Housing Briefs - November 20, 2009

State Updates

Legislature Enacts Affordable Housing Preservation Bill; Fixes State Low Income Housing Tax Credit Technical Glitch

After passing both branches unanimously, a bill to preserve expiring use affordable housing has been sent to Governor Patrick’s desk for signature. S. 2190 will help address expiring use challenges in three ways: 1) tenants will receive notification prior to a change in the building’s affordability, 2) a housing authority, local nonprofit or for-profit developer designated by DHCD will have a right of first refusal to match the purchase price of any transaction between an owner and a third party that does not preserve affordability, and 3) tenants in buildings that have their affordability restrictions terminated that do not qualify for enhanced Section 8 vouchers would have potential rent increases capped at Consumer Price Index plus 3 percent each year for 3 years.

The legislature also added a provision that will allow several State Low Income Housing Tax Credit projects to advance by removing the statutory prohibition against a taxpayer investing in more than 10 years of State Low Income Housing Tax Credits.

CHAPA is optimistic that Governor Patrick will sign S. 2190 into law. We would like to thank the entire legislature for making this possible, with a special note of gratitude to Senate President Murray, Speaker DeLeo, Housing Co-Chairs Rep. Honan and Sen. Tucker, Chairman Charles Murphy, Chairman Panagiotakos, Sen. Downing, Rep. Kaufman, Rep. Sanchez, Rep. Story, Rep. Wolf, Sen. Creem, Sen. Chandler, Sen. Tolman, Sen. Menard, Sen. Joyce, Rep. Malia, and Rep. L’Italien. In addition, we would like to thank DHCD and many organizations, including but not limited to Massachusetts Association of CDCs, Massachusetts Senior Action Council, Boston Tenant Coalition, AARP, and Greater Boston Legal Services for their partnership.

Key CHAPA Priorities Advance from Committees

On November 10th, the Joint Committee on Housing favorably advanced H. 1222, An Act Relative to Community Housing and Services. The bill calls for an Interagency Agreement and Action Plan to coordinate the creation of permanent supportive housing among the various state agencies involved in housing development and community-based services for homeless persons, persons with disabilities and seniors. We thank Sen. Susan Tucker and Rep. Kevin Honan for their active advocacy for permanent supportive housing.

The Joint Committee on Community Development and Small Business favorably reported S. 90, An Act Relative to Community Preservation. This legislation would ensure the Community Preservation Act’s lasting success by clarifying allowable uses, bolstering the state match, and broadening CPA's reach to cities and other communities underserved by the program thus far.

The bill, now before the House Committee on Ways and Means, also incorporates the CHAPA-initiated legislation filed by Rep. Steve Walsh and Sen. James Eldridge to clarify that CPA housing funds can be used for direct assistance to individuals, including downpayment assistance and rental assistance. We would like to thank Committee Co-Chairs Sen. Michael Moore and Rep. Linda Dorcena Forry for advancing this important legislation.

Budget Deficiency Bill and 9C Cuts Respond to Shrinking Revenues

On October 29th, the Governor announced over $350 million in budget cuts as part of a plan to close a projected $600 million FY 2010 budget deficit. The cuts largely spared affordable housing programs. However, the Homeless Individuals Assistance line item (7004-0102) was reduced by $2.7 million. This is the first appropriation reduction for shelter programs during the current downturn but a troubling cut to homeless shelter budgets as the winter months approach. Housing Consumer Education Center (7004-3036) support was also cut by $128,000, or 8%.

The 9C cuts also include a $15.8 million reduction in Transitional Aid to Families with Dependent Children. Beginning in January, an estimated 9,100 families with children whose parents have a disability and receive federal Supplemental Security Income (SSI) will have their TAFDC assistance reduced or eliminated. The loss of income will negatively impact tenant stability and housing provider budgets, ultimately leading to increased family homelessness.

