Housing Briefs - November 15, 2010

State Updates

CHAPA Releases Policy Recommendations for the New Gubernatorial Term

This fall, CHAPA released policy recommendations for the next gubernatorial term to continue the progress of the last four years. The paper recommends multiple strategies that meet a range of needs through both new production and preservation of existing rental and ownership housing for low and moderate income families and individuals. Specifically, CHAPA recommends the following housing policy strategies:

1. Preserve Existing Private Subsidized Housing
2. Preserve and Revitalize State Public Housing
3. Support the Affordable Housing Law, Chapter 40B
4. Increase the Production of Affordable Housing
5. End Homelessness/Expand Access to Housing
6. Minimize Foreclosures, Revitalize Neighborhoods, Sustain Homeownership
7. Collaborate with Municipalities to Support Housing and Planning Efforts
8. Promote Fair Housing, Accessibility and Choice
9. Support Community Development Corporations and Other Non-profits

Four Communities Adopt Community Preservation Act at November ballot box

The towns of Belmont, Gosnold, Middleborough and Sunderland all approved the Community Preservation Act at the November election. Voters in Marlborough rejected the CPA by a slim margin during the same election. This brings the statewide total to 147 cities and towns participating in the program.

Massachusetts Legislature Sees Significant Turnover

The November election’s results mean that there will be dozens of new faces on Beacon Hill next year. There will be 8 new senators and at least 38 new representatives sworn in to the Massachusetts Legislature in January. Congratulations to our new representatives and senators, and to the legislators that won re-election.

The significant turnover means that advocates will need to make an extra effort to develop new relationships and educate newly elected officials on the importance of policies and resources to expand and preserve affordable housing.

The 8 new senators are:

1st BRISTOL & PLYMOUTH: Michael Rodrigues (D), Westport;
CAPE AND ISLANDS: Dan Wolf (D), Harwich;
2nd ESSEX & MIDDLESEX: Barry Finegold (D), Andover;
HAMPDEN: James Welch (D), West Springfield;
1st MIDDLESEX: Eileen Donoghue (D), Lowell;
MIDDLESEX AND ESSEX: Katherine Clark (D), Melrose;
NORFOLK AND PLYMOUTH: John Keenan (D), Quincy;
SUFFOLK AND NORFOLK: Mike Rush (D), West Roxbury.

The 38 new representatives are:

3rd BARNSTABLE: David Vieira (R), Teaticket;
5th BARNSTABLE: Randal Hunt (R), East Sandwich;
1st BERKSHIRE: Gailanne Cariddi (D), North Adams;
2nd BERKSHIRE: Paul Mark (D), Hancock;
2nd BRISTOL: George Ross (R), Attleboro;
3rd BRISTOL: Shaunna O'Connell (R), Taunton;
4th BRISTOL: Steven Howitt (R), Seekonk;
8th BRISTOL: Paul Schmid (D), Westport;
9th BRISTOL: Christopher Markey (D), Dartmouth;
6th ESSEX : Jerald A. Parisella (D), Beverly;
9th ESSEX: Donald Wong (R), Saugus;
17th ESSEX: Paul Adams (R), Andover;
18th ESSEX: James Lyons (R), Andover;
2nd FRANKLIN: Denise Andrews (D), Orange;
3rd HAMPDEN: Nicholas Boldyga (R), Southwick;
6th HAMPDEN: Michael Finn (D), West Springfield;
1st MIDDLESEX: Sheila Harrington (R), Groton;
4th MIDDLESEX: Steven Levy (R), Marlborough;
6th MIDDLESEX: Chris Walsh (D), Framingham;
22nd MIDDLESEX: Marc Lombardo (R), Billerica;
32nd MIDDLESEX: Paul Brodeur (D), Melrose;
2nd NORFOLK: Tackey Chan (D), Quincy;
5th NORFOLK: Mark Cusack (D), Braintree;
9th NORFOLK: Daniel Winslow (R), Norfolk;
13th NORFOLK: Denise Garlick (D), Needham;
5th PLYMOUTH: Rhonda Nyman (D), Hanover;
7th PLYMOUTH: Geoff Diehl (R), Hanson;
8th PLYMOUTH: Angelo D'Emilia (R), Bridgewater;
4th SUFFOLK: Nick Collins (D), South Boston;
5th SUFFOLK: Carlos Henriquez (D), Dorchester;
6th SUFFOLK: Russell Holmes (D), Dorchester;
10th SUFFOLK: Ed Coppinger (D), West Roxbury;
1st WORCESTER: Kimberly Ferguson (R), Holden;
2nd WORCESTER: Richard Bastien (R), Gardner;
8th WORCESTER: Kevin Kuros (R), Uxbridge;
11th WORCESTER: Matthew Beaton (R), Shrewsbury;
13th WORCESTER: John Mahoney (D), Worcester;
18th WORCESTER: Ryan Fattman (R), Sutton;
The Sixth Worcester District is currently subject to a recount.

