Wednesday, June 29, 2011

Misleading depiction of Section 8

UPDATE: JUNE 30, 2011 5:59 P.M.--The National Low Income Housing Coalition (NLIHC) has also drafted a response to the Washington Post's article. Read it at NLIHC's On the Home Front blog.

Once again, we must correct a misleading depiction of an essential housing program.  On June 25, The Washington Post posted an article titled, “Housing vouchers a golden ticket to pricey suburbs.” The piece follows the story of Liza Jackson, a recipient of Section 8 vouchers in search of adequate housing to meet her family’s needs. With an oversimplified description of the Section 8 voucher process, the article gives the impression of recipients as picky freeloaders. Our major issues with the article:
  • Description plays into stereotypes.  The article offers gratuitous detail about Liza Jackson (gold sandals, car with pink eyelashes, slang descriptions) that play into popular stereotypes like the “welfare queen” bandied about in the 1980s.  At the same time, it tells us little about her economic situation—she gets unemployment, but that means she was previously employed.  If she’s receiving a voucher, she meets federally mandated income standards and has been vetted by a PHA.
  • Article omits basic facts about Section 8.  Voucher recipients must be low-income to qualify, and preference is usually for the very poorest.  Many who qualify don’t receive help at all, and those who do often wait a long time (as noted by the article).
  • Getting more property owners to accept Section 8 is good.  It’s only in the recent housing bust that more owners are willing to accept Section 8, because they value the stability of the subsidy stream.  During the boom years, it was often very difficult to get property owners in neighborhoods with better employment opportunities, schools, or transportation accessibility to accept vouchers.
  • Voucher holders should be picky consumers.  The article’s description of  Jackson’s choosiness when vetting properties seems to emphasize her relish at having a lot of options.  From a public policy perspective, we want voucher holders to choose the best properties and to leave if they’re not satisfied (vote with their feet, as we say in the industry).  That encourages owners to keep properties in good repair and provides the best value to government.
If you had a similar reaction, let the Post know what you think!

Tuesday, June 28, 2011

Pay for Success Bonds: An Innovative Way to Do More with Less

Debates and discussions about the future of federal spending seem to dominate the headlines today, and the general consensus is that cuts to discretionary programs – such as those that promote affordable housing – are inevitable. In the midst of these conversations, one line-item in the President’s Fiscal Year 2012 Budget has gotten less attention than it perhaps deserves: $100 million to pilot a Pay for Success bond program.
Called “social impact bonds” in the United Kingdom, Pay for Success bonds would allow the federal government to pay only for programs that meet predetermined outcomes. The concept is fairly straightforward: Private investors and philanthropies, the federal government, and service providers would agree to support an innovative program that is intended to achieve certain societal outcomes in a cost-effective manner. The partners agree to a set of targets that demonstrate whether the program is successful. The investors and philanthropies provide the initial capital, and if the targets are achieved, the federal government repays their costs and, if very successful, a healthy return on their investment. If the targets are not achieved, the investors do not recoup their contributions.
For the federal government, this is a winning proposition because it only foots the bill for programs that work. Socially-motivated investors that back successful programs can support strategies they believe in and use their recycled funds for other projects. And programs with potential have the opportunity to prove themselves.
Unfortunately, housing programs do not appear to be eligible for Pay for Success bonds in the President’s budget. Only a few program areas are identified as eligible, and they are focused on “prevention strategies” that lower future government costs. Examples of eligible programs on the White House fact sheet include efforts to reduce recidivism or increase early childhood interventions, thereby reducing future criminal justice and education costs, respectively.
If successful, however, there is no reason that Pay for Success bonds shouldn’t be available to fund innovative housing programs in subsequent years.  Emergency assistance programs that keep renters in their homes can lower homeless shelter costs. Help with mortgage payments during periods of unemployment can keep otherwise stable homeowners from facing foreclosure – a process that can be very costly for municipalities.  Affordable housing has also been shown to positively impact both health and educational outcomes, and any number of pilot housing programs might demonstrate savings in these sectors.
Despite a number of challenges and limitations, Pay for Success bonds appear to represent a silver lining in an otherwise cloudy budgetary picture. The concept is an innovative way to do more with less, and its implications for creative affordable housing programs should be explored.

