Legislative Updates

Beware the Lame Duck: With the off-year elections wrapped up, many elected officials will have at least a month or so to pass legislation before exiting or renewing their term of office. It is not uncommon for unfavorable legislation to pass during this time frame. Please keep an eye on end-of-year bills! The SEC & Junk Fees: On October 3, 2023, the Securities and Exchange Commission (SEC) announced a proposed rule that would require publicly traded companies to disclose more information about the junk fees they charge their customers. The proposed rule is part of a broader effort by the SEC to protect investors from unfair and deceptive practices. While the proposed rule is still in its early stages, it could have a significant impact on housing providers. The SEC is determining if these are all junk fees: late fees, application fees, and move-in fees. The SEC's proposed rule would require housing providers to disclose more information about any fees they charge, such as the amount of each fee, the frequency with which it is charged, and the conditions under which it is charged. Ideally this information would help tenants to make more informed decisions about whether to rent a particular unit. The goal of the proposal is to increase transparency, competition, and scrutiny, with the hoped-for impact of lowering the cost of housing overall. With SEC enforcement, real or threatened, it is likely the only cost that will change will be the payments to lawyers. In the meantime, please make sure your lease is clear on all fees, so your business doesn’t get junked! Seller Finance Coalition Virtual Event on December 14, 2023: Working with the Seller Finance Coalition for the past several years, National REIA is glad to share a value laden fundraising effort being promoted to help fund the lobbying campaign and push HR 3464 through the legislative process! This one-day event will feature 7 sessions that are not watered-down 'up-sell' presentations you might find at some events. These are content-rich sessions with techniques the speakers use. They will be sharing personal strategies related to: • Discover how to make owner financing work for both buyers and sellers. • Tips for safe seller financing to create notes that consistently perform. • The due diligence techniques successful note investors use on each transaction. • How to expand lending options and provide access to affordable homeownership and much more! For more information, please visit sellerfinancecoalition.org/event. Malvertising: Please make sure your virus protection is up to date and be alert to fake Windows advertising & emails regarding discounts and deals available this holiday season – these sites can insert malware into your computer to either take over your system as ransomware or steal critical financial data from you or your clients. Racially targeted hacking: Iranian-based hackers are targeting publicly known companies of Jewish individuals…if you are or may be confused with a Jewish-owned company, please take extra precautions with any online activities.

Federal Flood Insurance…Good news!

In positive news from the US Government: HUD Secretary Marcia Fudge in conjunction with the Federal Housing Commissioner Julia Gordon have lifted the requirement for Federal Flood Insurance only for FHA-insured mortgages.  This is a great step forward for citizens and consumers in FEMA designated flood zones.  HUD Secretary Marcia L. Fudge stated, “Flood insurance is required to ensure families and individuals are prepared if disaster strikes. Increasing consumer options for this important protection is one way we are building more resilient communities in the face of climate change.”  While insurance might not be the best form of resiliency, it will definitely help bring market forces to bear on FHA-insured mortgages and could greatly assist struggling buyers.  As a personal example, the Federal Flood Insurance proposal for a project of mine was estimated at $27,000 annually.  The private market offered it for $1,200.  Apples to apples.  Thank you, Secretary Fudge and Commissioner Gordon!

Rent Control:

Wherever rent control is tried, it has failed spectacularly.  It is the short-sighted solution to a long-term problem that eventually exacerbates the housing undersupply and increasing disinvestment, all without helping those it supposedly is intended to assist.  Much like the proverb, housing undersupply that local elected officials inherit from their predecessors must be addressed now.  Delaying the development helps no one and hurts many.  Please reach out to local elected officials and leaders in a coordinated effort to offer stakeholder experiences and advice!

The best time to plant a tree was 20 years ago.  The Second best is now.  – Chinese Proverb

Stay up to date:

Stay up to date with current industry news and updates by visiting RealEstateInvestingToday.com.  Likewise, visit NationalREIA.org/advocacy to stay up today with current legislation and governmental actions.

