2014 Policy Outlook

Speaking at the conference in Scottsdale, Urban Enterprises Senior Vice President Wayne Tyler detailed an under-reported effect of the federal budget sequester.
Speakers and audience members discuss legislative issues at IREM panel in Scottsdale, Ariz.

Speakers, audience members discuss legislative issues at IREM panel in Scottsdale, Ariz.

As lawmakers prepared to end the government shutdown and raise the debt ceiling on Wednesday afternoon, a panel at the Institute of Real Estate Management’s Fall Leadership Conference shed light on some other important—if less publicized–policy issues.

Speaking at the conference in Scottsdale, Ariz., Earthen Enterprises Inc. senior vice president Wayne Tyler detailed an under-reported effect of the federal budget sequester. “Obviously we’re looking at affordable housing stock being in jeopardy,” Tyler said. Spending cuts have reduced the number of low-income families receiving Section 8 vouchers by 140,000 nationwide, he explained. Funding for Section 8 housing vouchers has been slashed $193 million in California alone, and by $11.5 million in Washington, D.C. Delayed rental payments may prevent property owners from making mortgage payments on time. In addition, he warned, “Real estate managers with marginal Section 8 properties will move into negative cash flow.” One positive note: despite budget pressures, the U.S. General Services Administration has nevertheless found a way to lease 5 million square feet of space for federal agencies since July 2011, Tyler pointed out.

Turning to a new federal regulation with broad implications, a final rule issued by the U.S. Department of Housing and Urban Development will set off a flood of costly lawsuits, warned Greg Martin, a vice president with DK Living, the residential management unit of Chicago-based Draper and Kramer Inc. HUD’s new rule characterizes as discriminatory a practice that “results in a disparate impact on a group of persons.”  The rule “can be taken to the umpteenth level,” Martin argued. “Almost everything you could do, they could construe as having ‘disparate impact.’” Declining an application from a convicted felon, for example, could now be interpreted as discrimination.

Further infringements on sound business practices may involve criminal background checks and minimum income requirements. Property owners and managers now bear the burden of proof, rather than an alleged victim of discrimination, Martin explained. In response to the ruling, IREM and the National Association of Realtors have drafted a policy statement that addresses the burden of proof issue and other apparent excesses.

Also on IREM’s radar is the forthcoming revision to the Uniform Residential Landlord and Tenant Act, the 41-year-old guidelines that provide a framework for landlord-tenant interactions in 21 states. Scheduled for release in 2014, the proposed revisions include several burdensome provisions, reported Chet Fitzell, a property manager for Eugene Burger Management Corp. of Rohnert Park, Calif. A proposed cap on security deposits is arbitrary, ignores basic risks of property ownership, would narrow the pool of applicants and force owners to hike rents in order to make up for lost revenue, Fitzell commented. Expanded requirements to inform tenants of property left behind could require owners to keep units vacant for up to 114 days, resulting in lost revenue, he added.

Despite today’s skepticism about the responsiveness of government, the audience heard an encouraging message on grassroots action from Beth Wanless, IREM’s senior manager for government affairs: “Elected officials actually care what you think.” Wanless offered some best practices for conveying a message: know the issues thoroughly, be ready to answer questions, explain the bottom-line benefits of your ideas, invite the legislator to a chapter meeting, offer to be an expert resource and find out if you know someone who has a relationship with the legislator, among other tips.