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The CARH 2025 Midyear Meeting did not disappoint. Over two hundred participants convened at the Ritz-Carlton Bacara in Santa Barbara, California from January 27-29, 2025, to mix education, advocacy, networking, and well-deserved relaxation. Monday’s agenda included state-affiliated and committee meetings as well as Compliance Issues and the Washington Report. Tuesday’s general sessions covered State of the Markets, a fascinating session on the integration of AI into property management, and updates on the USDA transfer process. IRA Energy Funds, Navigating Insurance Costs and Stand-Alone Rental Assistance (SARA) rounded out the meeting on Wednesday. The Midyear Meeting offered ample networking opportunities, including two evening receptions overlooking the Santa Barbara clear night sky and coastline. Monday’s luncheon featured exhibitor introductions as well as the much-anticipated 2024 Award announcements.
State-Affiliated Association Committee
The State-Affiliated Association Committee began with Co-Chair Amanda Clark of the Affordable Housing Association of Indiana and Co-Chair Lenny Turner of the Housing Association of Mississippi leading the state updates. Indiana’s 2024 conference was well attended and included scholarship awards and an active shooter training. Both Florida CARH and the newly merged Carolina Council Affordable Housing/Mid-Atlantic CARH featured Toni Blake as the keynote speaker. Other 2024 topics at the state conference level included HOTMA, Inspire, Tribal One inspections, Inflation Reduction Act (IRA), tax credit education, insurance, energy efficiency, and mental health. Missouri CARH’s Deven Donley of MACO Companies described how the 2024 Missouri CARH meeting included a mental health panel with an introduction to their “988 Suicide and Crisis Lifeline” system. The Missouri Department of Mental Health presented how to de-escalate conflict with residents and how to work with people with mental health challenges. Donley cited that the session went over very well.
The topic of discussion migrated to how state organizations can maintain robust memberships and subsequently host well-attended, effective meetings. Several states are looking at joining efforts to form more of a regional association. Following the Carolinas merging with Virginia and West Virginia to form Mid-Atlantic CARH, Ohio and Michigan are candidates for possible collaboration. Missouri is exploring bringing in Illinois as the association in Illinois has disbanded. State associations need a minimum of five dues-paying members including association members, basic members, owners of a management company, developers, or syndicators that own properties. Chairwoman Clark reiterated that if states are contemplating merging, loop in national CARH so they stay informed. National CARH can also put you in touch with others who have completed the process. CARH’s website has a meeting section that includes state and national meetings that are updated as information is submitted, through 2026. Clark asks, as you sign contracts, send in meeting details and CARH will publish it on the website. Consult the calendar when planning future meetings to avoid overlap which makes it difficult for vendors and speakers.
Several recommendations were made for state organizations to save on personnel costs. Mid-Atlantic ultimately choose an association management company to help administer the group. Russell Kaney of Wisconsin CARH explained they eventually hired a part-time executive assistant for $25/hr. Historically their EAs have been self-motivated, outgoing, and love organizing and conferences. They staff three board meetings a year and try to make it easy for the board members. Wisconsin CARH has found success tapping into management companies to help recruit for the part-time position. Mississippi has employed two executive directors, both retired from USDA state offices.
State-affiliated members agreed to make key recommendations to the Board of Directors for further advocacy efforts: Continue to encourage Rural Development (RD) to bring back harmonization efforts, such as eliminating the need to resubmit the same information for multiple agencies. Streamline the tenant application, continue to ask RD state reps to attend state meetings, in-person if possible, and ask RD for more localized trainings.
Best Practices and Education Committee
The Best Practices and Education Committee convened to discuss the latest on resident relations, employee retention, and navigating the rising costs of health insurance. Hallmark Companies is testing “EliseAI” at three properties and plans a rollout to all properties in 2025. EliseAI, which answers the phone as “Emily” can assist properties in answering the phone during times when staff are not available. AI requires input such as rents, hours, and other pre-ready answers. It will then know what response to provide the caller. The property manager and regional manager receive a report which can be reviewed the next day. EliseAI can be integrated with Yardi or Real Page, and can acquire emails, phone numbers, send out texts, or field calls about non-emergent work orders and other maintenance requests.