In addition to the 9C cuts mentioned above, the Governor filed a budget balancing bill that was taken up by each branch of the legislature on November 18th and 19th. Both House and Senate budget bills reduce the Residential Assistance for Families in Transition appropriation from $3.06 million to $160,000 and use the funding from the $2.9 million reduction to help meet the deficiency in the Massachusetts Rental Voucher Program.

Both pieces of legislation also transfer an additional $11 million from the Smart Growth Housing Trust Fund to the General Fund, leaving between $4 and $6 million for Ch. 40R and Ch. 40S payments to municipalities. Final text of the legislation, H. 4348 and S. 2218, was not available when this edition of Housing Briefs was published.

Senate Passes Criminal Offender Record Information Reform Legislation

On November 18th, the Senate passed S. 2210, a bill to reform the CORI System. The bill reduces lengthy waiting periods to seal old records, moves the criminal history question from initial job applications to the end of a hiring process, and prevents the distribution of cases that were charged but dismissed or found not guilty. Homeless advocates have consistently cited issues with the CORI system as a barrier to placing homeless persons in permanent housing. Governor Patrick, Senator Chandler, Senator Creem and Mayor Menino helped champion the bill through the Senate with Senate President Murray and Chairman Panagiotakos’ strong support. It is unclear if the House plans to take action on the bill when formal sessions commence in January, 2010.

Governor Patrick Appoints Ron Homer as Chair of MassHousing

On November 10th, Governor Patrick announced that he has appointed business and civic leader Ron Homer as Chair of the MassHousing Board. The Governor also called on MassHousing to focus its attention on the following key areas: affordable housing preservation, workforce housing creation and bond financing for state public housing. Michael Dirrane, a 16-year member of the board whose term and chairmanship expired in September, will continue with the board and the Governor is recommending that the board consider Dirrane for the position of vice-chair.

CHAPA Releases Report Evaluating Massachusetts Code for Accessible Housing as Compared to Federal Codes

With section-by-section analysis of the Massachusetts regulations for the development of accessible housing for people with disabilities conducted by LCM Architects in Chicago, CHAPA's Committee on Accessible Housing Code has released a new report recommending that Massachusetts update its code to ensure the development of more high-quality housing for people with disabilities.

Specifically, the analysis by LCM Architects outlines all sections of the Massachusetts code that have either a lower standard of accessibility or a higher or unique standard of accessibility as they compare to Federal codes including the Fair Housing Act Design Manual, the Uniform Federal Accessibility Standards, and the Americans with Disabilities Act Standards for Accessible Design.

The analysis by LCM Architects yielded 48 areas where the Massachusetts code has a lower standard of accessibility, and over 100 areas where the code has either a higher standard or is unique to Massachusetts. The report recommends that, to the extent that these inconsistencies materially affect accessibility, policy makers in Massachusetts should consider rewriting the regulations to gain substantial equivalency to the Federal Codes, adopting Legislation to address those inconsistencies due to state statute, and/or adopting Chapter 11 of the International Building Code (IBC) on accessible housing with an addendum stipulating use of the existing Massachusetts code only in those instances where LCM Architects found that state regulations have a higher standard for accessibility than IBC



MAPC and CHAPA Issue Status Report on Chapter 40R Program

The Metropolitan Area Planning Council and CHAPA issued a detailed report last month on activity to date under Massachusetts’ Smart Growth Zoning and Housing Production Act (“Chapter 40R”) enacted in 2004. Chapter 40R offers cash payments and “school cost insurance” to communities that create “smart growth” overlay districts that allow housing to be built at minimum densities of 8-20 units per acre of developable land and require that at least 20% of the units be affordable. The report found that 27 communities had fully approved districts and that most were created in response to specific projects, including some long in the pipeline. It also found limited construction to date, in part due to the downturn in the housing market.

Get the Lead Out Program Reopens

Get the Lead Out, the loan program administered by MassHousing to help low-income homeowners, investors, and non-profit organizations finance lead paint abatement in 1-4 family residential properties, reopened with new funds at the end of October.

