Capitol Update: What Events in Washington Mean for the Apartment Industry

Dear Apartment Industry Colleagues,

When he eventually pens his memoirs, it is safe to say that the President will not look upon the spring of 2013 with much fondness. The White House now fights an investigations and public relations battle on three fronts – more questions about the Administration’s handling of the attacks on the U.S. Embassy in Benghazi, revelations about Department of Justice subpoenas of phone records from Associated Press reporters and apparent targeting at the Internal Revenue Service (IRS) of tea party organizations.
 
It is still to be determined what any revelations from these investigations may mean for the President or anyone in his administration. What is already known, however, is that these events give his opponents on Capitol Hill an excellent opportunity to place him on the defensive and weaken his ability to press forward on any overall policy agenda. Ironically, the outrage at the events was very bipartisan – Democrats and Republicans alike excoriated past and current staff of the IRS about their conduct as it relates to conservative non-profit organizations.
 
So what do these events mean for the apartment industry? These particular incidents reinforce many widely held views among members of the tea party, similar organizations and those in Congress who share their viewpoint. That is, the federal government in general cannot be trusted, nor can this President, in particular, who leads it. That increased distrust undermines the willingness of Congress to work with the Administration on important issues and chances get pretty slim (they’re already on the last notch of the belt) that anything gets done. That includes movement on issues of concern to the apartment industry.

But all of that said and despite the distractions of hearings, somber speeches about another Watergate and general gnashing of teeth, some members of Congress still want to actually legislate in a bipartisan manner. Case in point – immigration reform. This month the so-called “Gang of Eight” bipartisan group of Senators took a critical step forward by getting their carefully crafted immigration reform compromise out of the Senate Judiciary Committee unscathed. The Committee spent over a week marking up the bill and the members of the Gang of Eight on that Committee fended off all manner of destructive amendments that would have effectively killed any chance of the bill passing the Senate. This meant Republicans voting against amendments from other Republicans and Democrats holding back on offering amendments of great importance to their constituencies. It was an impressive display of courage and restraint.

Meanwhile, in May we received our first reports of impacts from the federal budget sequestration on apartment owners; specifically those who participate in the Section 8 program. As expected, budget cuts in the program filtered down to local Public Housing Authorities (PHAs). Different approaches are being taken by PHAs to respond to this shortage – reducing voucher expenses through attrition, for example. In at least two cases we know of, however, the PHA attempted to impose a reduction in the payment standard for project-based Section 8 contracts. Further, tenants could not be required to make up the difference. If the owner did not agree to that reduction the contract would be cancelled. For those of you who may encounter this, know that there are specific rules about how and when PHAs are allowed to make this kind of change. Also, there are a number of resources put in place by HUD to help PHAs respond to budget shortfalls.

Summer’s here. Stay cool and don’t forget your sunscreen. As always, contact me if you have questions, concerns or just a viewpoint to share.
 
Greg