Wednesday, July 23, 2014

City of Portland Mortgage Credit Certificate, DRAFT Example: $12,607 In Tax Savings in 5 Years.

In my recent post I indicated that the City of Portland could increase eligible incomes by 20% for their MCC program; in another post I reported that Oregon had only used 5% of their private activity bond capacity from 2011-2013, supporting the view that there was significant room to expand the use of MCC's.

Many, many years ago I had developed a tool that had been used by the Portland Housing Bureau to help determine what buyers might realize in tax savings by using the MCC.   The Bureau has an updated multipurpose Excel tool HERE that requires a lot of input to produce similar estimates. 

I found that tool a bit complex for my purposes so I created a draft simplified Excel tool that produces an estimate of ADDITIONAL tax savings over and above the mortgage interest deduction alone and also indicates whether the input income would qualify for a MCC. 

With the usual caveats that this is a DRAFT, and NOT tax advice but merely one person's estimate (mine) of possible tax savings, the PDF HERE and embedded below provides ONE example of a sales price affordable to a MCC income qualified household and the additional tax savings that a MCC might provide over a series of time periods. 


Originally created and posted on the Oregon Housing Blog

Portland City Council Meeting: Next Week Meet Will Consider Amended Ordinance to Dedicated Aribnb Tax to Affordable Housing.


Tuesday, July 22, 2014

Oregon Private Activity Bonds: Less than 5% of Capacity Used in Last 3 Years, $590 Million in Prior Year Cap Abandoned.

Interesting state map of recent private activity bond activity HERE. [Pic of Oregon table pasted at bottom of this post]

The map confirms what I said in prior post on City of Portland Mortgage Credit Certificates that "there is plenty of current state controlled bond cap to accommodate additional MCC allocations".

Oregon Mortgage Credit Certificate bond allocations totaled only $20 million over three years, with the last allocation occurring in 2010. NOTE: Check of Washington state map shows allocations of $440 million for MCC's over last 3 years, and $200 million in 2013 alone. 

Table shows that total Oregon PAB capacity for those 2011-2013 years was $4.02 billion, but total PAB issuance was only $191 million , or 4.8%.

$1.03 billion in unused cap was carried over from 2013, and $2.52 billion over those three years. 

In 2013, $217 million in prior year cap was abandoned and a total of $590 million in carried over cap was abandoned in the three years. 

In 2013 there was $307 million in new cap available and $1.1 billion in new cap over those three years.

SF Mortgage Revenue Bonds were allocated $20 million in cap in 2013 and $127 million over the three years.

Multifamily Housing bond allocations were $40 million over 3 years, and only $8.4 million in 2013. 

In total housing uses were $186.8 million over the three years, or 4.6% of the total capacity. The $28.4 million allocated in 2013 for housing uses was only 2% of the total capacity for that year.
Oregon Private Activity Bond Cap

Originally created and posted on the Oregon Housing Blog.

Monday, July 21, 2014

City of Portland Mortgage Credit Certificate Income Limits Could Increase by 20%+ , With Whole City at Target Area Income Limits.

I continue to work with OHCS to clarify their plans to keep or change the current income limits for their SF revenue bond program. My prior post HERE has information about purchase price limits that were recently implemented.

The City of Portland can use the same IRS guidance in setting their MCC program limits as OHCS; as with OHCS they can choose to adopt an income limit less than what the IRS would permit. 

For the MCC program the City is currently using a safe harbor limit of 115% of MFI for 3 and more persons and 100% of MFI for 1-2 person households. 


OHCS uses a different limit because Portland metro has a  high cost to income ratio under IRS regs. The City of Portland is free to use the same method to calculate income limits for their MCC program.

Using the current OHCS limits, the family of 3 + income limits for the Portland MCC program could increase from $79,810 to $97,160; income limits for a family of 2 or less can increase from $69,400 to $83,280. Those are increases of 20% and 22%.(As I indicated previously, OHCS is in process of reviewing income limits so there could be what I think may be some relatively minor tweaks to the PDX metro income limits).


At these levels these new income limits would mean that the entire city could have IRS compliant MCC income limits equivalent to target area maximums--140% (3 or more persons) or 120% MFI (2 or fewer persons). In effect the entire city would become a "target area" for income eligibility purposes for the MCC program--this is already the existing situation for the OHCS SF bond program, so the MCC program would be merely playing catch up.