Legislative Updates: Quarter 4-2023

Insurance costs are going up! Insurance costs have been going up across the nation, especially in hurricane and flood prone areas. Prepare by searching for insurance options early, as several states have been losing providers, and with fewer options, prices continue to increase. Consider increasing the deductible if you have cash on hand. And for flood insurance, ask about discount options. Are you a veteran? Have mitigation efforts been employed? And if you are buying outside your normal area, be sure this information is truly calculated into your due diligence!

On the other hand, rents seem to be stabilizing across the country – markets and especially micro-markets run the spectrum of increases and decreases. Knowing the difference in rent 2-3 city blocks can represent could mean a huge difference in pricing and value of the property. Longer term leases are being employed by some savvy housing providers and requested by residents who know they are in for the long haul. While financing companies like to see those longer-term leases, be sure to look at the whole picture to determine which options are best for each property!

HUD funding $85M to cities to revamp local zoning laws – more housing friendly: get involved! As part of a July role out and update to the White House’s Blueprint for Renter Rights, various departments have initiated new programs. HUD’s funding of $85M to local municipalities furthers the White House effort to expand housing supply promoted in 2022 through higher scores when applying for federal grants, expansion of Accessory Dwelling Units (ADUs) and redevelopment of commercial buildings into residential facilities. The funding will be available to local governments who can and are willing to:

• Reduce barriers to building housing, like restrictive and costly land use and zoning rules.
• Expand financing for affordable, energy efficient and resilient housing.
• Promote commercial-to-residential conversion opportunities, particularly for affordable and zero emissions housing.

So, cities, villages and townships will likely be reviewing their zoning laws? Great. Consider this a wonderful opportunity for local investors, especially ones who invest in their own community(!) to make themselves available to stakeholder groups that will participate in the review and likely redevelopment of the zoning laws. Aside from knowing where the changes will most likely impact – knowledge of real value – the relationship development for the individual and the local REIA can be game changing. This is the ground-floor planning of the community you are investing in, how much more of a pulse of the community could you possibly obtain?

Halloween decorations are out! Once Labor Day passes, the scary stuff starts hitting the shelves in September and October around the country. On the streets it is no different as off-year elections bring out local candidate of every stripe for the election in November. While there are 3 states with executive branch elections, primarily local elections will dominate. Overall, there will be more than 5,000 local positions open – from Trustees and Councilmembers to Alderman and Mayors, and many of those will be contested races. These positions may be long term influencers or a stepping-stone to higher office – but make no mistake, they will have influence. Will you? Candidates are the most impressionable right before an election! Engage with them because the anti-housing side will be there. The anti-property rights groups will…Will you?