Regional Planning Agencies Awarded HUD Sustainable Communities Grant

As the lead applicant in a consortium of Metropolitan Boston organizations, the Metropolitan Area Planning Council (MAPC) recently received a $4 million Sustainable Communities Grant to implement the MetroFuture Plan. The grant will help fund activities including but not limited to a regional housing needs study, an analysis of impediments to fair housing (CHAPA will be undertaking this component), a climate change adaptation plan, local zoning bylaw rewrites, and other planning and programmatic initiatives. The Berkshire Regional Planning Commission and the Franklin Regional Council of Governments also received Sustainable Communities Grants. The Pioneer Valley Planning Commission will also receive funding through this initiative as part of a cross-state effort between Greater Hartford and the Pioneer Valley.

Chapter 40T Affordable Housing Preservation Regulations Finalized

The Department of Housing and Community Development has finalized regulations implementing Chapter 40T, the state’s affordable housing preservation law. The regulations, 760 CMR 64, are in effect. Parties should contact the Office of Chief Counsel at DHCD with any questions.

MassWorks Infrastructure Program Consolidates Infrastructure Grants

The Patrick-Murray Administration has implemented a program to consolidate six infrastructure grant programs under one application process called MassWorks. Public Works Economic Development (PWED) Grant, Community Development Action Grant (CDAG), Growth District Initiative (GDI) Grants, Massachusetts Opportunity Relocation and Expansion Program (MORE), Small Town Rural Assistance Program (STRAP), and the Transit Oriented Development (TOD) programs have been consolidated under the Executive Office of Housing and Economic Development. EOHED anticipates two funding rounds per year beginning in 2011.

South Middlesex Opportunity Council and Town of Framingham Settle Civil Rights Lawsuit

After three years, the South Middlesex Opportunity Council (SMOC) and the Town of Framingham have settled a lawsuit alleging that Framingham violated the Fair Housing Act, the Americans with Disabilities Act and the Federal Rehabilitation Act by discriminating in the provision of housing on the basis of disability.

Under the settlement agreement, the Town of Framingham will make a payment of $1,000,000 from its insurer to SMOC and town officials will be required to attend training on the Fair Housing Act, Americans with Disabilities Act, Federal Rehabilitation Act and the Dover Amendment. SMOC agrees to provide an annual plan and three year plan to the Town annually and meet with the Board semi-annually.

The settlement comes after U.S. District Judge Douglas Woodlock denied a request by the town to have the case thrown out. Judge Woodcock found that there was sufficient evidence presented that the Town had violated both the Fair Housing Act and Americans with Disabilities Act for the case to continue to trial, stating that town officials "through abusive communications and improper efforts to manipulate the municipal permitting process, unlawfully violated the detailed legal constraints fashioned to assure that prejudice within a community not impede access to housing and related programs for those suffering from recognized disabilities such as alcoholism and addiction.”

Rather than continuing with the litigation, both sides chose to settle the long and arduous dispute.

Reports Explore Short-Term Rental Assistance Effectiveness for Homeless Families

The Metropolitan Boston Housing Partnership has released a report assessing the effectiveness of re-housing families sheltered in motels with Homelessness Prevention and Rapid Re-Housing (HPRP) funds. The report finds that very few families are likely to be able to sustain housing once short-term housing assistance expires. The report includes the following recommendations for the HPRP and Housing First model:

• The Commonwealth needs a case management system that goes beyond housing stability.
• Additional funding is needed for stabilization services.
• Experienced housing service agencies with established property owner relationships are best suited to re-house families and build stability.
• The barriers to entering the rental market faced by families who have been homeless must be reduced.
• Success should not be measured only by the number of families who move out of motels.
• Short-term rental assistance should be available for more than one year and renewed in yearly increments, particularly in areas with high housing costs.