Russell Kaney inquired how owners are integrating service coordination into their properties. Owners utilize the social service line item within the RD budget to hire a service coordinator directly. The service coordinator investigates what social services are available to residents and even handles requests for reasonable accommodation. Another option is to hire a non-profit whose service coordinator goes to units to connect residents with job training and other needs. The focus is tenant-driven, responding to needs identified by the residents.
Several administrative cost-cutting best practices were outlined. Floating HVAC-certified maintenance positions save on third-party vendor costs in addition to covering properties where there is no maintenance person on staff. One company has a “corporate manager” who executes virtual two-week trainings on HUD, RD, and tax-credit compliance. Staff now feel training is adequate compared to previous feedback. The corporate manager also provides follow-up for staff whose audits were not satisfactory, which is going well for follow-up training. Another company is utilizing “RD Voyager,” a training program that includes learning programs such as Inspire for Manager, leasing, customer service skills, deescalating conflict, and manager training. Citing it is more than just software; they are rolling out to corporate employees too. To reduce healthcare costs, one company mandates a year in service before healthcare is included as a benefit. Some companies are funding health savings accounts while others are funding disability insurance (Aflac as an example). Generally, companies are coming up with new ways to incentivize employees such as creating floating holidays from the list of Federally recognized holidays or utilizing floating positions across properties.
The recommendations from the Best Practices and Education Committee to the CARH Board of Directors include encouraging RD staff to attend state meetings, requesting more RD training sessions, and fix inconsistencies of feedback and policy from RD staff.
Lenders Committee
The Lenders Committee was led by Ben Coates of Churchill and Chris Mullen of Bonneville. In 2024, the budget authority for the 538 program was $400 million of guaranteed funding. Approximately $250 million was utilized. Bonneville reported they closed one hundred loans for $100 million in volume in 2024. Developer’s sentiment has turned sour on 538 products- 538 might be obsolete with other lenders creating alternatives with a higher interest rate but that takes less time to close. Investors need to be approached about new underwriting standards. Tax credit pricing is not going up so only additional dollars will be more debt (soft or otherwise). Michelle Foster from the National Association of State & Local Equity Funds stated the Affordable Housing Investors Council (AHIC) has a new Executive Director and they are recruiting new members. AHIC is looking at revisions for underwriting supportive housing deals and the timing is ideal to form a workgroup to discuss rural standards. One suggestion is for CARH to write up legislation for 50-year amortization and put it forth in front of Congress, feeling that momentum exists for Congress to make changes or eliminate certain regulations. Final comments highlighted Cloud Vault disruptions and issues with due diligence timing because of RD delays. Recommendation from the Lenders Committee to the CARH Board of Directors: Push for 50-year amortization and other changes to make 538 more competitive and relevant.
Management Committee
Staff retention and rising insurance costs dominated the discussion in the Management Committee meeting. Marcia Moore from Viridian Management stated navigating the post-COVID landscape is still difficult. Forty percent of staff have less than two years on board. They are always looking for new methods of improvement, whether it is pay, benefit, or remote training. Finding employees in rural areas can prove extremely difficult. Alex Lawrence from Fitch Irick offered increases in salaries and benefits, to remain competitive, which poses concerns that RD will push back on when approving budgets. There is a need to make a collective push to RD to accept proposed increases. Bob Margolis of TM Associates suggested a charge per unit on rent to create a fund that would insure the unit in the case of a catastrophic event or tenant damage. Bob also advocates for full RA in properties and sees that the climate might be ideal for making this change given the rural support of the current administration.
Obtaining utility documentation from utility companies has been an issue in some areas. One suggestion is that there should be a law mandating companies have to provide information if owners have to provide information to RD or HUD.
