Friday, December 19, 2014

Congress passes tax extenders legislation

by Rebekah King, National Housing Conference

On Dec. 16, the Senate approved a one-year package of tax extenders, the Tax Increase Prevention Act of 2014 (H.R. 5771) that will expire on Dec. 31, 2014. The House passed this legislation on Dec. 3. The law is essentially retroactive, so Congress will have to take up the same questions again in 2015. The package includes a long list of tax provisions with a few specifically on housing: Low Income Housing Tax Credit (LIHTC) and mortgage debt relief.
  • Fixed 9% rate for LIHTC. The Housing Credit rate was set at 9 percent minimum (as opposed to floating). However, most deals have already closed using the floating rate, so this provision has negligible value for LIHTC projects. A floating rate in 2014 has meant affordable housing projects receive 15-20 percent less equity making projects more difficult to finance and complete. The legislation did not include the 4 percent credit minimum proposal.
  • Tax relief for struggling homeowners. The bill includes mortgage debt tax relief which prevents homeowners from having to pay income tax on debt that gets forgiven in a mortgage modification or short sale. The provision will help homeowners who went through a modification or short sale in 2014, but homeowners will again face uncertainty in 2015. NHC has long advocated for mortgage debt relief; it helps prevent additional financial burden for distressed homeowners and enables decisions to help people move forward. This legislation was originally passed in 2007 and received extensions in 2009 and 2012. The number of short sales declined this year, which is partially because of an improved economy and fewer foreclosures, but also because of homeowner uncertainty about negative tax consequences.
The legislation also included an extension of the New Markets Tax Credit, energy provisions, and bonus depreciation. The earlier tax deal debated in late November included minimum 9 percent and 4 percent credit rates and mortgage debt relief for two years, through 2015, but because of the threat of presidential veto, that deal did not move forward. Congress will again have to address tax extenders in 2015.

Tuesday, December 16, 2014

How will housing markets and policies respond to the “diversity explosion”?

by Lisa Sturtevant, PhD, National Housing Conference

William Frey of the Brookings Institution has written a new book titled Diversity Explosion. An intentionally provocative title for a book about seismic demographic shifts in the U.S., the book formed the basis for a presentation and panel discussion I attended on Monday. Diversity Explosion describes the important demographic trends that will shape the future of politics, policymaking and economic growth in the country over the next four decades. The way in which the demographics of the country are changing will have important implications for future housing demand and housing policy. Three key findings from the book and their effects on housing needs are discussed below.

The U.S. population will turn majority minority between 2040 and 2050. The shift to a majority minority population is a key message from Freys book. Regardless of the U.S.s immigration policy, the country will become increasingly diverse over the coming decades, and by 2044 we are expected to be a nation where no one racial or ethnic group accounts for a majority of the population. The increase in the minority population is largely due to the fact that minorities in the U.S. tend to be younger and more likely to be in childbearing ages than the white population. At the same time, the white population is growing very slowly and, in fact, is projected to begin to decline in actual numbers in coming decades.

Minorities, therefore, will drive household growth in the future. And while they do and will have a diverse set of housing preferences and needs, minority householdsoverall housing demand patterns look different from those of whites. Minority households are less likely to be homeowners than white households. In addition, the rates of homeownership among minorities declined faster during the housing downturn than they did for whites. Lower and declining homeownership rates are strongly related to the growing wealth disparities between minorities and whites.

Because the primary means by which the middle class builds wealth in the U.S. has been through homeownership, public policy related to the accessibility and affordability of homeownership will be critical as the nation becomes more diverse. So, too, will the pace of rental construction activity and policies that either promote or slow the production of affordable rental housing.

The aging of the white population highlights the divergent preferences between minorities and white. The age structures of whites and minorities in the U.S. are starkly different. According to the 2010 Census, the median age of non-Hispanic whites was 42. The median age of Asians was 35, the median age of African Americans was 32 and the median age for Hispanics was 27. Thus, the minority population in the U.S. is much younger than the white population.