Workforce Housing Progress; Cost to City-Zero.

If workforce housing is a goal, then raising the MCC income limit to IRS permitted levels would be attractive because it would NOT cost the city anything (and there is plenty of current state controlled bond cap to accommodate additional MCC allocations). 

The MCC program is particularly attractive to professional and managerial singles or couples who typically have significant federal tax liabilities. For other first time home buyers without federal tax liabilities the Oregon SF bond program, whose current interest rate is a difficult to believe 3.125%, is likely a better fit .

There are several other possible MCC tweaks worth noting, including adoption of a veterans exemption from the 1st time home buyer requirement and a program to offer reimbursement of any future rebate to the feds which is now being used in several other areas. (the latter would remove one of the big sales objections to using the MCC).
[I believe the 2014 Portland metro purchase price limit of $354,375 is already in effect, although the City website still shows $366,835].

Originally created and posted on the Oregon Housing Blog


Sunday, July 20, 2014

Portland City Council Video/Audio on Old Town Action Plan, I Calculate $117 Per Month Local Subsidy for Apts Up to 100%MFI.

Video is HERE; I have also created and posted to my OneDrive cloud HERE a MP3 audio file of the 2 hour and 45 minute long discussion.

The 5 Year Action Plan document is HERE. A table from the plan pasted below shows affordable rents (without utility allowances) and eligible incomes at different MFI levels: 



60%-100% MFI City Subsidy for SDC 's is $117 Per Month, No Rent Burden Controls.
SDC waivers are intended to apply to new construction only. If you do the math you will see that $7 million in SDC waivers for 500 units would cost $117 per month, $1,400 per year, for 10 year compliance period. (If the compliance period increases then the cost per month decreases).



Another Program Might Provide Additional Subsidy if Some Units are Below 80% MFI Units?
Under the Multiple Unit limited tax exemption program it appears to me that it might also be possible to apply for tax exemption for all the units if rents for 20% of the units have rents affordable to HH's with incomes below 80% MFI ; every $1,000 in annual tax exemption would add $83 to the monthly subsidy cost. 

Using a base assumption of $1,000 per unit tax exemption value, for a 10 year term for the full 500 units there would be an additional $5 million in lost revenue or a total of $12 million. 

Using those assumptions local subsidy per unit would total $2,400 annually @ $200 per unit per month for 500 units, with 100 of those units affordable below 80% MFI.  

(Note: The plan also calls for funding of seismic studies and upgrades to existing buildings; if an existing building is adapted to provide housing, these subsidies might assist the development of those units (SDC waivers may not be available for these units since they only apply to new construction but it is not clear that there will be any income restrictions on seismic funding). 

Below 30% MFI HUD Subsidy, $517 Per Month; With 30% of Income Rent Burden Controls.
The latest HOME Forward Dashboard report HERE indicates average project based voucher HUD subsidy per month as $517 or $6,204 per year ; 82% of all Home Forward tenant based voucher holders had reported incomes below 30% MFI.  

This data suggests that roughly speaking it costs $400 more per month in rent subsidies to help a household below 30% MFI vs a household where rents are set as affordable at 100% of MFI in Portland. One additional benefit of HUD assisted rental subsidies is that renter paid portion of rent is generally limited to 30% of tenant income, substantially reducing the likelihood of tenant rent burdens. (Note: Differences are likely overstated, as significant percentage of HF voucher units are 2 bedrooms or more, whereas all examples for OldTown plan are shown as zero or 1 BR units).

SDC Assisted Unit Old Town Rent Burdens Will Not Be Limited to 30% of Income
Tenant paid rent levels in the Old Town projects will NOT adjusted by income as are HUD subsidized rents.  So long as the market supports, the maximum rent permissible at 100% MFI could be paid by a tenant with any income below 100% MFI. This means cost burdens for some renters likely will higher than 30% of their income, since few renters incomes will be exactly at 100% MFI. (As this would be by renters election, one could argue that this is a voluntary cost burden choice).

There is scheduled to be a City Council vote on the Action Plan on the 23rd. It is possible that there may be tweaks to the final plan, including limiting the rate of future rent increases past 10 years.

Originally created and posted on the Oregon Housing Blog