State Updates
Legislators Nearing Completion of FY'09 Budget
Legislative leaders are ironing out the details of the FY '09 budget and may vote on the final budget this week. The budget has been delayed, in part, due to the need to wait for a federal decision on Massachusetts' Medicaid waiver which contributes approximately $585 million towards the state's universal healthcare law. However, the Governor recently signed a mini-budget so government operations will not be interrupted.
Green Communities Act Sent to Governor's Desk
Legislation to promote energy efficiency and renewable energy was sent to the Governor's desk after both branches accepted the Conference Committee report. The Legislation, S. 2768, is likely to have an impact on new housing construction and the rehabilitation of existing public and private housing through new incentives and building code updates.
Provisions related to housing include:
- A requirement that home inspectors notify buyers of single family homes, condos or multi-family homes of less than 5 units of the benefits of an energy audit (Section 5).
- In order for a municipality to be deemed a "Green Community" and receive technical assistance and grants, the locality must require that all new residential development over 3,000 square feet "minimize, to the extent feasible, the lifecycle cost of the facility by utilizing energy efficiency, water conservation, and other renewable or alternative energy technologies" (Section 22).
- A provision establishing an alternative procurement process for local entities, including housing authorities, to contract for energy conservation projects or photovoltaic onsite generation panels. (Section 44).
- A requirement that local building inspectors have general knowledge of the energy requirements in the International Energy Conservation Code (IECC) and requires the State Board of Regulations and Standards to adopt, within one year, the latest edition of IECC as part of the State Building Code (Section 54 and Section 55).
- A pilot program that allows customers to purchase and install energy efficient or renewable energy products up to $500 for residential projects and pay for the projects through a charge on their utility bills in an increment that is less than the customer's energy savings over the course of a given year (Section 84).
- A Commission to study the environmental and economic impacts of a Green Building Plan (Section 88).
- A requirement that the Division of Energy Resources establishes a pilot program to assist consumers with the purchase of energy efficient items for residential home modifications through low-interest loans (Section 90).
- A requirement that the Secretary of EOEEA make recommendations regarding what supplemental funds, if any, will be needed for the Low Income Home Energy Assistance Program, including funding levels and sources (Section 106).
Governor Patrick Announces Start of Neighborhood Stabilization Fund
At an event hosted by Chelsea Neighborhood Developers today, Governor Patrick unveiled the details of a low-interest loan fund to purchase foreclosed properties.
The Fund consists of $17 million from the Massachusetts Housing Investment Corporation and the Massachusetts Housing Partnership and $3 million from the Boston Foundation and the Hyams Foundation. The loans are available for both for-profits and non-profits to purchase foreclosed properties to resell after rehabilitation or to maintain as affordable housing. Preference will be given according to need, with a requirement that each applicant display a clear and realistic plan for acquisition and use after rehabilitation.
The private funding will be backed by $1 million in Affordable Housing Trust Fund money to serve as a loan loss reserve and to provide up to $60,000 per unit for rehabilitation, and $500,000 from Living Cities to provide MHIC with assistance to facilitate the sale of foreclosed properties. The initial target areas are Boston, Chelsea, Lawrence, Springfield, Worcester, New Bedford and Brockton, but applicants from other areas experiencing high levels of foreclosures can apply.
The Massachusetts Housing Investment Corporation will administer the fund and the Department of Housing and Community Development will oversee the program.
House Passes Legislation Altering Cooperative Housing Statute
Yesterday, the House of Representatives engrossed legislation that would alter Ch. 157B, the Cooperative Housing Corporation Statute. The precursor to this bill, H. 1224, was enacted by both branches but vetoed by Governor Patrick because it impeded on the ability of coops to be used to provide affordable housing. The legislation put forward by the House does not affect affordable housing cooperatives to the same extent. However, its exact impact and applicability is still being studied. The legislation, H. 4897 is now before the Senate.
Draft Mortgage Lender Regulations Released for Comment
Last week, the Division of Banks released draft regulations, 209 CMR 54:00, to implement the mortgage lender community investment provisions within Ch. 206 of the Acts of 2007.
The proposed regulation will implement the amendment to Section 8 of Ch. 255E of the General Laws, which establishes a requirement for evaluating certain mortgage lenders' records of meeting the mortgage credit needs of the Commonwealth. This provision applies to licensed lenders who made 50 or more residential mortgage loans in the previous year by establishing performance tests, standards for evaluation, and ratings to be assigned evaluating each mortgage lender's record of meeting specified mortgage credit needs in Massachusetts.
This record will include efforts to meet residential mortgage credit needs in low- and moderate-income neighborhoods, consistent with the safe and sound operation of the mortgage lender. Under these provisions, the Commissioner must examine a lender for compliance with the new requirements and issue a public rating of the lender's performance and may take a lender's performance rating into consideration in a license renewal application or other application to the Division.
A public hearing will be held Tuesday, July 29, 2008 at 10:00 a.m., in Hearing Room A, 5th Floor, One South Station, Boston, Massachusetts on the proposed regulations; the comment period closes August 1st.
