Housing Briefs - June 23, 2009

State Updates

Legislature Enacts FY 2010 Budget; Cuts Housing Programs by 14%

On June 19th, the Legislature enacted its FY 2010 budget. The budget closes a shortage of nearly $5 billion through deep cuts across state government, federal stimulus funding, funding from the stabilization fund, revenues from a sales tax hike from 5% to 6.25%, the application of the sales tax to alcohol, and various fee hikes. The budget also provides relief to municipalities by eliminating property tax loopholes for telecommunications equipment and by giving them the option to levy a local meals tax and to increase hotel taxes.

Affordable housing programs will be cut by 14% under the legislature’s budget, with cuts spread across several programs. The Massachusetts Rental Voucher Program (MRVP) is funded at $32.5 million ($29.997 million in appropriations and $2.5 million in a MassHousing mandatory contribution via Outside Section 129), $3 million less than FY ‘09 expenditures. This will result in displacement of up to 500 households depending on how DHCD chooses to implement the cut. In addition, the Alternative Housing Voucher Program (AHVP) is also cut and will be funded at $3.45 million in FY 2010.

The Public Housing Operating Subsidy line item was cut to $65.3 million, which will lead to a cut in maintenance funding and potentially fewer units available. This cut reverses several years of progress in adequately funding housing authorities to properly maintain this critical state asset.

The Soft Second Loan Program appropriation was eliminated. However, MHP is required to contribute to the program under Outside Section 129, and language included in Outside Section 79 allows Housing Stabilization Funds to be used for the program. The program will have to rely on capital funding to maintain an adequate funding level for FY 2010, which is uncertain due to the scarcity of capital funding.

The budget includes language authorizing the Division of Banks to continue to make foreclosure prevention counseling and first-time homebuyer counseling grants funded by the licensure of mortgage loan originators.

The budget also adjusted eligibility for families seeking emergency shelter. Under the budget, families entering emergency shelter in FY 2010 must have incomes below 115% of the federal poverty level, down from 130% in FY 2009. However, families with incomes between 115% and 130% of the federal poverty level that resided in shelter during FY 2009 and that continue to reside in shelter once the FY 2010 fiscal year begins in July shall remain eligible for up to six months.

Outside Section 142 of the budget provides that the Department of Housing & Community Development will process applications for shelter at Department of Transitional Assistance offices until DHCD establishes an operational plan to do so at separate offices and files its plan with the Legislature.

Outside Section 130 of the budget transfers $7 million from the Smart Growth Housing Trust Fund to the General Fund.

Outside Section 40 of the budget includes new reporting requirements for tax credits, including Historic Tax Credits and Massachusetts Low Income Housing Tax Credits. The language requires “taxpayers” that receive tax credits to report on the amount of jobs created, units produced and other key factors and for that information to be aggregated in a report. CHAPA supports the concept, but has suggested minor language adjustments to clarify that the project sponsor, not the investor, is responsible for reporting.

Outside Section 131 transfers $4,000,000 from underutilized septic tank removal fund to the Get the Lead Out Lead Paint Abatement program, which is administered by MassHousing.

The Governor has until June 29th to sign the budget, veto it, or sign it in part and veto certain line items or sections. In a letter to the Governor, CHAPA has requested that the Governor not reduce any affordable housing appropriations.

Bill to Preserve Expiring Use Affordable Housing Emerges from Committee

Today, the Joint Committee on Housing advanced legislation to preserve expiring use affordable housing by giving the Department of Housing and Community Development (or its designee) a right of first refusal to purchase affordable housing if the market transaction would not preserve affordability, establishing additional notice requirements, and protecting tenants from rent increases for three years following a termination of affordability. The bill, which largely resembles a bill passed by the Senate in July, 2008, was reported to the Senate Committee on Ways and Means.

Massachusetts Foreclosures Drop in May but Petitions Rise

On June 18, The Warren Group reported a 24% drop in the number of Massachusetts foreclosure deeds recorded in May (582) compared to April (769) and a 59% drop compared to May 2008 (1405).

Overall, year-to-date foreclosure deeds (4,110) are down 26% compared to a year ago. Foreclosure petition filings in May (2,329) were 15.7% higher than in April (2,013), though year-to-date filings (10,978) are down 14% compared to 2008 (12,276). Auction notices also rose in May (1,377) by 27% compared to April (1,086), but are still down 35% year-to-date (5,825) compared to 2008 (8,916).

