Tuesday, July 30, 2013

HUD issues new final HOME Program rule

by Liza Getsinger and Ethan Handelman, National Housing Conference

The Department of Housing and Urban Development (HUD) released the HOME Investment Partnership program (HOME) new final rule July 24, generating the program’s first substantial regulatory revision since 1996. The HOME block grant program provides funding to state and local governments for rental and home ownership housing development, homebuyer downpayment assistance, homeowner rehabilitation assistance and tenant-based rental assistance. Since the program’s inception, many HOME participating jurisdictions have encountered new challenges in administering the programs and in managing growing portfolios of older HOME projects, even as the program has created over 1 million homes. These challenges have grown in the wake of the recession and housing crisis.

As the rule summary outlines, the final rule updates definitions and adds new terminology relevant to the housing and real estate markets, modifies the eligibility requirements of community housing development organizations, establishes deadlines for project completion, strengthens conflict of interest provisions, and clarifies language in several existing HOME regulatory provisions. HUD states that the final rule generally adopts the provisions included in the proposed rule, which HUD published for comment in December 2011. However, it did make some changes to the final rule in response to a large volume of comments it received. Read about how the final rule incorporates comments from NHC’s National Foreclosure Prevention and Neighborhood Stabilization Task Force.

NHC, as part of the National Foreclosure Prevention and Neighborhood Stabilization Task Force, submitted comments in response to HUD’s proposed rule. Below is a brief summary of taskforce comments and HUD’s response:

1. Eliminate or substantially change the requirement that rehabilitated or newly constructed HOME homeownership units that are not sold within 6 months of completion of construction must be converted to rental.
a. Increase the length of time to one year before any trigger goes into effect.
i. HUD did extend the deadline from 6 months to 9 months, and it clarified that a unit need only be under contract, not a closed sale, to fulfill the requirement.
b. Recognize that some PJs and Community Development Housing Organizations lack scattered-site rental management capacity.
i. HUD acknowledged the capacity challenge but did not offer a solution. Indirectly, they seem to be emphasizing that the rule encourages PJs to only undertake projects if they have the capacity to handle all the requirements, including the possibility of rental operation.
c. Permit PJs the flexibility to market properties at some point after they have converted to rental.
i. As we understand the final rule, once a property has converted from for-sale to rental, it would be subject to a long-term HOME use agreement. Although there is some limited ability (as under the previous rule) to sell rental units to HOME tenants. HUD made it clear in the comment that lease-purchase approaches should be planned from the outset, not added on in reaction to the sale deadline. Also note that this provision of the new rule is only forward-looking—it applies to new projects, not existing projects, some of which are affected by riders on appropriations bills that required conversion to rental after a failure to sell units. Consult the rule for specific applicability.
2. Maintain the requirement that all HOME-assisted homebuyers must receive counseling.
a. HUD adopted this requirement.
3. Maintain the requirement that participating jurisdictions must establish written policies for underwriting standards, antipredatory lending measures, and refinancing standards.
a. HUD adopted this requirement and will issue guidance shortly around the Consumer Financial Protection Bureau’s ability to repay rule and implications for the HOME programs.
4. Retain the new lease-purchase provisions—specifically around the use of HOME tenant-based rental assistance funds for lease-purchase.
a. HUD adopted this provision.

Thursday, July 18, 2013

Inclusive communities mean more than just zoning

by Patrick Maier, Executive Director, Innovative Housing Institute

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.

IHI Executive Director Patrick Maier
A little over a year ago, I got a call from Jeff Lubell who asked about the Innovative Housing Institute’s intent for the next National Inclusionary Housing Conference. We had held three national inclusionary conferences up to that point, together with partners NHC, Business and Professional People for the Public Interest, and PolicyLink. I told Jeff that we didn’t have one in the works at the moment and related my chagrin at the financial hit we took at our last Conference for not filling enough hotel beds. It was a great conference in substance and in terms of who was there, but as the old joke goes, “Other than that, how was the play, Mrs. Lincoln?”

Jeff seized the moment, mentioned that NHC/CHP was starting to put together the next NHC Solutions Conference, and asked “Would IHI lead the planning for a strong track that focuses on inclusive strategies?” I didn’t have to think very long about whether or not we were interested.

