Federal regulators recently proposed changes to their rules implementing the Community Reinvestment Act (“CRA”). As CHAPA reported when the proposal came out, the CRA is a critical law that prevents lending discrimination and encourages banks to invest in low- and moderate-income (“LMI”) communities.
The CRA and Affordable Housing
The CRA requires regulators to grade banks on their LMI community investment efforts and, crucially, to consider those grades when banks seek permission to expand. This incentive structure has become increasingly key for funding affordable housing development over the years.
For example, the current rules are responsible for driving 80% of private investment in the federal Low-Income Housing Tax Credit Program (“LIHTC”), which, in turn, is the “primary tool for building and preserving affordable housing” in the U.S. That puts the CRA at the center of ongoing efforts to address our nationwide affordable housing shortage.
LMI communities, especially extremely low-income households, are the hardest hit by that shortage. Thus, for the CRA to truly support those communities as intended, it must maintain strong incentives for banks to invest in affordable housing and boost our low-income housing stock.
Opposition to Proposed Changes
The proposed changes would instead do the opposite. As CHAPA outlined in a public comment opposing the proposal, the changes would:
- Weaken existing incentives for many banks to finance affordable housing; and
- Restrict the flow of flexible financial support for community development corporations.
The result will be fewer private resources available to support affordable housing development and, ultimately, fewer projects getting done. In the midst of the affordability crisis, the government should be encouraging more housing investment, not less. That is why CHAPA is calling on the federal government to reverse course and rescind the changes.
The public comment period on this proposal closed on 10/13. Under federal law, the government must now review and respond to comments before it can implement the changes.