Dependency ratios are one way to measure the age structure of populations. Dependency ratios are defined as the total non-working age population divided by the total working age population. The “old age” dependency ratio uses the number of seniors in the population as the numerator of the ratio; the “child” dependency ratio uses the population under age 18. The child dependency ratio is higher in the minority population compared to that in the white population; the old age dependency ratio is much higher for whites than for minorities and is rising quickly among the white population. This disparity in dependency ratios can lead to competition for public resources that can increasingly pit older whites against younger minorities. While the white population may increasingly advocate for more resources for seniors, minorities will see a greater need for public investment in children and young adults.

This struggle will play out in the demand for limited affordable housing resources. There may be pressure from whites for programs that give preferences to seniors, while the growing minority population may call for additional housing support for families with children. Policies that spell out how housing resources should be allocated—or who should be given preference for housing subsidies—will need to be drafted to recognize the growing divide in priorities between the shrinking white and the growing minority population.

Minorities have been moving more frequently to the suburbs. According to the 2010 Census data tabulated by Frey, for the first time, a greater share of African Americans lived in the suburbs of the nations largest metro areas than in the central cities. Growth in the suburban Hispanic and Asian populations has also been dramatic. In the Monday discussion, Frey commented on some of the positive implications of the suburbanization trend, specifically the possibility that minorities moving to the suburbs were able to access better education, employment and other opportunities than they were able to in the cities. But he cautioned that the suburban migration has not been uniform among all types of minority households. Specifically, minority households that are two-parent families with children have been more likely than single parents to have moved from cities to suburbs. And the panel did not dwell on the less positive issues around increased minority suburbanization, including gentrification of central cities that has priced out some minority households, and challenges associated with rising suburban poverty.

The increase in the number of minority households in the suburbs suggests a need for local housing policies that are designed purposefully to build inclusive and integrated communities. HUDs proposed affirmatively furthering fair housing rule, designed to better implement the obligations specified by the National Housing Act and to improve neighborhoods and housing opportunities for all, is an important step to help suburban communities recognize and address their diverse and changing housing needs. Local strategies like inclusionary housing with on-site (or near-site) affordability requirements can be effective tools to increase inclusivity.

As William Frey has made clear, demographic change is reshaping the population of the U.S. and the racial and ethnic make-up of cities and states across the country will look dramatically different in 2050. The trends outlined in Diversity Explosion are clear—we know where we are headed—so it is now incumbent upon the policymakers, developers and advocates to come together to plan for ways to meet the housing needs of our diversifying population.

Monday, December 15, 2014

DC is the latest city to prioritize public land for affordable homes

by Robert Hickey, National Housing Conference 


One of the better tools cities have for protecting economic diversity and improving housing affordability is using publicly owned land creatively to include affordable homes. Recognizing this, the Washington, DC city council recently voted unanimously to require that all new multifamily residential developments on city-owned land include at least 20-30 percent affordable housing. With the mayor’s acquiescence landing the day after Thanksgiving, this big news was easily overlooked. But the act’s passage is an important step for the city, and places the District in the company of other cities locally and nationally that have become more intentional about using “public land for public good,” and making affordable homes a priority.

Like neighboring Arlington County (Va.), Montgomery County (Md.) and the city of Alexandria (Va.), Washington, DC is seeking to incorporate affordable homes on more types of pubic properties – from surplus property sites to the grounds of new fire stations, libraries and community centers. Offering land in these contexts at a discount to developers that agree to include a significant share of affordable homes helps make new affordable homes more financially feasible. Given the shortage of affordable land in the District, especially in safe, desirable neighborhoods,  the new DC law can help ensure there are more reasonably priced housing options in well-served locations for long-time residents and essential workers who are increasingly priced out of the city.

Arlington Mill Residences, a 122-unit, affordable residential property built on public land alongside a new community center, opened in Arlington County last February. 
(Credit: Anice Hoachlander/ Hoachlander Davis Photography).

November was a big month for affordable housing policy in the District. In case you missed it because you were immersed along with the rest of us in our successful Solutions conference, the DC council also voted unanimously in mid-November to appropriate at least $100 million annually to the city’s Housing Production Trust Fund. This is another big step forward for housing efforts in the city, and an important complement to the city’s public land policy. 

In a forthcoming report from NHC’s Center for Housing Policy due out in January, my co-author Lisa Sturtevant and I look at lessons that can be learned from similar land policies and local case studies – including the recently completed Arlington Mill Residences. Stay tuned!

