Assistance Animals in Multifamily Housing
Background:
The Fair Housing Act (FHA) prohibits landlords from discriminating against tenants or prospective tenants based on disability, race, color, national origin, religion, sex, or familial status. Under the FHA, housing providers have a further obligation to accommodate people with disabilities who, because of their disability, require trained service animals or other types of assistance animals to perform tasks, provide emotional support, or alleviate the effects of their disabilities.
Recent years have seen an increase in reasonable accommodation requests for assistance animals, particularly in properties with no-pets policies or properties that impose weight or breed limitations or charge pet deposits or fees. These requests frequently are made using verification of the assistance animal provided by obtained online and from sources with little or no knowledge about the individual or the animal.
IREM Position:
IREM supports the rights of persons with disabilities to make reasonable accommodation requests so they may have equal opportunity to use and enjoy a dwelling.
IREM supports property owners and managers having the ability to take the necessary steps to alleviate potential abuse by tenants and prospective tenants who fraudulently claim their pets are assistance animals and to ensure that the benefit of reasonable accommodation applies to only those who rightfully need the accommodation.
To this end, IREM encourages the U.S. Department of Housing and Urban Development (HUD) to issue clear guidance regarding assistance animals or take other actions to alleviate potential abuse and ensure that reasonable accommodation is provided only to those who need it.
(Adopted 9/2019)
Tenant Protection in Property Foreclosure
Background and Objective:
As home foreclosures continue to grow, tenants are being evicted from their rental homes, often with no advance notice of the action. Seventeen states and many localities have existing laws requiring disclosure of foreclosure action to tenants, but not all areas do. Also, in many cases, the bank or lending institution can be unaware that tenants are residing in the property.
Legislation has been introduced to attempt to protect tenants and ensure they are not evicted without notice in the case of a property foreclosure. Specifically, the legislation requires the "immediate successor in interest" of a foreclosed property to provide the tenant with at least 90-days notice before requiring the tenant to vacate the property. In addition to the 90-day notice, the bills require that the tenant may stay, beyond the 90-day notice period to the end of the lease term, if the “successor in interest” does not intend to reside in the property as a principal residence. This legislation would preempt state and local laws, unless existing law was more protective to tenants.
It is unclear in many cases whether the “immediate successor in interest” is the bank, lending institution, or the new purchaser of the property following a foreclosure. That may depend upon state law.
IREM Position:
IREM believes notification of tenants is important whenever displacement may occur. We would support requirements that banks and lending institutions be required to notify tenants of a pending foreclosure on the property. IREM would support that tenants, if all rents are paid and current, and are in compliance within all other requirements of the lease, could remain in the property through the end of the lease, assuming the subsequent owner does NOT intend to use the property as a principal residence.
(Adopted 7/09, updated 1/14)
Section 8 Tenant Protection in Property Foreclosure
Background and Objective:
As home foreclosures continue to grow, tenants are being evicted from their rental homes, often with no advance notice of the action. Under current law, a Housing Choice voucher tenant does not lose their subsidy as a result of foreclosure, but currently may have to find a new place to live.
Legislation has been introduced to require that the "immediate successor in interest" of a foreclosed property be subject to the pre-existing lease and Housing Assistance Payment (HAP) contracts for Housing Choice voucher tenants. This would apply to tenants in conventionally financed properties who received Housing Choice vouchers (not project-based assistance). Through changes in the language to the HAP contract, the legislation attempts to subject a new owner, who is the “immediate successor in interest,” to the existing HAP contract that was agreed to by the previous owner.
IREM Position:
IREM supports requirements that banks and lending institutions be required to notify tenants of a pending foreclosure on the property. IREM would support that Housing Choice voucher tenants, if all rents are paid and current, and are in compliance within all other requirements of the lease; could remain in the property through the end of the lease, assuming the subsequent owner does NOT intend to use the property as a principal residence. IREM would oppose a requirement that subsequent owners of rental property be subject to a HAP contract (and the requirements attendant to that contract) without disclosure of such a contract prior to sale of the property to a subsequent owner.
(Adopted 7/09, updated 1/14)
Fair Housing and Equal Opportunity
The Institute of Real Estate Management strongly believes in equal opportunity in housing and supports the right of all people to freely choose where they will live without the constraint of prejudice or discrimination. We believe that equal opportunity in housing can best be achieved through continued leadership, observance of law, education and mutual cooperation of the real estate industry and the public through a free and open housing market. The Federal Fair Housing Law, which we strongly support, provides for the right of all people to freely choose where they will live without regard to race, color, religion, sex, national origin, handicap or familial status.
In addition, the law should protect the rights of those individuals, such as the elderly, who freely choose to live in an adults-only environment by allowing adults-only sections of apartment complexes and by easing the regulatory requirements regarding qualifying as elderly housing.