Observers suggest lenders are taking more steps to avoid foreclosure. Others attribute the decline to two Land Court decisions in March that invalidated several foreclosure sales because title had not been assigned to the lender in advance.

MassHousing Announces PDF Funding and New Rental Preservation Program

MassHousing has announced the availability of about $30 million in Priority Development Fund (PDF) monies to support the preservation or new development of affordable or mixed-income rental housing. As detailed in the program guidelines, the funding can be used for a wide range of activities and applications will be reviewed on a rolling basis. The money became available through reallocations from projects that have not moved forward.

MassHousing also announced that it is accepting applications for up to $50 million in tax-exempt financing under a new pilot program to help revitalize “severely distressed” properties that have MassHousing first mortgages. Eligibility is limited to projects with “substantial” unfunded capital needs (e.g. at least $30,000 per unit). Applicants may also be able to access up to $4 million in PDF funds as well. The deadline for the NOFA is July 31.

Asset Development Commission to Release Final Report

The Asset Development Commission will release its final report to the legislature at an event to be held on Thursday, June 25th at 2pm at the Grand Staircase of the Massachusetts State House. The event will feature all of the commissioners and a short speaking portion with comments from the Governor, Undersecretary Tina Brooks and Senator Jamie Eldridge, and two individuals who will tell their stories as they pertain to the work of the commission.

CHAPA Funds Second Round of Community Outreach Initiative

With funding from the Miller Foundation, CHAPA has selected seven communities for assistance under Round 2 of our Affordable Housing Outreach Initiative. The purpose of the Initiative is to demonstrate how a concerted effort among committed local residents can result in an increase in affordable housing acceptance and development.

With their grant awards, the Town of Nantucket will create a series of three mini-videos/documentaries about affordable housing suitable for YouTube, while the Wellfleet Housing Authority and Local Housing Partnership will develop a series of theatrical presentations to dramatize the need for affordable housing. The Sudbury Housing Trust will develop materials to increase awareness and support for a proposed group home for persons with disabilities, The CDC of South Berkshire will organize public support for two prospective housing developments in Lenox and Great Barrington, and the City of Salem’s Affordable Housing Trust will create a local housing awareness campaign. Other award recipients include the Pioneer Valley Planning Commission and the Town of Saugus.





Federal Updates

House Financial Services Committee to Hold Hearing on Preservation Bill This Week

The House Financial Services Committee will hold a hearing on Thursday, June 25, on draft legislation to preserve federally- and state-assisted private housing. The National Low Income Housing Coalition (NLIHC) reports that the draft bill is expected to be released before the hearing. The June 25 hearing will have just one witness, HUD Secretary Donovan, but at least one more hearing will be held to hear testimony from developers, tenants, and advocates.

Congress Revises ARRA Davis Bacon Rules for Certain HUD Programs

A Supplemental Budget bill (H.R. 2346) bill approved by Congress last week includes a provision (Section 1205) that eases Davis Bacon requirements for certain HUD ARRA-funded programs including CDBG and the Neighborhood Stabilization Program (NSP). It applies the standard CDBG rule for Davis Bacon (exempting projects with less than 8 units), rather than the stricter ARRA requirement.

Frank Urges Treasury to Modify Tax Credit Exchange Program Provisions

On June 1, Representative Barney Frank wrote a letter to the Treasury Department urging it to modify the guidance governing how states can exchange low income housing tax credit allocations for direct grants. It urged Treasury to:

• Extend the deadline for disbursing the last dollars by one year to December 31, 2011.
• Give states the option of disbursing some funds as loans rather than grants.
• Allow states to secure recapture obligations by means other than first liens since first liens impede other permanent financing.

Housing and Development Reporter reports that Treasury announced on June 8th that loans will be allowed if no interest is charged or payments required during the 15-year compliance period. As of June 22, Treasury has approved TCEP grants to 12 states (including Maine, New Hampshire and Rhode Island) plus the District of Columbia and Puerto Rico.

Obama Administration Unveils Recommendations for Financial Regulatory Reform

On June 18, the Treasury Department issued an 89-page report outlining its proposals for reform of the financial regulatory system.

