Thursday, March 29, 2012

The pitfalls of "short funding" Section 8

by Michael Bodaken, National Housing Trust and National Housing Conference Board of Governors

NHC invites guest blog posters to write on important housing topics. The views expressed by guest posters do not necessarily reflect those of NHC or its members.

For reasons that fall well beyond this commentary, the federal government is sharply reducing so-called "discretionary" spending. Nevertheless, President Obama's proposed FY 2013 budget fails the test of reducing the deficit while avoiding harm to our nation's neediest.

HUD's budget proposal for next year would "short fund" the Project-Based Section 8 program by over $1 billion. The bulk of this shortfall would be met by not funding housing contracts for a full 12 months. As many as 920,000 apartments may be "short funded" under this proposal. (See my PowerPoint presentation on the consequences of this decision that I shared at NHC's Annual Budget Forum in Washington last month.)

Short funding is short sighted. Appropriators from both parties have expressed concern over this proposal (as have numerous groups in the affordable housing space). Sen. Murray (D-WA), chair of the Senate THUD Appropriations Subcommittee, and Sen. Collins (R-ME), the ranking member, expressed concerns that short funding contracts could lead to perverse incentives for owners to opt out of the program or under invest in property conditions. House THUD Appropriations Subcommittee Chair, Rep. Latham (R-IA), has asked HUD for more specifics on how this proposal will be implemented.

Here are 5 reasons why short funding Project-Based Section 8 contracts is misguided:

  1. Short funding contracts will NOT reduce federal expenditures. Short funding merely kicks the can down the road. At a recent appropriations hearing, Rep. Olver (D-MA) expressed concern about making up this shortfall in the upcoming FY 2014 budget. We cannot gamble that these funds will be replenished given the political uncertainty concerning future expenditures.
  2. Short funding contracts will harm vulnerable residents. Anything less than full, 12 month funding will increase rent burdens on fixed-income populations, delay critical repairs to affordable housing, and limit a property owner's ability to provide supportive services to their elderly and disabled tenants. The average income of families that will be affected by short-funding is less than $12,000 annually. 64% of households are either elderly or non-elderly disabled.
  3. Short funding contracts increases both risks and costs to owners, lenders and investors as it becomes increasingly uncertain whether property owners will be able to meet their debt servicing obligations. Tens of thousands of Section 8 apartments are rehabilitated with the low income housing tax credit every year. HUD's proposal will undermine investor confidence in these transactions.
  4. Short funding contracts will hurt the FHA. More than half of all Section 8 properties are FHA insured to the tune of $14 billion. Without ongoing rental income, owners will be unable to continue payments on existing debt and the FHA will be left holding the tab.
  5. Jobs, jobs, jobs...according to HUD, the Section 8 program supports 100,000 private sector jobs annually.

As HUD itself observed two years ago: "Annual funding should be predictable, timely and sufficient to fund rental contracts for a full 12 months." HUD must act as a fair and consistent partner by honoring the contracts it has entered into with property owners. Full 12 month funding of the Section 8 program is crucial for Section 8 residents, properties, investors, and the owners of over 1.2 million apartments across the U.S.

Michael Bodaken has served as the president of the National Housing Trust for more than 13 years. Under his guidance, the Trust has become the primary national nonprofit intermediary dedicated to the preservation and improvement of affordable multifamily homes. The National Housing Trust preserves and revitalizes affordable apartments to better the quality of life for the families and elderly who live there.

Tuesday, March 27, 2012

Housing experts offer support for Choice Neighborhoods at Senate hearing

by Clare Duncan, Stewards of Affordable Housing for the Future

NHC invites guest blog posters to write on important housing topics. The views expressed by guest posters do not necessarily reflect those of NHC or its members.

Today, the Senate Banking Subcommittee on Housing, Transportation and Community Development held a hearing to discuss the Choice Neighborhoods Initiative. Sandra Henriquez, Assistant Secretary for Public and Indian Housing at the U.S. Department of Housing and Urban Development spoke first, highlighting how Choice Neighborhoods builds off the successes of the HOPE VI program by using a comprehensive, place-based approach that leverages public and private resources to address not only the distressed housing but also the community blight that often surrounds failed housing developments. She stated that the program has already leveraged a combined $1.6 billion of other investments in the 35 neighborhoods who have been awarded grants, over 12 times their total grant award.