The recommendation to the CARH Board of Directors: Can RD provide a better method for utility allowance calculation? Increase the maximum allowed on reserve accounts and make them easier to fund. The elimination of a CNA to resize reserve accounts would be a way to make this happen.
Developers and Owners Committee
The Developers and Owners Committee sparked a spirited discussion on several possible recommendations for the new administration. In addition to full RA for the balance of the 515 portfolio, Bob Margolis of TM Associates added that a minimum tenant payment could be organized to generate more RA slots, perhaps a $50 minimum. However, lawsuits arose when this was attempted by HUD. Another suggestion is to eliminate the negative rent payment where utility costs puts them into a negative category. Ari Severe of TM Associates sees a need for MOUs between RD and state housing finance agencies and is advocating for one in Maryland. Verbal agreements existed but with staff changes, these have become obsolete.
Preservation and new construction challenges exist. Housing credits and bond caps were discussed with bond caps are being met in several states. Credit pricing is lowest on rural deals, in the mid to high seventy-cent range. Yet, CRA urban deals still can attract the mid to high-nineties. Concerns were raised that developers are now working harder to find investors as syndicators are not pursuing deals with previous zeal. Investors are looking for higher returns. LIHTC has competition from energy credits, which have shorter compliance and double-digit returns. Thus, something has to make LIHTC more valuable to investors.
Director Fisher asked the group about decoupling and Stand-Alone Rental Assistance (SARA). Only a fraction of the eligible projects participated, though there were not many in the eligible pool. Concerns were raised about credit checks being performed on existing owners as well as the need for a new 2530 submission. Another concern was having to fund reserve accounts out of pocket and requiring a capital needs assessment to review reserve deposits. SARA might not work with fair market rents, and if there is no distribution, where is the benefit? Another commented that RD requires a refinance even with a small amount left on the mortgage. Fisher clarified that RD cannot accept prepayment earlier than the original maturation date. If you can show no adverse effect on minorities or that the property is no longer needed in the program, the agency can grant a no-need exception under LIPPA.
Recommendations from the committee to the CARH Board of Directors: Continue the SARA demonstration but clarify the rules and mandates. Push for more reliance on housing finance agencies, investors, and soft money sources to perform construction reviews.
Compliance Issues Today-Delay and Revisions
Steve Rosenblatt from Spectrum Enterprises, Inc. and Orlando Cabrera of Arnall Golden Gregory, LLP (formerly HUD) led the discussion on the latest in compliance. Rosenblatt began with HOTMA. Despite the fact HUD has pushed back implementation to January 1, 2026, due to technological deficiencies, RD is still on track to implement on July 1, 2025. Housing finance agencies have adopted HOTMA in 2025. Cabrera added, that the HUD TRACS system has not been updated since 1997 hence USDA is much further ahead than HUD on HOTMA. Rosenblatt is advocating for a 6-month grace period after July 1, 2025, for management agents to correct and/or comply, i.e., do not penalize a property as they are implementing the new regulations.
Rosenblatt discussed significant changes in imputing income, child support income, medical deductions, elderly deductions, and recertifications. The HOME program has new rules published in the January 6, 2025, Federal Register. The HOME Final Rule includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher Programs consistent with the implementation of the changes to the HOME program. HUD is delaying the effective date of the HOME Final Rule by 90 days from January 20, 2025. With this delay, the effective date for the HOME Final Rule is now April 20, 2025.
Cabrera spoke of what we might see on the deal-formation side and the post-closing side. The continuing resolution is through March 14, 2025. There is a lot of work among both Democrats and Republicans to see that issues that can be bridged despite a “budgetary food fight” still happening. A full-year resolution is foreseeable with many anomalies. Anomalies are permissible attachments to the continuing resolution. Cabrara does not predict a change in programmatic pace through September 30, 2025.
