Tuesday, December 17, 2013

Form-based codes can turn land use policy into affordable housing strategy

by Robert Hickey, Center for Housing Policy

Earlier this month I was a panelist on an interesting webinar about how jurisdictions are linking “upzoning” with affordability. When localities in various parts of the country relax zoning restrictions, they are ensuring that some of the new value created for landowners leads to new affordable housing. Though not new, this concept, sometimes described as “land value capture,” has been gaining traction as a strategy for creating inclusive communities over the past few years. Indeed, the research I conducted for our report After the Downturn (PDF) found that most, if not all, of the new inclusionary housing policies we've seen since the recession are based on this principle.

Arlington County provides an exciting new example of land value capture in action. Just before Thanksgiving, the county adopted a new form-based zoning code for residential neighborhoods along the Columbia Pike corridor. Like many form-based codes, Arlington’s new form-based overlay increases residential development potential through greater heights and densities. What’s distinctive is that it includes both affordability requirements and affordability incentives.

Developers seeking to redevelop residential properties along Columbia Pike are required to set aside between 20 and 35 percent of net new units for affordable housing. The exact affordability requirement is tied to the additional development potential provided at a given site. In addition, the code provides parking and height bonuses for developers that volunteer additional affordable housing.

A growing number of jurisdictions across the U.S. are adopting form-based codes. A recent estimate suggests that more than 200 were under development this past year. While not all form-based codes expand heights, densities, and overall development potential, many do. This suggests to me a growing opportunity for win-win strategies for producing affordable housing in 2014, following Arlington County’s recent example.



Thursday, December 12, 2013

Imperfect budget deal opens door for partial sequestration fix

By Liza Getsinger and Ethan Handelman, National Housing Conference

Budget Committee chairs Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wisc.) unveiled Tuesday night a bipartisan budget deal, setting spending levels for FY2014 and FY2015 and rolling back a substantial portion of sequestration cuts in year one. Under the deal, overall spending levels will be set at $1.012 trillion in FY2014, which is a net increase of $45 billion relative to the sequester level. The deal also makes modest adjustments to sequestration in FY2015, raising spending only slightly over FY2014 levels. The additional spending will be shared evenly between defense and non-defense discretionary programs. Savings were generated through reduced contributions to federal pensions, increases in airline user fees, and extending small portions of sequestration for two years, primarily affecting Medicare.

The deal’s major accomplishment is preventing another government shutdown by setting a top-line budget number. The deal is very far from a grand bargain, however. It does not increase revenue, significantly change entitlement programs, reform the tax code, or replace the across-the-board sequestration cuts. In the true spirit of compromise the deal does not seem to fully satisfy members on either side of the aisle, with some House Democrats voicing complaints that it does not extend federal unemployment benefits, while some conservatives are concerned over offsets of some of the sequestration cuts. Much of this will be hashed out this afternoon as the bill is set to head to the House floor for debate and a vote.

What this all means for housing and community development funding is still unclear. Setting a top-line number was just the first step. Appropriators now have to settle on allocations for each of the twelve subcommittees and then craft final bill language. If House and Senate appropriators are able to reach consensus on funding levels for Transportation, Housing, and Urban Development (T-HUD) programs then it is likely to be included in an omnibus or minibus appropriations bill. Since the T-HUD bill nearly passed back in the summer, there is some hope of agreement this time around. If appropriators are unable to work out some of the more contentious elements of the T-HUD bill (namely high speed rail funding) then funding through a continuing resolution at FY2013’s level becomes likely. Over the coming weeks (maybe even days), final funding levels for HUD programs will be worked out as appropriations staff hammer out specifics of the final bill.

This budget cycle offers a real opportunity to improve the funding trajectory of HUD programs and to undo at least some of the devastating impacts of year over year cuts on low-income families and recovering neighborhoods. Decisions may well happen quickly now that the contentious top-line spending level has been set. Take this opportunity to tell your senators and representatives how housing and community development programs help the people they represent. Your individual thoughts will be the most persuasive, but you can also use this letter from NDD United as a guide. We will keep you posted on NHC’s Open House Blog and in the Washington Wire as more details emerge

Wednesday, December 11, 2013

Growing challenges for renters: Three less-common storylines

by Lisa Sturtevant, Ph.D., Center for Housing Policy

This week, the Joint Center for Housing Studies (JCHS) released a report on the state of rental housing in
the U.S. A major headline from the report is that the number of cost-burdened renters has reached an all-time high. More than half of all renters spend more than 30 percent of their income on rent, and 28 percent are severely cost burdened, spending more than half of their incomes on rent. The rental population is growing—both as a result of demographic and economic factors—and the rising affordability challenges and increasing rental supply gap are critical problems, particularly in this era of declining federal resources.

The JCHS analysis includes an abundance of data and concise summaries of key policy issues related to the rental housing market. In addition, the report describes the situations of renter households and the conditions of the housing market from a variety of perspectives, and some of the less common storylines are particularly beneficial for expanding the dialogue around housing needs.