The Institute of Real Estate Management is deeply concerned with Fair Housing legislation that would broaden the definition of "handicapped" to include those individuals who are known to be non-recovering alcoholics and/or drug abusers. IREM is sensitive to the human needs of these individuals but at the same time the membership is aware of the need for safety of other residents and of the property owner/managing agent's liability for acts committed by third parties. Legislation to be enacted must protect the owners/agents from the risk of liability for possible violence and personal injury that could occur to, or be caused by, non-recovering alcoholics, and/or drug abusers who would be residents of multifamily dwellings. In addition, the Institute feels its members are not equipped nor do they currently employ personnel who are trained and experienced in dealing with non-recovering alcoholics and/or drug abusers. Physical facilities are not typically available on multifamily housing sites in which to provide the necessary counseling services. The Institute membership knows that the welfare and safety of current residents, specifically elderly residents, may well be threatened by non-recovering alcoholics and/or drug abusive residents. Furthermore, owners and managers of multifamily housing must be able to establish occupancy standards where none exist to protect the safety and welfare of all residents.
The Institute also stresses the need to clearly define the terms "reasonable," "reasonable period," and "reasonable amount of money," and other terms not clearly defined in the final regulations to the Fair Housing Amendments Act of 1988.
Professionalism in Fair Housing and Equal Opportunity
IREM is dedicated to the high ethical standards as provided by our designations and Code of Professional Ethics. We encourage and applaud the actions of our members and their management companies who adhere to Fair Housing and Equal Opportunity principles.
We invite our membership to actively participate in and promote professionalism in the area of Fair Housing and Equal Opportunity by utilizing our continuing education courses, publications, articles, and programs. We believe that Fair Housing and Equal Opportunity efforts should be supported in order to maintain and improve the quality of life in our communities.
We urge our members to engage in Fair Housing and Equal Opportunity practices and other activities that foster continued excellence in the area of property management. We believe our efforts are best served through community leadership and continued education of our members. We applaud the actions of communities which have implemented Fair Housing and Equal Opportunity without federal assistance and continue to encourage the involvement of the private sector.
Classes Protected From Discrimination
The Fair Housing Act prohibits discrimination on the basis of race, color, religion, sex, handicap, familial status, or national origin. On February 3, 2012, a final rule was entered into the Federal Register which implements HUD policies ensuring that its core programs, specifically rental assistance, are open to all individuals regardless of sexual orientation, gender identity, or marital status.
Twenty states, the District of Columbia and over 200 localities have added sexual orientation and/or gender identity as a protected class to their fair housing ordinances or statutes. The National Association of REALTORS® added prohibitions against discrimination on the basis of sexual orientation or gender identity to the Code of Ethics and NAR's Code of Ethics and the Fair Housing Partnership reflect the prohibitions of the federal law.
As a national organization, IREM's policies should reflect national, state and local policies. Consequently, IREM's positions on fair housing should include the protected classes under federal fair housing law and should consider other protected classes included in state and local law. IREM recognizes the inclusion of sexual orientation and gender identity as an additional protected class.
Accessibility
The Fair Housing Act of 1988 requires that seven basic accessibility features be designed and constructed in all multifamily buildings built after March, 1991. These requirements include: accessible building entrances on an accessible route; accessible common and public use areas; usable doors (by a person on a wheelchair); accessible routes into and through the dwelling unit; accessible locations for light switches; electrical outlets, thermostats and other environmental controls; reinforced walls for grab bar installation; and usable kitchen and bathrooms.
Some buildings which were designed and built after the March, 1991 date do not meet the specified requirements of the Fair Housing Act. Some of these buildings have since been sold to owners who had no part in the design or construction of the building, but have been named as respondents in Fair Housing Act complaints. HUD maintains that successors in interest may be charged for violating the Fair Housing Act even if they had no involvement. HUD has also stated that successors in interest may be appropriate respondents to assure that "changes required to remedy violations can be accomplished."
IREM acknowledges the importance of Fair Housing practices. However, we believe that successors in interest should not be held liable for compliance designs made during the design and construction of multifamily properties. While we believe that the law should be upheld, the responsibility of these decisions should remain on those who were originally involved with the planning, design, and construction of the buildings.
IREM asserts that in the absence of final rules, there were no clear and specific guidelines for architects and developers to follow until the final rule was reissued in April of 1998, seven years after the effective date of the statute. In the interim period, until the guidelines were reissued, those architects and developers who made a good faith effort to comply with the intent of the law should be afforded maximum consideration in resolution of any complaints.
Furthermore, IREM does not believe that the intent of the law includes successors in interest, nor do we believe that the law intends to include costly retrofitting projects or remodeling. We feel that the law requires changes to be made if the changes are within reason.
With all of the grey areas involved with the Fair Housing Act, IREM believes that clarification of successor liability is needed prior to the enforcement of these laws.
Fair Housing Partnership: Model Affirmative Fair Housing Marketing Plans
For participation in FHA subsidized and unsubsidized housing programs for the development or rehabilitation of subdivisions, multifamily projects and manufactured home parks of five or more lots or units, federal regulations require an Affirmative Fair Housing Marketing Plan (AFHMP). The Voluntary Affirmative Marketing Agreement (VAMA), a substitute for individual AFHMPs, was eliminated to allow more creative approaches to fair housing in different firms and markets through the Fair Housing Partnership Agreement between NAR and HUD. This partnership replaces the current activities of VAMA whereby NAR and HUD would mark certain fair housing issues and concerns which need to be addressed. Strategies would be developed to positively influence these problems, followed by a subsequent evaluation to determine if implementation of such strategies was successful.