Cabrara says we are looking at a very different HUD, even from the first administration. All civil litigation is on hold and the environmental division has stopped all outside communication and we should expect to see the same thing for fair housing enforcement. HUD will revisit “withdraw” rules as well as rules published within the last 90 days that conflict with the current ideology. HUD will see a nominee for the Office of General Counsel, a new Assistant Secretary of Fair Housing, and a new general counsel of Fair Housing. The Supreme Court decision of Loper Bright has agencies asking what they can regulate because not every directive comes from Congress. Thus, Congress will have to become more prescriptive with regulations.
The Washington Report
The Washington Report was moderated by CARH Executive Director Colleen Fisher and featured Tom Reynolds of Holland and Knight, LLP, senior policy advisor to CARH, as well as Nick Tsimortos of Golden Gregory, LLP and CARH general counsel.
The panel began with an overview of the political landscape at present. The new administration won rural areas by 30+ points in the November 2024 election. Democrats for the first time have high-end income voters while “working” people voted predominantly with Republicans. There are sixty-six new members in the House and twelve new members in the Senate, many of whom were not there for the 2017 tax cuts.
Operationally, Angela Denton is the acting director and will stay as deputy administrator. Expect Mike Resnick, Director of Asset Management, and Dan Rogers, Director of Production and Preservation, to stay as well. At HUD-FHFA, Bill Pulte is nominated and may push for the privatization of Fannie Mae and Freddie Mac.
“Return to Office” is real and happening. With hiring freezes and the pace at which things move, could RD have another reorganization and possibly go back to the previous organizational structure.
Both incoming secretaries are native Texans. Brooke Rollins, USDA Secretary, is a policy wonk “in every way” according to Tsimortos. He states she is a strong candidate because she was born on a farm in rural America. Her mom was elected as the oldest state legislator in Texas history. Rollins is the first female student body president at Texas A&M and worked for Texas Governor Rick Perry. She headed the Texas Public Policy Foundation, an Austin-based conservative think tank. Tsimortos states Rollins knows how to push an agenda, and we should expect “energy and swiftness.” Rollins is very much on inside as a “Trump loyalist” and worked for Trump in the first administration. Rollins founded the American First Policy Institute and serves as its President and CEO.
Scott Turner has been appointed Secretary of HUD. Turner served as part of the American First Policy Institute. He Interned on Capitol Hill, became a Texas state representative, and worked in the first Trump administration with opportunity zones.
The three major issues for legislation are tax, border, and energy. The House wants tax, energy, border in one bill plus reconciliation while the Senate prefers two bills, both of which will be decided soon. Decoupling will continue as long as there is a continuing resolution. CARH is advocating for a permanent SARA or decoupling program. The decoupling legislation must be reintroduced in the new Congress. Look for a Trump administration budget in February with discussion through July. The State of the Union is March 7, 2025, so the administration will want some results by then. New committee chairs are in place. Committees important to rural housing are Banking, Appropriations, and Finance in the Senate and Appropriations (THUD and Housing Subcommittee) in the House.
Housing Strategies-State of the Markets
The Housing Strategies-State of the Markets panel included Campbell Brown, CFO at The Hallmark Companies, Kells Carroll, Partner and Director of Acquisitions at Sugar Creek Capital, Lauren Lyon, Of Counsel at Tiber Hudson, and BJ Biggio, Director of Public Finance at Stifel.
Stabilizing interest rates began the discussion with an average spread on taxable vs tax-exempt at 1.10%. Carroll commented that yields are up for tax credit investors while pricing is down. Economic investors are waiting for the tax cut discussion later in the year and there is a lack of CRA investors. Carroll is involved with providing equity through the purchase of state tax credits. Campbell Brown sees increases in construction costs and recommends taking a long-term approach to structuring deals, perhaps two to four years out, keeping up dialogue with investors on both equity and debt. He adds, to pay attention to the pay-in schedule on LIHTC deals. Lauren Lyon discussed the volume cap slide per state, stating that several states are oversubscribed, and others are not.