The second panel consisted of Maria Maio, Jersey City Housing Authority; Dr. Susan Popkin, Urban Institute; Dr. Anthony Sanders, George Mason University School of Management; Paul Weech, Housing Partnership Network [and NHC board member]; and Egbert Perry, Integral Development Group. All of the witnesses highlighted the benefits of the program, including making housing a platform for other services, except for Dr. Anthony Sanders. While he agreed with the merits of the program, he suggested accelerated depreciation as a way to encourage more investment in affordable housing beyond the comparatively small $350 million requested for Choice Neighborhoods.

Subcommittee Chairman Menendez introduced S 624, the Choice Neighborhoods Initiative Act of 2011, last year, which would authorize the program but it has yet to move out of committee. This hearing was a critical first step towards authorizing this program.

While not yet authorized, the program has been funded through the appropriations process since FY 2010 and has been met with high demand. So far, HUD has received over 230 applications from public, private, and nonprofit sponsors to help fund the transformation of HUD-assisted housing and neighborhoods in 37 states, the District of Columbia, Puerto Rico and the Virgin Islands. However, due to the limited amount of funding, only 35 Choice Neighborhoods projects were funded in 2010 and 2011. The Administration continues to stress the importance of this program and requested $150 million for it in FY 2013, an increase of $30 million from FY 2012.

Stewards of Affordable Housing for the Future organizes the Choice Neighborhoods Coalition, a group of more than 30 public, private, nonprofit and for-profit organizations that advocates for the Choice Neighborhoods program, including NHC. For more information or to join the coalition, please contact

Clare Duncan serves as Policy and Program Associate at Stewards of Affordable Housing for the Future. Clare was formerly a policy associate at the National Housing Conference, where she convened NHC members on a broad range of affordable housing issues including foreclosure prevention and neighborhood stabilization, energy efficiency and the intersection of housing and transportation policy. Stewards of Affordable Housing for the Future (SAHF) is a 501(c)(3) network of eleven social enterprise nonprofits. SAHF’s members provide high quality, affordable rental homes for over 97,000 households in 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands.

Friday, March 23, 2012

Risk-sharing loans for small multifamily properties

by Ethan Handelman, National Housing Conference

HUD is working on a new adaptation of FHA risk-sharing to provide more capital to small multifamily properties. At a roundtable with housing stakeholders on March 21, HUD officials outlined the why the small multifamily market segment needs attention and how they’re considering making capital available.

Small properties house many renters but lack scale or capital channels

More than a third of households in this country rent their homes. Of those, about one-third live in small properties of 5-49 units. By and large, those properties are owned by individuals and small businesses, and they’re often financed by local lenders who do very few of these loans. That means many properties do not have reliable access to new financing for renovations or capital repairs.

Risk share proposal in development

HUD is examining ways to adapt the Section 542(b) risk-sharing programs to allow more entities, such as state HFAs and community development financial institutions (CDFIs) to make loans to small multifamily properties. Key elements of the concept, which is still in the early stages, are:
  • Loans for existing small properties that serve low- and moderate-income renters by virtue of their market niche
  • Create an exception to statutory requirements for rent- and income-restrictions, to reduce compliance and monitoring costs on properties that will serve the target market anyway and for whom formal compliance would be a barrier to participation
  • Allow CDFIs, state HFAs, and possibly other mission-oriented entities that qualify (standards TBD) to originate and service small multifamily loans
  • Have FHA insure the full loan to enable Ginnie Mae securitization, but give FHA recourse to the originating lender for the risk-share portion of the loan
All of this is still provisional, with many details still to be worked out—loan limits, qualification standards for originating lenders, types of properties and loans that would be eligible, and more are still being thought through. And there’s still more work to be done to determine whether the new risk-share product can offer pricing and terms that will fit the requirements of these properties. Given the need in the small multifamily arena, HUD’s work is encouraging. NHC will continue engagement on the issue to help HUD and other stakeholders work through the outstanding issues.

Thursday, March 22, 2012

Recycle houses to remedy the national housing crisis

by Nancy Welsh, Builders of Hope

NHC invites guest blog posters to write on important housing topics. The views expressed by guest posters do not necessarily reflect those of NHC or its members.

Vacant, foreclosed homes in the United States have been abandoned and left to languish. At the same time a dearth of affordable housing has left Americans—many of whom are college-educated, working-class people—struggling to put roofs over their heads.

More than a third of Americans spend more than 30 percent of their pre-tax household income on housing related expenses including rent or mortgage payments, property taxes, utilities, insurance and homeowner association fees, and in 2009, 19.4 million American households spent more than half of their yearly incomes on housing. Facing a housing cost burden often forces families to make sacrifices when it comes to other necessities such as food, clothing, transportation and medical care.