Friday, June 24, 2011

NHC Policy Summit wrap-up: mortgage finance reform bill announced, Treasury "strongly considering" feedback on proposed QRM rule

Rep. Gary Miller (R-CA) today announced plans to introduce a bill to reform the nation’s mortgage finance system during a policy summit convened by NHC. About 200 people attended the event at the Columbus Club in Washington, D.C., where Miller offered views on the importance of the government-sponsored enterprises (GSEs) in providing access to credit for Americans.

“Fannie [Mae] lost money one year, in 1985,” Miller said in the opening speech. “Freddie [Mac] lost money never. Find me one lender that did that well.”

Bucking the consensus to immediately phase out the GSEs among his GOP colleagues, Miller hinted that the legislation will outline a more moderate approach to mortgage finance reform.

“If you want to hurt taxpayers, cut off the lending market,” Miller remarked. “If you want to hurt the housing market, eliminate the GSEs without providing a viable alternative.”

Miller declined to offer details of the bill but said that he and other lawmakers would introduce the legislation July 6.

Jeffrey Goldstein, Treasury’s undersecretary for domestic finance, said in the summit’s keynote speech that the Obama Administration is mulling concerns on finalizing the proposed risk retention rule drafted by federal regulators to fulfill provisions of the Dodd-Frank Act.

"We are seriously considering feedback and are committed to getting this rule right, so that we can ensure securitization is a stable and reliable source of credit for consumers, businesses and homeowners," Goldstein said.

The proposed rule includes a new definition for qualified residential mortgages (QRM), which are loans exempt from the risk retention requirement. The underwriting standards for QRMs laid out in the proposal include a required 20% down payment, strict debt-to-income ratios, and borrower credit history restrictions. Public comments were originally due on June 10, but in the wake of criticism from housing and industry groups including NHC, regulators announced on June 7 that they would extend the comment period until August 1.

The summit convened NHC members, housing leaders and experts from around the country to debate how to reform America’s housing finance system. Panelists and moderators included thought leaders from private development, banks, academia and nonprofits. Among them were David Stevens, President and CEO of Mortgage Bankers Association; Bart Lloyd, manager of acquisitions for Preservation of Affordable Housing; Willy Walker, Chairman, President and CEO of Walker & Dunlop; Susan Wachter, Richard B. Worley professor of financial management and professor of real estate and finance at the Wharton School; Lawrence J. White, Robert Kavesh professor of economics at NYU Stern School; Diana Reid, executive vice president of PNC Real Estate and Brian Montgomery, partner and co-founder of The Collingwood Group. Ted Chandler, chief operating officer of AFL-CIO Housing Investment Trust will also serve as a panel moderator.

A central theme of the final panel was that multifamily housing has performed better and requires different solutions for mortgage finance reform than does single-family housing.

“If it’s not broken, don’t fix it. And don’t break it,” commented Reid, articulating a consensus that emerged from the panelists.

The event followed NHC’s annual Housing Person of the Year Gala scheduled on June 23 at the National Building Museum, honoring Professor Nicolas Retsinas and Sister Lillian Murphy, RSM, and celebrating NHC’s 80th anniversary. Retsinas, director emeritus of Harvard’s Joint Center for Housing Studies, former FHA commissioner and a longtime fixture in national housing policy, moderated a key panel at the summit.

Thursday, June 23, 2011

NHC’s Annual Gala honors two of housing’s greats in organization’s 80th year

Hundreds of affordable housing leaders and supporters will gather at Washington, D.C.’s National Building Museum to honor Sister Lillian Murphy, RSM, and Professor Nicolas P. Retsinas as the National Housing Conference’s Housing Persons of the Year and to mark NHC’s 80th year. Each year, NHC recognizes those who have worked tirelessly towards the goal of providing safe, decent and affordable housing for all in America.

Sister Lillian’s early work with the Sister of Mercy began in 1959, meeting health and education needs in her community. When the sisters made the connection between housing, health and education, starting Mercy Housing in 1981, Sister Lillian was not far behind. Since her appointment as CEO of Mercy Housing in 1987, she has dedicated herself to responding to the “absolutely critical” needs for affordable housing and residential services for low- and moderate-income residents. Under her leadership, the organization has grown from a regional charity into an award-winning, national nonprofit with a presence in 220 cities, 41 states and the District of Columbia, serving more than 135,000 people in nearly 40,000 affordable homes..