For state tax credit programs, there are twenty-six states with programs, six states have proposed legislation, and nineteen states have no program. Credit periods range from five or six years up to ten years and longer credit periods are optimal. South Carolina is oversubscribed. Georgia has a well-run program. Tennessee has an unfunded program but could see funds in 2026. Other state subsidies include real estate abatement, state and local programs, payment in lieu of taxes (PILOT), and soft debt. Bond deals need soft debt to work, and investors are capping funds in 2025. Credits are averaging mid seventy cents to mid eighty cent range with developers receiving fewer offers than in past years. Bigger portfolios in bond deals may have a difficult time finding equity. Thus, two to three properties at a time might be a prudent approach. Lyon reviewed several case studies. One observation noted that a 266 election can add equity to a deal. Construction interest and bond interest can be structured into basis. A tax-exempt seller note can also generate additional credits. It was pointed out that bond deals require substantially higher rent to pay debt service.
AI= Already Impossible, Angry Interactions, or Absolutely Insightful: How to Navigate Rapidly Advancing Artificial Intelligence Tools
This panel included Kevin Coy of Arnall Golden Gregory, LLP, David Layfield of Green Street Housing, Steve Rosenblatt of Spectrum Enterprises, and Mark Livanec of Yardi Systems.
Coy began the session by providing a nice overview of different AI mechanisms. An example of “machine learning” is a self-driving car. “Deep-learning” includes CGI effects in a movie or video. Large Language Models (LMMs) analyze large sets of data or translate huge amounts of data. “GPT” stands for Generative Pre-trained Transformers and includes the app Chat GPT. This also includes writing assistance, content generation for social media, bots, and “Grammarly.” Natural Language Processing (NLP) are voice-activated tools like GPS and speech recognition digital assistants such as Siri. Coy reviewed states (20 in all) that have adopted AI laws with Colorado having the broadest legislation taking effect January 1, 2026. Federal laws are being discussed. HUD has already set forth fair housing guidance for using AI for advertising and applicant screening.
David Layfield, also of Houser, proclaims AI is the best thing that has happened to the housing industry and that 50% of any business problems can be resolved faster and more effectively using AI. Prior to the start of the panel, which was the first of the morning, the Trump administration’s freeze on Federal grants was announced. As a demonstration of the capabilities of AI to process data and in ChatGPT’s case, output the question into a coherent and cohesive statement, Layfield asked ChatGPT a lengthy, multi-faceted inquiry regarding how the latest Federal grant freeze could impact the housing industry. Within a matter of moments, ChatGPT provided an audible answer that was succinct and factual. Layfield explained how databases mine millions of books while Coy added that user agreements ensure information is accurate and factual. There is even a mechanism within ChatGPT to display which references are used in a thread or answer. Layfield predicts that in three years, accounts payable staff will be obsolete. AI will have many uses for management companies and vendor use is evolving.
Rosenblatt echoed the efficiencies associated with using AI in compliance. At Spectrum, they are using AI for both market and general research and to monitor files. He sees AI as being beneficial for cost savings and time savings and ultimately frees up staff to do other tasks including customer service for residents. AI can assist with looking up RD handbook regulations or determine quickly that a regulation does not exist.
The panel concluded that AI is contingent upon inputs. A company implementing AI first would have to spend time initially inputting into the system to generate the desired outputs. They recommend discussing AI with vendors-what they are using or what they have an interest in using. Who in your business is leading the AI department? Layfield recommends paying the $20.00/month for ChatGPT for employees. Many management company leaders acknowledge AI will be ingratiated into their businesses but only a very small percentage have taken steps in doing so.
The Transfer Process Today: Improvement for Tomorrow
The Transfer Process panel included Shelly Cullin of Chrisman Development, Don Fisher of Saad & Saad, Chase Powell of Green Street Housing, Robin Wolff of Enterprise Community Partners, and Nick Tsimortos of Arnall Golden Gregory, LLP. Laurie Warzinski, Senior Policy Advisor at Rural Development, and Jonathan Bell, Director of Processing Reporting at Rural Development, joined the panel remotely.