There is a serious misconception that affordable housing is just for people who are destitute or living below the poverty line. Prior to the housing market’s collapse, there was already downward pressure on affordable housing. However, the housing crisis has exacerbated the situation and the situation continues to get worse.

According to recent Census data, from 2000 to 2010 the nation’s median income fell by 7 percent to $49,445. In addition, in the third quarter of 2011, the national median market-rate rent was reportedly $1,004, up from $981 a year earlier, while the national rental vacancy rate declined to 9.8 percent, down from 10.3 percent in 2010.

We have millions of people in need of affordable housing and millions of units of vacant housing available. Policymakers fantasize about tearing down as many as 3 million vacant and foreclosed homes in an effort to jump-start the housing market, but it’s imperative that we recognize these homes as valuable assets. It would be a critical mistake to tear them down.

Instead, it’s time to put this already existing stock to work. With quick and sustainable rehabilitation, we can offer affordable housing to our working class. If the average U.S. household is 2.63 people, then 3 million homes could shelter 7.89 million people. That’s roughly the population of Virginia.

The Builders of Hope home recycling model provides a logical, universal solution to the housing crisis. It’s sustainable and scalable for cities across the country. By rebuilding the nation’s existing stock of vacant homes, opposed to tearing it down, we can be socially, economically and environmentally responsible.

A study by North Carolina State University found that rehabilitating an existing home through the “Extreme Green” remodeling process, defers 19.36 tons of carbon-dioxide when compared with building a new home using traditional construction methods. This is equivalent to deferring the CO2 emissions from 1,979 gallons of unleaded gasoline. Tearing down a home also adds approximately 35,000 pounds of debris to our nation’s already overburdened landfills

By rehabbing and renting vacant, foreclosed homes, we can decrease blight and shift the paradigm for affordable housing by providing beautiful, energy efficient housing to working and low-income families.

Nancy Welsh is Chairwoman, Founder and CEO of Builders of Hope, a North Carolina-based nonprofit developer seeking to increase the availability of high-quality, safe, affordable and workforce housing options. Through innovative reuse and rehabilitation, Builders of Hope works to incorporate economic benefits, environmental stewardship and social solutions.

Friday, March 16, 2012

Flaws in FHFA’s analysis of principal reductions

by Sarah Jawaid, National Housing Conference

Amherst Securities Senior Managing Director Laurie Goodman came before a Senate banking subcommittee hearing March 15 testifying that the Federal Housing Finance Agency used flawed analysis to substantiate its opposition to principal reductions. Goodman’s stated goal in testifying before the committee was to “discuss three actions that [could] strengthen the mortgage market, at no or minimal cost to taxpayers: increasing reliance on principal reduction modifications; a ramp up of the bulk sales program, coupled with financing for these properties; and a careful vetting of new rules that affect already tight credit availability.”

Goodman discussed that the analysis used by FHFA did not differentiate between loans with and without mortgage insurance. She gave the example: “if a borrower holds a $100,000 mortgage on a house worth $75,000, the mortgage insurer would cover any loss down to $70,000. If the GSE reduces the loan amount down to $80,000 and the borrower redefaults—though redefault rates on principal reduction mods are roughly 25%—the GSE loses the $20,000 given up. The insurer would then pay the GSE $10,000—the difference between the new loan balance of $80,000 down to $70,000 covered—and the resulting REO is only sold for $70,000, the GSE still loses the $20,000 it gave up in principal reduction and the insurer is off the hook.”

In addition, FHFA used state-level home prices instead of metropolitan statistical level prices and this ended up not capturing the accurate amount of borrowers in negative equity. "We would urge the FHFA to re-run their results, using the new model which incorporates the triple incentives [by the Treasury Department], correcting the technical flaws in their analysis, and breaking out loans with and without mortgage insurance separately," Goodman said in her written testimony. "We believe when this is done, it will be clear that forgiveness is the better solution for the bulk of the two-thirds of their book of business without mortgage insurance." Read more in HousingWire’s coverage and in Goodman’s testimony.

Foreclosures—A story without end

by Maya Brennan, Center for Housing Policy

Every quarter when new data on serious mortgage delinquencies is released on, one of the challenges is that it rarely seems to change much. Florida? Still extremely high rates of extended mortgage delinquency and foreclosure. California? The Rust Belt? Still pretty hard hit. And the Memphis area keeps shifting back and forth—a little better for a quarter, then a little worse again. No clear movement or prognosis. The foreclosure crisis is less Homer’s Iliad—an epic tale where major developments pack every page—and more an unedited manuscript by an author with lots of ink but no idea of how to get to the denouement.

