NAHC actively works with HUD, Congress, and non-profit coalitions and organizations to push for changes to help co-ops and shareholders, and to stimulate the development of new cooperatives.
Below are the major issues that NAHC is pursuing for 2007.
Tax fairness for co-op shareholders
Since 1941, co-op shareholders have enjoyed the right to take a personal federal income tax deduction for their share of mortgage interest and real estate taxes paid by the co-op on their behalf. This law puts co-op residents on a par with other homeowners…most of the time. But the law also imposes a rule, called the 80-20 rule (80% of the co-op’s income must come from tenant-shareholders), that sometimes causes a problem that, in turn, causes the personal tax deduction to be disallowed. NAHC wants to correct the legislation to prevent shareholders from losing the deduction due to actions or events beyond their control. NAHC’s proposed correction would establish alternate rules, giving more co-ops the opportunity to qualify their shareholders for the deduction.
Tax fairness for shareholders in manufactured home co-ops
There are a growing number of manufactured home park co-ops in the US. The tax code that gives a personal income tax deduction for shareholders in apartment and townhouse co-ops does not extend to shareholders in manufactured home park co-ops. NAHC proposes to correct this oversight and give manufactured home co-op shareholders the same deduction as other homeowners.
Renewal of energy tax credits
Energy tax credits for co-ops expire on December 31, 2007. NAHC urges Congress to renew these tax credits.
Preservation of housing for low and moderate income families
Hundreds of thousands of units of affordable rental housing built with financing under Section 236, Section 221(d)(3)-BMIR and the Low Income Housing Tax Credit are in jeopardy either of deteriorating due to lack of capital for repairs or of becoming unaffordable as restrictions on rents expire and rents are raised. NAHC supports legislation that facilitates the sale of this housing to responsible landlords and cooperatives, so that affordability can be preserved.
Creation of more affordable housing
The US has a shortage of 1.5 million units of affordable housing. NAHC supports creation of a National Affordable Housing Trust Fund to leverage private sector construction and rehabilitation of additional affordable housing, including cooperatives. NAHC also supports the President’s legislation to provide a tax credit to developers of affordable ownership housing, including cooperatives.
Zero downpayment mortgage insurance
The President has called for legislation for a new FHA mortgage insurance program that would allow buyers to purchase with no downpayment. NAHC supports this legislation, which includes cooperatives.
People with low paying jobs cannot find affordable housing and often must accept homelessness. NAHC is the author of a 3 year demonstration program to set up a national corporation to develop and manage affordable cooperative housing, with priority for transitionally homeless families. The program is included in the Bring America Home Act.
NEW HUD PROGRAMS
Reverse mortgages for co-op shareholders
Legislation passed in 2000 authorizes HUD to insure reverse mortgages secured by a co-op membership or shares. NAHC urges HUD to publish long overdue regulations so that this new service can be used by elderly cooperators who need to convert their home equity into cash so that they can remain in the co-op.
Accelerated mortgage processing
Lenders in most HUD programs for multifamily mortgage insurance can make use of Mortgagee Accelerated Processing (MAP), whereby the processing and approval time for new mortgages is greatly speeded up. However, lenders cannot use MAP yet for co-ops, and so co-op loan applications linger for months and years in HUD offices and are treated as something no one in the HUD office wants to deal with. NAHC urges HUD to publish guidelines for lenders to use MAP for co-op loans, so that co-op loan applications can benefit from the same processing time savings as rental housing applications.
Release of the Hollister report
In 2004, HUD awarded a $300,000 contract to the Hollister Group to study co-ops, document HUD’s history with co-ops, and make recommendations on how co-ops can be used to increase homeownership opportunities for minorities. The work was completed in mid-2004, but has not yet been released or acted upon. NAHC urges the release of this document.
Special Assistant for Cooperative Housing
While not a new program (the position was created by Congress in 1955), this position at HUD has been vacant for the better part of a year. Previous occupants have greatly improved communications about co-ops, and NAHC urges that the position be filled as soon as possible, not only to meet HUD’s statutory obligation, but to keep the dialog on co-op policy and regulation at the forefront.
HUD REGULATION OF EXISTING CO-OPS
Many co-ops are subject to HUD regulation because their mortgages are insured by HUD or because they accept Section 8 funds. In general, the regulation is the same as done to rental properties, and treating co-op like rentals gives rise to problems for co-ops. NAHC engages in ongoing efforts to correct the mistreatment of co-ops in HUD’s regulatory scheme, including the issues below.
REAC
HUD’s physical property inspections fail to differentiate co-ops from rentals. NAHC believes that in-unit inspection of co-op apartments and townhouses encroaches on the idea of homeownership embodied in co-ops. NAHC has asked HUD to stop making in-unit inspections of co-ops, unless the unit is covered by Section 8, and in that case, the inspection standards should be the same Section 8 inspection standards that apply to single family homes.
Each co-op is different
Co-op policies about maintenance and replacement of in-unit items varies from co-op to co-op. To facilitate understanding and to increase the information in HUD offices about each co-op, NAHC and HUD agreed upon a form or checklist that allows the co-op to document policies about maintenance and replacement of items in the units. With such a form on file, HUD employees will have a reference point when responding to co-op member complaints, and when reviewing reports of physical inspections. NAHC urges co-ops to file a checklist form with HUD so that this information is on file.
Multifamily handbook
Changes pertaining to co-ops in the HUD 4350 handbook have been drafted, but are not yet available for comment. NAHC urges HUD to make these proposed changes public, so that knowledgeable co-op managers, attorneys, and consultants can review them.
Limited English Proficiency
HUD is expected to issue final rules soon regarding the obligation of building owners and managers to provide important documents in native languages of residents with limited English proficiency. On behalf of co-ops, NAHC is concerned about the potential financial burden of translating documents, as well as whether the rules will be clear as to which documents must be translated.
Prepaying the mortgage
Many co-ops are prepaying their older HUD mortgages and refinancing the property. HUD-assisted co-ops generally have to sign a use agreement, promising to keep the housing affordable. The use agreement is a rental agreement and needs to be modified with co-op language. In addition, co-ops seeking HUD’s approval to prepay are treated differently in different parts of the country. NAHC recommends that HUD modify its use agreement and ensure that co-ops seeking prepayment approval are treated fairly everywhere.
OTHER REGULATION
In 2006, Congress gave veterans of the armed forces a new benefit of a loan guaranty program to help them buy into a co-op. NAHC supports prompt implementation of this program by the Department of Veterans Affairs through publication of reasonable regulations.
HUD property disposition
An NAHC victory of the 1970s was to add Section 246 to the National Housing Act which encourages HUD, when it acquires a foreclosed building, to offer the building to residents who then organize themselves into a co-op. The Act also authorizes HUD to provide financing to the co-op. In default situations in recent years, HUD has adopted a practice of selling the mortgage, rather than foreclosing and allowing tenants to organize and buy the building from HUD. NAHC urges HUD to limit the practice of selling the mortgage and return to the practice of foreclosure and offering the building to tenants with HUD financing as a co-op.
Lead paint regulations for remodeling
The Environmental Protection Agency has drafted regulations implementing 1995 legislation regarding inspection and abatement of lead paint hazards during renovations and remodeling. NAHC is concerned that the regulations put the greatest emphasis on buildings with the greatest hazard, and that the regulations recognize the different relationship between shareholders and the co-op, versus the relationship between landlords and tenants, particularly as to painting, decorating, and remodeling in the unit.