The model plan would enable Realtors to easily comply with affirmative marketing regulations rather than through individual outlines of specific affirmative marketing activities for each project. HUD will accept the model plan in lieu of individual AFHMPs for each project.
NAR and HUD envision this type of partnership to extend to the state or local level of the Association of REALTORS and HUD offices. While voluntary compliance through the collection of signatures may no longer be relevant, members are encouraged to continue to fulfill their fair housing commitment.
Note: In April, 2004 several of IREM’s existing fair housing Statements of Policy were combined into this single, more comprehensive policy: Fair Housing (6/89), Fair Housing Accessibility (6/99), Equal Opportunity (6/88; updated 11/97), Classes Protected from Discrimination (11/92; updated 11/97), and Professionalism in Fair Housing and Equal Opportunity (11/93).
(Updated 4/09, 4/11, 1/14, 4/15)
Foreign Nationals
Background and Objective:
After the September 11, 2001 attacks on the United States, property owners in several states were contacted by local law enforcement officials to provide lists of foreign nationals occupying their properties.
IREM Position:
IREM supports the Fair Housing Act, and other federal, state, and local laws that prohibit discrimination on the basis of race, color, religion, national origin, sex, familial status, disability, or sexual orientation. IREM encourages all to work diligently within these laws to assist law enforcement at all levels in investigating possible law violations in all forms of investment property.
(Updated 10/07, 10/11)
Homelessness
Background and Objective:
The emergence of a permanently homeless population in America has become one of the most pressing problems our nation faces. The 2008 Annual Homeless Assessment Report to Congress: A Summary of Findings reported that in 2008, roughly 1.6 million persons used an emergency shelter or a transitional housing program, in other words, 1 in every 190 persons in the United States is homeless and uses the shelter system. These numbers do not include the multitude of homeless, who do not take advantage of shelters and may currently be much higher due to the recent recession experienced in the United States.
IREM Position:
The Institute of Real Estate Management affirms the national goal of "a decent home and a suitable living environment for every family." The Institute believes that this commitment should encompass the entire housing ladder including the homeless and therefore urges any national housing policy to address a spectrum of housing needs. The fact that rent control in certain areas of the country is a factor contributing to homelessness should also be addressed. Rent control significantly affects the housing inventory by hastening the deterioration and/or loss of existing housing, while it discourages the construction of new housing. In addition to a national policy, the Institute encourages states and localities to identify who the homeless are and to define the scope of their respective housing problems as they relate to the homeless.
IREM believes that financial appropriations which address homeless population housing initiatives should be broad enough to include social service programs which provide for the whole individual/family. More specifically, when the developer/owner/management agent identifies a particular social concern which increases overall homelessness, that developer/owner/agent should not be deterred from addressing such a need by unnecessary constraints. Therefore, IREM strongly endorses federal funding and/or state and local initiatives and development of private and public partnerships for social service programs which might include development of personal "life skills" that empower individuals/families in such a way as to assist them from ever being homeless again. This funding should be in addition to that which provides innovative approaches to affordable housing.
(6/89, updated 12/95, 10/06, 10/10, 1/14)
Involuntary Contractual Imposition
Background and Objective:
The Section 8 housing program for existing housing involves the issuance by a local government of Section 8 certificates which allow the certificate holder to rent any apartment, with the tenant paying monthly rent in an amount usually not more than 30% of the tenant's certified household income to the landlord, and the local government guaranteeing to pay the remainder of the rent, up to local fair market rent limits, based upon unit size. The property operator enters into a contract with the tenant and third party, usually the local housing authority, which pays the portion of the rent above the amount to which the tenant is directly obligated to the landlord, as a rental subsidy. The legislative construction and intent of the program was for landlord participation to be voluntary, meaning a property owner or manager is not required by the federal government to participate in the Section 8 program. Landlords who participate in the Section 8 program and accept Section 8 rental subsidy certificates must follow strict and voluminous regulatory requirements including, without limitation, specific lease terms (required and prohibited), inspection requirements and other required regulations.
In addition to the certificates, the program also grants vouchers to individuals as a form of payment for rent. It is the responsibility of the tenant to make up the difference between the amount of the voucher and the amount of the actual rent. The acceptance of the Section 8 vouchers is also voluntary.
In April 1999, the City of Chicago Commission on Human Relations found that Section 8 vouchers are a source of income and that property owners or managers must accept Section 8 vouchers unless they have a non-discriminatory reason not to do such, and that such readings are not prohibited by federal law.
Similarly, since the Chicago ruling findings or legislation in 12 states and the District of Columbia prohibit source of income discrimination. They are California, Connecticut, Maine, Massachusetts, Minnesota, New Jersey, North Dakota, Oklahoma, Oregon, Utah, Vermont and Wisconsin. Ordinances and court decisions that would serve to mandate acceptance of tenant-based subsidy contracts undermine the entire voluntary nature of the Section 8 program as set forth by the federal government.
IREM Position:
IREM is supportive of the concept of government assisted housing practices. Affordable housing opportunities should be available to all citizens. There are many opportunities for the government and property owners and managers to work together to provide adequate, affordable housing to citizens. Involvement in these opportunities, however, should not be mandated by any level of government, whether it be local, state, or federal. The selection of tenants and the terms of the contractual relationship are the function of the property owner or manager, not the government. Allowing certain tenants to have different (government-mandated) provisions included in their leases is unfair to all residents of the property.