Inclusion as a residential land use strategy to promote affordability is still in its adolescence here in the United States. The first localities in the U.S. to adopt policies did so in the mid-1970s. There were not very many of them and they were developing inclusionary policy out of whole cloth. It’s worth noting that these were the first inclusionary policies in the world. Civic leaders recognized that local workers were priced out of the communities they served and fashioned solutions that work with market development to provide some housing that was affordable, integrated with the larger community.

There has been substantial growth in adopted policies since then, particularly in states that developed statutes that promoted such local policies. But because these policies are inherently local in relationship to the housing market environment, that fashioning is still going on today—adjusting to changes in market demand, the profile of need in that area, and the changing shape and economics of real estate development.

So like adolescents of all stripes, inclusionary policy needs guidance, role models, friends, and perhaps some discipline to prosper. And the opportunity to work with the National Housing Conference to continue the dialogue and sharing of expertise that our previous conferences offered was too good to pass up. The Innovative Housing Institute and the National Housing Conference are jointly presenting an outstanding program track, Solutions for Inclusive Communities, as part of the upcoming Solutions 2013: National Conference on State and Local Housing Policy. And to be clear, we’re not just addressing inclusionary zoning. We will address the broader set of solutions that are in play when a community decides affirmatively to be inclusive rather than exclusive. We’ve assembled an excellent advisory panel for this track to ensure that it presents the most critical developments in the field including those affecting fair housing, developments in state and regional policy, advocacy and legal issues and technical best practices.

We hope you will consider joining us in Atlanta in September. As the country emerges from the not-so-great recession, the challenges to fair and affordable housing are more evident than ever. Your help in strengthening inclusive policy and practice may point the way to a better future for all Americans.

Patrick Maier is the Executive Director of the Innovative Housing Institute and a housing professional with more than thirty years of experience in all aspects of affordable housing. The Innovative Housing Institute is a national leader in the field of inclusionary housing and provides consulting assistance on affordable housing in economically diverse and sustainable communities.

Wednesday, July 17, 2013

Full steam ahead as Senate confirms Cordray as CFPB director

by Liza Getsinger, National Housing Conference

Yesterday the Senate voted 66 to 34 to confirm Richard Cordray as Director of the Consumer Financial Protection Bureau, who has served as the agency’s acting director since his controversial recess appointment by President Obama in early 2012. Cordray’s confirmation ended what was a long, drawn-out battle waged by Senate Republicans who held up his nomination for several months over concerns about funding and leadership structure of the agency. Ultimately Cordray was confirmed with bipartisan support, with all Senate Democrats and twelve Senate Republicans voting affirmatively for his confirmation.

CFPB Director Richard Cordray. Photo: NCRC
The CFPB has been politically controversial since its creation by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 is intended to help protect consumers against deceptive and abusive practices related to mortgages, and other financial products. Cordray’s confirmation all but solidifies the agency's legality and generates level of certainty for the young agency. Senator Elizabeth Warren (D-Mass.), while delivering remarks today at a Capitol Hill event titled, “Examining the Impact of the Consumer Financial Protection Bureau,” co-hosted by Corporation for Enterprise Development and Democracy: A Journal of Ideas, spoke excitedly about Cordray’s confirmation and the future of the CFPB, saying that, “we can say loudly, clearly and with confidence that the Consumer Financial Protection Bureau is here to stay.”

The Bureau is already making its presence felt in the mortgage industry. Jeremie Greer, director of government affairs at CFED, and Bill Bynum, CEO of Hope Community Credit Union, speaking at the same event, discussed CFBP’s ability to both “police the bad guys” and highlight successful consumer-centered lending practices, using the recent clarifications of the ability-to-repay rule as an example. The rule, as mandated under the Dodd-Frank Act, is an attempt to protect consumers from unaffordable mortgage products while requiring services to clearly assess consumer’s ability to repay the loan before proceeding forward. The recent clarification exempted Community Development Financial Institutions and other charitable-based and nonprofit lending programs, who—in spite of potentially risky underwriting practices—have had low default rates and without an exemption would not have been able to continue to serve the same client base. This example highlights an important role for the Bureau moving forward—to create regulation that minimizes risks to consumers and lending institutions while continuing to make sure there are financial institutions and mortgages products to meet the needs of low- and moderate-income borrowers.

