The 114th Congress is sworn in and getting down to

2014 Midterm Election Analysis What Happened, What s Ahead BY GREG BROWN AND KATHLEEN GAMBLE The 114th Congress is sworn in and getting down to business. As you know, Republicans had a very successful midterm election in 2014, taking control of the U.S. Senate for the first time in six years and securing the largest majority in the U.S. House of Representatives since the Great Depression. Now the celebrations are over and it s time to govern. A recap of the election results and an overview of the new class of Representatives and Senators as well as party and committee leaders, follows. More important, we analyze what all of this could mean for the apartment industry and our issues in the 114th Congress. Results Recap In the Senate, Democratic incumbents Mark Pryor (D-Ark.), Mark Udall (D-Colo.), Kay Hagan (D-N.C.), Mark Begich (D-Alaska) and Mary Landrieu (D-La.) lost their seats while Republican incumbents Mitch McConnell (R-Ky.) and Pat Roberts (R-Kan.) successfully defended theirs. In open seat races, Republican candi- dates Dan Sullivan (Alaska), Rep. Steve Daines (R-Mont.-1), Gov. Mike Rounds (S.D.), Rep. Cory Gardner (R-Colo.-4), Rep. Shelly Moore-Capito (R-W.V.-2), Joni Ernst (R-Iowa), David Purdue (R-Ga.) and Rep. Bill Cassidy (R-La.-6) each won. The total number of Democratic seats in the Senate dropped to 44 while the Republican majority is now 54 seats. Two seats are held by independents who currently caucus with the Democrats. The chart below illustrates the change in the Senate makeup from the 113th to the 114th Congress. In the House of Representatives, the GOP won a net expansion of its majority by 12 seats with one race still to be decided. The total number of Democratic seats in the House dropped to 188 while the Republican majority grew to 246, the largest since 1928. In 26 of the most competitive districts, seven changed party hands, all for Republicans. There were nine upsets in much less competitive districts and Republicans won six of those. The chart on the opposite page illustrates the change in the House makeup from the 113th to the 114th Congress. 26 Units J a n u a r y 2 0 1 5 w w w. n a a h q. o r g

Demographics of 114th Freshman Class Overall, there are 73 new members of Congress 13 Senators and 60 Representatives. Fifty-five of them are Republicans and 18 are Democrats. Seventeen percent are women, 42 percent are under the age of 50 and 75 percent have held prior political office. Individually, 14 served in the military and 20 have law degrees. Additionally, 60 members of this freshman class are white, five are black, three are Latino and two are Asian. The House of Representatives is now 20 percent women, 20 percent minorities and has 35 members who listed real estate as their occupation. Additionally, 7.9 percent of the Representatives are under the age of 40, down from 8.5 percent in the 113th Congress. By contrast, the percent of members under 40 grew in the Senate to 2.1 percent, up from 1 percent in the 113th Congress. The Senate is also now 21 percent women, 6 percent minority and has five members who listed real estate as their occupation. Help NAA Grassroots There are new faces in Congress and new leaders, all of whom can impact the advocacy goals of the apartment industry. Your Government Affairs team in Washington, D.C., needs the help of the grassroots to ensure those goals reach fruition and that bad proposals are stopped before they harm your business. If you are not already part of the Apartment Industry Mobilization Service (AIMS), contact Katelin McCrory at Katelin@naahq.org today and add your name to the list. Participants are called upon periodically to reach out to their members of Congress to communicate the views of multifamily on respective issues. Party and Committee Leadership Exit polls showed an anti-d.c., anti-incumbent sentiment that is reflected to a degree in Senate midterm elections. However, this sentiment is not reflected in who will lead both parties in the 114th Congress. There is little change in the top leadership posts as Mitch McConnell (R-Ky.) will be Majority Leader along with the existing Republican leadership team: Majority Whip John Cornyn (Texas), Republican Conference Chair John Thune (S.D.), Republican Conference Vice-Chair Roy Blunt (Mo.), and Republican Policy Committee Chair John Barrasso (Wyo.). The only change is that Roger Wicker (Miss.) will head the National Republican Senatorial Committee for the 2016 election cycle. He replaces Jerry Moran (Kan.). The Senate Democrats also did not change their leadership team. Harry Reid (Nev.) will continue as head of the Democratic w w w. n a a h q. o r g J a n u a r y 2 0 1 5 Units 27

