GlobeSt.com EXCLUSIVE: Bush Re-Election Could Hurt Affordable Housing

PHOENIX-The most active segment of the multifamily industry could be jeopardized if Americans reelect George W. Bush for president in November. That’s the opinion of Stuart Boesky, chairman and CEO of New York City-based CharterMac, the largest owner of apartments and affordable housing in the US. Boesky revealed his thoughts during the first annual RealShare Multi Family Investment & Finance conference yesterday at the Arizona Biltmore hotel. The event was sponsored by Real Estate Media, GlobeSt.com’s parent organization.”There’s a crisis growing right now at HUD,” Boesky declared. “The Bush administration has taken the position that Section 8 vouchers should be based on the Consumer Price Index and not the cost of housing in the community where the tenant lives. The net result of that is that 900 communities are now notifying voucher tenants that they are going to have to start taking away their vouchers.” In a move that barely registered as a blip on the radar screen, HUD released a notice April 22 saying it would no longer reimburse local housing authorities based on actual current voucher costs. Instead, HUD is now issuing payments based on the vouchers under lease on August 1, 2003, adjusted for inflation. The change will be retroactive to the beginning of the year. Boesky also stated that Bush’s recent obliteration of another program—Hope VI—will also have a detrimental effect on the affordable housing investment and finance industry. “The Bush administration shut down the Hope VI program, a program that conferred public housing to private ownership,” he explained. “It was a really successful program. “In addition, Bush’s last tax proposal was centered on repealing the dividend tax and cutting corporate income tax,” he continued. “The net effect of that proposal drastically reduced the value of LIHTCs because the buyers are corporations. Basically, the law was fashioned in a way that discouraged corporations from sheltering any of their taxable income. So therefore, why buy tax credits? “If Bush is reelected, one of the first initiatives he will take is to abolish the tax on dividends and then go back and try to lower the corporate income tax,” Boesky continued. “It would be devastating.” Later in the day, Doug Bibby, president of the Washington, DC-based National Multi Housing Council, also warned of the impending crisis currently facing the Sec. 8 voucher program. In an exclusive interview with Real Estate Media’s editor in chief, Michael Desiato, Bibby said that these changes would result in a $3.1-million shortfall in subsidies to the city of Boston. He also noted that Oregon residents would suffer at the hands of these changes. Also at the first annual conference, which drew 200 attendees from across the country, a number of the multifamily experts stated that low interest rates have led to a compression of cap rates, sending them below 6%, and in some cases below the 5% mark. According to Bibby; Boesky; Hessam Nadji, of Marcus & Millichap; and a handful of other executives, talks by the Fed to raise interest rates will have a positive impact on suffering multifamily market fundamentals throughout the US. “Home ownership has gone up nearly 500 basis points since 1993,”explained Nadji. But during this time, Echo Boomers have been losing their jobs, and in some cases were supported by their-Baby Boomer parents. The inability to finance a home by some younger US residents will further bolster apartment market conditions, he said. During a town-hall meeting forum, Harvey Green, president of Marcus & Millichap concurred with Nadji, adding that the average homeowner in the US has refinanced three times and now has $14,000 accrued in credit-card debt. But the rental market will only improve if more jobs are created, and Nadji forecasts that there will be a modest 1.5% job growth nationwide next year. Therefore, a true correction in multifamily market nationwide, he predicted, should emerge in 2006.