HUD plans to raise housing goals for Fannie Mae, Freddie Mac and the Department of Housing and Urban(HUD). Secretary Andrew Cuomo has announced plans to raise the affordable housing goals for Fannie Mae and Freddie Mac by 19% over the next two years. The 1992 legislation revising the regulatory structure for the giant government-sponsored secondary market corporations authorized HUD to set specific targets for affordable housing finance. Under current regulations, at least 42% of the residential units financed by each corporation's mortgage purchases each year must be housing for low- and moderate-income families.
In addition, at least 24% of the units must be located in central cities, rural areas and other underserved areas, and at least 14% must address the rental and ownership housing needs of low-income and very-low-income families in low-income areas. The 14% goal includes multifamily mortgage purchases equal in dollar volume to at least 0.8% of each corporation's total mortgage purchase volume in 1994. (These goals are overlapping. That is, a multifamily loan in a low-income central-city area could count toward all of the goals.) The law gives HUD the authority to adjust the goals annually, and Cuomo has announced proposed increases for calendar 2000 and 2001.
"This action will transform the lives of millions of families across our country by giving them new opportunities to buy homes or move into apartments with rents they can afford," says Cuomo. "[The new law] will strengthen our economy and create jobs by stimulating more home; it will help ease the terrible shortage of affordable housing plaguing far too many communities."
The proposal would raise the overall low- and moderate-income housing goal from 42% this year to 50% in 2001. The goal for underserved areas would rise from 24% this year to 31% in 2001 and the low-income and very-low-income housing goal, from 14% to 20%. According to HUD, the higher goals will mean an additional $488.3 billion in affordable housing financing by Fannie Mae and Freddie Mac over the next 10 years, providing housing for seven million low- and moderate income families.
HUD may assist in multifamily disposition HUD has issued proposed regulations for the provision of up-front grants and loans to support the disposition of multifamily properties owned by the department. Under the regulations, a loan or grant could be provided only for properties meeting certain requirements for affordability and financial viability. In addition, the availability of funds for loans or grants will depend on congressional appropriations action. A grant or loan could fund up to 50% of the cost of repairing or rebuilding a project or $40,000 per housing unit, whichever is less.
To be eligible, a project must have more than 50% of its units occupied by very-low-income families at the time a disposition is approved by HUD. The project must be located in a housing market or submarket with a shortage of affordable rental housing, and it must provide affordable housing for at least 20 years or the term of the loan, whichever is shorter.
After rehabilitation or rebuilding, the project would have to generate sufficient income in a competitive market to cover operating expenses and debt service, fund required reserves, and generate positive cash flow.
IRS issues capital-gains rules on depreciation recapture The Internal Revenue Service (IRS) has issued final regulations for capital-gains taxes on installment sales of real estate that provide for all depreciation to be recaptured at the special 25% rate before any gain is taxed at the regular capital gains rate. No substantive changes were made in the proposed version of the rules. Once any gain taxed at ordinary income rates is accounted for, all gain reported in each installment will be taxed at the 25% rate until all depreciation is recaptured. Any remaining gain will then be taxed at the 20% maximum rate for long-term capital gains.
The rules apply to all installment payments received after May 6, 1997, the effective date of the legislation revising capital gains taxes, even if the sale occurred before that date. All gain reported for pre-May 7, 1997, payments will be treated as if depreciation recapture had been taken into account. If gain on payments received after May 6, 1997, and before publication of the regulations was reported differently the actual amount of 25% gain will be used in determining the treatment of future installments.