The Rent Roll with Jay Parsons

Episode #48: Michael Novogradac | The 'Big Beautiful Bill' & Rental Housing
Released: August 28, 2025

Episode Overview

This episode of The Rent Roll centers on the impact of the recently enacted “One Big Beautiful Bill” (OBBB) on rental housing. Host Jay Parsons brings on renowned housing tax policy expert Michael Novogradac (of Novogradac & Company) to dive deep into how this landmark legislation could reshape affordable housing, rental supply, policies like Opportunity Zones, and tax incentives. Before the interview, Jay spotlights pivotal new research on how operational regulations may unintentionally increase rents—especially for low-income renters.

Key Segments & Insights

1. New Research: How Regulations Affect Rents

(00:00 — 17:30)

Main Points:

• Jay shares a first-of-its-kind study from MetroCyte titled "Regulation and Rents," examining how operational policies affect rental affordability.
• Findings highlight:
  • Source of Income Laws: Requiring property managers to count government vouchers as income raises rents by ~5.2–5.3%.
  • Eviction Protections & Right to Counsel: These collectively raise average rents by 5.9–6.5%.
  • Screening Limitations: Laws restricting the use of criminal background or poor credit history in screenings drive rents up by 1.5–3.4%.
  • The cost increases hit lower-income renters hardest—the groups such policies aim to help.

Memorable Quote:

"There is a real cost to regulation, even well intended ones, and that cost of regulation is being shouldered by renters."
— Jay Parsons (13:36)

Chart Segment Conclusion:

• Regulations sometimes have unintended negative impacts, calling for a more nuanced policy approach that weighs affordability ramifications.

Authors' Conclusion (Read Aloud by Jay, 16:40):

"Certain rental housing policies can raise the cost of providing rental housing, which we show leads to higher rents, especially for lower income households... A balanced approach is essential."

2. News & Market Activity

(17:31 — 21:00)

• Multifamily Starts Data: Industry skepticism about census-reported strong multifamily starts; economists question accuracy.
• REIT Acquisitions:
  • Dream Residential REIT (Canada-based but U.S.-focused) acquired by Morgan Properties for $354 million.
  • Avalon Bay sells 1,248 D.C. units to Folger Pratt, reflecting changing investor appetites and regulatory challenges (notably D.C.'s "TOPA" tenant rights law).

Industry Quote:

"'Doesn't represent what we are seeing.' — Chris Nebenzol on multifamily start data" — Jay Parsons (18:35)

3. Rental Housing Trivia

(21:00 — 21:20)

• Question: What is the change in housing credit allocations in the OBBB for affordable housing?
• Answer: Increased by 12%.

4. Interview: Michael Novogradac on the “One Big Beautiful Bill”

(20:24 — 49:18)

Novogradac’s Background & History with LIHTC

(20:38 — 22:52)

• Michael began his career during the tax-shelter era of the early '80s, working on tax syndications for rental housing.
• The 1986 Tax Reform Act eliminated most tax shelters but invented LIHTC (Low-Income Housing Tax Credit), which Michael helped champion and document.

"I have worked with the low housing tax credit since its creation back in 1986."
— Michael Novogradac (21:11)

Preservation Challenges in Affordable Housing

(24:01 — 29:06)

• Discussions often miss building condition/deferred maintenance issues when LIHTC restrictions expire.
• Preservation dollars were historically supported by private activity bonds, but since 2020 (after the 4% floor was set), those dollars often shift to new construction rather than rehab. The OBBB is expected to direct more resources toward preservation.

"We expect there to be more resources thanks to the One Big Beautiful Bill to renovate existing affordable housing."
— Novogradac (28:45)

If He Could Redesign LIHTC (Hindsight)

(29:06 — 31:20)

• Earlier policy tweaks have improved LIHTC (floating-to-fixed rates, financing thresholds), but Novogradac would further expand individual investor access to these credits for greater market efficiency.