caucus as Minority Leader. He is joined by Minority Whip Richard Durbin (Ill.), Democratic Conference Chair Charles Schumer (N.Y.), Democratic Conference Vice-Chair Patty Murray (Wash.) and Steering & Outreach Chair Amy Klobuchar (Minn.). Jon Tester (Mont.) will head the Democratic Senatorial Congressional Committee, replacing Michael Bennett (Colo.). The Democrats added two new leadership slots. The first is for Elizabeth Warren (Mass.), who will be responsible for strategic progressive outreach and the second is for Mark Warner (Va.), who will be policy development advisor at the Democratic Policy and Communications Center. Similar to the Senate, the top House leadership positions remain unchanged with John Boehner (R- Ohio-8) re-elected as Speaker of the House along with the rest of his leadership team: Kevin McCarthy (R-Calif.-23) as Majority Leader, Steve Scalise (R-La.-1) as Majority Whip and Cathy McMorris Rodgers (R-Wash.-5) as Republican Conference Chair. Luke Messer (R-Ind.-6) joins the team as the Republican Policy Chair. Similarly, the Democrats kept their current leadership in place with Nancy Pelosi (D-Calif.-12) as Minority Leader, Steny Hoyer (D-Md.-5) as Minority Whip, John Clyburn (D-S.C.-6) Assistant Democratic Leader and Xavier Becerra (D-Calif.-34) as Democratic Conference Chair. The new Republican majority in the Senate also means new committee ratios between Republicans and Democrats, new committee members and, perhaps most importantly, new chairs and ranking members. Changes to the leadership of key committees for NAA in the Senate as well as the House are in the charts (above right). Those with an * are new to their leadership role on the Committee. Senate Committee Leadership Committee Chairman Ranking Member Armed Services Sen. John McCain Sen. Jack Reed (R-Ariz.) (D-R.I.)* Banking, Housing Sen. Richard Shelby Sen. Charles and Urban Development (R-Ala.) Schumer (D-N.Y.)* or Sen. Sherrod Brown (D-Ohio)* Environment Sen. Jim Inhofe Sen. Barbara Boxer and Public Works (R-Okla.) (D-Calif.) Finance Sen. Orrin Hatch Sen. Ron Wyden (R-Utah)* (D-Ore.) House Committee Leadership Committee Chairman Ranking Member Armed Services Rep. Mac Thornberry Rep. Adam Smith (R-Texas-13)* (D-Wash.-9) Energy & Commerce Rep. Fred Upton Rep. Frank Pallone (R-Mich.-6) (D-N.J.-6)* Financial Services Rep. Jeb Hensarling Rep. Maxine Waters (R-Texas-5) (D-Calif.-43) Ways & Means Rep. Paul Ryan Rep. Sander Levin (R-Wis.-1)* (D-Mich.-9) Importantly, NAA members have strong ties with the committee leaders in both the House and the Senate. Implications for the Apartment Industry While it is possible to generalize about how the reshaped Congress will affect the apartment industry, it is perhaps more useful to examine potential implications on a committee basis as that is where all legislation begins. It is worth noting that Speaker John Boehner (R-Ohio-8) will manage an expanded caucus with a continued strong membership of conservatives. Much like in the 113th Congress, this seg- While it is possible to generalize about how the reshaped Congress will impact the apartment industry, it is perhaps more useful to examine potential implications on a committee basis as that is where all legislation begins. 28 Units J a n u a r y 2 0 1 5 w w w. n a a h q. o r g