While Sister Lillian manifests her passion for community development and housing to solve America’s housing problems in practice, Professor Retsinas’ influential books and articles are a foundation of the policy and research principles that help organizations like Mercy Housing thrive. Nic is currently Senior Lecturer in Real Estate at the Harvard Business School, following a position as director of Harvard University’s Joint Center for Housing Studies. He has been a fixture in housing policy since long before he joined the Harvard faculty. At the state level, he served as executive director of the Rhode Island Housing and Mortgage Finance Corporation. In the 90s, he served in the Clinton Administration as Assistant Secretary for Housing-Federal Housing Commissioner at the HUD and as Director of the Office of Thrift Supervision.

NHC is proud to honor the work of Nic and Sister Lillian, and we look forward to hearing those closest to them share their own expressions of gratitude at this year’s Gala.

The National Building Museum, this year’s Gala venue, is located at 401 F Street N.W., Washington, D.C . The Gala begins at 5:30 p.m. Gala tickets are available here online and at the door. Those interested in attending can also contact Frances Robinson at (202) 466-2121, Ext. 246 or

Wednesday, June 22, 2011

Moving Forward: Transportation policy is housing policy

by Jeffrey Lubell, Executive Director of the Center for Housing Policy

I have been struck lately by the confluence of two trends:

1. Housing affordability problems are worsening. HUD recently reported that the number of very low-income renter households with worst case needs increased by 20 percent in just two years. The Center for Housing Policy similarly found that housing affordability problems have worsened for working renters and owners. (A brief summary of both reports is available here.)

2. Budgetary pressures are increasing. The talk in Congress is about cutting discretionary spending, not adding to it. To state the obvious, there simply is no political will right now to substantially increase funding for government housing programs to meet the nation's growing housing challenges.

So what can we do?

There are a number of different ways to approach this question. I'd like to focus on one—the development of strategies for effectively assisting more families with available funding.

In thinking through some of the initial ideas I have for doing more with available funding, I've noticed they have three things in common:
  • First and foremost, they all involve working across silos to achieve a set of goals shared by multiple policy communities and constituencies - for example, housing and asset-building, housing and the environment, or housing and transportation. Bridging these silos is obviously very difficult, but also critical for developing more comprehensive solutions and expanding the base of political support for needed changes.
  • Second, they all involve a form of "value capture," taking advantage of expected changes in property values or incomes to implement solutions that are paid for in whole or in part by those increases.
  • Third, they all require thinking very differently about some aspect of current practice.

Bus, cars and cyclist sharing a street

Here's one specific idea: In many (but not all) cases, the development of new transit stations or lines leads to higher housing prices as developers bid up the price of land around planned stations and develop higher-priced housing. (See, for example, this recent report from the Dukakis Center for Urban and Regional Policy at Northeastern.) There are undeniably some environmental and economic benefits to this form of reinvestment. But in my view we can do better. Much better.

Imagine if before construction began on the transit line, a proactive housing strategy were developed to ensure that families of all incomes could afford to live within walking distance of the stations expected to experience residential development. The strategy might focus on some or all of the following elements:
Such an approach would have many benefits—reducing displacement of existing residents, maximizing ridership for the transit line, ensuring that families of all incomes have equitable access to the new transit service, and reducing energy use and greenhouse gas emissions by increasing the number of residents that live within walking distance of the transit stations. Moreover, if adopted early enough in the process, much of the costs of the strategy could be paid for through "value capture." For example, a community might offer a 30% increase in residential density in exchange for a commitment by owners to ensure that 15% of the units are affordable over the long term to moderate-income households. Or a community might dedicate 20% of the revenue from a planned tax increment district to fund affordable housing. Remaining costs could be met by prioritizing these locations for a portion of existing housing resources.

Such a strategy is much more cost-effective if put in place early, before land prices rise. More often than not, however, the political will to adopt a comprehensive housing strategy does not materialize until after the station has been built and housing prices have risen dramatically.