When households have to spend more on rent, they spend less on other necessities. Low-income households that have to spend more on rent spend less on food, health care, transportation and savings, among other things. Having to choose between food and rent or health care and rent is a devastating choice and these tradeoffs compound the stress and instability many severely cost-burdened households experience every day. And the inability to save for retirement or even for “life happens” emergencies undercuts the opportunities for building economic security. The JCHS report did not specifically mention child care, but in some parts of the country, child care for two children can cost just as much as rent and can be an additional hurdle for lower-income working families. A recent analysis of housing costs and household budgets for low- and moderate-income families in Arlington County, Virginia highlights these cost pressures.

When households spend a disproportionately high share of the income on rent, they have little left for necessities and their quality of life of suffers. Furthermore, when they have to spend a greater share of their income on rent, they also have less to less to spend on other non-essential goods and services, which means that the local economy can also feel an impact.

The challenge to find affordable housing is a problem for households along much of the income spectrum. Over 80 percent of very low-income households (those with incomes below $15,000) spend more than 30 percent of their income on rent. However, affordability problems among higher-income households have increased dramatically. For example, according to the JCHS report, the share of cost-burdened households with incomes between $45,000 and $74,999 nearly doubled between 2001 and 2011. Even when working full-time, many renters still face affordability challenges. Nearly 40 percent of renters with a full-time job spend more than 30 percent of their income on rent.

When higher-income households face affordability challenges, they put even more pressure on the availability of housing affordable to lower-income renters. A recent Atlantic Cities article provides a good summary of how middle-class households have crowded out lower-income households from the more affordable housing stock.

Despite the recent surge in multifamily construction, the concerns about overbuilding are generally misplaced. During the recession, residential construction activity slowed to a crawl. In 2009, there were only 109,000 new multifamily housing starts, compared to well over 300,000 each year in the decade prior. By 2013, the number of new multifamily starts will have increased to about 294,000 on an annualized basis. In some fast-growing metropolitan areas, new multifamily rental buildings have been going up seemingly non-stop. This acceleration of building activity has some concerned about an oversupply of multifamily rental housing. However, as the JCHS report points out, the renter population has grown much faster than the supply of rental housing, and future rental demand will remain high. Furthermore, rent levels continue to increase and vacancy rates continue to be low. Therefore, by these measures, there seems little evidence that we are overbuilding.

However, there is some evidence that multifamily rental housing is not always being built in the most appropriate locations. The suburbs continue to attract more and more jobs; however, in many suburban communities, zoning ordinances prohibit the construction of multifamily housing, even in areas close to job centers. Concentrating multifamily housing near transit has also been shown to have substantial benefits to households and communities, but many transit projects are developed, designed and funded without consideration of the inclusion of multifamily, or in particular affordable, housing in the plans.

During the recent increase in multifamily housing construction activity, many developers have focused on the higher end of the market, with a substantial share of luxury apartments with amenities designed for high-income young professionals. The rate at which high-end rental housing is being built outpaces the pace at which slightly older housing can trickle down to more affordable price points. So low- and moderate-income renters have not benefited from the current supply surge in most markets.

We hear often about the affordability challenges of renters. The problem is not going away and, in fact, is getting worse by most measures. But because the same kinds of numbers about cost-burdened households are reported often, some people tend to tune them out. Different storylines, different perspectives can help underscore the importance of rental housing and broaden the base for dialogue about housing affordability challenges.

Tuesday, November 26, 2013

Sequestration cuts threaten to undo gains in ending homelessness

by Liza Getsinger, National Housing Conference

It’s not often that we get to shine light on positive housing news coming out of Washington, but the Department of Housing and Urban Development’s (HUD) recently released Point-in-Time (PIT) Estimates of Homelessness for 2013 are certainly something to celebrate. HUD’s recent estimates revealed nationally, homelessness declined 4 percent between 2012 and 2013, and a 9 percent decline since 2007. Since 2010 there has also been a 24 percent decline in homelessness among veterans. This steep decline is likely directly linked to the HUD-VA Supportive Housing (VASH) program which funds housing and clinical services for homeless veterans. The concerted push by the federal government to prevent and end homelessness appears to be working. But as the nation continues its slow and uneven recovery from the recession there is so much more work to be done.

These positive national numbers obscure some distressing local trends where, in places like the District of Columbia and New York, homelessness numbers increased. The most startling increase is in the state of North Dakota where homelessness increased by just over 200 percent between 2012 and 2013. The percentage is so high because of the state’s relatively low homeless population, which increased from 688 to 2,069 this year, but the increase is dramatic nonetheless. The state’s oil and gas boom has contributed to housing shortages, with the demand for affordable housing far outpacing the supply. Other states that saw increases over the last year are California, South Carolina, and Massachusetts, while Florida, Colorado, and Texas saw substantial declines. Check out HUD’s state tables to investigate trends in your own state.

The differences in state counts are driven by a combination of local factors such as population distribution, funding sources, and prioritization of housing and homelessness issues. For example, localities with a more robust shelter system may have higher counts because it is easier to count the sheltered rather than unsheltered. And with the number of sheltered homeless increasing slightly nationally as the overall count declines, this points to an emergency shelter and transitional housing system that is increasingly serving more people.