The legislature and Administration worked to secure the funding to help families with children under the age of 6 remove lead paint from homes. CHAPA partnered with MACDC, the lead advocate for the program, in securing funding for Get the Lead Out in the FY2010 budget process. Click here for the new program guidelines.

Massachusetts Building Permits Fall in September

According to U.S. Census Bureau estimates, Massachusetts building permit activity dropped by 19% in September compared to August and is now down 36% year to date compared to 2008 and down 71.6% from January through September 2005.

Year to date through September, permits for a total of 5,050 units have been issued, down from 7,917 during the same period in 2008. Nationally, permit activity fell by just over 1% in September compared to August and total units permitted year to date have dropped 29% (in the Northeast, the drop was 33%). Figures for October building permit activity in Massachusetts will be released on November 24. (Nationally, the Bureau has reported that the number of units permitted fell by 4% in October compared to September and are down 24% compared to 2008.)

Federal Updates

Congress Extends HUD Continuing Resolution for FY2010

Pending completion of a conference bill for the HUD FY2010 budget, Congress extended the continuing resolution for HUD through December 19. The extension was included in H.R. 2996 and added language on the last page of the bill allowing the use of up to $200 million in FY2010 Section 8 funds for public housing authorities with funding shortfalls in their voucher programs to avoid terminating voucher holders.

Senate Banking Committee Issues Draft Financial Regulatory Reform Bill

On November 10, Senator Christopher Dodd announced the release of the Senate Banking Committee’s financial regulatory reform bill. At this point, the bill is in discussion draft form. The Committee also published an 11 page summary of the discussion draft.

HUD Releases Draft Choice Neighborhoods Initiative Legislation

On November 6, HUD issued a fact sheet, summary and draft authorizing legislation for its proposed Choice Neighborhoods Initiative (CNI) for which it has requested $250 million in the FY2010 budget. CNI would replace the current HOPE VI program and was funded in the Senate-approved budget bill, but not in the House budget bill. The National Low Income Housing Coalition has also prepared a summary analysis. HUD will take comments by email at choiceneighborhoods@hud.gov through November 24.

The proposed program will “build on the successes and lessons learned” from HOPE VI and will assist private and public HUD assisted housing. It will target neighborhoods that have: (1) concentrations of “extreme poverty” with other distress indicators such as high rates of crime, vacant or substandard housing and failing schools; (2) concentrations of “severely distressed” public and/or assisted housing; and (3) potential long-term sustainability (such as local anchor institutions such as hospital and universities, and access to jobs and transportation).

The fact sheet indicates that “locally driven” education reform will be a key component of the program as well. The program will address the needs of the surrounding neighborhood, as well as the HUD assisted housing. Eligible applicants include local governments, public housing agencies, Community Development Corporations, owners of assisted housing and private and non-profit entities. Applicants will be required to develop a transformation plan. Grant funds would be usable for a range of activities.

Obama Administration Reiterates Support for National Housing Trust

On October 29, HUD Secretary Donovan and Treasury Secretary Geithner issued a statement urging Congress to support key housing measures and pledging to work with Congress to identify a $1 billion funding source for the National Housing Trust. Bills have been proposed in both the House and Senate to provide funding through TARP (see the National Low Income Housing Coalition side-by-side comparison).

HUD has draft regulations in review now and is expected to release the distribution formula for the Fund in early December.

Federal Housing Administration Reports Shrinking Reserves due to Losses

On November 12, FHA Commissioner David Stevens released the agency’s annual independent actuarial study and reported that its capital reserve ratio had fallen below the level mandated by Congress as a result of significant losses on loans made before 2009. The capital reserve ratio measures reserves held in excess of projected losses over the next 30 years. Stevens noted that FHA lending has increased significantly in the past year as subprime lenders have withdrawn, insuring almost 50% of first-time homebuyer loans in the second quarter of 2009. He reported that the average credit score of FHA borrowers has risen by 60 points in the last two years to 693 today. Stevens also announced changes to credit policies effective January 1, 2010 (more timely appraisals, etc.) and the appointment of a first-ever FHA Chief Risk Officer.