Asset Development Commission to Hold Public Hearing
The Asset Development Commission, created by the Legislature as part of the 2006 Economic Stimulus Bill, will hold a public hearing on July 14 at 2:00 p.m. in State House Room B-2. The Commission, co-chaired by Representative James Eldridge and Undersecretary Tina Brooks, is soliciting opinions regarding the policies, programs and practices that are necessary to better assist low and moderate income families to build and retain assets, such as housing, business ownership, savings, and retirement funds.
For more information or to submit written testimony, contact the office of co-chair Representative Eldridge at 617-722-2060 or at Rep.JamesEldridge@hou.state.ma.us, or the office of co-chair Tina Brooks, Undersecretary for Housing and Community Development at 617-573-1441 or at karen.bresnahan@state.ma.us.
Legislature Passes Boston Co-op Exemption Bill
On June 20th, Governor Patrick signed Ch. 145 of the Acts of 2008 into law to provide a residential tax exemption for cooperative housing residents in the City of Boston to exempt 30 per cent of the average value of the cooperative corporation's residential units. Boston condo and single family owners already benefit from a residential tax exemption. Rep. Martha Walz championed the legislation to extend the property tax relief to co-op owners as well.
Department of Housing and Community Development Finalizes Public Housing Operating Cost Study
DHCD has recently finalized a study to calculate the cost of operating the state publicly-assisted housing portfolio to affordable housing industry standards, and framing the range of opportunities that could realistically reduce those costs while maintaining high property management standards.
Consistent with past studies, it found that the current real cost of operating the public housing portfolio requires subsidies of roughly $115 million per year. As the Commonwealth increases investments in public housing, the report says that DHCD is committed to working with local housing authorities to achieve cost savings and system improvements to reduce the state subsidy.
Massachusetts Building Permits Continue to Drop
Massachusetts building permit estimates released by the Census Bureau earlier this month show a continued decline in the number of units permitted (not seasonally adjusted). An estimated 4,089 units were permitted between January and May 2008, forty percent (40%) below the same period a year ago and 56% below the recent peak of 9,345 units for that period in 2006. Nationally, year-to-date permit activity dropped 36% compared to 2007.
The estimated 1,109 units permitted in May 2008 was the lowest monthly May total since published Census recordkeeping began in 1969, as was the January through May figure. A total of 2,054 single family homes were permitted in January through May, down 41% from 2007 and down 60% from 2008. Permits for units in multi-family properties (5+ units) totaled 1,834, down 35% from 2007 and down 47% from the 2006 peak of over 3,400 units.
The 2008 data also show a continued decline in the share of new permits attributable to single family homes, with single family homes accounting for 50% of new units permitted in 2008, down from 70% in 2004, and multi-family construction accounting for 45% of new units in 2008.
Massachusetts Foreclosure Deeds Up 140% Over 2007
Banker and Tradesman reported yesterday that 5,576 foreclosure deeds have been filed in Massachusetts this year (January through May), up 139.6% over the same period last year. Foreclosure deeds represent the actual loss of a property. The number of foreclosure deeds filed in May alone (1,405) is the highest monthly total since The Warren Group began tracking them in 2005 and more than double the number (677) filed a year ago.
Federal Updates
Major Senate Housing Bill, Including Foreclosure Aid, Advancing Slowly
Senate efforts to pass a major housing bill last week, the Housing and Economic Recovery Act of 2008, were stalled by a Nevada senator seeking approval of an amendment to extend energy tax credits. The Senate is expected to take up the proposed bill again during the week of July 7. The National Low Income Housing Coalition reports that the Senate is considering the bill in three separate parts and that on Friday, June 26 it overwhelmingly approved several key elements, including foreclosure programs and GSE reform/establishment of a National Housing Trust Fund.
The Senate bill is an amendment to legislation passed by the House on May 8 (H.R. 3221) that rolled five bills previously approved by the full House or the Financial Services Committee into one large bill. Key elements include:
- Authorization of an FHA insurance program to help households at risk of foreclosure to refinance into more affordable loans and establishment of a legal "safe harbor" to remove a potential barrier to loan modifications by servicers.
- $3.9 billion in community development block grant (CDBG) funds to help cities and states stabilize neighborhoods with large concentrations of foreclosed properties and return the properties to occupancy (not in the House bill).
- Reform of GSE oversight and creation of a National Housing Trust funded in part by Fannie Mae and Freddie Mac contributions (funds from the Trust would be used to help fund the FHA refinance program in the first 3 years).
- Modifications to the Low Income Housing Tax Credit Program and tax-exempt bond programs to make them easier to use with other funding programs and a temporary increase in credit and bond allocations to states, in part, to support foreclosure prevention and neighborhood stabilization activities.
Supporters remain cautiously optimistic that the bill will pass the Senate and that the differences between the House and Senate versions can be reconciled, though it is unclear whether the Neighborhood Stabilization proposal will survive. The President issued a veto warning on June 19, objecting to the provision of the stabilization fund. CHAPA continues to urge the Massachusetts Congressional delegation to include the stabilization fund in the final package.