Friday, July 12, 2013

Hensarling offers a partisan counterpoint on mortgage finance reform

by Ethan Handelman, National Housing Conference

Yesterday, Rep. Jeb Hensarling (R-TX), Chairman of the House Financial Services Committee released a mortgage finance proposal that stands in sharp contrast to the bipartisan Corker-Warner proposal introduced last month in the Senate. The highly partisan bill focuses on private-label mortgage-backed securities while eliminating or ignoring critical pieces of housing finance that are essential to American families' access to affordable mortgages and rental housing.

The bill proposes to dismantle the GSEs and curtail FHA's role in hopes that private-label securities will fill in the rest of the secondary market. It would not provide an explicit government backstop, thereby leaving the country in a situation similar to the pre-financial crisis world, in which there was no explicit guarantee of mortgage markets, but everyone expected the federal government to step in if the system crashed. Without an explicit government backstop, however, there would be little room for the safe, sustainable 30-year fixed rate mortgage that provides stable housing and a way for American families to build wealth.

Certainly, some parts of the bill deserve a closer look. Transparency and standardization would do much to make private-label mortgage-backed securities more efficient. Regulatory provisions, like the risk retention rule, could be modified to let credit flow more freely to responsible borrowers without perfect credit or accumulated wealth. There may well be more buried in the bill's 300-odd pages, but given the partisan rhetoric surrounding it, few may ever read it.

The rhetoric surrounding the bill is in some ways worse than the policy provisions. It relies on a simplistic, ideologically-driven view of the world that misses how unregulated private capital pumped up the housing market and then fled during the crash, leaving government-backed sources as the only option for families in need of mortgage credit. Ascribing the housing crash entirely to government is a tired lie that will lead policy astray.

Housing finance reform is a practical challenge that requires hard work and political compromise to overcome. Only a truly bipartisan effort has a chance to enact meaningful reform that would bring private capital back, protect taxpayers, and ensure reliable flows of capital for affordable homeownership and rental housing for all in America.

Thursday, July 11, 2013

The summer of mortgage finance?

To fix the nation's housing system, Congress must seize the moment

by Ethan Handelman, National Housing Conference

Congress is back from the July 4th recess, and members seem ready to finally tackle mortgage finance reform. Although other issues certainly crowd the agenda, there is enough activity in both Houses of Congress and from members in both parties to create some momentum. When thinking ahead, there are two questions: why would Congress act on mortgage finance now, and if it does, how will action proceed?

Why now? Unsurprisingly, the answer is money. Fannie Mae and Freddie Mac are now generating revenue, which would help to ease any transition by creating a way to build up reserves. Waiting, however, is tricky, because that revenue is flowing to the Treasury. The longer the federal government relies on that additional revenue, the harder it will be to give it up (four Senators have already acknowledged this in legislation). Congress should act quickly before it gets hooked.

What’s next? Action will come in parallel. The Senate Banking Committee will start with legislation on FHA, then likely move to the Corker-Warner proposal to replace Fannie Mae and Freddie Mac with an insurance model. House Financial Services will likely focus on a privatized approach that would have trouble attracting support across the aisle. Bipartisan efforts in the Senate will be the best place to work out a plan that could pass.

It’s been six years since the financial crisis began, and five since the federal government placed Fannie Mae and Freddie Mac into conservatorship. The issue is surely ripe—let’s hope Congress can pluck it from the vine.

This article originally appeared in the July 2013 issue of Under One Roof, the monthly newsletter of the National Housing Conference and Center for Housing Policy, in Ethan Handelman's monthly Policy Workshop column. To subscribe and be eligible to be featured in Under One Roof, join NHC today.

Wednesday, July 10, 2013

Better local policies can help communities meet the need for long-term affordability near transit

by Robert Hickey, Center for Housing Policy

The United States is undergoing a transit boom, with more than 700 transit projects in some stage of development nationwide (see Reconnecting America’s great, interactive map.) As regions add or expand light rail, heavy rail, and bus rapid transit systems, many jurisdictions are surrounding new transit stations with transit-oriented development (TOD). By maximizing opportunities to walk to transit, these regions seek to enhance their economic competitiveness, revitalize under-served neighborhoods, reduce air pollution, and create better-connected, healthier, more affordable places to live.