There are many valid, nondiscriminatory reasons for not participating in the Section 8 program. Participation in the program requires a property owner to sacrifice many private property rights and forces the operator to comply with burdensome government regulations and procedures which can seriously compromise the performance and financial viability of a property, which may include: entering into housing assistance payment contracts, amendments of landlord's leases, and compliance with additional required regulations not normally attendant to conventional housing. IREM recognizes that some of the regulations and logistical burdens attendant to tenant-based Section 8 tenancies needlessly inhibit private participation in the program. IREM encourages HUD and Public Housing Authorities to eliminate those burdens inconsistent with conventional housing practices.
It is the position of IREM that legislation in the states mentioned in the background, directly undermine the voluntary nature of the Section 8 program set forth by the federal government. We strongly oppose any such policies that require owners of private housing to surrender their property rights.
(Adopted 11/99, updated 4/04, 8/12)
Rental Housing
In light of the recent recessionary environment, rental housing is expected to continue to be needed as the single family housing industry recovers from the market collapse of 2008. According to CB Richard Ellis, the nationwide vacancy rate for apartment buildings dropped from 7.4% in 2009 to 5.2% in 2011. In 2011 alone, rental rates jumped nearly 5%. In view of national housing growth projections and anticipated removal of dilapidated structures, our nation urgently needs to encourage the creation of additional safe, decent and sanitary housing units for a better housed America.
We call on all levels of government to meet this demand by removing disincentives to financing, production and improvement of rental housing for citizens of all income levels. In this way, solutions to the rental housing crisis are attainable without reducing homeownership opportunities or interfering in the property rights of all Americans.
(6/86, updated 11/04, 10/09, 4/12)
Housing for Low-Income Families
We support a national housing objective of affording every American the opportunity to live in safe, decent and sanitary housing which can best be served by means of a healthy housing market for all economic levels. Such a market can best be maintained by providing an adequate, continuous supply of mortgage money, at reasonable cost, for all segments of the economy and by special assistance in the form of funding workable programs for new, rehabilitated and existing housing for very low, moderate and middle-income families who could not otherwise afford such housing.
We believe that housing for low- and moderate-income rental occupants is best managed by the private sector and further recognize that private enterprise sponsorship is crucial to the successful operation of any federally assisted multifamily housing program. We encourage action by Congress to alleviate the hardships experienced by sponsors of projects for low-income residents through operating subsidies for restoring the economic viability of projects that are well conceived and properly managed.
(6/86, updated 4/05, 10/09, 9/14)
Multifamily Housing Ownership
Private ownership of real property is the foundation of our nation's free enterprise system. Every citizen has the inherent right to own property. Each citizen's right to share in the privilege of property ownership must have a preferred place in our system, publicly recognized by federal, state and local governments.
Condominium and cooperative forms of ownership are legitimate shelter resources providing important, economically attractive options for consumers. To further the goal of making this affordable form of homeownership more available, there is a need for the government agencies involved with condominium and cooperative financing to continue to streamline and update their policies.
We oppose all unreasonably restrictive requirements and moratoria regarding the conversion of rental housing units into condominium and cooperative forms of homeownership and believe that the regulation of the condominium/cooperative form of ownership should be formulated at the state level where needs can best be determined and met.
(6/86, updated 4/05, 10/09, 9/12, 9/14)
Owner-Occupant Relations
To achieve suitable housing for the entire American population, the relationship between owner and occupant should be mutually beneficial. Equity requires that any revision of owner-occupant laws must equally protect the rights of both parties. This is most important in order to attract the necessary capital investment to erect new rental housing units and to prevent the depletion of existing rental housing.
Owners of rental property should provide safe and decent housing for the needs of their rental occupants; rental occupants must recognize and accept their legal responsibility to maintain and care for the property and safety of their fellow occupants. The rights given each party under basic contract law should not be abolished to create causes of action which could be used for harassment.
(6/86, confirmed 10/06, updated 10/10, 9/14)
Tenant Participation
We discourage any legislation or governmental regulation which would ensure the involvement of tenants in the management decisions and functions of rental housing, which could undermine the viability of government-assisted housing and which is counterproductive to prudent management. We strongly question HUD's contention that tenant cooperation and participation are "essential" to the successful operation of a multifamily project. There is no evidence that tenant input is vital to the long-term financial or physical viability of a project.
(6/86)
Mrs. Murphy Exemptions
Background and Objective:
Approximately 53% of this nation's residential rental units are in buildings of four units or less and single family homes, according to data from the 2009 American Housing Survey of the U.S. Census Bureau. Frequently, these are in 3 or 4 flat apartment buildings in which the owner resides in one of the units. These units are commonly referred to as "Mrs. Murphy's." The term comes from the U.S. Civil Rights Act of 1968 and was used to describe a property owner of a limited number of units whose real estate transactions did not involve the use of a broker or agent. Approximately two-thirds of the states exempt "Mrs. Murphy's" from state and local laws governing the landlord tenant relationship and fair housing practices. It is important to note the “Mrs. Murphy’s” exemptions do not apply to rental advertising.