"I think the time now is to expand the investor base to make the credit even more efficient..."
— Novogradac (31:07)

The “One Big Beautiful Bill”: LIHTC Boost

(31:20 — 34:07)

• Headline Impact: 12% permanent boost in allocated credits (9% LIHTC) + bond financing test lowering from 50% to 25%.
• This could finance over 1.2 million additional affordable apartments in the next decade if states maintain current bond allocations.
• Greater potential for both new construction and preservation/rehab.

"That’s a lot of homes, that’s a lot of families that would end up being served."
— Novogradac (33:04)

Technical Detail: Bond Financing Thresholds

(34:07 — 36:33)

• Lowering the required bond-financed project cost portion from 50% to 25% enables states to support more projects with the same cap.

"Now a state can take their existing bond cap and basically, theoretically, they could finance twice as many projects."
— Novogradac (35:11)

Opportunity Zones Provisions

(36:33 — 39:57)

• Big Win: Permanency of Opportunity Zones, but bill narrowed zone eligibility (from areas at 80% of AMI to 70%)—resulting in fewer zones overall.
• Novogradac’s group suggested more aggressive housing incentives—such as extra benefits for affordable-housing conversion/renovation—which weren’t included.

"If I was able to make some adjustments, I would put those in."
— Novogradac (39:50)

Other Provisions Affecting Apartments

(40:11 — 42:16)

• Bonus Depreciation: 100% deduction turbocharges returns on new/existing property, increasing equity supply.
• Interest Limitation Loosening/Fixes: Some technical relief on the ability to deduct interest.
• New Market Tax Credits: Can support mixed-use but not direct residential; remains relevant for certain projects.
• Phasing Out Renewable Credits: Energy efficiency credits are being dialed back, which could impact housing with green components.

Macro Grading the OBBB

(42:16 — 45:33)

• Novogradac’s “grade”: "Never more than a triple, but it is a home run for our purposes given the 1.2M new units."
• Largest boost in housing supply in over two decades; but acknowledges other policy needs remain (e.g., workforce/middle-income housing incentives, preservation-focus bills).

"It’s pretty monumental in terms of its success... at least 25 years since something as significant as that."
— Novogradac (43:25)

The “Missing Middle” and Future Policy Needs

(45:33 — 48:54)

• Middle-income (workforce) housing tax credits still need attention—bipartisan support exists, but “prioritization” delays adoption.
• Opportunity Zones have helped build substantial workforce housing; Novogradac cites data showing an estimated net-new >600,000 units due to OZ.

"Workforce housing is a huge need and that is something that I think the Opportunity Zones has done a good job of creating..."
— Novogradac (47:49)

Notable Quotes & Timestamps

• On Regulation Costs:

  "These policies include things like eviction protections, screening limitations, source of income requirements...but actually backfiring on [renters] in the form of higher rent."
  — Jay Parsons (04:40)

• On 1980s Tax Reform:

  "[In the early 80s] we were building over 500,000...apartment units a year."
  — Novogradac (21:47)

• On Policy Caution:

  "I will note that there are on the 15 year... rules to how quickly that could happen. And a number of states have extended use agreements beyond the 30 years."
  — Novogradac (25:22)

• Looking Forward:

  "The one big beautiful bill was definitely a huge success and we do look forward to in future tax bills adding to that success."
  — Novogradac (45:30)

Structure & Flow

The episode opens with new independent research about the real-world impacts of well-intended rental regulations, followed by a concise news round-up. The interview with Michael Novogradac forms the core of the episode, structured around historical policy context, present-day law changes, and a vision of what’s still needed. The tone balances technical tax policy with “big picture” urgency—a friendly, informed, but pragmatic discourse.

For Listeners Who Missed It

• The “One Big Beautiful Bill” is the most consequential affordable housing legislation in decades, permanently increasing tax credit allocations by 12% and drastically improving the effectiveness of private activity bonds for financing.
• Despite the best intentions, many rental regulations may be unwittingly raising costs for low-income tenants.
• There is broad industry hope for further moves to enable middle-income/workforce housing and better preservation incentives.
• The conversation brings real policy nuance—suggesting a need for balanced, data-driven reform and ongoing advocacy.

Guest: Michael Novogradac
Host: Jay Parsons

[End of Summary]