Among other things, it proposes creating a new Financial Services Oversight Council of financial regulators to improve interagency cooperation and identify emerging systemic risks. It would also create a new National Bank Supervisor, eliminate the federal thrift charter and other provisions that allowed bank holding companies to evade regulation by the Federal Reserve, and set higher capital standards for all financial firms, and especially for large interconnected firms.

It would also create a new Consumer Financial Protection Agency and give the Federal Reserve expanded powers to monitor entities “too large to fail.” It does not, however, impose any new requirements on the credit rating agencies. Legislation will be required to implement the proposals.

House Financial Services Subcommittee Holds Hearing on the Future of the GSEs

On June 3, the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises held a hearing on the current and future status of Fannie Mae and Freddie Mac. The subcommittee chair noted that the hearing is just the start of long-term discussion.

The hearing featured testimony by James Lockhart, director of the Federal Housing Finance Agency, who noted the important role of the GSEs in the mortgage market (they currently own or guarantee 56% of U.S. single family mortgages), their recent financial rescue by the federal government and the near-term financial challenges they face. He also discussed how they might continue their liquidity role in the future (as private, hybrid or public entities) and suggested having the GSEs meet affordable housing goals through a direct-subsidy program (such as the FHLB Affordable Housing Program) rather than setting goals as a percentage of business.

Representatives Ask GSEs to Change Condo Mortgage Rules

The Wall Street Journal reported on June 22 that Representatives Barney Frank and Anthony Weiner (New York) have sent a letter to Fannie Mae and Freddie Mac asking them to “make appropriate adjustments” to recent or proposed policies on condominium mortgages.

In March, Fannie Mae announced it would no longer guarantee mortgages if less than 70% of the units in a condominium building are sold, up from 51%. It also won’t buy mortgages if one owner has more than 10% of the units or 15% of owners are delinquent on their condo fees. Freddie Mac plans to implement similar rules this month. Both agencies also raised closing cost fees on condominium mortgages in April. The agencies have not formally responded yet, but Fannie Mae noted that the 70% rule does not apply to applications submitted under some underwriting programs.

HUD, DOT and EPA Announce “Partnership for Sustainable Communities”

On June 16, at a Senate Banking Committee hearing, representatives of HUD, the Department of Transportation and the Environmental Protection Agency announced that the three agencies have developed a set of six "livability" principles that they will all use to guide housing, transportation and environmental policy.

The principles include: providing more transportation choices; promoting energy-efficient affordable housing in a range of locations that reduce the combined cost of housing and transportation; supporting existing communities; and investing in a range of locations (urban, rural and suburban). The Administration’s FY2010 budget request includes funds to set up a new HUD Office of Sustainable Communities and to offer $150 million in grants to metropolitan regions to develop integrated housing, transportation and land use plans as well as to state, regions, and localities to make “market-shifting” changes in local zoning rules.

Renters in Foreclosure Toolkit Posted

The National Low Income Housing Coalition (NLIHC) has created a website with detailed information on the new federal protections for renters in foreclosed properties, including sample letters for renters and owners and links to a webinar. The new law went into effect on May 20. HUD’s Boston office has also issued a letter to PHAs on the rights of voucher holders.





Recent Research

State of the Nation’s Housing 2009 Released

On June 22, the Joint Center for Housing Studies of Harvard University released its annual assessment of the U.S. housing market.

The State of the Nation's Housing 2009 concludes that long-term demographic trends, including the movement of the echo-boom generation into their home-buying years, will raise housing demand over time but also notes that the uncertain economy makes other sources of demand, including in-migration, and timing more difficult to predict. It also predicts that recovery will be uneven geographically.

Despite recent falls in home prices, it found no broad improvement in housing affordability. Overall, the percentage of households paying more than half their income toward housing rose 13% to 16% between 2001 and 2007 and the study expects little improvement in that statistic going forward even if the economy improves.

Urban Institute Releases Updated Profile of Low Income Working Households

The Urban Institute released a fact sheet this month detailing the challenges facing households with incomes at or below 200% of the federal poverty level, based on 2006 national data.

The fact sheet includes demographic characteristics, hours worked, wages earned and housing and health cost burdens. Overall, the Institute found that almost half of these households (48.6%) included at least one full time worker and that low wages ($10-$11 an hour on average) were the primary reason for their low incomes. Single parent households faced even greater challenges as they generally worked fewer hours.