Update from the National Apartment Association: On the Omnibus Appropriations Package

Written by Apartment Management Magazine on . Posted in Blog

The Omnibus appropriations package has been a topic of discussion in the news for several months. The bill, which has passed both the House of Representatives and Senate is now on its way to the President for his signature. There are several elements of interest to housing providers within this legislation which are summarized below.

Omnibus Federal Funding Bill is “Mixed Bag” for Rental Housing Industry

The Omnibus Appropriations Package passed by Congress is a $1.7 trillion fiscal 2023 government funding package (the Omnibus). The National Apartment Association (NAA) achieved several victories in this legislation, but as often happens with massive spending packages like this, we did not get everything we wanted.

  • New “YIMBY” Demonstration Project Funded

Although Congress failed to pass the “Yes in My Back Yard (YIMBY) Act,” they did provide $85 million for a new, first-of-its-kind competitive grant program based on the YIMBY Act that will reward state, local, and regional jurisdictions that have made progress in improving inclusionary zoning practices, land use policies, and housing infrastructure to increase the supply of affordable housing. Some specific examples include increasing density, reducing minimum lot sizes, creating transit-oriented development zones, or streamlining or shortening permitting processes, among others. Additionally, the bill directs HUD to issue best practices for local, state, and regional agencies to improve such opportunities. Action on reducing local barriers to the development of housing has been a top priority for NAA in the last two Congresses.

  • The National Flood Insurance Program Lives On

In another win for rental housing, Congress reauthorized the National Flood Insurance Program (NFIP) for one year until September 30, 2023, another important request made by NAA and many others in real estate. The NFIP helps share the risk of flood losses and reduce damages for policyholders.  NAA and our members from states where flooding is more pervasive advocated for the extension of the program and a long-term reauthorization which would include industry-recommended reforms. Unfortunately, those reforms were not included in the extension of the program. That is a fight the industry will take up again in the New Year as we continue our efforts to ensure the program remains accessible for our members and work towards securing improvements.

  • Tax Provisions Largely Left on the Cutting Room Floor

Despite furious lobbying efforts by many industries, tax policy largely did not make the cut for this Omnibus package. This means that several harmful revenue raisers, actively opposed by NAA, were not part of the package. These include increasing ordinary income and capital gains tax rates, taxing carried interest as ordinary income and curtailing like-kind exchanges.

Unfortunately, this also means that several tax proposals supported by industry were not part of this legislation. These proposals include expanding the Low-Income Housing Tax Credit, extending current law allowing apartment firms to immediately expense 100% of the cost of certain assets instead of depreciating them, and changing the limitation on deductions for interest expense from 30 percent of EBIT (earnings before interest and taxes) starting in 2022 to 30 percent of EBITDA (earnings before interest, taxes, depreciation, and amortization). The outlook for these proposals remains unclear in the 118th Congress, but we will be looking closely at advocacy opportunities for all of them.

  • Last Minute Attempt at Limiting Multifamily Access to H-2B Visas Defeated

NAA was among the many industries urging Congress to increase the overall number H-2B worker visas for construction employers and others to help address the labor shortage in multifamily. After negotiations between labor and business failed to produce an agreement, several organized labor groups attempted to insert language doing this for certain industries but reducing access for construction and multifamily, specifically.  An impromptu alliance of construction groups, including NAA, opposed this proposal, mobilized over the last weekend and defeated the effort.

  • HUD / FHA Programs See Increases in Funding

The bill reauthorizes $58.2 billion for U.S. Housing and Urban Development (HUD) programs including multifamily lending programs, rental assistance programs and grant programs. Notably, it increases funding for Section 8 Housing Choice Vouchers by $130 million, enough to support 12,000 new vouchers. Other funding includes:

  • 32% increase in funding for the Community Development Block Grant and related economic and community development programs to $1.55 billion,
    • $14.9 billion for Project-Based Rental Assistance, including an additional $1.0 billion for emergency funding,
    • $1.5 billion for HOME, the same as in fiscal year 2022, and
    • $3.6 billion for Homeless Assistance Grants, $420 million above fiscal year 2022.
  • Federally Assisted Property Fire Alarm Requirements Added Despite Industry Concerns

The Omnibus Package also includes fire-alarm requirements for federally assisted properties.  Specifically, the provision mandates that existing buildings use a 10-year battery in their alarms and use alarms that meet new requirements for people with hearing loss. Currently, no such product exists that meets both requirements. NAA understands the goal of this legislation to provide reliable smoke alarms in federally assisted housing, especially for those experiencing hearing loss. However, we have and continue to raise serious concerns with the cost-effectiveness, technical feasibility and product limitations of the alarms required in the bill. We are working with our coalition partners and lawmakers to address these issues.

This legislation is over 4,000 pages and we will continue to review it for other items impact rental housing providers. Look for further analysis of the bill in the future. Meanwhile, NAA continues its federal advocacy efforts to advance the rental housing industry’s priorities and promote responsible and sustainable housing policy solutions. Contact me for more information about the measures above or NAA’s federal advocacy generally.