Seeing Red State and Local Elections Update BY CARLY SIMPSON I n keeping with the trend in Congressional elections, the Republican Party also saw huge gains at the state level. Before Election Day, the partisan split of governors was 29 Republicans to 21 Democrats. Now, after elections in 36 states, Republicans will hold gubernatorial seats in 31 states while Democrats will hold 17 states. Notably, Republicans won elections in some traditionally Democratic states including Arkansas, Illinois, Maryland and Massachusetts. In Alaska, an independent candidate has been elected governor and results are pending in Vermont. Current Vermont Gov. Peter Shumlin (D) failed to secure 50 percent of the vote, and the Vermont Legislature will pick the governor when it convenes this month. The Vermont Legislature is controlled by the Democratic Party. Other notable governor races: In Pennsylvania, Gov. Tom Corbett (R) lost to Democratic challenger Tom Wolf, making Corbett the only Republican incumbent governor to lose in 2014. Greg Abbott (R), who currently serves as the Texas Attorney General, has been elected as the governor of Texas. The seat was open when Gov. Rick Perry (R) chose not to run again. Other first-time governors include Pete Ricketts (R) in Nebraska, Doug Ducey (R) in Arizona and Gina Raimondo (D) in Rhode Island. State legislatures also rode the red wave on election night. According to the National Conference of State Legislatures (NCSL), prior to the elections, 27 state legislatures were under Republican control in both upper and lower chambers; 19 states were under Democratic control in both chambers and three states were split. In 2015, Republicans will now control both house and senate chambers in 30 states, while Democrats will hold both chambers in 11. Eight states will have split legislatures and Nebraska is a unicameral legislature. Locally, the U.S. Conference of Mayors indicated that more than 150 cities held mayoral elections in November. Notable mayoral races included Washington, D.C., where Muriel Bowser (D) defeated independents David Catania and Carol Schwartz. Bowser defeated Vincent Gray, the incumbent mayor in the primary. In Oakland, Calif., incumbent mayor Jean Quan was defeated by City Council member Libby Schaaf. While one could speculate that the state election results could signify more business-friendly policies, it is still too early to forecast what effect state and local elections will have for the apartment industry. Governors are setting their agendas for 2015 and state legislators are currently in the process of filing bills for the 2015 state legislative sessions, most of which begin in January and February. Now is the time to meet with your state and local elected officials and educate them on the apartment industry s issues. We expect state and local governments will continue the trend of introducing proposals related to fair housing issues, such as protected classes, as well as proposals that place restrictions on the ability to screen potential employees and residents. By getting in front of these issues and others that affect the apartment industry, you have a better chance of having a seat at the table rather than being on the menu. Carly Simpson is Manager of State and Local Government Affairs for NAA. Sources: National Journal, National Conference of State Legislatures, U.S. Conference of Mayors w w w. n a a h q. o r g J a n u a r y 2 0 1 5 Units 29

ment of the Republican majority will force Boehner to carefully consider what legislation makes it to the floor and what those bills look like. The most significant change in committee leadership in the House is that of Paul Ryan (R-Wis.-1) leaving his current post as Chairman of the Budget Committee to take the helm at Ways and Means, a post he has long sought. He succeeds retiring Rep. Dave Camp (R-Mich.-4). Ryan enjoys diving deep into complicated policy subjects and has signaled that pro-growth tax reform is a priority for him. Passing tax reform legislation is a steep hill to climb anytime, but could be especially challenging in a presidential election cycle. Camp was not afraid to take on established constituencies in the tax code, which was reflected in the bold tax reform proposal he released in 2014. It s difficult to tell if Ryan will want to be as aggressive as his predecessor, but history shows that he is unafraid of taking on the tough issues (see his budget reform proposal from 2012). Moreover, the Camp legislation did lay out a number of revenue-generating proposals that impact real estate, among other industries, and could come back in the next round of tax reform. On the Senate side, the new chair of the Finance Committee, Orrin Hatch (R-Utah) is a long-time friend of the real estate industry, and while his personal focus seems to be more on health care, tax reform will almost certainly be high on the committee s agenda. On the Senate side a familiar face returns to the Banking Committee. Richard Shelby (R-Ala.) is chairman after a hiatus of several years. Importantly for apartment industry concerns, Shelby is a veteran of the GSE wars of a decade ago and will set the agenda for the Banking Committee s deliberations on this issue in the 114th Congress. Reportedly, he is more interested in reforms to the Dodd-Frank law, but if Fannie Mae or Freddie Mac begin to experience financial challenges, he may have to move their reform to the top of the committee s to-do list. While Shelby was a strong critic of the GSEs during previous reform conversations, it s uncertain if he is in the same place as House Financial Services Committee Chairman Jeb Hensarling (R-Texas-5) who prefers to eliminate the federal role in housing finance altogether. Finally, Jim Inhofe (R-Okla.) will take over from Barbara Boxer (D-Calif.) as chair of the Senate Environment and Public Works or EPW Committee. Boxer is a staunch environmental advocate so this change is significant, especially in light of the many environmental proposals coming out of the Obama Administration. To say Inhofe is skeptical of environmental regulation is an understatement. It s safe to say that representatives from the Environmental Protection Agency should plan to spend a lot of time in front of the EPW Committee to answer questions in a whole host of areas. To the extent those proposals add to the regulatory burden of the apartment industry, the bright light of hearings could be impactful. Greg Brown and Kathleen Gamble are members of the NAA Government Affairs Department. 30 Units J a n u a r y 2 0 1 5 w w w. n a a h q. o r g