This month, Massachusetts Law Reform Institute also released a report on the effectiveness of short-term housing assistance made available over the past two years to address homelessness. The report highlights the need for additional resources for permanent affordable housing.

Court Ruling Clarifies Ability to Charge Same Condo Fees to All Homeowners in a Mixed-Income Condominium Association

In Ambrosini et al. v. Cawley, et al., Judge Charles Trombly Jr. held that a condominium association could assess owners of deed-restricted affordable housing and market rate housing the same condominium fees if stipulated in the master deed. This summary judgment decision provides clarity on a previously disputed issue.

In a separate attempt to clarify the law prospectively, the legislature passed Ch. 183 of the Acts of 2010 last July, which clarified that condominium associations could set percentage interest and condominium fees equally across all owners. In these instances, the affordable sales prices would take into account the higher condominium fee.

Legislation Reforming Declaration of Homestead Advances in the House

An Act Relative to the Estate of Homestead, S. 2406 has been engrossed by the House in informal session after clearing the Senate earlier this year. This legislation modernizes the existing law and eliminates the requirement that an actual filing be necessary to ensure that a homeowner is protected. If S. 2406 is enacted, $125,000 in homeowner equity would be automatically protected from creditors. The Homestead protection would rise to $500,000 if the homeowner files a Declaration of Homestead. The proposal has been spearheaded by the BBA, REBA and the MBA.

Massachusetts Home Sale Activity Down Since July, Prices Stable

On October 26, the Warren Group reported that the number of homes sold (single family and condominiums) in July through September fell by more than 20% compared to a year earlier. However, home prices still remain above 2009 levels. The median price for a single family home sold between January and September was $299,000, up 6.5% from a year earlier ($285,000), while the median condominium price was $265,000, up 3% from a year earlier ($257,000).

Federal Updates

House and Senate Committees Issue Revised Draft SEVRA Bill

On November 5, the staff of the Senate Banking and House Financial Services committees released a new, streamlined draft of the Section 8 Voucher Reform Act (SEVRA) to improve the voucher program and other housing assistance programs. As reported by the Center on Budget and Policy Priorities (CBPP), the draft was released with the hope that it can be enacted during the lame duck session by attaching it to an appropriations bill. The session will begin on November 15 (when Congress returns) and is expected to last two to five weeks.

The new draft contains many elements of the earlier draft, including a more stable funding formula, streamlined housing inspections, simpler rent calculations and changes to make it easier to project-base vouchers. However, it has dropped several controversial earlier provisions, including sharp expansion of the Moving-to-Work demonstration and a new identification requirement that could have caused many eligible citizens and legal immigrants to lose assistance. It also drops elements that would raise program costs, including authorization for 150,000 incremental vouchers, changes in enhanced voucher rules, and a new earnings disregard. As a result, the revised bill will be scored as carrying no added cost. CBPP has posted a comparison between the new draft and current law.

HUD Issues Draft National Housing Trust Regulation

While a funding source has yet to be identified for the National Housing Trust Fund authorized by Congress in 2008, HUD issued draft regulations for how the Fund would operate, with comments due by December 28.

A summary of the draft regulations is available on the National Low Income Housing Coalition (NLIHC) website. The Trust Fund is intended to provide States with flexible funding primarily targeted to extremely low income (ELI) and poverty level households and by statute, most of the program funds (at least 90%) must be used to assist renters and at least 75% of the rental expenditures must assist ELI or poor renters.

The draft regulations propose greater targeting, by applying the same 75% ELI targeting requirement to ownership expenditures, and by setting the year one ELI targeting requirement at 100% for both rental and ownership housing. They also allow HUD to continue to set targets above 75% on a year by year basis in the future.

The draft regulations, which would be a subpart within HOME regulations, also spell out eligible uses, including operating cost assistance, in more detail, along with the process States must follow in distributing funds and a Trust Fund Allocation Plan requirement. Housing advocates, meanwhile, continue to push for $1 billion in initial funding, along with $65 million for linked project-based rental assistance, through tax extender legislation in the lame duck session and/or GSE reform legislation. Massachusetts would receive approximately $26.5 million if the $1 billion allocation is funded.

HUD Proposes Changes to Section 8 Renewal Policies

HUD announced proposed revisions to it Section 8 Renewal Policy Guide Book in a Federal Register notice on October 13 (with comments due by November 15). The proposed changes, spelled out on HUD’s website, are intended to clarify, simplify and improve the process for renewing project-based Section 8 contracts and help preserve existing affordable developments. Among other things, the proposed changes would allow prohibitions of distributions to non-profit owners by waiver. CHAPA has submitted comments on the proposed changes.