There is growing awareness, however, that to realize these goals, and to grow equitably, local jurisdictions need to take proactive steps to ensure that transit-accessible housing will be available to people of all incomes over time. Without upfront investments and policy support for long-term transit-area affordability, there is a real risk that lower-income households will be edged out of transit-accessible neighborhoods as rail systems expand and growing demand for housing near planned and existing stations increases rents and home prices. Given the high share of income that lower-income households already dedicate to combined housing and transportation expenses (see here for the latest data), arguably we need to be increasing – not reducing – transit-accessible living options for lower-income households.

The good news is that, nationwide, thousands of new deed-restricted affordable homes have been built or preserved within walking distance of new transit stations over the past decade. This is well short of the need, but a good start nonetheless.

But how many of these affordable homes will still be affordable after 15 years? This question is particularly relevant for regions with long-term build-out timelines. Atlanta, for example, is building a light-rail line along the BeltLine that won’t be complete for at least 17 years. Here, as in other cities, it is likely that a good share of the affordable housing being created today near transit will not still be affordable when the transit system is fully built out.

A new report I authored for the Center for Housing Policy explores the potential of community land trusts (CLTs) to help address this issue. Drawing on case studies of Atlanta, Denver, and the Twin Cities, the paper looks at how CLTs are helping to create transit-accessible, affordable homes that remain affordable over the life of the local transit system.

A challenge for CLTs (and other developers of affordable TOD) is inconsistent public policy and funding support for long-term affordability near transit. Land access is also difficult for CLTs, as it is for other affordable housing TOD developers, especially in hot markets.

The report offers several steps that might help rectify this situation. These include:

  • Prioritizing funding for CLTs and similar institutions that can deliver permanent affordability near transit stations. 
  • Providing incentives for market-rate or affordable housing developers to partner with CLTs in developing or preserving homes near transit.
  • Facilitating access to transit-proximate land by such means as adopting inclusionary housing policies, investing in public/private TOD land acquisition funds, enabling municipal land banks to pass foreclosed or vacant properties near transit to community land trusts, and creating opportunities to develop affordable housing on publicly owned land, including lots owned by transit agencies.

Whether achieved through the use of CLTs or by other means, it is clear that dedicated efforts must be made to ensure that affordable housing will have staying power in areas with convenient access to our nation’s expanding public transit networks. The recommendations above offer some potential ways for advocates and policymakers to work together to create a lasting supply of truly affordable housing in their communities.

Monday, July 1, 2013

Paving the path forward for housing at the Solutions 2013 conference

by Amy Clark, National Housing Conference and Center for Housing Policy

At our 41st Annual Housing Person of the Year Gala last week, NHC President & CEO Chris Estes noted during the presentation of the Carl A.S. Coan, Sr. Award for Public Service to Affordable Housing that it is because of the work of people like Carl Coan, Sr. and Carl Coan, Jr. that housing advocates today have the luxury of considering the path forward for housing. When the federal government began creating housing policy in earnest in the mid-1930s, “housing’s path forward” was to ensure every American had the most basic of needs met: indoor plumbing, electricity, complete shelter from the elements. While the challenges faced by the housing community today can be more complex than those met by our predecessors, the central purpose remains the same: to ensure that every American family has the safe, decent, affordable home they need.

Through the hard work of advocates and practitioners across the country, many states and local communities have developed housing policies and programs that augment federal resources and meet local needs in targeted and innovative ways. Now, housing’s path forward means localities and states working collaboratively to address residents’ housing challenges and develop inclusive, resilient and sustainable communities.

Supporting these efforts and helping build capacity at the state level is an important part of our mission as an evidence-based advocacy and resource organization. That’s why Solutions 2013, the NHC and Center National Conference on State and Local Housing Policy, will focus on giving practitioners, advocates, policymakers and program administrators the best available information on key issues in state and local housing policy and advocacy.

Solutions 2013: National Conference on State and Local Housing Policy | September 16-18 - Atlanta, GA | Learn More

Paving the path forward for housing in our communities will require programs that help neighborhoods and families heal from foreclosure, policies that expand affordable housing in desirable neighborhoods, an understanding of the impact of good affordable housing policy on important social outcomes, and communications strategies that help advocates expand recognition of the benefits of affordable housing. Our conference tracks, as well as our special focus on veterans and older adults, will showcase innovative strategies that advocates and practitioners can take home straight from Solutions 2013 and use in their communities.

Solutions 2013 is September 16-18 in Atlanta. Visit our website to learn more and register. We can’t wait for you to join us as we navigate the path forward for housing together.