On the other hand, in states with a larger rural population there may be some undercounting, as it is more difficult to count people who are dispersed. Furthermore, with federal resources dwindling, cities and localities have stepped up as they can by stretching resources and implementing innovative strategies to combat homelessness. But as localities have had to make tough decisions to shift (or cut) resources away from homeless services in response to the recession, there are real and immediate implications for the homeless and near-homeless populations in these communities.

Continued year-over-year cuts to valuable housing programs risk undoing the positive gains we are making. If we are serious as a nation about ending homelessness we must support the full spectrum of housing programs, programs designed not only to re-house those who have become homeless, but to prevent homelessness altogether. Crucial programs such as rental assistance can lessen the burden of rising rents and prevent displacement, while funding for supportive housing can provide needed shelter and services like job readiness and addiction and recovery programs. As need rises it is critical to continue to provide strong funding for HUD programs that help individuals and families avoid homelessness. Otherwise, we risk undoing years of positive gains.

Monday, November 25, 2013

Growing regional economies by increasing the supply of housing

by Lisa Sturtevant, Ph.D., National Housing Conference and Center for Housing Policy

I led a panel at the Virginia Governor’s Housing Conference last week, where the conference theme was “Housing: Building Strong Economies.” In Virginia, along with most of the rest of the country, local
Housing affordability should be a key component of local
and economic development strategies. 
jurisdictions are tackling challenges associated with rebuilding their economies in the aftermath of the recession. Housing—as evidence by the emphasis of the Virginia conference—is often talked about as being critical to promoting economic growth.

At the local level, there has been a great deal of analysis of how the development of affordable housing spurs local job growth and economic activity. Building affordable housing does, in fact, create jobs and encourage spending and local revenue both during and after the construction period. So, too, does building market rate housing or commercial development projects.

Is there another perspective on how housing is important to economic growth? This question was the basis for my conference panel at the Virginia housing conference. Without discounting the direct and induced economic impacts of affordable housing development, I propose a shift in the focus of the discussion. The availability of housing affordable to people along the income spectrum is an important building block of strong, resilient regional economies. Along with a robust transportation network, good schools, sound government, and an open business environment, housing affordability should be a key component of local and economic development strategies.

We worry about what will happen to our economy if those other pieces go missing or are insufficient. If we don’t have a strong employer base and a business-friendly environment, we lose jobs and our economy suffers. If our transportation system is a mess, we recognize the impact on quality of life and the region’s attractiveness to businesses. If our schools are deficient and we are not preparing the future workforce, we worry about our competitiveness. When our local government is poorly run, we know that is an obstacle to attracting private businesses. We talk about these things—and sometimes we try to fix them—because we know that they are important to attracting and retaining a diversity of businesses that lead to a robust and vibrant regional economy.

But we seldom talk about how an insufficient supply of housing can serve as an obstacle to economic growth.

What could we expect if there is an insufficient supply of housing that is affordable to workers along the income spectrum?
  • Workers are not able to live close to their jobs so traffic congestion increases, which decreases worker productivity and makes it a less efficient place for businesses to locate.
  • Businesses have a hard time attracting and retaining workers who can’t afford to live in the region, so they seek to locate elsewhere.
  • Resident-serving businesses (e.g. grocery stores, restaurants, dry cleaners) have difficulty hiring local workers so local businesses disappear and prices for everyone in the community go up.
In the session I moderated, housing practitioners and advocates from Arlington, Richmond and Virginia Beach talked about how regional efforts to increase the supply of affordable housing need to bring the economic development and business community into the discussion, and that it is the responsibility of the housing community to help them understand that affordable housing is a “bottom-line” issue. Some of the questions that were raised at the session included the following:
  • How can data and research bring business groups to the table around affordable housing? Specifically, how can we quantify (and monetize) the link between a lack of housing and reduced economic development potential? 
  • What are the specific roles that can be carved out for chambers of commerce or economic development departments in the housing planning process? How can we identify and foster a champion in the business community? 
  • How can models from around the country—including the Silicon Valley Leadership Group—be modified and built up in some regions? 
What are your thoughts on this approach to the link between affordable housing and economic development? Are you having these conversations in your jurisdictions?

Friday, November 22, 2013

Senate Banking examines transition path for housing finance reform

by Ethan Handelman, National Housing Conference 

The Senate Banking Committee held a bipartisan hearing Friday to examine the challenges of moving from the current mortgage finance system to the one being developed by the committee. Witnesses and participating senators alike struck a collegial tone in keeping with the other hearings the committee has held on mortgage finance.

Attendance was thin, perhaps due to the timing of a Friday hearing before the Thanksgiving recess. Chairman Johnson (D-SD), Ranking Member Crapo (R-ID), Senator Corker (R-TN) and Senator Warner (D-VA) all participated actively and drew thoughtful answers from the testifying witnesses:


A recurring theme in the discussion was the choice between a timeline-based transition, which would set a deadline for the wind-down of Fannie Mae and Freddie Mac, and a target-based transition, which would tie the wind-down to achievement of specific objectives around participation of private capital and market functioning. Witnesses were unanimous in support of a target-based approach, citing the many uncertainties surrounding when and how private capital would return and possible exogenous disruptions to the timeline. They also recognized the need for accountability, a point particularly raised by Sen. Crapo, so that the transition would ultimately occur.