Bell began by reviewing the current RD structure and discussed his role as the Director of Processing. Warzinski discussed the “Mapping Mural” project that began in May 2024. The project entails gathering feedback or concerns on the 515-transfer process. RD requested feedback first from internal employees and then from outside stakeholders. Each comment is put on an electronic post-it note and color-coded by four categories: processing and report review, underwriting, closing, and program support. The map then shows which sections of the transfer process elicit the most feedback or concerns and enables RD to study how they can make the process more efficient and productive. Prior to realignment, fifty state offices were processing transfers. Now, the process is centralized into a national model. In FY 2021, the average time for completion of transfers was 1 year, 11 days. In FY 2022, the average was 11 months, 2 days. In FY 2023 it was 9 months, 26 days and in FY 2024 it improved to 8 months, 18 days. Bell encouraged all to sign up for e-mail updates via rdwebmaster@usda.gov
Shelly Cullin spent 30 years at the Oregon HFA before moving to Chrisman Development as Director of Development for the past 12 years. Cullin states she processed twenty-five transfers over the past two years with the key to efficiency being open communication, especially with closing Branch Chief Jennifer Dillard. Cullin states that navigating third-party reports still remains a challenge and pointed out that the transfer checklists do not include construction documents, so you have to consult separate checklists. Cullin suggests the underwriting branch could start their review while third-party reports are being completed in order to streamline the process even more. Approval of change orders, sometimes as long as two weeks, causes problems with subcontractors and slows or even stops construction in some cases.
Chase Powell has worked on four projects to closing. Powell echoes Cullin’s sentiments regarding third-party reports needing to be completed before moving from processing to underwriting. Powell advises reviewing the PAT tool early in the process. Finally, the subordination agreement is shuttled between the underwriting and the closing branch. RD should have a clear policy of who is responsible for completing the subordination agreement and the timeliness of moving it forward.
Robyn Wolff discussed the simple transfer process and the technical assistance contract with non-profits. Wolff emphasized a clean application with TA assistance helps get to the 8-month closing and that they recently closed on a pre-payment property. Enterprise has worked with challenging ownership situations which can add to the time it takes to assemble a transfer submission.
Don Fisher has been in the private sector for 13 years and formerly worked at Office of General Counsel at USDA. For Fisher, the Letter of Conditions (LOC) is all-important. He suggests that amendments to the LOC be allowed and would like to see better communication between processing and closing. The handling of subordinations is still an issue and attorneys for USDA are not engaged in the process.
Inflation Reduction Act Energy Funds: Powering Ahead or Pulling the Plug?
Speakers on this panel included Ryan Sheehy, President of Fleet Development, Jake Stern, Senior Vice President of Business Development at Cinnaire, Nick Tsimortos of Arnell Golden Gregory LLP, and moderator Rob Dicke, Senior Manager of Energy & Infrastructure at Baker Tilly.
Stern began by discussing Cinnaire lending, a CDFI leading business development in the mid-Atlantic region with an office in Delaware, and Community Power Corporation (CPC), also a CDFI that was awarded Greenhouse Gas Reduction Funding (GGRF). The National Energy Fund (NEF) invested into CPC. CPC is also a Fannie, Freddie, and HUD lender. They partnered with Self-Help Credit Union and were awarded almost seven billion dollars. How does the funding work? 2.4 billion is earmarked for multifamily lending to be lent across the country for projects that are avoiding carbon emissions. It is subsidized funding, flexible, not expensive, and can act as a gap filler. The funds incentivize to go deeper into de-carbonizing work into the property and it is meant to push the bar whether it is rehab or new construction.
Sheehy states they look at how to leverage tax credits by analyzing a property’s energy bill and savings. This started with retrofitting onto existing properties. They then package it to let the developer use savings as a tool within the proforma which makes it effective. Each state has its own grants. Washington State, for example, works on merging whatever is available to see what is most effective for your project.