Fortunately, there's a relatively straightforward fix to this timing problem that would carry little or no cost to the federal government and may well save local communities money over the long run. Through the New Starts program, the Federal Transit Administration (FTA) awards funds to state, regional and local agencies to cover a portion of the costs of major public transit investments. By modifying the New Starts competition to reward applicants that commit to developing and implementing an effective housing strategy to ensure that families of all incomes can afford to live near planned stations over the long term, the FTA could create a strong incentive for communities to create effective housing plans early in the process, when low-cost solutions are still feasible.

Changing the New Starts award criteria would carry no out-of-pocket costs for the federal government. It would be desirable, however, to make a small amount of funding available to New Starts applicants to help them coordinate the development of an effective housing strategy as housing is unlikely to be their forte and they will need to work with many different local agencies to pull together an effective strategy. Among other approaches, this could be accomplished by prioritizing New Starts applicants for HUD's Sustainable Communities planning grants or other existing resources.

So that's one idea for how to do more with available funding. In this case, it turns out that a modest change in transportation policy would have major benefits for affordable housing. But it's a win-win for all, advancing transportation and environmental goals as well.

I plan to share other ideas for 'doing more with available funding' in my next few columns and then broaden the focus in future columns to consider different ways to think about the federal role in housing (in contrast to the roles of states and localities) and long-term market and demographic trends worth keeping an eye on.

In the meantime, please join the conversation by commenting on this post!

Moving Forward is a new monthly column about ideas for the future of U.S. housing policy by Jeffrey Lubell, Executive Director of the Center for Housing Policy. The column offers perspectives on the government role in housing and on broader housing market trends likely to shape future housing policy.

Tuesday, June 21, 2011

Housing Policy and Family Well-Being

Increasingly, housing’s role in supporting family and community wellbeing is being recognized by policymakers, researchers, community groups, and the Administration.  New resources continue to document the link, and federal programs build on this connection by fostering interagency collaboration. 

The Center for the Study of Social Policy released a new set of resources today that reinforce the connection between housing policy and family well-being.  The new resources include the addition of affordable housing to child and family topics on, and a paper, Affordable Housing as a Platform for Family Well-Being.

Like all of the topics on, the Affordable Housing section is framed around improving outcomes for children.  The idea that affordable housing is now included alongside more focused child welfare topics such as child abuse prevention and teen pregnancy reduction shows that housing’s importance is starting to resonate beyond the usual housing advocacy organizations.  People already engaged in housing policy may find the site useful for showing policymakers why they should care about housing.  Those working in other fields may learn what some strong housing strategies and funding approaches look like.

For anyone interested in strengthening neighborhoods, the new paper is a must-read.  It argues that housing itself it not sufficient, but that comprehensive community development approaches can provide a more complete foundation for family success.  Building on existing research (including some recent Center for Housing Policy reports), the paper documents the importance of neighborhood conditions, the problems posed by concentrated poverty, and some tools available to support comprehensive neighborhood improvements.  Federal programs described in the paper include Choice Neighborhoods, Sustainable Communities, and the Neighborhood Revitalization Initiative. Such efforts are all part of a suite of initiatives that encourage collaboration among agencies in housing and fields like education, the environment, transportation, and economic development—policy areas previously addressed within in their own silos but now increasingly practiced as part of a comprehensive policy strategy.  And, to bring it all back to the communities where people live, examples from Louisville, Atlanta, Chicago, Lansing, New Orleans, New York City, and Baltimore show what family-focused community development looks like in practice. 

Monday, June 20, 2011

Washington Post Columnist Michelle Singletary on QRM

How exactly does the proposed 20% down payment rule to meet the criteria for a Qualified Residential Mortgage (QRM) protect against a future credit crisis? So asks Michelle Singletary, syndicated columnist for the Washington Post, as she examines the QRM proposed rule. In her column, Singletary professes confusion as to why regulators have proposed high down payments (as part of Dodd-Frank Wall Street Reform and Consumer Protection Act) to reduce risk when they weren’t one of the major factors contributing to loan defaults in the housing crisis. Instead, large down payments will most likely restrict low-to-moderate income families from purchasing a home. She adds, “If a household earning the median annual income of $47,777 did nothing but save for a 10 percent down payment plus 5 percent in closing costs, it would take 13 years to accumulate enough money — assuming the borrower had saved about 5 percent of his after-tax income — to buy a home with a U.S. median sales price of $173,333, according to calculations by the Center for Responsible Lending.”