Picking up on comments from Prof. Min, Sen. Warner spoke of the importance of rental housing and the proven success of the GSE multifamily businesses even during the crisis. He referenced that much work was being done to fill in the multifamily section of S. 1217. NHC with many allies has called for a multifamily mortgage finance system that builds on the successful Fannie Mae and Freddie Mac multifamily businesses, starting with a transition now to prepare for eventual privatization.

See witness’ written testimony and video of the hearing on the committee web site.

Thursday, November 21, 2013

How a post-nuclear Senate could help affordable housing

by Ethan Handelman, National Housing Conference 

Today the Senate changed its rules to eliminate filibusters on presidential nominees (apart from Supreme Court Justices). The so-called nuclear option invoked by Senate Majority Leader Harry Reid (D-NV), paves the way for nominees to be confirmed by simple majority votes, which means that Senate Democrats can prevail without Republican votes if they remain united.

With the nomination of Rep. Mel Watt (D-NC) to head the Federal Housing Finance Agency (FHFA) still pending, this rule change could have major impacts for affordable housing. FHFA has been pursuing many actions that reduce affordable housing options for America, getting pretty far ahead of a Congress that is finally making bipartisan progress on mortgage finance reform. NHC supports the nomination of Rep. Watt and hopes the Senate will now move swiftly to confirm him.

Most recently, Bloomberg reported FHFA is planning to forge ahead with reductions to the multifamily production of Fannie Mae and Freddie Mac, despite widespread comments that such action reduces affordable housing and hurts the long-term value of the GSEs (NHC’s comment is one among many). A bipartisan group of House lawmakers even wrote directly to FHFA opposing the multifamily reductions.

In the long term, of course, this rule change could come back to bite the current majority party if and when they become the minority party once again. But as John Maynard Keynes said, in the long run we’re all dead.

Monday, November 18, 2013

What the duty-to-serve concept in mortgage finance really means

by Ethan Handelman, National Housing Conference

I’ve had several conversations with Senate staffers recently about the concept of a “duty to serve” in mortgage finance. Often, the idea gets conflated with numerical goals, which misses the fundamental issue: only government can get the intertwined primary and secondary markets to serve a broad range of housing need.

Primary market lenders originate loans and so are the first gatekeepers of access to credit. However, their ability to lend is constrained by the liquidity supplied by the secondary market. Without a capital supply, the primary market cannot originate large volumes of loans. The secondary market, in contrast, focuses on efficiency, using high volumes of homogeneous loans to achieve economies of scale and attract capital. Packaging easily-standardized, lower-risk loans into securities has great benefits, but the business is necessarily constrained to work with the loans that the primary market originates. It therefore becomes difficult for either the primary market or the secondary market to cause the other to broaden its parameters for what loans to provide, since neither can act without the support of the other.

Government is uniquely placed to align the primary and secondary markets to serve as broadly as possible. To the extent that the primary market is serving low-income areas, rural areas, communities of color, small rental properties, subsidized rental housing, manufactured housing, and other underserved market segments, the secondary market should also. That’s what the “duty-to-serve” embodied in the Housing and Economic Recovery Act of 2008 (HERA) was aiming at, and it’s something we need to include in the next iteration of mortgage finance. To read more about this issue and others, see my recent testimony to the Senate Banking Committee.

Friday, November 15, 2013

Planting a Seed to Grow a Movement

by Maya Brennan, Center for Housing Policy

A colleague recently got me thinking back to my days as a landlord-tenant counselor. Answering the phone, I never knew what problems or questions I’d find on the other end. Was it a landlord with a disruptive tenant? A tenant wanting to know if a rent increase was legal? A horrifying rat infestation story? Or my repeat caller who believed that her apartment was under siege due to voodoo? More often than not, it was a call about late rent or a pending eviction due to nonpayment of rent.

For some of the tenants who called us, life was a struggle to always stay just one step away from eviction. Many were so familiar with rent court notices appearing on their doors that they didn’t even read them anymore. They learned a pattern that prevented eviction and kept following it.

Here’s how the process worked when I was a counselor in Maryland more than ten years ago. (This is not intended to describe the current eviction practices there which may have changed.) The tenant doesn’t have the rent money on the due date. The landlord waits out the late fee period and then files in court. If the tenant doesn’t appear in court or hasn’t paid the rent by then, the court will rule in favor of the landlord who can then get an eviction warrant. The landlord calls the office responsible for carrying out these warrants (usually a sheriff or constable) and schedules an eviction date. If the tenant can pay the landlord in full before the eviction starts, they get to stay.

Usually, that is.

For tenants always skirting the edge of eviction, it’s easy to fall into a pattern of rent crises and then paying in front of the sheriff or at some earlier point in this process. (By the way, the rent crisis pattern sounds tough as a tenant, but think about it as a landlord, too. It sounds like a lot of effort to essentially give the tenant an extension on their due date. And then face it again one month or maybe two months later. Would you want to rent to someone you thought was going to be repeatedly behind on the rent? I sure wouldn’t.)