While the federal Fair Housing Act does contain the Mrs. Murphy exemption, state’s fair housing laws vary on whether and to what extent they recognize the exemption. Alaska, Nevada, Ohio, and Wisconsin, for example, do not recognize the Mrs. Murphy exemption in their fair housing laws. Many other states’ fair housing laws contain provisions which limit to varying degrees the applicability of Mrs. Murphy’s exemptions.
IREM Position:
IREM believes that the landlord-tenant legislation that exists across the country was put in place to protect tenants from unscrupulous property owners, both large and small. IREM also believes that fair housing legislation is designed to protect all rental tenants. The size of a rental unit makes no difference to a person victimized by unscrupulous management or housing discrimination. Essentially, "Mrs. Murphy" exemptions allow small landlords to legally deny services and benefits to rental tenants. The exemptions also allow small landlords to subject rental tenants to unfair and unsound practices that would otherwise be illegal in larger apartment buildings. The exemption allows the conduct of small landlords to be outside the scope of the law relative to discrimination against racial and religious minorities, various national origins, one’s sex or sexual orientation, disabled individuals, and families with children.
Professional property managers who are not exempt from landlord-tenant and fair housing laws face stiff penalties for non-compliance. IREM believes that all individuals who rely on the housing needs of others for income should be subject to the same laws and regulations that require fair and equitable treatment of renters and ensure decent and affordable housing regardless of race, color, religion, national origin, sex, family status, , disability or sexual orientation.
The Institute advocates the reversal of all existing "Mrs. Murphy" exemptions and urges state legislatures to apply landlord-tenant and fair housing laws to all residential property owners.
(11/88, updated 3/91, 10/07, 10/11, 9/14)
Housing Quality Standards
Background and Objective:
Managers of affordable/insured/subsidized housing must maintain certain housing quality standards in order to receive the subsidy on a unit as defined by the Section 8 Certificate Program and Housing Voucher Program. Housing quality standards require that the unit is properly provided with utility service, among other requirements and standards. If utilities are discontinued, a unit will not meet the housing quality standards and subsidy will be discontinued. Unfortunately, housing managers are not always notified when a tenant's utilities have been turned off for failure to pay. This can result in a delay in eviction proceedings and a loss of subsidy. While eviction is an alternative to having the manager pay the utilities, a period of time can exist during which the subsidy has been discontinued and the tenant is still in occupancy. In some cases, managers may also be paying for the utilities of the tenant facing eviction in order to maintain service and prevent damage to the unit from loss of service.
IREM Position:
IREM believes that it is the responsibility of a subsidized tenant, and not the property manager, to ensure that utility service is maintained in the tenant's unit by providing regular and timely payment of utility bills when service is provided directly to the tenant. IREM also believes that tenants who fail to maintain utility service present a danger to themselves and the property and should be duly and expeditiously evicted. In order to comply with the housing quality standards associated with subsidy programs, managers of subsidized housing should be notified by utility companies when the utilities of a subsidized tenant are turned off for failure to pay. IREM believes that it is unfair for HUD or other agencies to discontinue the subsidy when housing managers are not notified by utility companies and are unaware that utilities have been discontinued. When utility companies refuse to notify managers that utilities have been turned off, HUD should continue the subsidy until the tenant is duly evicted for failure to maintain utility service.
(11/91, updated 4/07, 8/12)
Combating Drugs in Rental Housing
Background and Objective:
IREM realizes that the problem of illegal drug activity exists in subsidized and conventionally financed all rental properties. IREM realizes that failure to address the problem in all types of property will only serve to shift the problem from one type of property to another. IREM also believes that to significantly reduce the problems associated with illegal drug activity, it is necessary to have a coordinated effort between all rental housing owners and operators.
IREM recognizes that an increasing number of states have passed legislation legalizing to varying degrees the use and cultivation of medical marijuana. The use or cultivation of marijuana for any purpose is still in violation of federal law. This legal conflict can pose a complicated situation for property managers. (Please refer to our statement of policy on medical marijuana for more information)
IREM Position:
IREM recommends, on a local basis, individuals spearhead the coordination of a drug awareness and prevention program with other rental housing organizations, large multifamily property owners in their area, and local law enforcement, with the objective of resolving and preventing drug abuse and other illegal activity problems in subsidized and conventionally financed housing. IREM chapters are encouraged to lobby local governments to strengthen local laws to enable landlords to evict those residents as soon as possible.
(11/91, updated 4/07, 3/11, 9/14)
Department of Defense Housing Initiative
Background and Objective:
The condition of Department of Defense (DOD) on-base housing in the 1990’s warranted a response. The on-base housing at that time consisted of thirty- to forty-year-old rental-type housing that was deteriorating in part because of inadequate maintenance. The Pentagon sought IREM's advice and opinions as an industry expert on both the pre-draft concept of the legislation and on the proposed legislation itself in 1995. The Institute submitted official comments to the Pentagon based on extensive concerns presented by the IREM Legislative Policy Review Subcommittee (now known as the Legislative and Public Policy Committee).
Congress established the Military Housing Privatization Initiative (MHPI) in 1996 as a tool to help the military improve the quality of life for its service members and families by improving the condition of their housing. The MHPI was designed and developed to attract private sector financing, expertise, and innovation to provide necessary housing faster and more efficiently than traditional Military Construction processes would allow. The MHPI Military Services are authorized to enter into agreements with private developers selected in a competitive process to own, maintain, and operate family housing via a fifty-year lease.
