Regulatory Reform Rolls on With Wins for Multifamily

By David Kay lead — Copyright: David Kay

Since the Trump Administration came to power in January 2017, regulatory reform efforts have been front and center. Not since 2001, under former President George W. Bush, has more been done to slow the regulatory regime in Washington. Both Congress and the Administration have been hard at work looking for ways to slow, rescind, or completely repeal a host of regulations that hamper economic growth and job creation. NMHC/NAA have leveraged this momentum to secure significant victories for the industry that will make it easier for apartment owners, developers, managers, and financiers to operate their businesses invest in new projects and expand hiring. As more Presidential nominees are confirmed and take their seats at the agencies, we will be able to increase our focus on many of the issues that we have identified on our list. However, below are some of the regulations that NMHC/NAA asked policymakers to review and that have been addressed so far, either by Congress or via Executive Branch action:

Energy Benchmarking

HUD issued a proposed regulation that would require every FHA multifamily loan to track and submit energy benchmarking data through EPA’s ENERGYSTAR Portfolio Manager. NMHC/NAA has argued the proposed regulation would be an administrative burden for owners, drive up their servicing costs. In many cases the information is not available and owners could be restricted from borrowing from HUD if the data is not reported. In July 2017, in a meeting with HUD they informed real estate industry representatives that they plan on suspending the rule and its mandatory reporting energy benchmarking requirement for HUD assisted properties and is voluntary for those properties using green MIP.

Waters of the U.S. Rule

The Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) issued a rule intended to clarify the scope of the waters regulated under the federal Clean Water Act. This far-reaching “Waters of the U.S.” (WOTUS) rule would significantly increase the costs and time associated with permitting requirements, provide greater opportunities for citizen lawsuits and essentially federalize local land use planning. The Trump Administration issued an Executive Order requiring EPA to re-write the WOTUS rule. The EPA administrator has signed a directive implementing the Executive Order to repeal the current rule and develop a replacement. Congress is expected to consider draft measures that would more narrowly define the term “Waters of the U.S.” later this spring. NMHC/NAA will continue to aggressively advocate for a Clean Water Act that protects private property rights and the quality of the nation’s waters.

Small Area Fair Market Rents (SAFMRs)

HUD finalized a rule implementing Small Area Fair Market Rents (SAFMR) which establishes rent rates by ZIP Code. NMHC/NAA and the real estate industry oppose the use of SAFMRs/ZIP codes as a substitute for real estate markets in setting rents. HUD has suspended the final rule for two years (except for the Dallas-Plano-Irving Metro Division), while additional research is being completed.

Federal Flood Risk Management Standard

The Department of Housing and Urban Development (HUD) proposed a rule to expand its floodplain management oversight to increase disaster preparedness and flood resiliency of federally funded buildings and projects. While well-intentioned, NMHC/NAA asserted that the rule went beyond its originally intended scope and sought to apply the new, costlier standards to FHA multifamily projects that are simply insured by the federal government as opposed to funded. President Trump issued an Executive Order that rescinded this proposed rule.

High Volatility Commercial Real Estate (HVCRE) Standards

Federal regulators have produced a number of regulations and standards that constrain capital flows to the multifamily sector. Among those are Dodd-Frank risk-retention rules and Basel III capital standards, both of which impact how financial institutions must treat the multifamily debt they hold and originate. NMHC/NAA supported bipartisan legislation - H.R. 2148 - that clarifies and modifies the HVCRE rules to ensure that they are appropriately calibrated and do not impede credit capacity or economic activity, while still promoting economically responsible commercial real estate lending. On October 11, 2017, H.R. 2148 passed the House Financial Services Committee and now awaits consideration by the full House of Representatives.

Labor Department Overtime Rule

The Department of Labor (DOL) finalized a rule increasing the salary threshold for white collar workers who are entitled to overtime pay protections under the Fair Labor Standards Act (FLSA). Multifamily and other industry workers would be impacted because overtime pay would be determined solely on falling below the threshold. Among other issues, the multifamily industry is concerned the rule will harm the ability of employers to implement, and employees to take advantage of, flexible scheduling options. In August 2017, a federal judge overturned the rule. The DOL has also put out a Request for Information asking for input about how a possible new rule should be written. NMHC/NAA will remain engaged with the agency in its future work on the issue.

National Labor Relations Board Joint Employer Ruling

The NLRB ruled that it could impose joint employer liability when an entity has “indirect” control and “unexercised potential” of control over another entity’s employees. This could have a significant impact on multifamily firms who may become liable for the actions of subcontractors, suppliers, vendors and temporary staff. Joint employers are also required to negotiate with any union representing the jointly employed workers. With NMHC/NAA’s support, the House of Representatives passed a rider to its version of omnibus FY2019 appropriations legislation to deny funding to enforce the joint employer rule. Free-standing legislation (HR 3441) has also been introduced to overturn the rule.

As the Trump Administration and Congress continue to look for ways to reduce the regulatory burden faced by American businesses, NMHC/NAA will continue to advocate strongly for the interests of the multifamily industry.

Julianne Goodfellow jgoodfellow@rettc.org