Tenants in perpetual financial crisis can get used to this pattern. And the emergency rent assistance process relies on this process to distribute funds to the people most likely to get evicted. (“Bring in a copy of the warrant when you apply for help.”) But the right of redemption, as it’s called, ends if a tenant has too many judgments over a 12 month period. Then the landlord (at long last, from their perspective) gets the apartment back.

And the tenant’s perpetual crisis gets worse.

This is what happens when wages and housing costs don’t match up. It hurts renters. It hurts property owners. It hurts their neighbors and neighborhoods. And it eats up time and money in the courts and related enforcement offices.

It’s imperative for the housing movement to grow and strengthen. Rent crises are not an isolated problem. More than one in four working renter households – approximately 6 million renter households in total – had severe housing cost burden in 2011. Federal rental assistance programs break the rent crisis cycle for the people they serve, but less than one in four eligible households receives assistance.

Federal funding for vouchers, public housing, project-based rental assistance, and homelessness prevention programs are well below the level needed to prevent rent crises for the working poor, unemployed, elderly, and disabled. In addition, moderate-income households, such as teachers, fire fighters, and even urban planners, face serious challenges with unaffordable housing in many parts of the country.

Fixing this cycle of crises is going to take the efforts of all of us in a strong and united housing movement. Be clear about why housing assistance matters. Join the conversation at NHC about housing solutions that can yield broad support. And, most importantly, spread the word outside of the housing community. The movement to end housing crises won’t grow unless each of us plants a seed.

Tuesday, November 5, 2013

Guaranteed growth

by Michael Rubinger and Terri Ludwig

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.

Michael Rubinger
Terri Ludwig
Take a moment to push past the shutdown rhetoric and you’ll find some good news is coming out of
Washington after all: The Treasury Department announced a new program to make hundreds of millions of dollars available for development in low-income communities.

We admit the title isn’t flashy: the CDFI Bond Guarantee Program. It sounds as if it’s designed more for Wall Street than Main Street.

For the first time we, community development lenders, have access to long-term, fixed-rate capital that can help breathe new life into economically devastated neighborhoods. And this program brings together two long-time partners and sometimes competitors to make it happen.

After all, it’s not as if community development capital is a new idea. There are nearly 1,000 Community Development Financial Institutions (CDFIs) supporting work all over the country. The Local Initiatives Support Corporation (LISC) and Enterprise Community Partners, Inc. (Enterprise), for instance, have raised and invested a combined $27 billion to help revitalize disadvantaged areas over the last three decades. Significant progress is already being made.

The big news, here, is that until now we’ve never really had access to predictable, affordable 30-year capital—the kind of financing that is pretty common for development projects in more affluent areas. That distinction matters for a whole host of reasons. Without it some projects never leave the drawing board. Others are left to cobble together multiple short-term debt products, which is both expensive and financially unstable. Without a source of long-term capital, CDFIs like Enterprise and LISC simply can’t be as effective as they might otherwise be in helping to lift up low-income communities.

The CDFI Bond Program begins to change that. Treasury is making capital available in a way that costs taxpayers next to nothing, while reducing the risk of long-term lending in troubled urban and rural areas.

With it, affordable housing developers can take on tough challenges: Toxic, crime-ridden neighborhoods can be revived with beautiful new rental and homeowner housing that even very low-income families can afford. Top-quality charter schools can make space for thousands of children languishing on waiting lists. New and expanded community health centers can make sure crowded emergency rooms are no longer the only primary care option available in distressed areas. Overall, people who struggle to get by will have access to more opportunities, and their communities will enjoy renewed economic life.

Here’s an example of how it works: Bank of America has been authorized to issue $100 million in bonds under the program and is working with LISC and Enterprise Community Loan Fund, Inc. to each invest $50 million of the proceeds. The bonds are purchased by the Federal Financing Bank, which is itself part of the Treasury Department, and fully guaranteed by the federal government.

The risk to taxpayers is mitigated by the focused design of the program and the healthy balance sheets of Enterprise and LISC. Treasury extensively evaluates the organizations making the on-the-ground loans, with an eye toward ensuring high-impact investments and limiting losses. Enterprise and LISC have strong track records in this line of work, even in places that many conventional lenders avoid. Community development isn’t a sideline business for us; it’s what we do everyday.

This program has sparked collaboration among the largest, most experienced community development intermediaries in the country. And in the process, it is helping us build a performance history for long-term lending that hopefully will encourage the private market to join us in this effort.

The impact is pretty clear: more commercial and residential development is coming to neighborhoods in need. And with it, new jobs, bigger tax receipts, safer streets, healthier families and—over time—a better quality of life.

It turns out bond guarantees are newsworthy after all.

Michael Rubinger is president and CEO of LISC, and Terri Ludwig is president and CEO of Enterprise Community Partners, Inc.