Singletary’s concern is shared with other voices, including some unlikely partners, like Consumer Federation of America, Mortgage Bankers Association, National Community Reinvestment Coalition, Center for Responsible Lending and the National Housing Conference.

For more information, read the QRM white paper released by the National Association of REALTORS® and 40 other organizations including the National Housing Conference. An earlier post on NHC’s position on QRM is available here, and FDIC Chairman Bair’s comments on QRM makes good reading, too.

Monday, June 13, 2011

Housing Counseling: The Facts

Housing counseling has been a primary tool in the effort to prevent foreclosures and help families recover from default, which makes the recent cuts in the federal budget for housing counseling programs all the more painful. To better understand the potential impact of these cuts, The Center for Housing Policy has compiled a fact sheet on the impacts housing counseling has been shown to have in reducing mortgage delinquency and foreclosure. In part:

  • There is strong evidence that housing counseling can be an effective intervention in helping distressed homeowners avoid foreclosure. 
  • Early intervention is important. 
  • Families who participated in the national foreclosure mitigation counseling program were also able to negotiate lower monthly costs. 
  • There is also evidence that counseling provided before a household purchases a home can reduce the likelihood of mortgage delinquency. 
  • Pre-purchase counseling can help reduce the likelihood of default and foreclosure by helping individuals determine if they are ready for homeownership, and by connecting them with safer and more affordable mortgage products.
These studies are far from perfect, and more research is needed to understand the extent of the impact homeownerhip education and counseling can have. In particular, a randomized experiment involving pre-purchase counseling would make a significant contribution to the field. In the meantime, take a look at what evidence is out there.

Friday, June 10, 2011

NAR, NHC and others outline QRM rule consequences in white paper

Today, the National Association of REALTORS® and 25 other organizations including the National Housing Conference (NHC) released a white paper, Proposed Qualified Residential Mortgage Definition Harms Creditworthy Borrowers While Frustrating Housing Recovery. The paper details concerns with the proposed qualified residential mortgage (QRM) definition, explaining that the definition is too narrowly written and that high down payment and low debt-to-income ratio requirements will make it hard for creditworthy borrowers to afford a home in the future.

The QRM definition was included in the risk retention rule released in March by federal regulators, which would require that sponsors of asset-backed securities retain at least five percent of the credit risk of the assets. Underwriting standards for QRMs, which are loans that are exempt from the risk retention requirement, laid out in the proposal include 20% down payment, strict debt-to-income ratios and borrower credit history restrictions.

The white paper argues that Congress provided a clear framework for improving the mortgage finance system through the Dodd-Frank Wall Street Reform Act and purposely did not include high minimum down payments as a requirement for QRMs because it is not considered a significant factor in defaults. In fact, it reinforces the point that well-underwritten low down payment home loans have been safely used for decades. The paper also states that the definition “should be redesigned to align with Congressional intent: encourage sound lending behaviors that reduce future defaults without harming responsible borrowers and lenders.” 

Earlier this week, regulators extended the deadline for public comment on the proposed risk retention rule (which includes the QRM exception) until August 1 to allow interested parties more time to analyze the issues and submit comments. NHC and other organizations that have been active in cautioning policymakers on the unintended consequences of the QRM rule applaud the regulators’ decision to extend the deadline to allow for additional input to ensure this rule is defined properly.  In another recent twist to this debate, FDIC Chairman Sheila Bair stated on Thursday said that the Qualified Residential Mortgage exemption should be eliminated from the risk retention proposal if possible.

For more information, read the QRM white paper and FDIC Chairman Bair’s comments on QRM. Also read more on NHC’s position on QRM here

HUD Secretary Donovan responds to Washington Post HOME articles

U.S. Secretary of Housing and Urban Development Shaun Donovan’s op-ed “The HOME Program I know,” appearing in today’s Washington Post, provides a good overview of the success of the program. It also highlights major flaws in the Post's recent analysis of HOME, which asserted that one in seven HOME-funded projects was delayed or abandoned.

 "Less than 4 percent of the projects in The Post’s sample of more than 5,000 HOME projects are currently delayed or canceled,” Donovan points out. 