Treasury Rejects Goldman Sachs Proposal to Buy GSE Low Income Housing Tax Credits

On November 3, the New York Times and other newspapers reported that Goldman Sachs and Warren Buffet had proposed buying up to one-half of Fannie Mae’s $5.2 billion in low income housing tax credits since Fannie is unable use them due to its lack of income. The purchase would provide an infusion of cash to Fannie Mae but at significant cost to the federal Treasury. On November 7, Bloomberg News reported that the Treasury Department rejected the proposal.

Senate Committee Increases Subsidized Housing Set-Aside in Climate Change Bill

On November 5, the Senate Environment and Public Works Committee approved the climate change bill (S.1733) with a much higher set-aside from allowance proceeds reserved for energy efficiency improvements in subsidized housing than the House Bill.

The Center on Budget and Policy Priorities notes that there is uncertainty regarding the value of the allowances, but estimates that the set-aside would provide about $290 million for such improvements in 2012 and an average of $330 million a year (inflation adjusted) from 2012 to 2019. It cautions, however, that the bill may change as it proceeds through the Senate.

CBO Finds Federal Spending on Housing Rising, Primarily for Homeownership

A new issue brief by the Congressional Budget Office reports that federal budget authority for housing activities, through direct spending and tax expenditures, has risen significantly in the past two years as a result of the financial crisis and will total about $300 billion in 2009. About $230 billion (70%) will benefit homeowners.

Major components of the $300 billion include $110 billion in tax expenditures for homeowners (including $14 billion in first time homebuyer tax credits) and $95 billion in direct spending for homeowners, including the Making Home Affordable loan modification and refinancing program ($50 billion), subsidies for Fannie Mae and Freddie Mac in conservatorship ($43 billion), and the Neighborhood Stabilization Program ($2 billion).



Fannie Mae Announces Deed for Lease Program for Foreclosed Properties

On November 5, Fannie Mae announced a new “Deed for Lease” program under which it is willing to lease properties in its portfolio facing foreclosure to their current owners and/or tenants if the owner surrenders the deed. The units will be leased at market rate rents. For details on the program, including servicer guidelines and program fact sheets, click here.



HUD and Treasury Report Continued Progress on Loan Modifications

On November 10, HUD and the Treasury Department released an updated status report on the administration’s Making Home Affordable Initiatives. It noted that just over 650,000 households have received a trial or permanent mortgage modification as of October 31, including 14,677 in Massachusetts.

The status report includes updated performance data on the 71 servicers participating in the HAMP program. Overall, these servicers have begun trial or permanent modifications on 20% of their estimated qualifying portfolio (3.2 million loans that are 60+ days delinquent). Among the four servicers with the largest numbers of delinquent loans, Citibank had the highest percentage of modifications underway (40%), followed by JP Morgan Chase (32%), Wells Fargo (29%) and Bank of America (14%). A number of smaller servicers had much lower percentages while a few were higher.



Census Bureau Releases American Community Survey Data for Smaller Communities

On October 27, the Census Bureau released 2006-2008 ACS estimates on housing, demographic and socioeconomic trends in communities with populations of at least 20,000. The new data is available at the Bureau’s American FactFinder site. The Bureau also released county and school district income and poverty estimates on November 18.

FHA Temporarily Eases Rules on Condominium Mortgages

On November 6, the Federal Housing Administration issued a mortgagee letter indicating it was temporarily easing its requirements for homebuyer mortgages for condominium units. The new requirements will become effective on December 7, 2009 and run through December 31, 2010. Among other things, the new rules reduce the percentage of units in a development that must already be pre-sold to 30% (most conventional lenders require 70%) and increase the percentage of units in a development that can be financed with an FHA-insured mortgage to 50% and even 100% under some circumstances.



Recent Research

New Federal Reserve Study Examines Ways to Revitalize the LIHTC Program

A new report commissioned by the Board of Governors of the Federal Reserve System outlines several proposals to update the LIHTC program in light of changes in the world of investors in the past decade, the withdrawal of the GSEs, and the current shortage and geographic differences in demand.