Wednesday, October 30, 2013

A change of direction at FHFA


by Chris Estes, National Housing Conference

As President Obama renews his call for the Senate to confirm Rep. Mel Watt as the new head of the Federal Housing Finance Agency (FHFA), it is time to evaluate the direction FHFA is taking in housing finance. The agency is increasingly closing off options for housing finance reform rather than opening them, and it has placed affordable housing issues in a distinctly second tier. Senate confirmation of Rep. Watt would allow the agency to take a new direction toward fulfilling the housing needs of all in America. The confirmation decision should be based on policy considerations, not partisan point-scoring

The conservatorship of Fannie Mae and Freddie Mac has moved well beyond the brief stabilization role initially anticipated. Now in its sixth year, conservatorship by necessity affects the ongoing operation of the secondary mortgage market entities and plans for the future. Although FHFA has done much to preserve the assets of the GSEs, it has also taken steps that run counter to meeting pressing housing needs. Examples include the reductions in multifamily production, unwillingness to allow shared appreciation or other principle reductions on distressed loans, the de facto moratorium on product innovation, and the decision not to fund the National Housing Trust Fund.

Rep. Mel Watt brings a dedication to affordable housing, long experience overseeing the GSEs through his committee service in the House, and extensive experience dealing with a wide range of housing stakeholders. If confirmed by the Senate, we expect he will guide the agency ably through the difficult decisions ahead. We urge Senators considering his nomination to focus on the pressing policy issues involved and Rep. Watt’s qualifications to lead rather than partisan distractions. The housing needs in this country—ongoing foreclosures, neighborhoods struggling to recover, and burdensome housing costs for households of modest means—cannot wait on the political maneuverings among parties and branches of government.

Dismantling Barriers to Success

by Maya Brennan, Center for Housing Policy

Federal housing assistance is a scarce non-entitlement program that low-income families can build on to improve their lives, but housing programs can also create barriers to families’ economic progress. Many assisted households remain trapped at low-incomes for fear of earning enough to go over the assistance cliff and lose their housing assistance – support that they may have waited several years to receive.

There is a solution. It’s called FSS.

FSS, or the Family Self Sufficiency program, changes the income incentive for families with housing assistance. In the absence of FSS, any increase in household income leads to an increase in rent -- therefore limiting families’ incentive to work or report their earnings completely. FSS changes the game. For an FSS participant, any increase in household earnings still increases the rent, but an amount equal to the rent increase goes into a savings account for families (also called escrow). This means families grow accustomed to paying higher and higher rents as they earn more, while also building a nest egg to help them achieve any of their goals or dreams.

The program is also a win for public housing authorities. Families pay more in rent, the housing authority’s housing assistance payment (HAP) goes down, and the escrow money comes from HUD. Over time, housing authorities can serve more families and help their existing clientele make headway along a path to economic success. And they don’t even feel it in their bottom line.

So, why don’t more housing authorities offer FSS? Supportive service funding is the main limiter. Housing authorities understand how to work with HUD funding, and many are not equipped to find funding in other ways. With stagnant federal funding for FSS coordinators, it’s hard to blame housing authorities for not offering FSS or trying to expand existing programs’ reach.

But there are FSS models that work. Partnerships that bring in case managers. Funders who will gladly cover program costs when they learn that it opens up a pathway out of poverty.  Using public dollars to leverage philanthropy? Who doesn’t want that?

Let’s expand this program. Let’s get FSS everywhere – explaining to housing authorities that it’s ok to operate a program with no service coordinator money from HUD. And explaining exactly how to do it.

Let’s also break FSS out of the arbitrary limitation to the housing choice voucher program and public housing. What about project-based rental assistance? We could and should easily shift to allowing all HUD-assisted households to benefit from FSS.  Even affordable homes developed using the Housing Credit, with some extra thinking, could offer a better economic support system for their residents.

Tuesday, October 29, 2013

House committee grills FHA Commissioner but loses focus on housing policy


by Ethan Handelman, National Housing Conference

Today, members of the House Financial Services Committee heard testimony from FHA Commissioner Carol Galante and then questioned her closely in a grueling 3-hour hearing. Questions were markedly partisan and at times took a nasty turn, but ultimately the hearing did little to clarify the future of the FHA.

Questions from Republicans on the committee focused on the required capital draw for FHA’s reserve fund, which they termed a “bailout.” Attempts by Commissioner Galante and other committee members to clarify the sometimes subtle differences between on the one hand, the FHA’s appropriation to meet the minimum capital standard required by the actuarial review and, on the other hand, government bailout of private financial institutions owned by private investors, failed to redirect the questioning.

Rhetoric at times overwhelmed both substance and politeness. At various points Republican legislators referred to Commissioner Galante as a “faceless bureaucrat,” questioned her on her health insurance, and compared actions of the federal government in housing to Soviet occupation of Eastern Europe after World War 2. Democrats in response defended the Commissioner and thanked for her public service. They also emphasized the long-standing importance of the FHA in making home loans affordable and available nationwide. They, too, at times strayed onto rhetorical tangents related to the recent government shutdown.