MHPI addresses two significant problems concerning housing for military Service members and their families: (1) the poor condition of DOD owned housing, and (2) a shortage of quality affordable private housing. Under the MHPI authorities, DOD works with the private sector to revitalize military family housing through a variety of financial tools including direct loans, loan guarantees, equity investments, conveyance or leasing of land and/or housing/and other facilities. Military Service members receive a Basic Allowance where they can choose to live in private sector housing, or privatized housing. The amount of money that must be allocated for the MHPI depends on the scored cost of the projects that have been approved for a given fiscal year.
In March, 2012 the Department of the Air Force entered into a deal that would develop housing in various regions around the U.S. The project will take roughly five years to develop and cost roughly $362 million and will conclude with the renovation or construction of roughly 3,260 housing units.
IREM Position:
The Institute of Real Estate Management supports the Department of Defense (DOD) working in conjunction with the private sector to provide affordable on- and off-base housing to military personnel and their families.
Through cooperative agreements and/or joint ventures with the private sector, military personnel is provided better quality housing at less cost to the government than if they had constructed additional military housing independently. Working with the private sector not only saves taxpayer funds; it also puts money back into the local economies surrounding military installations.
Working in conjunction with the private sector also allows for unit sizes to be determined based on local needs and markets, making the properties available to conversion to civilian housing, if the military installation shrinks or closes. Federal private sector endeavors such as this are a positive solution to the present need for increased quality housing as more families are assigned to existing bases in reaction to recent base closures. Not only does it reduce required military housing staff, it also opens up opportunities for private sector investments.
The Institute would prefer the legislation to be amended to address the following views and concerns of Institute members:
1. Establishing Year-Round Leases to Guarantee Rental Income in Unexpected Deployment or Transfer
The private sector may have a difficult time agreeing to long-term leases with DOD, based on past base closures' effects on the industry. An exception would be for wartime/emergency deployment or transfer of military personnel with short notice. IREM believes that in times of war and unexpected deployment of U.S. military forces for national defense, a thirty-day minimum written notice to vacate is a privilege that should be offered to military personnel. Legislation mandating this privilege should specifically state that this minimum notice can only be invoked by military personnel who are called to serve or are transferred in times of war or unexpected military deployment and who then present the landlord with military documents so ordering the assignment of transfer.
2. Concern Regarding High Tenant Turnover
The property management industry is concerned that, due to the transient nature of military personnel and their families, occupancy of DOD-assisted housing will not be guaranteed. High turnover is also a factor in operating costs, and allowable rental rates should reflect the transitory nature of military personnel. Lease safeguards should be provided to protect property owners from forced or sudden vacancies due to deployment or personnel transfers. There is also concern that future base closures would render a devastating economic loss to property owners and communities who partake in joint DOD housing ventures.
3. Rehab and Restoration Less Costly than Creating New Buildings
Restoring and improving existing housing to acceptable living conditions may be more practical and economical, and presents less risk to investing private property owners during the uncertainties of the military draw-down. All levels of government should cooperate in exploring creative avenues of code compliance for rehabilitative housing. IREM particularly supports rehabilitation and renovation of existing military housing and HUD housing; it is cost-efficient and may add 25 to 35 years to the life of older properties.
4. Insurance Provided by the Federal Government
The federal government should be responsible for providing mortgage insurance coverage for private sector-DOD properties. Property and liability insurance should be a cost of the project owner or owners and borne as a component of the rent.
5. Ownership of Private Sector-DOD Properties
The Institute opposes government ownership of DOD-private sector properties and believes the private sector should be responsible for maintaining ownership and control of the concerned properties. The federal government should lease the properties or use loan guarantees or other incentives, such as tax credits and bond financing. The result of private ownership of concerned properties is savings incurred by DOD and FHA.
(11/01, updated 4/07, 10/07, 3/12)
Mark-to-Market HUD Multifamily Portfolio Re-engineering
The Institute of Real Estate Management (IREM) generally supports the concept of debt reduction combined with restructured rent subsidy levels on FHA-insured projects which receive project-based assistance in order to reduce the federal government's escalating long-term costs of maintaining such programs and to achieve debt reduction and reduced federal spending. However, our support for the so-called "mark-to-market" process is contingent upon the preservation of viable existing affordable housing opportunities for low-income families and individuals, limits on tenant dislocation, and protections of the rights of project owners and managers.
IREM believes HUD-assisted portfolio re-engineering should be conducted with the following principles in mind:
The federal government should be responsible for ensuring the maintenance of the stock of properly-operated Section 8 low-income housing. Private investors would have neither created nor maintained the valuable Section 8 housing resource were it not for the proactive involvement of the federal government. HUD's desire to abruptly end its commitments to these programs represents a profound change in the delivery of low-income housing and could result in owner disinvestment and tenant displacement.
Neither the private sector nor state and local governments are necessarily equipped nor willing to accept responsibility for preserving this valuable housing stock created by federal programs. For HUD to abandon these projects would be irresponsible and unfair to tenants, owners, managers, and the surrounding communities. IREM believes the federal government should maintain its commitment to these programs in a manner conducive to achieving reduced spending and limited bureaucratic interference.