By contrast, Census data reviewed by HUD shows that 34 percent of all new housing starts from 2007 to 2010 were delayed at least three years. This suggests that HOME projects were much less likely to be delayed than privately funded projects during the recent recession. 

Donovan also responds to the Post articles' criticism that HUD trusted "local agencies to police projects" by emphasizing that Congress set up the program as a block grant, in which communities are empowered to make their own decisions on how to use the funds to meet their housing needs and to select and contract with developers and monitor construction.

Thursday, June 9, 2011

Where it's at matters

On Tuesday, May 24, the Center for Housing Policy hosted a webinar on the importance of location-efficient development, which is characterized by walkable neighborhoods in close proximity to transit, employment centers, schools, and other amenities that allow residents to reduce the frequency and distance of trips taken by car. The webinar, entitled, Not Just Where, but How and What: the case for location efficient development, featured three speakers that provided information on the need to consider location as a critical factor for sustainable and energy-efficient development. From an affordability standpoint, location-efficient development can offer significant cost savings to households by reducing the overall cost of transportation, the second highest expense after housing.  

The first speaker, Danielle Arigoni, Division Director of the US EPA's Office of Sustainable Communities opened her presentation with an overview of different development principles that promote location-efficiency, including compact, mixed use development and green building practices. Ms. Arigoni discussed the EPA’s role in the Sustainable Communities Initiative, a formalized partnership between the EPA, the Department of Transportation, and the Dept. of Housing and Urban Development to transform policies across agencies to encourage sustainable development. As part of this effort, the EPA is developing guidance to incorporate sustainability principles into the environmental review process, is providing technical assistance to states and localities, and is establishing a set of performance measures to evaluate sustainability efforts.  

Matthew Lister, Senior Project Manager at Jonathan Rose Companies provided the second webinar presentation. He reported on the findings from a paper he co-authored, called Location Efficiency and Housing Type- Boiling it Down to BTUs. The report is the first to analyze the energy use (measured in British thermal units (BTUs)) associated with a range of development approaches in conjunction with housing type. The study estimates the BTU score and associated annual energy costs for households in auto-dependent, location-efficient and transit-oriented developments; multifamily, single-family detached and attached homes; and conventional cars and homes with their energy-efficient counterparts. The study finds that the most effective way to reduce energy consumption is to locate homes of all types in areas where households could replace some automobile use with transit use, leading to energy reductions between 39 and 50 percent. 

The final speaker, Ellen Dunham-Jones, Professor at the Georgia Institute of Technology, touched on the health, environmental and economic imperatives to location-efficient development.  She discussed the possibilities of retrofitting the suburbs, in particular “dead” malls and other empty commercial spaces, by adopting entirely new land use patterns that embrace mixed-use and compact development.   Her presentation included several examples of how formerly sprawling and isolated suburban areas have been converted into thriving, walkable downtown centers.  

 Click here to download the webinar recording and to access the presenter’s slides        

Tuesday, June 7, 2011

Regulators Extend QRM Comment Period

Today, regulators extended the deadline for public comment on the risk retention proposed rule (which includes the Qualified Residential Mortgage exception) until August 1 to allow interested parties more time to analyze the issues and submit comments.

At the end of March, the U.S. Department of Housing and Urban Development (HUD) along with the four bank regulators, the Security and Exchange Commission and the Federal Housing Finance Agency released this risk retention proposal, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule would require that sponsors of asset-backed securities retain at least five percent of the credit risk of the assets. The proposal also defines qualified residential mortgages (QRMs) which are loans that are exempt from the risk retention requirement. The underwriting standards for QRMs laid out in the proposal include 20% down payment, strict debt-to-income ratios, and borrower credit history restrictions. Public comments were originally due on June 10.

Many consumer and industry groups have previously expressed concern over the June 10 deadline for submitting public comments on this rule. NHC has been active in cautioning policymakers on the unintended consequences of the QRM rule and applauds the regulators’ decision to extend the deadline to allow for additional input to ensure this rule is defined properly.