Neither party, however, made much progress in defining a future course for the FHA, which is navigating a difficult path back from the financial crisis. While the recent draw from the Treasury is more of an accounting feature than any kind of actual cash shortfall (FHA has billions on hand), it is a nontrivial reason to think about choices for the future. As we have written about previously, we need a bipartisan, cooperative approach to FHA that makes it more independent, more flexible, and better able to manage risk so that it remains true to its core mission of lending to low-income and first-time homebuyers through up- and down-market cycles.

Watch video replay of the hearing on C-SPAN (http://www.c-span.org/Events/FHA-Commissioner-Testifies-on-Treasury-Bailout/10737442341-1/). The committee’s hearing page has Commissioner Galante’s testimony and the framing statement from the Chair.

Monday, October 28, 2013

White paper: QRM proposal strikes the right balance


by Liza Getsinger, National Housing Conference

A new white paper released October 24 by the Coalition for Sensible Housing Policy, titled “Updated QRM Proposal Strikes Balance: Preserves Access While Safeguarding Consumers and Market,” explains why regulators have struck the right balance by proposing a rule to align the qualified residential mortgage (QRM) rule with the qualified mortgage (QM) rule. The product standards in QM ensure borrowers have access to safe, sustainable mortgages, and those same standards can also protect investors by applying risk retention requirements to loans outside of the QM standard. Aligning the two standards also brings much-needed clarity for mortgage markets, which will help lower costs for consumers.

Importantly, new data within the paper indicates the underwriting and loan product limitations mandated through QM effectively limit the risk of default without excluding large numbers of creditworthy borrowers. This new analysis by The Urban Institute shows the new proposed QRM will reduce the risk of default and delinquency by more than half:
  • Loans purchased by Freddie Mac and Fannie Mae that met the re-proposed QRM standard had default rates of 4.1 percent as compared to 8.7 percent for mortgages that did not qualify for QM status.
  • The delinquency rate for mortgages in private label securities originated in or prior to 2013, that did not meet the re-proposed QRM standard, was 30.6 percent. The delinquency rate for purchase and refinance loans that met the new QRM proposal was nearly two thirds lower at 12.6 percent.
The coalition also weighs the alternative proposal in the rule which would require a 30 percent downpayment to qualify as a QRM loan. This option would unnecessarily slice the secondary market in two and exclude 60 percent of homebuyers from the most efficient form of financing while disproportionately burdening communities that have historically not been well-served by capital markets.

“In synchronizing the definition of QRM with QM, the revised rule will encourage safe and financially prudent mortgage lending, while also creating more opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market,” the paper concluded. “Most importantly, it will help ensure creditworthy homebuyers have access to safe mortgage financing with lower risk of default.”

The Coalition for Sensible Housing policy, of which NHC is a member, brings together a wide range of housing stakeholders. See the full coalition list at the Coalition for Sensible Housing Policy website.

The entire white paper can be found here.

Thursday, October 24, 2013

Shutdown put strain on HUD staff when we need them more than ever

by Chris Estes, National Housing Conference

This post originally appeared as the Member Update from the President column in the October 22, 2013 edition of the Washington Wire. To receive the Wire in your inbox every week, become a member of NHC

The drama of the government shutdown and near-default has ended, but the after-effects will take a while to
sort out. A lot of attention is paid to those government positions where an immediate impact can be felt by the public or businesses: national parks, museums and monuments, customs and immigration, etc. But what about all the folks protecting our drinking water and food, or folks working on improving school curricula or getting transit projects through to approval so investment can begin?

I spent some time over the weekend talking with a friend who was one of the essential employees at HUD who worked through the shutdown. Trying to keep housing transactions moving forward with the current staff shortages was hard enough, but it became even more stressful with most of the building empty. My friend told me it really began to feel like "piling on" to an already beleaguered workforce. Not to mention the backlog of work they all faced when they got back to their desks.

In our world of housing, we often complain about HUD much more than we appreciate it. It is a big bureaucracy that has been ignored by some administrations and rarely embraced by any. It easy to take shots at (even by people who work there). Ultimately, though, we want and need talented people to come work at HUD, especially folks who had successful careers outside of Washington who will serve in a leadership role for the 4-8 years of a presidential administration. While HUD is still far from perfect, one of the things I have really enjoyed about coming to Washington has been getting to know many talented and motivated HUD employees, from the Secretary's office on down to field staff.

To endure continuous underfunding while trying to improve HUD's work is a daunting and draining effort. Yet their work is vital more than ever as developers, community organizations and local governments work to respond to the increasing need for quality affordable homes and community investment. Imagine on top of that difficult challenge having most of your co-workers sent home for several weeks because some in Congress cannot agree for political reasons, or see the value of what you do for our country. Remember, you've already experienced a cut in pay from sequestration-induced furloughs. Now imagine you are back at work after your three weeks of unscheduled leave. How many emails are there to respond to, how many projects are now behind? It would be a very difficult environment for sure.

We will all be working with HUD staff as they dig their way out of this. How we work with them can go a long way towards getting the kind of HUD we want versus one where everyone who can, leaves. More importantly, the value of what HUD does is part of our story and of the impact quality affordable housing has on a community. As we look towards another showdown in January and February of 2014, we must remember how damaging yet another round of cuts would be.