Section 8 rental subsidy contracts should be abrogated. "Mark-to-Market" activities should coincide with contract expiration and should be conducted with the consent and cooperation of project owners and managers allowing for consideration of unique physical and financial project characteristics. Upon Section 8 contract expiration, projects should have the option to convert to conventional housing at the owner’s discretion. The physical and financial condition, tenant make-up, local government affordable housing plans, and community characteristics should all be factors in determining the future of the project.
"Mark-to Market" should be limited to Section 8 New Construction/Substantial Rehabilitation (NC/SR) projects whose contract rents are higher than local prevailing rents for similar housing units. Section 8 project-based contracts on older assisted properties are the first contracts scheduled to expire. Nearly half of these older assisted units (Loan Management Set-Aside Units) are occupied by elderly and disabled residents. Rent levels for these units are generally below market rent. Marking up to market rent level produces no cost savings to the federal government and provides no benefits to tenants, owners, managers, or communities. Residents face being priced out of such units if rents are raised.
Mark-to-Market should be limited to NC/SR projects whose rents, through no fault of the owner, are above market rent levels and whose contracts begin to expire in 1998. This group of projects is the most suitable candidate for mark-to-market due to their anticipated ability to survive after experiencing debt restructuring coupled with rent reduction.
Project-based Section 8 assistance should be maintained. Owners should be allowed to determine whether project-based or tenant-based assistance shall be provided after debt restructuring. While IREM supports a reformed tenant-based rental assistance program, we are opposed to the total elimination of project-based housing assistance which would prove detrimental to many existing projects, cause tenant dislocation, and discourage future development of additional low-income housing units.
It is unclear how savings will be achieved by converting project-based assistance to tenant-based subsidies, especially after rents are adjusted to reflect market rent levels. IREM members' experience reveals that tenant-based subsidies actually cost more than project-based assistance to administer. At best, there is not significant savings with the use of certificates and vouchers versus project-based assistance. Overly-bureaucratic requirements associated with existing certificate and voucher programs have resulted in owners choosing not to participate, further limiting housing options for low-income individuals and families.
The project-based subsidy has traditionally provided unique housing opportunities for low-income tenants. Many projects offer special services and were designed to meet the housing needs of special populations like the elderly and disabled. Such housing accommodations are unavailable or cost-prohibitive in the private rental market. In addition, lenders will choose not to participate in project debt restructuring without the guarantee of project-based assistance attached to housing units.
FHA mortgage insurance should be provided on restructured mortgages. FHA mortgage insurance is essential for financing projects whose cash flow is supported by HUD rental subsidies. Private mortgage insurers have chosen not to participate in subsidized housing projects in the past due to the perceived risk associated with such housing. Investors and private mortgage insurers will be increasingly unwilling to participate in deals involving federal government subsidies due to the uncertainty of the future of such funding.
Owners should be protected from adverse tax consequences associated with mark-to-markets. Depending on how debt restructuring is accomplished, owners may face significant tax consequences associated with mark-to-market. "Cancellation of indebtedness" income tax penalties may apply to owners of projects whose debt is restructured. HUD should work with Congress to fashion legislation that protects owners from "cancellation of indebtedness" income treatment before any mark-to-market process is begun. Alternatively, mark-to-market should be conducted in such a manner to avoid any negative tax implications for project owners. Absent protection from adverse tax treatment, owners will resist participation in mark-to-market and/or will undoubtedly engage in litigation to achieve such protection.
Mark-to-market demonstration projects should be conducted to test various debt restructuring methods. IREM supports the concept of a mark-to-market demonstration program like that included in the FY 1996 VA, HUD and Independent Agencies Appropriations bill. The demonstration, conducted on a limited number of varied projects, would allow for an examination of the results of this untested concept. The uncertainty of the results of mark-to-market is partly responsible for the concern expressed by all stakeholders. Demonstration projects will allow for program adjustments and will help build support for mark-to-market.
HUD should use available tools to identify and sanction "bad" owners. IREM believes the vast majority of project-based Section 8 apartments is properly managed and provides safe, decent and affordable housing for low-income individuals and families. An inordinate amount of negative publicity associated with a small portion of the entire project-based portfolio has skewed the perception of privately-owned, federally-assisted affordable housing projects. HUD currently has the authority to bring appropriate sanctions and penalties against owners and managers who fail to properly operate their properties. However, in many instances, the Department has failed or has been slow to use these tools to protect residents from poorly performing owners and managers.
IREM members have a great interest in the maintenance of HUD-assisted multifamily housing programs which were created to provide quality housing to the nation’s neediest citizens. We believe this goal will only be achieved through the provision of proper, ethical and professional property management of the existing housing stock. We look forward to working with HUD to ensure the continuation of successful federal affordable housing programs.
(2/96, Updated 4/08)
Pets in Conventional Housing
Background and Objective:
The right of conventional and non-elderly subsidized housing owners or managers to elect whether or not to accept pets and set the terms for acceptance has been an issue to IREM and its members for decades. Federal law, as it applies to federally assisted elderly housing, was enacted in the late 1970's. This statute mandates the acceptance of pets under certain conditions.