Stern added that Greenhouse Reduction Act (GRA) funding has been allocated. There are three pieces to the GRA-Clean Communities, Solar for All, and the National Investment Fund. Climate United is one of three groups awarded while CPC is processing a ton of interest. Tsimortos is more worried about EPA funding versus GRRP funding and is optimistic about tax credits.
Sheehy stated that the split incentive is a barrier for solar. Is solar lowering rents by reducing utility expenses? The utility allowance (UA) system is a natural block to using solar or other energy-efficient sources. One issue is that solar savings cannot be provided to tenants who have their own utility accounts. A large solar project for the entire building knocks costs down at the root. A misunderstanding exists that when electricity costs go up, decreasing rent revenues. As long as you have a UA system, tenants do not have an incentive to reduce their energy usage and owners do not have an incentive to implement. Solar can bring costs down for 30+ years. Even if you need a loan to cover the gaps, it is still a pragmatic decision to reduce energy.
Dicke offered that HUD has a list of about fifteen items demonstrating savings for tenants. One example is to install wi-fi for everyone in the housing project. RD has approved this list pointing to HUD’s list. Director Fisher and Tsimortos have been working with RD to issue the same memo as HUD.
Sheehy explained that improvements are measured by tons of carbon emissions reduced. The size of funding will depend upon emissions of a property compared to what the design will achieve, and it is not tied to a specific scope. The funding would come into the deal as a subordinate loan, at the bottom. Terms of the loan are still being worked out, but it would likely be 1-3% interest only, with a capacity for amortizing. This loan is not intended to be forgiven and will need to be repaid as it will be used in exit analysis. There is a return on capital through interest earnings and tons of carbon will be reduced or avoided. Technical assistance is available to analyze designs so owners and developers would not have to figure it out by themselves. The program is built so people will not have to navigate it on their own. The new construction bar is zero emissions. This does trigger Davis-Bacon prevailing wage rules. If you implement Davis-Bacon, you can get $5000 per unit. Not implementing Davis-Bacon but netting zero energy yields $2500 per unit. A minimum of 20% of the funds need to be spent in rural communities.
What are other efficiency measures beyond solar? Energy efficiency is most important, and you want to do it first. It includes insulation, siding, windows, doors, heat pumps, home appliance electrification (rebate) program or providing air conditioning in units. To see how to utilize these funds, particularly to analyze a specific region, simply submit an intake form to Climate United or consult their many webinars offered. At the end of the day, it is reducing the energy subsidies the government pays. HUD subsidy bill to the UA program is over $10 billion so participating will pay off long term.
Strategies for Navigating Insurance Costs
Trent Iliff and Chris Chiero of USI Insurance led the session on navigating insurance costs. They began by projecting a 5% reduction or flat reduction in non-catastrophic rates. Catastrophic areas could see 5-10% increases. If you had a policy that requires six to eight carriers to reach minimum insurance amounts, know that carriers have more capacity now. Wildfires could top $250 billion in claims while all other 2024 catastrophic claims equaled $240 billion. This is $50 billion higher than the last major event which was Hurricane Katrina. That impact will not be felt until July or January 2026 when policies are renewed or replaced. Multiple factors impact rates and companies are looking for ways to charge more for premiums by making a claim as a driving factor. Deductible increases to reduce exposure and market volatility are also in play. Certain agents and brokers have a limited scope while larger brokers have access to everything.
Iliff and Chiero state that non-renewals should be coming 90-100 days out which affords ample opportunity to shop around. There is zero excuse for an agent not to be at least 90 days informed on what the market is doing. They might not know the exact increase and underwriting might not have occurred, but they should have a directive already in terms of getting an increase or decrease. Communication between the agent and the client is key. Use a company with an A-rating or above which is required by RD.
Insurance carriers state they need to push values up to drive premiums. Underwriters do not care as much about what number is on the spreadsheet-they know how much it will cost to rebuild. Carriers know what premium they want to charge. The best approach is to figure out balance on what is close and what is sufficient capacity to pay for claims throughout the year.