Tuesday, October 22, 2013

What our neighbors can teach us about working families

by Lisa Sturtevant, Ph.D., National Housing Conference and Center for Housing Policy

For a researcher, definitions are important. Defining precisely the target population for assessing needs or evaluating program outcomes is essential for producing reliable research results.
Center Director and NHC Vice President for 
Research Lisa Sturtevant, Ph.D.


In the Center for Housing Policy’s Housing Landscape report, working households are defined as those that have household members working at least 20 hours per week, on average, and earning no more than 120 percent of the area median income (AMI). In our Paycheck to Paycheck analysis, we compare the wages of workers in occupations with low and moderate wages to rents and home prices in metro areas across the country to measure affordability.

But I wasn’t thinking about definitions or research reliability during a recent conversation with Lucas.

Lucas is the parking garage attendant around the corner from my office. He started at his job the same week I started at mine, in mid-August. I see him every morning when I pull into the garage and every evening when I leave for home. A few weeks ago, I had an unusually long day. I pulled up to the parking garage just after 6:00 am and Lucas was opening up the garage door. Lucas and I said “Have a good day” to one another. When I returned to the garage at 6:45 that evening, Lucas was still there and wished me a good night.

As I drove home trying to unwind from a nearly 13 hour day at work, I realized that Lucas had also had a 13 hour day. Did he work 13 hours five days per week? Did he have a family he was supporting? What kind of opportunities did he have for getting ahead?

The next day I asked him about his work schedule. It turns out that he does, indeed, work from 6:00 am until 7:00 pm five days a week. On top of that, he comes in on Saturday mornings to power wash the garage and several days during the week he leaves the parking garage at 7:00 and works at a restaurant until 11:00. He has a 12-year old daughter with cerebral palsy, and his wife has to stay home to take her to doctor appointments and to school. He says he gets only about three hours of sleep each night and has a constant headache that recedes only when he closes his eyes. He says they are just getting by.

Lucas typifies the struggles that many working families face. There is evidence that the situation for people like Lucas has been getting worse over the past few years. Data reported by the U.S. Census Bureau indicate the median household income in the U.S. was $51,017 in 2012, virtually unchanged from 2011 and about nine percent lower than at the beginning of the recession. The highest income households, however, have been seeing their incomes grow. According to an analysis by Emmanuel Saez, an economist at University of California, Berkeley, incomes of the top one percent of households grew by 11.2 percent between 2009 and 2011, while households in the bottom 99 percent shrank by 0.4 percent.

The wealth divide is also growing during the economic recovery. As the stock market has improved, the wealthiest households benefited disproportionately as nearly two-thirds of their wealth comes from financial holdings. But among lower wealth households (those with net worth of less than $500,000), just 33 percent of their wealth is in the form of financial assets; 50 percent comes from their home. While home values have been rising, many homeowners remain underwater. In addition, stringent lending requirements have shut out many potential homeowners, reducing their opportunities for building wealth through their home.

Everything about the current economic situation seems like it’s making it tougher to get ahead.

In the face of growing income and wealth disparities, many families also face high and rising health care costs. The risk of unexpectedly large health care costs weighs heavily on many families’ minds—perhaps including Lucas’s—and unanticipated medical expenses are a primary main driver of foreclosure and bankruptcy.

Lucas works over 70 hours per week to keep a roof over his family’s head, to put food on the table and to pay for medical care and education for his daughter. What opportunities does Lucas have to get ahead? How many other people are there like Lucas across the country, who work as much as possible but face tremendous obstacles to moving up the economic ladder and who are one unfortunate event away from falling far, far behind?

The growing income and wealth inequality, and the difficulty of people on the lower rungs of the economic ladder to be able to get ahead, suggests that housing affordability problems will only increase for those in the more modest income groups. It suggests a need for an increased supply of housing, particularly in fast-growing and high-cost areas. It also suggests the importance of the transportability of housing vouchers within a region, as was recommended by Bruce Katz and Margery Austin Turner, to make it easier for working households to move within a region for a better job or a better neighborhood.

The situation also suggests a need for critical analysis of how working households in the middle and bottom of the income spectrum are to build wealth. Historically, for these households, owning a home was the primary way they accumulated wealth. Even as homeownership became ostensibly more affordable across most of the country, access to homeownership has declined through tighter credit markets and stricter standards.

The ability of working households to get ahead depends on more than just access to affordable and decent housing near jobs. But the lack of accessible and affordable housing is most assuredly a barrier to having a chance.

When I saw Lucas later in the week, he thanked me for asking about his situation. “It sounds like you worry about me,” he said. “I worry about me, so it’s nice to think someone else is.”

What should we be doing beyond worrying? From a researcher perspective, we can remain steadfast in our efforts to document and disseminate data on the economic circumstances of working families. Furthermore, researchers in the housing field, including the Center for Housing Policy, can raise questions and suggest answers for how housing policies and programs incentivize or discourage wealth creation. And researchers should serve as a resource to advocates and others who need to be armed with rigorous and thoughtful analysis as they seek change.