Legislative Update-Spring 2022

By Charles Tassell

The first scheduled interest hike is in March, with the Federal Reserve forecasting at least two more during the year. This first one is expected to be .5%, but there are no guarantees. Nor are markets sure what to expect from future raises, or if there may be even more. To further complicate the issue is Russia’s invasion of Ukraine. The impact on commodities, especially wheat, oil and natural gas when the logistical backlogs were starting to slow, could be dramatic. As of this writing, it is still unknown. What is known is that COVID and COVID-fatigue are creating a spring of growth for 2022. That is if one can find employees! The Great Resignation, in part due to Boomers aging out and in part due to those who have determined there is something better for them – especially those seeking remote and hybrid options, is still in full swing. However, what is entirely missing and may yet change the calculus are the myriad of service workers who have given up on work/employment and shifted to gig-employment as needed, and if needed. Their expectations have been lowered to such a degree that a small but regular government check seems better than the drudgery of dealing with the public in their former service roles. This missing group and its possible return may be the difference between chasing inflationary pressuring wage hikes and a stable but increasing GDP benefitting all. In the summer of 2020 I was in a meeting with council members, mayors and city managers who were discussing the various COVID era grants and how the funds should be spent, when the discussion turned to documenting those expenditures. The real concern wasn’t even the documentation but if the categorization was incorrect, would the municipality, and therefore the taxpayers be on the hook for the expenditure, with a mandatory repayment. Or in true IRS fashion: interest, fines, and interest on the fines! While the feds and many governors were calling for the funds to be spent, many local level elected officials were rightly concerned. Business owners should be concerned as well, not only for the potential liability of the municipality where they pay taxes, but also because the Small Business Administration is seriously focusing on PPP and EIDL grant/loans. Auditors are sharpening their pencils as careers will be made auditing the expenditures. PLEASE make sure your documentation is correct. IF you have concerns, call them before they call you. Like a police officer, if they have to chase you down, well…you are going to pay! Legislative Log Jam With the mid-year election cycle coming this November there will be an increasingly disparate and shrill call that things are either doing much better or far worse than reality, depending on whose interests are of concern. Word of advice: seek balance and truth early and often, as they will be harder to find as the year progresses. Then breathe deep before making decisions…International conflicts will further complicate the decision process. Be sure to check out the Advocacy tab on NationalREIA.org website. Here, as part of our bill tracking, you find a listing of bills introduced and ongoing across the country. With over 5K rental property related bills alone, your state is probably considering doing something (detrimental) to your business! For example, there are: • 32 bills on abandoned housing • 219 bills on house rehabbing • 66 bills on housing preservation • 13 bills on property maintenance code • 3,632 bills on business licensing • 124 bills on real estate inspections • 5,431 bills on landlord issues / property management A word to the wise: Speaking of International conflicts… The ramifications of those conflicts could show up at a computer near you. Every computer-protection firm and various branches of the government are warning businesses to back-up and lock down their computers. Consider the time lost to rebuilding a hacked and locked file system vs a 100 Terabyte(!) back-up hard drive. And if you are not sure how to do it, hire a teenager for $100 and watch the magic! (When they ask if you want regular back-ups with alternating overwrites, say “yes.”) For perspective, there are several websites that show the active level of hacking threats, botnet threats and other more nuanced efforts, such as: https:// securitycenter.sonicwall.com/m/page/ worldwide-attacks. However, in cyber protection efforts, it is important to understand that with all the hacks and leaks out there, inevitably accounts and pcs will get hacked. How prepared you are for them, how quickly you respond and are able to bounce back may well speak to the viability of your business and your sanity! HUD Update: HUD’s Moving to Work program expands as it marks 25 years in existence. 29 Housing authorities have been added to the program, with little said about past success, in part because of the lack thereof… HUD-FHA in an effort to help singlefamily owner occupants, has extended the purchase time for single-family homes that have been “taken back” (nice phrase for foreclosed: yes, they still do that!) by one of the quasi-governmental mortgage housing funders and insurers. The extension will expand from 15 to 30 days as of March 1st. The unintended consequence being that every municipality and next-door neighbor who has been hoping to get these vacant and often damaged homes back on the market will now wait an additional two weeks for an investor to buy the property, fix it up and place it back on the market. This is another example of the government fixing a problem that was not broken. In the general marketplace singlefamily homes can be sold with multiple offers before even hitting the market! Yet, somehow these often highly problematic homes need an additional two weeks sitting on the market because America’s 1.5+ million real estate brokers somehow cannot find them in the first two weeks! The reality is that these properties often need substantial repairs and /or updates beyond the loans offered by the GSEs, not to mention a level of sophistication to get work done properly, that the general public would rather avoid. However, after an investor re-capitalizes the property and makes it habitable again, they do sell – and everyone benefits. The extension is an example of feel-good policy with poor results. HUD has significantly increased funding for testers and fair housing violations – please make sure you and your business are up to date on ALL fair housing requirements. This is especially true for reasonable accommodation requests. The housing industry is quite familiar with the highly abused issue of companion animals (not pets!) and a mistake or misstep can cost thousands of dollars. It’s a new year with a federal administration that is still settling in, so please take an updated fair housing class! Besides, with local, state and various federal programs having potential jurisdiction, not to mention all the bad advice and misinformation on the internet, a professional in the housing industry really does need to stay up to date on these issues. Many cases I am familiar with result in misunderstandings of rights on both sides that should have been resolved early on, but personalities and stubbornness resulted in litigation rather solution-seeking. Please don’t let a lack of knowledge cost your company or your reputation. Charles Tassell is the Chief Operating Officer