Last week, NHC’s Ethan Handelman, Vice President for Policy and Advocacy, spoke at a press conference in Washington alongside representatives from the Mortgage Bankers Association, the National Community Reinvestment Coalition, the Consumer Federation of America, and the Center for Responsible Lending. Handelman and others described how the draft QRM definition could make it harder for low- and moderate-income families to afford homes due to the stiff requirements on borrowers to make a 20% down payment and a low debt-to-income ratio.

The National Association of REALTORS® and 14 other national associations also wrote a letter requesting the deadline be extended to allow the public adequate time to review the 400 page rule and comment given the impact this rule could have on the availability of mortgage credit in the future.

NHC will make comments on this rule before the new August 1 deadline as well as remain active in discussions in the coming months around the QRM rule in order to ensure safe, decent and affordable housing for all in America.

For more information, read the joint media release on the comment period extension and read more on NHC’s position on QRM here.

Robert Hohler

Bob Hohler has been a force to be reckoned with in the affordable housing community for over two decades, most recently as the Executive Director for the Melville Charitable Trust. He passed away last week while vacationing with his family.

In addition to his work in housing, Bob was a civil rights activist who marched on Selma, Alabama. He dedicated his life to social justice, and creating opportunity for those denied it.

"At the center of everything we do is the idea of individual empowerment, of helping people to help themselves by getting access to the tools and means to achieve," Holder said in 2004.

He will be missed.

Friday, June 3, 2011

HUD Assistant Secretary Marquez Defends HOME Program

Assistant Secretary for Community Planning and Development (CPD) Mercedes Marquez testified before the House Financial Services Committee today on the strength of the HOME program in creating affordable homes and strengthening communities.  The testimony was prompted by misplaced claims of mismanagement and stalled projects made by the Washington Post.

Marquez submitted testimony that the Post’s story "was full of numbers—and misstatements—but lacking in context and balance." HUD has said the projects described in the Post represent 2.5% of 28,000 developments nationally while largely ignoring HOME’s strong track record of creating more than one million affordable homes. With the entire housing market suffering due to the economic downtown, Marquez stated that HOME program compares "very favorable to the private market success rate."  

Further, the Post labeled 700 projects as “stalled” when in fact HUD’s Office of the Inspector General (OIG) found this figure to be closer to 108 project delays and in fact these projects were delayed mainly due to the recession and have since been completed or terminated. Marquez also testified that the Post did not provide the data used in their story to HUD, even upon on her request, so it is unclear how the Post came to 700 project delays.  

Alongside Marquez, the Assistant Inspector General for Audit at HUD’s OIG, James Heist, testified regarding his role as independent auditor of the HOME program. He found that the program needs greater internal controls and monitoring but stated that when compared to other HUD programs, it is doing reasonably well because of clear requirements built into the program that make the auditing process easier. Heist stated that while the program has been associated with fraud allegations, the OIG has recommended measures to rectify these challenges and CPD, for most part, has responded.

Members of the House Financial Services Committee were largely split along partisan lines in their questions on the HOME program. Most members stated they did not believe this program should end because of these allegations but they were concerned that taxpayers’ dollars not be wasted. Some members expressed a desire for greater oversight and control of what happens with program dollars once they are distributed to local grantees. Others members felt like the program is doing well, and that local governments should continue to control how the money is spent on the ground without HUD interfering. Further scrutiny of the program may well occur. The hearing will remain open for the next 30 days to allow for further testimony and questions by members of the Committee.

Read Assistant Secretary Marquez and Heist’s testimony on the House Financial Services Committee web site.

Read NHC’s Letter to House Financial Services Committee in support of HOME.

Read more on NHC’s position on HOME here

NHC’s Role in Alliance with Bankers and Other Consumer Groups Against QRM, Featuring Ethan Handelman, NHC VP for Policy & Advocacy

NHC’s Ethan Handelman, Vice President for Policy and Advocacy, has joined a growing number of voices in the housing community cautioning policymakers on the draft rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, particularly the new language on qualified residential mortgages (QRMs).  Handelman spoke during a press conference in Washington where he and representatives from the Mortgage Bankers Association, the National Community Reinvestment Coalition, the Consumer Federation of America, and the Center for Responsible Lending provided regulators with an alternative viewpoint on how the draft QRM could make it harder for low- and moderate-income families to afford homes.