House Subcommittee Approves HUD Appropriations Bill
The House Appropriations Subcommittee on Transportation and HUD approved a FY2009 budget bill for HUD on June 20th. Mark-up by the full House Appropriations Committee, originally scheduled for June 26, is now expected to take place during the week of July 7. The Senate Appropriations Committee is scheduled to consider its own bill on July 10.
The House Subcommittee bill provides modest increases over the FY2008 budget for most major HUD programs, generally in order to maintain current programs, and in a few cases, "to restore the Administration's most detrimental cuts". Overall, the subcommittee bill provides $1.6 billion more for key housing programs over the FY2008 budget (and about $2.8 billion more than the President's FY2009 request).
While the bill text, and thus detailed information, is not yet available, the National Low Income Housing Coalition reports that the $1.6 billion in increases over the FY2008 budget include:
- About $1 billion for the Section 8 program to maintain current contracts (the Subcommittee admits this still leaves project-based contracts under-funded) and fund 14,000 new vouchers for veterans (10,000) and persons with disabilities (4,000).
- $381 million for public housing programs, including a 14.4% increase for the operating fund, a $61 million (2.5%) increase for the capital fund, and a $20 million (20%) increase for HOPE VI.
- About $280 million for small funding increases to a number of programs including homeless assistance grants (up 6.7%), Section 202 (up 4%), Section 811 (up 5%) and housing counseling (up 30%).
The bill level funds HOME and HOPWA and provides a 3.5% increase for the Community Development Fund. Additional information and a budget chart are available on the NLIHC website.
HUD Publishes Proposed Fair Market Rents (FMRs) for FY2009
On June 12, HUD published its proposed Fair Market Rents for FY2009 for the Section 8 Housing Choice Voucher Program and other programs in the Federal Register.
The FMRs represent HUD's estimate of the 40th percentile gross rent (contract rent and utilities) new movers will pay for non-luxury apartments in FY2009. HUD has proposed small increases (2.9%-4.5%) in 15 of the 19 FMR areas in Massachusetts. It has proposed decreases in four areas, however, including Greater Boston.
The biggest decrease proposed is for the Fall River-Providence area, with decreases ranging from 6.3% to 9.4% ($64 for a two-bedroom unit, $147 for a four-bedroom unit). This is because that area had had higher FMRs (set at the 50the percentile) in recent years in order to address unduly concentrated use of vouchers in a few census tracts. HUD is not continuing the higher FMRs for that area in 2009 because concentration levels have fallen.
HUD has proposed a 4.5% cut in FMRs ($43-$49 for a two bedroom unit) in the Worcester and Eastern Worcester County areas and an 0.6% decrease for the Boston-Cambridge-Quincy FMR area ($8 for a two-bedroom unit). HUD is accepting comments through August 1.
Website Launched to Support Stabilization Efforts in High Foreclosure Neighborhoods
A number of national organizations have joined together with the Enterprise Community Partners to form the "Save America's Neighborhoods" task force. CHAPA has been working closely with the task force. In addition to advocating for passage of federal legislation to provide at least $4 billion in emergency Neighborhood Stabilization grants to states and cities, the coalition has launched a website – http://www.saveamericasneighborhoods.org/ - with data on the scope of the problem and information on state and local initiatives and best practices. The site also has state by state fact sheets on foreclosure levels and estimates of the funding each state would receive under the proposed legislation. They estimate Massachusetts communities would receive about $74 million under a $4 billion program.
Recent Research
State of the Nation's Housing 2008 Report Released
The Joint Center for Housing Studies of Harvard University released its annual comprehensive analysis of U.S. housing trends this week, "The State of the Nation's Housing 2008."
The report finds high rental vacancy rates and a large "overhang" of ownership units for sale, but expects underlying demand to eventually reduce both. However, the time required is unclear given the uncertain near-term outlook for the national economy, rising energy costs, tighter lending standards and buyer uncertainty about falling prices.
The report also discusses the erosion in housing affordability for both middle and low income households, renters and owners, and concludes that bringing affordability back to 2000 levels would require both changes in housing prices and rents and "unprecedented" real income growth.
Study Finds Foreclosure Rates Highest in Poor Neighborhoods in New England
The National Low Income Housing Coalition (NLIHC) issued a new research note this month, "Neighborhood Poverty and Tenure Characteristics and the Incidence of Foreclosure in New England", which profiles the characteristics of foreclosed properties in four New England states (Connecticut, Massachusetts, Rhode Island and New Hampshire).
The study examines the neighborhood characteristics of over 14,600 properties which were scheduled for auction or became bank-owned over the past 15 months (January 2007 through March 2008). Overall, it found that "the real foreclosure 'hot spots' are neighborhoods with high levels of poverty and average-to-high levels of renter-occupied housing." Not surprisingly, it found that foreclosure rates in poorer census tracts were more than twice the statewide average in three states, including Massachusetts.
After ranking tracts by poverty rate (bottom, middle and top third), it found that the foreclosure rate (total units foreclosed as a percentage of total housing units) in the bottom third of tracts was 99 units per 1,000, compared to an overall rate of 50 units per 1,000 for the four states combined.