HUD Issues Final FY2011 FMRs

HUD issued its final Fair Market Rents for Fiscal Year 2011 on October 4. In most of Massachusetts, the FY2011 FMRs are the same as proposed in August and within 1% of the FY2010 FMRs (Greater Boston FMRs are down $8 for a two bedroom – a decline of 0.6%). FMRs for Springfield declined by 3.7% compared to FY2010.

Revised Role for Government Sponsored Enterprises Remains Uncertain

The likelihood of revising the role of the two major Government Sponsored Enterprises (GSEs) – Fannie Mae and Freddie Mac – remains uncertain. The House held hearings on this topic in October and a number of organizations have offered recommendations. The Center for American Progress issued a working paper in October specifically addressing the need to ensure a secondary market for multifamily housing mortgages (see Recent Research below) and will be releasing a final report in December. The Obama Administration is expected to issue a proposal this January and some housing advocates hope it will include a funding mechanism for the National Housing Trust Fund. However, others believe action is unlikely in the next session given divisions within Congress.

New Jersey Appeals Court Orders State to Develop New Affordable Housing Regulations

A New Jersey State Appeals Court decision issued on October 8 invalidated the regulations issued by the state’s Council on Affordable Housing (COAH) in 2008 and ordered COAH to develop new rules within five months (by March 8, 2011). The Court concluded that the 2008 rules did not do enough to remove regulatory barriers to housing affordable to low- and moderate-income people.

The decision came after the Court consolidated 22 separate lawsuits challenging the 2008 rules. As summarized by the New Jersey Fair Share Housing Center and others, the court held that COAH’s 2008 fair share methodology was flawed because it allowed communities to avoid satisfying their housing obligations by adopting exclusionary zoning and because minimum densities (4-8 units/acre) combined with 25% set-asides were insufficient to create incentives for developers to create inclusionary housing.

It also found that exclusionary zoning practices where no environmental constraints exist are unconstitutional, as are plans that promise that at some point in the future homes will happen, but leave exclusionary policies in place in the meantime. It concluded that COAH should adopt rules similar to those in place during the 1980s and 1990s.

Foreclosure Updates

Massachusetts Foreclosures Surpass 2009 Totals

The Warren Group reported on October 21 that 890 foreclosure deeds were recorded in September, bringing the year to date total to 10,777 – 58% more than the January-September 2009 total (6,796) and 16% above the 9,269 reported for all of 2009. Petition filings continue to slow, with 2,358 filed in September, bringing the year to date total to 20,964, down 20% from August and 3% below the year to date total for the same period in 2009.

Foreclosure Distress in Massachusetts Becoming Less Urban

The Massachusetts Housing Partnership’s Foreclosure Monitor reported on November 9 that the state’s larger cities now account for less than half (49%) of all “distressed” units in Massachusetts, down from 54% two years ago.

It found that as of October 1, 2010, 51% of the 34,632 units in Massachusetts subject to a foreclosure petition, auction notice or actually taken back by the lender were outside the cities. It attributes the shift to rising economic problems among suburban and rural homeowners, rather than an overall decline in foreclosure problems in urban areas.

Federal Reserve Report Examines Neighborhood Stabilization Challenges

A new report by the Federal Reserve Banks of Boston and Cleveland provides detailed and comprehensive information for communities and policymakers trying to address foreclosed “real estate owned (REO)” and vacant properties.

Issued in September, “REO and Vacant Properties: Strategies for Neighborhood Stabilization” includes recent research on market dynamics, servicer practices and the impact of investor buyers. It also profiles diverse strategies undertaken around the nation and difficulties encountered, including deciding how to target limited resources and develop disposition strategies. It highlights the need for more flexibility than Neighborhood Stabilization Program (NSP) currently provides to respond to changing needs.

HUD Reports 36% Drop in Active HAMP Loan Modifications Since March

On October 25, HUD released its monthly Housing Scorecard and report on loan modification activity under the Home Affordable Modification Program (HAMP). The number of households with active trial or permanent HAMP modifications fell to 640,300, down 2% from a month earlier and down 36.5% from almost 1,009,000 in March 2010. The March to September drop is primarily the result of the cancellation of almost 545,000 trial modifications as servicers addressed the backlog of trials awaiting permanent conversion decisions.