Friday, December 12, 2014

House Committee on Veterans' Affairs hearing highlights successes and challenges in ending veteran homelessness

by Rebekah King, National Housing Conference

On Dec. 11, the House Committee on Veterans’ Affairs held a hearing on Evaluating Federal and Community Efforts to Eliminate Veteran Homelessness. Nonprofit organizations focused on policy, housing, and service comprised the first panel; federal agency staff comprised the second panel. The first panel highlighted the success and progress they are seeing on the ground:
  • Since 2010, the homeless veteran population has declined by 33 percent, an unprecedented achievement which is a direct result of research-based interventions, federal leadership, and Congressional support and funding.
  • Having a combination of programs is working: HUD Veterans Affairs Supportive Housing (VASH), Veterans Affairs Grant Per Diem (GPD), and Supportive Services for Veterans Families (SSVF). These programs together offer a range of supports and interventions to meet the varying needs of homeless veterans and give them the resources necessary to be stable and self-sufficient.
The panel also raised some policy recommendations which will strengthen efforts in communities nationwide:
  • Non-VA case management is necessary in many places. Getting linked with a VA case manager can be a lengthy process and in some areas, VA case managers are simply not available. Using community partners to provide case management would improve outcomes for veterans.
  • SSVF could be even more effective with a higher funding level; GPD would benefit from greater flexibility so that different communities could use the program to target their specific needs. 
  • Congress, federal agencies, and housing and service providers all need to understand the changing veteran population. While Vietnam veterans are the largest group of veterans currently, the number of post-9/11 veterans is rapidly increasing. Female veterans are also growing in number as are female veterans with children.
Lastly, the panel discussed concerns for the future.
  • In most areas, there is not enough affordable housing stock. Additionally, rental costs have been on an upward trend, and this trend will continue. Developing affordable housing projects is not a quick process because of the time necessary to locate sufficient resources. Additional supply is a key aspect of ending homelessness.
  • Significant progress will only continue to be made on reducing and ending veteran homelessness with continued funding and research-based programs. Congress and the VA also need to be thinking about how to prevent veteran homelessness and how resources will need to be utilized to maintain our achievements of ending veterans homelessness.
Panelists on the first panel were Baylee Crone of the National Coalition for Homeless Veterans, Steve Berg of the National Alliance to End Homelessness, John Downing of Soldier On, Phil Landis of Veterans Village of San Diego, Casey O’Donnell of Impact Services Corporation, and Jon Sherin of Volunteers of America.

Thursday, December 11, 2014

Senate Banking subcommittee hearing highlights housing challenges and recommends policy changes

by Rebekah King, National Housing Conference

On Dec. 9, the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development held a hearing on Inequality, Opportunity, and the Housing Market. The panelists discussed the range of challenges that continue to plague the housing recovery: concentrated foreclosures, negative equity, vacant and abandoned homes, tight credit, and households of color shut out of the conventional mortgage market. The hearing highlighted that despite overall economic improvement, many families and neighborhoods are being left out of the recovery. The panelists highlighted a number of policy recommendations that would improve family and neighborhood outcomes.

Areas for Congressional action
  • Complete housing finance reform in a way that ensures affordable access to credit. The uncertainty of the GSE’s future negatively impacts the housing market. NHC has repeatedly urged Congress to enact housing finance reform.
  • Pass the Mortgage Debt Relief Act through 2015. Homeowners considering short sales need certainty that they will not face negative tax consequences so they pursue this better option over a foreclosure or walking away. NHC has advocated on this issue along with many allies.
Areas for Federal Housing Finance Agency action
  • Fannie Mae and Freddie Mac should update their credit score models, using options like FICO 9 and Vantage Score, which are more refined and open up the mortgage market to more borrowers. This action could also encourage other lenders to update their credit score models.
  • Fund the National Housing Trust Fund and Capital Magnet Fund, which would help create more affordable housing.* 
  • Continue work with other regulators to improve mortgage servicer rules.
REO Disposition
  • FHA’s Distressed Asset Stabilization Program (DASP) offers a viable way to preserve homeownership and stabilized neighborhoods. Though FHA has made some improvements to the program, it could make additional changes to DASP so that nonprofits were better able to participate like awarding extra points to Neighborhood Stabilization pool bidders committed to social outcomes. NHC discussed this program in a recent blog.
  • The Federal Housing Finance Agency (FHFA) should strengthen its First Look program for REOs, so that homebuyers and nonprofits have a longer period to purchase those homes. The program could also be improved by considering how to give nonprofits and homebuyers access when prices decrease.
Panelists at this hearing were Wayne Meyer of New Jersey Community Capital, Julia Gordon of the Center for American Programs, Mabel Guzman of the National Association of Realtors and Deborah Goldberg of the National Fair Housing Alliance.

