, vacancies are on the rise and can be attributed to overall attrition in the workplace and growing unemployment. Apartment owners and managers found a rise in evictions as well as a growing number of renters returning home or obtaining roommates to reduce living costs. With this decreased occupancy and a challenging job market, apartment owners and managers are faced with difficulties in obtaining rent increases, as noted in the enclosed charts. In 2008, the growth in rental INDUSTRY/MARKET TRENDS

activity, but has ultimately resulted in failed funding within the apartment industry.

Despite the lack of liquidity in multifamily housing, Congress’ $787 billion American Recovery and Revitalization Act passed in February 2009 looked to restore access to capital within the industry. Through both its Tax Credit Assistance Program and Section 1602 exchange program, ARRA is expected to have notable impact on the housing market as it is aimed at closing the gap in current deal financing via state housing agencies. More recently, many of these agencies, having finalized their requirements under these two programs, have begun to fund various projects. Currently, 16 states have full access to disburse their awarded TCAP funds to selected projects, while the Treasury also has approved an additional $754 million in credit exchange funds to be issued to16 states, thereby increasing the total assistance to nearly $1 billion. Provisions under the TCAP and exchange programs have become clearer as well. Both HUD and the Treasury have issued detailed guidance on the programs, directly pointed at answering questions the two departments have been fielding since ARRA was passed. Topics addressed include issues surrounding the Davis-Bacon labor requirements and eligible costs under the exchange program, among other things. Moreover, the guidance defines what activities are considered recapture events under the Section 1602 program. Further support also has come from the National Council of State Housing Agencies. In July, NCSHA adopted eight principles for state housing agencies to follow when administering and monitoring the TCAP and exchange programs. On another note, the green movement has continued to take shape within the industry as support from the federal government has increased with additional provisions and significant changes made to previous regulations. Under the ARRA, greater incentives now exist to entice developers to consider going green. These incentives not only include a greater flexibility overall in the use of two energy credits — the

54 u fall 2009 issue