THE GREAT RECESSION arrived quickly and dramatically, but the climb out is happening at a much slower, more modest speed. Our members tell us that while they saw very slight signs of stabilization in the fourth quarter of 2009, they don't expect much improvement during the next six months.

The inability of developers to access traditional capital markets remains a significant issue. The National Association of Home Builders (NAHB) estimates that the current historically-low level of multifamily starts—less than a third of the 300,000-unit annual average over the last decade—will result in shortages of new rental apartments by the end of 2012.

In the short term, the lack of supply is likely to increase rents significantly as the economy recovers. For developers to meet the continued demand from, in particular, Gen Yers, we recognize the need to restore the flow of debt and equity. While the way forward for the overall economy is still unclear, NAHB Multifamily is clear as to our goal: to ensure the multifamily sector emerges from the recession with the strength to take on a larger role in the new housing economy. NAHB is focused on the following four high-priority issues.

1. Avert a Change in the Tax Rate on Carried Interest. For the past three years, NAHB has successfully averted Congressional attempts to tax as ordinary income the carried interest generated by many real estate development partnerships—payments that compensate a managing partner for taking on the risks of development. That change would increase taxes on carried interest from the current 15 percent, which treats the interest as a capital gain, to at least 35 percent.

This idea resurfaces whenever Congress looks for ways to pay for both housing and non-housing measures and has recently been proposed as a revenue offset for legislation in the House of Representatives aimed at extending expiring tax measures. NAHB is working with our industry partners to persuade Congress that this change would have negative consequences for the multifamily sector.

2. Keep FHA Programs Alive. When the availability of traditional financing slowed to a trickle, HUD's Federal Housing Administration (FHA) multifamily mortgage insurance programs—Section 221(d)(4) for new construction and rehab and Section 223(f ) for acquisition, refi- nancing, and moderate rehab—skyrocketed in popularity. Once a relatively small slice of the multifamily market, loans insured under those programs now represent a significant portion of the multifamily units financed this past year.

That increased activity brought with it a somewhat elevated level of defaults in the agency's multifamily portfolio. FHA now is concerned that its credit risk management standards and approval processing may not appropriately reflect current conditions and is considering significant changes to those two programs' underwriting standards. NAHB is meeting with the FHA commissioner and his staff to provide guidance concerning the impact of such changes on developers and their ability to provide housing.

3. Ensure Access to Affordable Housing Development Capital. Last year, NAHB successfully lobbied for additional federal stimulus funding for affordable housing production via the Tax Credit Assistance Program. An equally effective lobbying effort led to the enactment of the Tax Credit Exchange Program, which allows states to provide developers with equity investment in exchange for low-income housing tax credits already awarded. Both programs were part of the economic stimulus bill that passed in February 2009. NAHB currently is working to encourage lawmakers to extend the Tax Credit Exchange Program an additional year, which will help finance much-needed affordable rental housing.

4. Safeguard the GSEs' Future. Government-sponsored entities (GSEs) Fannie Mae and Freddie Mac are a vital part of the multifamily market, with lending programs that have become increasingly important to the sector's developers. But their future is uncertain. Lawmakers and others have recommended that the GSEs be reformed, or even scrapped and replaced.

NAHB continues to support the GSEs' mission to provide mortgage market liquidity in a safe and sound manner—a mission directed at a broad range of housing needs for the benefit of people at all income levels. As Congress discusses this issue and serious reform initiatives emerge in the coming year, NAHB will be front-and-center in the effort to preserve the best aspects of the GSEs.

Sharon Dworkin Bell is senior vice president of multifamily and 50+ housing at the National Association of Home Builders in Washington, D.C.