*On Dec. 11, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to begin setting aside and allocating funds to the Housing Trust Fund and the Capital Magnet Fund. You can read NHC’s blog post here.

FHFA orders Fannie Mae and Freddie Mac to fund affordable housing

by Ethan Handelman, National Housing Conference 


This morning, the Federal Housing Finance Agency (FHFA) ordered Fannie Mae and Freddie Mac to begin funding the National Housing Trust Fund and the Capital Magnet Fund, both of which support the creation and preservation of affordable housing. FHFA’s action is a major step forward for affordable housing, as each of these programs were authorized in 2008 but had yet to receive any funding from Fannie or Freddie. (The Capital Magnet Fund received one round of appropriated funds that was oversubscribed and quite successful.) It is also a much-anticipated action by FHFA Director Mel Watt reversing a decision by the previous director, Ed DeMarco.

Under DeMarco, FHFA had temporarily suspended contributions to the funds citing the financial instability of the two mortgage companies. To implement this new decision, FHFA sent letters to Fannie Mae and Freddie Mac that lifted the temporary suspension. In the letters, FHFA stated that “set aside and allocation would not contribute to the financial instability” of either company. It also stated that “the profit levels [Fannie Mae/Freddie Mac] has experienced since 2012 are not expected to be sustainable, reasonable projections indicate that [Fannie Mae/Freddie Mac] will remain profitable for the foreseeable future.” Watch NHC’s Openhouse Blog for updates on funding and implementation.

Wednesday, December 10, 2014

Omnibus appropriations details for housing

by Rebekah King, National Housing Conference

On Dec. 9, House Appropriations Committee Chairman Hal Rogers (R-Ky.) and his Senate counterpart, Barbara Mikulski (D-Md.) released the FY 2015 omnibus appropriation bill. It follows the $1.014 trillion budget cap set in the Murray-Ryan deal in 2013. The bill will fund 11 agencies through Sept. 30, 2015 and will fund the Department of Homeland Security through Feb. 27, 2015. The House has announced plans to vote on the bill Thursday, Dec. 11, but may need to pass a short-term continuing resolution to avoid a shutdown. The Department of Housing and Urban Development would receive $45.4 billion in gross funding but because of a decline in projected FHA receipts, HUD’s program budget is actually $104 million below the FY 2014 enacted level. Below is a chart showing funding for selected HUD programs. Project based rental assistance, CDBG, HOME, and Choice Neighborhoods would all experience significant funding cuts. However, 10,000 new HUD-VASH vouchers would be funded at $75 million; Jobs Plus and Family Self Sufficiency would hold steady at $15 million and $75 million respectively. Full text of the bill is available here, and the Senate appropriations summary is available here.

Positive policy changes in the bill:
  • Raises the Rental Assistance Demonstration (RAD) program cap from 60,000 units to 185,000 units and extends the program through 2018.
  • Permanently extends RAD Component 2 (for Rent Supplement and RAP properties) and makes McKinney Vento single room occupancy dwellings eligible.
  • Authorizes residents in project based Section 8 to participate in the Family Self Sufficiency program for the first time.
Negative policy outcomes:
  • Prohibition on FHA funding for the Homeowners Armed with Knowledge (HAWK) Initiative.
  • No funding for “green” or “sustainable” programming.

      Other policy provisions include a prohibition on FHA financing for mortgages seized by eminent domain, no new FHA mortgage fees, and a provision requiring HUD to take enforcement actions if a property owner fails to maintain their HUD-assisted property. Project based rental assistance will also shift to calendar year funding.



      Red numbers indicate decreases compared to FY14 enacted levels, green numbers indicate increases, and black numbers indicate flat funding.