Recently, some advocacy groups have focused on attempting to encourage owners to accept pets on all types of rental properties. Some municipalities have passed ordinances requiring that landlords cannot enforce no-pet policies for other types of rental housing, not just federally assisted.
It should be noted that, under the Federal Fair Housing Act, service animals for disabled individuals are not considered pets, and as such, “No Pet” policies do not apply, and pet fees cannot be charged.
IREM Position:
IREM believes that rental property owners and managers should retain their right to determine pet policies for each rental property on a property specific basis and that these policies should not be mandated by municipalities or other governmental bodies. Legitimate reasons exist for private property owners to choose to not have pets on their properties. The safety of residents and the quiet enjoyment of their home may be materially jeopardized by the presence of pets under a variety of scenarios. First, common household pets increase the normal and customary wear and tear on a rental unit. Second, apartment residents do not always control their pets and properly dispose of animal waste. Even carefully controlled and well-behaved pets increase the maintenance costs of a unit, often through harm to the walls and floor covering/floors, and increased incidence of fleas and other pests, both during habitation by a resident and after the resident has moved. Furthermore, many people have pet-related health issues such as allergies and cannot live in an environment that allows pets. Owners and managers of rental properties have to be able to provide people with pet-related health issues a safe, pet-free environment in which to live.
Finally, there are liability and property rights issues to consider. The presence of pets in rental housing can result in increased tort risks to the owner and manager. Primary are the costs of liability incurred by an owner or manager because of the possibility of injury to a resident or visitor to the property by a pet. Tenants, guests. and others have sought damages from the owners and managers whom they allege know, or should have known, of a pet's vicious tendencies. In addition, injury to a pet may need to be covered by the owner or manager's insurance as well.
IREM acknowledges the positive impact pets can have on an individual's life, However, IREM also understands that not all individuals choose to have pets or live in rental properties that allow pets. IREM strongly believes in the legal right of the property owners to determine whether or not to allow pets into a multiple unit rental property. Because of this, IREM opposes any legislation that requires owners or managers of rental property to allow pets in their units.
(1/00, confirmed 4/08, 10/11, 9/14)
Secondary Mortgage Market for Multifamily
Background and Objective:
As Congress considers the future of the Government Sponsored Enterprises (GSEs, ie Freddie Mac and Fannie Mae), much of the focus is on the future of single-family mortgage finance. But the GSEs also securitized nearly $2 trillion in multi-family loans; which have not experienced the dramatic losses seen in the single-family portfolio.
Even during the recent economic downturn, multifamily loans are performing well. Delinquencies are below 0.8% for Fannie Mae and 0.3% for Freddie Mac. This is less than 1/6 the single-family delinquency rate.
Private capital is necessary for the continued stability of this housing sector, but without a government guarantee, this capital cannot be sustained. The government’s role is needed to be sure that there is a stable, counter-cyclical, and affordable source of capital for affordable, and market-rate rental multifamily housing nationwide.
In May, 2014, Senators Tim Johnson and Mike Crapo introduced legislation which would require Fannie Mae and Freddie Mac to spin off their multifamily businesses into subsidiaries within one year of enactment, with the ultimate intention of these subsidiaries becoming stand-alone businesses. Also, Johnson-Crapo would wind down Fannie Mae and Freddie Mac, and replace them with a Federal Mortgage Insurance Corporation. Within the FMIC would be an Office of Multifamily Housing.
Comprehensive GSE reform is an ambitious goal which will require an enormous amount of political will, effort, and most of all, time. As such, Johnson-Crapo passed the Senate Banking Committee without overwhelming support, and GSE reform legislation may not be called for a vote until the next administration. However, the Johnson-Crapo bill is an encouraging sign that legislators recognize the differences between single-family and multifamily in the secondary mortgage market.
IREM Position:
The secondary mortgage market is critical to the stability of the multifamily housing, and necessary to continue to meet the ongoing demand for rental housing. Apartments house more than 15 million American families. The GSEs have provided liquidity in this market and allowed housing providers to keep up with demand for rental housing.
IREM believes the role of the government in the secondary mortgage market is necessary for a liquid, fully- functioning mortgage market for multifamily properties. There is a need for a multifamily conduit and alternative sources of multifamily underwriting and mortgages.
Adopted 4/11, updated 9/14
Management and Occupancy Review (MOR)
Background and Objective:
Project Based Section 8 properties are required to be reviewed annually by the Performance-Based Contract Administrator (PBCA). The reports, called Management and Occupancy Reviews (MORs), include a look at general appearance; security; follow up from inspections; maintenance and operating procedures; tenant files; leasing processes; and document review. Within 30-days a completed report is sent to the owner/management agent.
IREM members have used these reports for internal processing and to improve performance. They are also used to demonstrate to Congress that the HUD portfolio is well managed so as to ensure continued support of the program.
IREM Position: IREM believes that MORs are an important part of the management review process. MORs help the performance of a property and demonstrate strong management operations and areas for improvements. They are also helpful in demonstrating to Congress that the HUD portfolio is well managed so as to ensure continued support of the program. HUD should ensure that MORs are conducted on a regular basis, and reports provided to owner/managers in a timely manner.
(Adopted 10/12)