A quick look at the maps of metropolitan serious delinquency rates in September 2011 compared with September 2010 suggests that maybe the plot is moving along again. California is looking much better, although housing problems are far from resolved there yet. Arizona also seems to be improving. But these small positive steps aren’t universal. At least as of September, much of the country is still in a holding pattern. And a few areas, mainly in the Pacific Northwest, are starting to see rising serious delinquency rates as the foreclosure problems of the rest of the country finally reach them. Hope mixes with despair, and we clearly have several chapters left to go.

How much longer will it last? Even with a promising attorneys general settlement, I expect the answer is measured in years. Years in which we grow accustomed to historically high foreclosure rates and seriously delinquent mortgage rates being normal. Unremarkable. Not worth newsprint. Unless you are one of the millions of families at the heart of the story.

Tuesday, March 13, 2012

"The Pruitt-Igoe Myth" and the death knell of public housing

by Blake Warenik, National Housing Conference and Center for Housing Policy

In the mid-20th century, two housing projects were built: one in New York City, one in St. Louis. Both held the shape of the American dream for their residents and for those who presciently saw that America's future lay in its cities. Nearly the same in form, both developments were considered triumphs of modern architecture and urban design in their day. But today, only one development one still stands. The other is a symbol of the darkest days of the public housing experiment. What was the difference?

A new documentary, "The Pruitt-Igoe Myth," contrasts the history of St. Louis' Pruitt-Igoe community, one of the most infamous American housing projects, to the story of Penn South, a contemporary community that still thrives today. When Pruitt-Igoe opened to fanfare in 1954, residents, many of whom formerly lived in crumbling slums, gushed over gleaming towers, lush lawns and modern amenities. Communities and families thrived in the corridors and in the parks among the buildings.

But before the next decade was out, the community was literally on fire: drug dealers and gangsters had taken over, the once-pristine exterior was charred and pocked with bullet holes and families lived in fear. It was demolished in 1974, less that 20 years after its hopeful completion. Many have used the Pruitt-Igoe experience as a cautionary tale on the consequences of dedicated low-cost housing. However, the documentary points out that using Pruitt-Igoe as a final answer on public housing ignores not only the successes of similar communities but also the real reasons for Pruitt's demise.

A New York Times review of the documentary explores Pruitt-Igoe's role in the debate on housing and claims by cultural critics and housing authorities that the architecture or the residents themselves were to blame for the community's hellish collapse. In fact, the very 1949 Housing Act that built communities like Pruitt-Igoe financed the urban flight of the latter half of the 20th century that decimated urban job markets. Changing demographics and the collapse of manufacturing economies in cities like St. Louis killed budding urban communities on the vine. But that was just the beginning the tragedy.

The documentary reveals that housing authorities themselves made disastrous decisions that ultimately damned the community. Authorities didn't set aside enough money for maintenance when public housing opponents blocked funding. Perhaps most shocking was the revelation that night patrols stalked the halls of Pruitt-Igoe evicting fathers of resident families, enforcing "unfathomable welfare rules stipulating that no able-bodied man could live in a home where the woman received government aid."

Meanwhile, the Penn South co-operative community, similar both in architecture and that it was built for low-income residents, still thrives today in Manhattan near the exclusive Chelsea neighborhood. So many of the original residents have remained that the community has been designated a "naturally occurring retirement community," as the residents age in place. The "towers in the park" design, inaccurately faulted for contributing to the conditions at Pruitt-Igoe, provides Penn South residents with a safe place to walk and socialize and an island of green in the city.

When President Kennedy dedicated Penn South in 1962, he spoke of what labor could accomplish in America. The community was sponsored by International Ladies' Garment Workers Union and built by organized labor to house working families in New York. Today, NHC member AFL-CIO Housing Investment Trust is investing $134 million in affordable housing, which will preserve affordability at Penn South for another 20 years and create more than 600 union construction jobs. Another NHC member, Fannie Mae, worked with AFL-CIO HIT to provide financing. See the video below for more.

So what do the twin experiences of Penn South and Pruitt-Igoe show us about housing? For every Pruitt-Igoe, good policy could have instead made low-cost housing that lasts.

Monday, March 12, 2012

Mortgage servicing settlement filed

The full mortgage servicing settlement, all 317 pages of it, was filed today by HUD, the Department of Justice, 49 state attorneys-general, and the five participating mortgage servicers, as announced in a Department of Justice Press Release. The settlement now requires court approval before it goes into effect, although many states are already deciding how they plan to use the funds (indeed, some aren’t using settlement funds for housing!). 

Summaries of the settlement have been available for some time at, but now the full filing is available.