Total active permanent modifications rose by about 239,000 to over 466,000 during the same period. HUD reports that default rates to date on permanent modifications have been relatively low (11% for modifications 9 months or older, with 16% 60+ days delinquent). In Massachusetts, approximately 16,000 households had active HAMP modifications (trial or permanent) in September, down from about 23,300 at the end of March.

Recent Research

2010 Greater Housing Report Card Released

The Dukakis Center of Northeastern University released its eighth annual report card on the state of the housing market in Greater Boston on October 12. The report is co-sponsored by CHAPA and The Boston Foundation.

The report found mixed trends in housing affordability and uncertainty regarding likely trends in the coming year. Overall, it noted a number of threats to the recent stability in house prices and projects that sale prices may not return to 2005 levels until sometime in 2014, despite a relatively low vacancy rate in the ownership stock (1%). However, the report finds a different picture in the rental market, with rents starting to rise again, due in large part to growth in the area’s student population, and noted the potential for further rent increases in coming years due to the sharp decline in new multifamily construction since 2007.

Construction activity as measured by building permits reached historic lows in 2009 and early 2010, both for ownership and rental units (multifamily units permitted in 2009 was 74% below the number permitted in 2005). Given the softness in housing markets and the likelihood of a second wave of foreclosures in the coming year, it is unclear when construction activity will pick up, the report said. At the same time, the report found a number of positive economic signs, relative to the nation as a whole, including a lower rate of unemployment and some population gains.

Study Recommends New Secondary Market Entities for Multifamily Rental Housing

A Center for American Progress (CAP) working paper issued last month recommends changes to the secondary market system for multifamily (5+) rental mortgages. “A Responsible Market for Rental Housing Finance” recommends replacing Fannie Mae and Freddie Mac with a limited number of privately-owned and privately capitalized Chartered Mortgage-backed Securities Issuers (CMIs) that would have a government guarantee of payments on the securities (but no guarantee of the debt of the entities).

CMIs would pay guarantee fees and be subject to a federal regulator with resolution authority, similar to the FDIC. Charters would be awarded competitively and the selected entities would have to meet a number of public goals, including ensuring countercyclical liquidity, promoting access to credit, and financing affordable rental housing. CMI fees would also fund affordable housing and “innovation efforts”. The paper recommends that CMIs be required to meet a broad affordability goal (that at least 51% of the securitized units be initially affordable to households at 80% of area median) but without an ongoing affordability requirement.

It also recommends that the federal government impose a fee on all issuers of mortgage securities to be paid into a Market Access Fee (MAF), the proceeds of which could be used to support more targeted affordability goals, as well as the development of innovative products to support rental housing goals (including addressing the challenges of securitizing mortgages for small rental properties). The CAP proposal would also require CMIs to set standards for eligible mortgages and use standardized mortgage documents to facilitate liquidity. They could limit their business to multifamily mortgages or also securitize single family mortgages.

Study Finds Maintaining Economic Diversity Key to Transit Oriented Development

Northeastern University issued a new study in October that examines whether investment or reinvesting in transit-rich neighborhoods leads to displacement of long-term, lower-income residents.

“Maintaining Diversity in America’s Transit Rich Neighborhoods” studied 12 metro areas where transit-rich neighborhoods showed more pronounced demographic changes between 1990 and 2000 than the metro area as a whole. It found that while impacts varied, there was clear evidence of gentrification in some neighborhoods, especially in those with large numbers of renters (rising housing costs, rising household incomes and rising car ownership).

The study concludes that without careful planning, gentrification can undermine transit use goals. That is, increases in housing costs and car-ownership have slowed or reversed ridership growth in some areas by displacing core ridership groups. It recommends that planners anticipate these impacts when they first engage in transit planning and use both housing market and transportation management tools to ensure affordable housing opportunities and attract non-car-owning residents.

National Trends in Rental Affordability

The Center for Housing Policy released a review last month of recent trends in rental housing affordability. Overall, it finds numerous challenges to rental affordability, as losses to the existing low-cost inventory (including unsubsidized units) have offset two-thirds of recent additions and real rental costs have outpaced renter household income growth. The rise in the number of renter households nationwide, combined with the disruption of the low-income housing tax credit market in the past two years and declines in multifamily production, has exacerbated this trend. It notes that only one-third of extremely low income renters receive housing assistance and that fewer than half (44 percent) live in housing they can afford.