Buzz Roberts of LISC recommends modifying Community Reinvestment Act (CRA) policies to ensure smaller banks can receive credit for investing regional LIHTC funds (and thus stimulate their participation in low-demand areas). Joe Flatley of the Massachusetts Housing Investment Corporation and CHAPA board calls for the federal government to be a co-investor in LIHTC projects, perhaps using TARP funds, until the market stabilizes. Others suggest ways to make it possible for individual investors to participate, including creating a secondary market through tax-credit backed securities, and ways to structure investment partnerships to assist preservation projects.

New Study Finds High Rates of Family Mobility in Disadvantaged Neighborhoods

A study, Family Mobility and Residential Change, issued by the Urban Institute this month found that residents in “disadvantaged neighborhoods” move more often than others, with over half (57%) in ten areas studied moving at least once within a three-year period. However, most stayed in the same city (65%) and relatively close to their prior residence (the median distance moved for households with children was 2.6 miles) and maintained strong ties to their old location.

It also found that most changes in neighborhood poverty levels were due to differences in the incomes of people moving in or out of a neighborhood rather than changes in the incomes of those staying. The authors identified a typology of neighborhoods (incubators, launch pads, neighborhoods of choice, comfort zones and isolating neighborhoods) and found all but the last had some positive attributes. They conclude that neighborhood-based improvement programs, such as the Choice Neighborhood Initiative (CNI), must consider this mobility in designing and evaluating programs, including the spillover effects on the households that leave.

Study Finds Servicer Compensation Structure Discourages Loan Modifications

A new study by the National Consumer Law Center, “Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior”, has found that the current compensation structure for mortgage loan servicers discourages loan modifications. This is because servicers almost always lose money on modifications, while they do not lose money on foreclosures and may even increase their earnings (through late fees, etc.).

The study recommends actions to remove the disincentives and promote modifications, including revising accounting rules and passing laws to require a loan modification assessment before foreclosure. It also recommends requiring servicers to automate loan modification reviews to more quickly address current delinquencies.

Study Finds Rental Vouchers Modestly Improve Mobility of Families Receiving TANF

The Joint Center for Housing Studies released a new study in October on the effects of rental vouchers on families receiving TANF. It looks at how voucher receipt affected families in terms of the quality of the neighborhood in which they resided, the likelihood that they would experience housing instability or homelessness, their ability to live independently, the likelihood that they would experience food hardship and their economic self-sufficiency status after 4-5 years. It also uses interviews with the families to understand why some families did not use their vouchers initially and why others gave them up over time.

It found that vouchers had the biggest positive effect, in terms of neighborhood quality, on families who initially lived in very high poverty neighborhoods (poverty rate above 30%), with most moving to slightly less poor areas (poverty rates of 20-30%). It found moves to even lower poverty areas are unlikely to happen without additional supports, such as mobility counseling. Overall, it found vouchers helped reduce hardship but alone were not sufficient to move households to self-sufficiency within 4-5 years.

Study Finds Lower Foreclosure Rates in States with Strong Anti-Predatory Lending Laws

A new study by the University of North Carolina Center for Community Capital has found that foreclosure rates were 12% lower in states with strong anti-predatory lending laws. It also found that national banks increased subprime lending more in those states than in other states after 2004 when Congress exempted such banks from state anti-predatory lending laws.

Upcoming Event

New England Housing Network Annual Conference

The New England Housing Network’s Annual Conference will be held on Friday, December 4, from 9:00 a.m. to 4:00 p.m. at the Sheraton Needham hotel in Needham, MA. Featured speakers will include Sandra Henriquez – HUD Assistant Secretary for Public and Indian Housing, William Apgar – Senior Advisor on Mortgage Finance, Office of the Secretary of HUD, and Barbara Sard –Senior Advisor for Rental Assistance, Office of the Secretary of HUD.

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