Friday, March 9, 2012

Conrad Egan on the life of housing pioneer Patty Rouse

by Cynthia Dodd Adcock, National Housing Conference and Center for Housing Policy

The housing community is mourning the loss of a beloved member. "Patty" Traugott Rouse, the wife of Columbia's founder James Rouse, passed away on Monday, March 5 according to officials at Enterprise Community Partners, the organization founded by the couple 30 years ago. Mrs. Rouse was honored by the National Housing Conference in 1998 as Housing Person of the Year.

Patty Rouse, left,  NHC Housing Person of the Year in 1998,
at podium during the 2008 NHC Gala.  At right is Doris Koo,
former president and CEO of Enterprise Community Partners.
Conrad Egan, NHC’s former president and CEO, said, "Patty Rouse was a special friend and supporter of NHC.

"Along with and then beyond Jim Rouse, her vision and values and strong guidance for affordable housing, community vitalization and social progress certainly earn her the distinction to be honored and remembered as a true houser."

James Rouse died in 1996 at 81.

Read more about the life and contributions of Patty Rouse here.

Thursday, March 8, 2012

Why the most recent data doesn't seem so recent

by Laura Williams, Center for Housing Policy

For the past several days, I have been updating some data files to the most recent available: 2010. If that gave you a bit of pause because, wait, isn’t it 2012? Then you know how I frequently feel – especially as I try to tell some of the organizations we work with regularly that, yes, that really is the most current file I just sent.

It can often be frustrating to not know what’s going on in housing right now. That’s one of the reasons why it’s often important for me to connect with practitioners. Someone working at the neighborhood or metro level often has a good feel for local market conditions that can pick up where the data left off. The two accounts together provide a richer description.

This is even more true from my vantage point in Washington. We look at a lot of national housing trends that we try to break down to state and local levels, but the real story behind the number of severely burdened households or low wages is best told by someone in the thick of it all.

One of the reasons we exist is because at the local level, many organizations do not have the capacity to develop detailed data sets or parse trends in the market. Our services such as and the Housing Research and Advisory Service can help to fill such holes, just as practitioners’ experiences help to inform our work back here.

But that's why we need local practitioners. If the work is not getting done on the ground, it's not getting done at all.

Tuesday, March 6, 2012

Donovan does the Daily Show, highlights help for homeless vets

by Sarah Jawaid, National Housing Conference

HUD Secretary Donovan made an appearance last night on Comedy Central’s The Daily Show with Jon Stewart where he highlighted the administration’s position in dealing with veteran homelessness and families facing foreclosure. In the segment, Donovan explained that getting an individual into housing is cheaper than government paying the costs of emergency services (like EMTs and police) incurred as a result of homelessness. He also brought up President Obama’s goal of eradicating veteran homelessness by 2015. In the last year, HUD has helped 20% of homeless veterans find a stable home. This appearance coincides with the administration’s plan released today to help homeless veterans.

President Obama today announced a plan to help veterans and service members affected by the foreclosure crisis receive relief. This fits into the President’s larger plan for housing recovery by helping responsible homeowners families refinance their homes and support communities that are the most impacted by foreclosures. The announcement also included a reduction of fees for FHA borrowers seeking to refinance.

The plan to help veterans and service members includes: “compensating service members wrongfully foreclosed upon, compensating service members wrongfully charged higher interest rates, providing relief for service members forced to sell their home at a loss due to a permanent change in station, $10 million for the veterans housing benefit program, foreclosure protections for service members receiving hostile fire/imminent danger pay.”

Monday, March 5, 2012

Housing Landscape 2012: Reframing the housing discussion

by Cynthia Adcock, National Housing Conference and Center for Housing Policy

The press coverage and interest in the Center for Housing Policy’s release of its annual Housing Landscape report, which tracks housing affordability for America's working households, was phenomenal. Close to 100 media outlets from across the U.S. and in four foreign languages wrote about the report and its core finding that despite falling home sale prices, housing affordability worsened between 2008 and 2010. This finding helps counter the widespread belief that our housing affordability problems have been solved by the Great Recession.

As Jeffrey Lubell’s recent Moving Forward column noted, the continued challenge of housing affordability is only one of several key themes that we must highlight to expand support for affordable housing. A growing body of credible research links affordable housing with other core societal values, including health, education, economic mobility and environmental sustainability. National, state and local advocates and policy makers are taking notice, resulting in a reframing of how we talk about housing. In addition to reminding people of the need, we’re offering proof of why and how it matters so much.

Thank you all for your ongoing efforts to spread the word about how important affordable housing is to the health and well-being of families and communities.