A broker should be able to provide “probable maximum loss study.” That way you can provide proof to RD that limits are adequate, and it is using analytics instead of throwing a dart. One example is a lender requiring a 75-million-dollar limit. Iliff ran a model and found out the exposure was only thirteen million. This model was taken to the lender, then to the carrier who was told to restructure the policy. The owner bought twenty million just to be safe and the carrier lowered the limit to twenty million which resulted in significant savings for the owner.
Director Fisher asked how state pools work and are more people being forced to use them. It depends on the state, location, and what coverage is needed. Florida has a state organization that provides coverage, but it is a carrier of last resort. It is a “forced placement” agreement with the carrier and lender. These are extremely limited, expensive, and typically act in the interest of the lender. California has an “assigned risk pool” which you can turn to when you have no other option. An owner would have to declare insurance could not be obtained across the market. The pool affords a one-year policy. However, an owner can exit the pool without penalty if coverage is found elsewhere. Workers Comp pools, such as Florida, are different. Rumors have always existed that the California Fair Plan Pool is going bankrupt, but the state has the ability to bail the pool out of insolvency.
What are ways to mitigate liability? A proactive risk management process and active engagement with risk managers are part of the process. Carriers are there to prevent and mitigate claims and should be involved in managing those steps. Carriers have a budget for that. When an owner moves coverage, ask what they are offering for risk control. Do it in the first 90 days of the policy not the last. Examples would be assessing broken sidewalks and the snow removal process at a property.
SARA (Stand Alone Rental Assistance): What Do We Know About Decoupling Today?
CARH Executive Director Colleen Fisher was joined by USDA Assistance Deputy Administrator Karissa Stiers and CARH of Counsel, Nick Tsimortos. Director Fisher began by offering that a demonstration is the way to go when you have a new program. It is very difficult to make changes after a permanent program is enacted into law.
Stiers voluntarily moved to the field operations division. She states they are really trying to make changes and provide efficiency while continuing to ask for feedback and engagement. RD conducted multiple listening sessions in 2024 to establish the guidelines and rules for the program. SARA authority is up to one thousand units portfolio-wide. It is intended for maturing properties in fiscal year 2024. They are continuing to work from 2024 authority and will engage SARA-eligible properties until the end of the continuing resolution. They are not engaging properties maturing past March 14, 2025. In FY 2024, nine out of thirty-five eligible properties participated. They started by holding concept calls and discussed options for maturing out of the program. 181 units were preserved out of 661 eligible units. Ownership included both non-profits and profit-motivated. Of the nine that are accepted, conditional commitments have been issued for eight, no contracts have been signed, and no closings have taken place. Twenty-six properties (188 units) did not participate, of which thirteen (252 units) exited the program. One property was transferred to new ownership and the remaining re-amortized their debt with RD. Another 1,000 units were authorized for FY2025, and forty-six properties were originally qualified but only sixteen are now eligible due to the continuing resolution date in March 2025. Rental assistance captured from properties that prepaid and left the program will be redistributed in 2025 to the most overburdened tenants. SARA properties will have 100% rental assistance.
Director Fisher asked the audience if you were eligible to participate and didn’t, what are the reasons you refrained? One owner cited fear of the unknown and a lack of clarity. Another stated it did not make sense for them in a couple of cases, and yet another questioned the logic of participating if RD was still going to control “everything.”
SARA contracts spell out that there is no restrictive use agreement, no limits on cash distribution/excess cash, and are not considered to be a part of the 515 portfolio. Stiers has set up a SARA-specific team in field operations who will work as specialists on this program. With some properties, the FMR’s and OCAF raises each year may not allow a property to be financially feasible. For residents, a tenant notification will come from the owner, but it has yet to be published. A budget-based option rather than the FMR/OCAF option is not available at present.
Note: Russell Kaney, Russ Endres, and Rob Dicke of WI-CARH attended the conference.
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