The draft QRM rule includes stiff requirements on borrowers to make a 20% down payment and have a low debt-to-income ratio.  Mortgage loans that don’t meet these requirements would be subject to risk retention, potentially raising their cost.  Of even more concern, the QRM rule is coming out ahead of broader mortgage finance reform and other rules implementing Dodd-Frank, and so may unintentionally become a focal point for future policy.  That could result in low- and moderate-income homebuyers, particularly in communities of color, facing much higher costs and less access to affordable mortgages.  Other portions of the QRM rule, such as the restrictions on unsustainable mortgage products like no-documentation loans and exploding ARMs, can be an effective part of the mortgage finance system.

Handelman had this to say about NHC’s role in the unusual alliance responding to the QRM: “The reason you're seeing these alignments is because all of the players in the space, including mortgage bankers and consumer advocates, recognize that an overly restrictive definition of QRM will exclude large numbers of responsible low- and moderate-income families from homeownership.”  A part of NHC’s mission is to ensure affordable housing options for all Americans, so we take pride in our involvement in this group alliance, choosing to speak up about the potential harm this may cause to some families.

This issue goes beyond just those who are directly involved with housing.  On Wednesday, June 1, Senator John Kerry wrote a letter to the secretary of the U.S. Department of Housing and several others charging them with the task of reconsidering the proposal associated with the Dodd-Frank Act.  Kerry mentioned “that in states such as Massachusetts, where property prices are above the national average, it’s unreasonable to expect that buyers can afford to put 20 percent toward the purchase price of a home.”  This is an issue that needs support and action from all sides, including senators like Kerry—after all, it is an alliance effort.

For more information about this issue, see this article in American Banker with quotes from Ethan. 

Thursday, June 2, 2011

Housing Groups Continue to Defend HUD’s HOME Program

Across the country, housing advocates, including NHC, united in support of the U.S. Department of Housing and Urban Development’s (HUD) HOME program which the Washington Post attacked last month for project delays and overall program inefficiency. The incomplete reporting of the Post failed to address the strong track record of the HOME program in creating more than one million affordable homes and providing more than 240,000 families with rental assistance.

Citizens’ Housing and Planning Association (CHAPA), a Massachusetts-based affordable housing and community development organization, issued a response highlighting HOME as a necessary funding tool for affordable housing in Massachusetts. In addition, CHAPA refutes claims made by Ed Glaeser in his Boston Globe op-ed that HOME and the Low Income Housing Tax Credit (LIHTC) programs are “wasteful” because the housing they produce is not needed or can be provided by the private sector. CHAPA recognizes that “access to housing for low- and moderate-income households most often requires some form of public investment” and “the HOME Program is a positive example of this kind of investment.”

Read CHAPA’s response here

Learn more about NHC’s position on the HOME program.

Read the Washington Post articles.

Does Ownership Pay Off?

The idea of a home as an investment has been so ingrained in American culture that it’s difficult to conceptualize it and the American Dream in any other way. And yet we do not expect most other large, utilitarian purchases to increase in value as we use them: not our cars, our appliances nor our furniture. And if recent reports are accurate, we might be moving away from doing so with our housing.

The collapse of the housing market in 2008 can be largely credited with this shift. It was the expectation of ever-increasing value that led to the initial bubble in the market, and which often puts homeownership out of reach for low- and moderate-income families. But for those same families, a house can be a gateway to financial security as they build equity and assets that can launch them into the middle class.

So is housing a good opportunity to build wealth? Wenli Li and Fang Yang, in a paper for the Federal Reserve Bank of Philadelphia, provide evidence that it might not be. Their research found that the average real rate of return on housing actually falls below zero for the average homeowner, particularly for low-income borrowers who put little money down and take longer to build equity. 

However, Jordan Rappaport at the Federal Reserve Bank of Kansas City took a different approach to weighing the investment potential of home ownership. The paper compared the wealth homeowners build through equity to wealth which could have been accumulated by renting an identical home and investing the comparable savings in the stock market. The results were mixed, demonstrating that renting plus investing can be as effective at helping families build wealth as home ownership is, and that it largely depends on the markets at the time of purchase. 

All this is to say that home ownership continues to be a valuable way to save and build wealth for some families, but for many renting can be equally or more beneficial – at least in strictly economic terms. Which is all the more reason to continue to pursue a balanced housing policy.