Housing Briefs - October 23, 2009

State Updates

HUD Secretary Lauds Massachusetts Affordable Housing Innovations; Outlines Principles to Promote Multifamily Housing

Secretary of the US Department of Housing and Urban Development Shaun Donovan delivered remarks before 1,300 housing professionals and civic leaders attending CHAPA’s Oct. 22nd Annual Dinner. Donovan’s speech focused on four major themes: 1) Praise for Massachusetts’ innovation and advocacy for expanding and preserving affordable housing; 2) a recap of the tremendous housing challenges the country and Commonwealth have faced in the last year; 3) reaffirmation of HUD’s commitment to Fair Housing; and 4) an overview of how HUD plans to expand multifamily rental housing opportunities under the Obama Administration.

Secretary Donovan outlined the following four principles HUD intends to implement to transform its multifamily housing programs:

• The first principle is to make HUD rental assistance funding streams reliable. The Obama Administration is committed to full funding of Project-based Section 8 and supports the the Section 8 Voucher Reform Act.
• The second principle is to streamline and simplify HUD programs so that they’re easier to use at the local level.
• The third principle is to encourage resident choice and mobility by finding ways to combine the best features of HUD tenant-based and project-based programs.
• The fourth principle commits HUD to bringing market investment and discipline to all of its rental programs.

To read the text of the speech, please click here. CHAPA thanks each of the 1,300 people in attendance, our honorees Conrad Egan and David Harris, and Secretary Donovan for his inspiring remarks.

Patrick Administration Prepares $600 million in Additional Cuts to the FY 2010 Budget to Manage Falling Revenues

Due to falling revenues, the Patrick Administration announced that it will be making $600 million in cuts to the FY’10 budget by the end of this month. The Building Blocks Coalition has opposed any further spending reductions to affordable housing and homelessness prevention programs. These programs were already cut by 14% and any further cuts will have a profound impact on rising homelessness. There are already 2,000 families living in emergency shelters and an additional 1,030 families in state-funded emergency hotels/motels.

Click here to read the Building Blocks Coalition letter to the Executive Office for Administration and Finance detailing the impacts of insufficient affordable housing program support.

Administration Releases FY 2010 Capital Budget

On October 7th, the Executive Office of Administration and Finance released its FY 2010 Capital Budget. The spending plan reduces DHCD capital spending from $193 million in FY’09 to $168 million in FY’10. The largest cuts were to the Housing Stabilization Fund and Public Housing Modernization. Most other programs were level-funded.

Due to declining revenues, overall spending for the entire capital budget is cut by $1.1 billion over the five year plan. In addition, the FY’09 capital budget included $24.5 million in MassHousing contributions that were not available to the Administration in the FY’10 budget. Click here for an analysis of capital spending on housing and community development.

Advocates Work to Push Housing Priorities with Four Weeks Left in the Fall Legislative Calendar

The first year of the two-year legislative session comes to a close at the end of November and housing advocates are working diligently to gain legislative support for time-sensitive priorities.

CHAPA’s top priorities for the next four weeks are to pass 1) H. 4132, An Act Relative to Preserving Publicly Assisted Affordable Housing, and 2) H. 2779 and the CHAPA Proposal to Stimulate the Massachusetts Low Income Housing Tax Credit. In addition, we are actively working during the remainder of 2009 to secure a favorable Committee report of bills to bolster the CPA, support permanent supported housing, provide foreclosure relief, reform land use and zoning laws, and allow condo fees to be charged equitably.

Bills that are not passed by the November session’s expiration will continue through the process and have until July 31, 2010 to become law. Please contact Sean Caron at scaron@chapa.org or (617) 742-0820 x 103 if interested in these and other legislative issues.

New “Lobbyist” Registration Provisions Delayed Until January 1st

Provisions of Ch. 28 of the Acts of 2009 that broaden the definition of “lobbying” activities regulated by the Secretary of State were delayed by the Legislature until January 1, 2010. Nonprofit staff and board members have been analyzing the bill to determine what activities require registering and reporting as a lobbyist. While clarification has not been released, the additional time is helpful in learning more about the new laws governing advocacy activities.

Community Preservation Act Trust Fund Disbursements Lowest in Program’s History

The Community Preservation Act (CPA) trust fund payment distributed last week to 135 eligible municipalities was the lowest since the program began, according to data from the state Department of Revenue (DOR). The FY’10 base payment of a 34.8 percent match to locally raised funds is over 65 percent lower than the dollar for dollar match received in the first six years of the CPA program. DOR estimates that the distribution will fall again next fiscal year, likely as low as 28 percent for many communities.

The CPA has helped produce over 3,185 units of affordable housing, including Habitat for Humanity projects in 22 municipalities. At least 27 Communities have hired housing planners, 11 communities have created homebuyer assistance programs, 9 communities have created rental assistance programs and at least 14 housing authorities have used CPA to rehabilitate public housing. CHAPA strongly supports S. 90, filed by Senator Cynthia Stone Creem and cosponsored by 80 legislators to bolster the CPA.

Judiciary Committee Holds Hearing on Legislation to Address Foreclosure Crisis

At an October 15th Judiciary Committee hearing, Attorney General Martha Coakley, Undersecretary Barbara Anthony, Dept. of Neighborhood Development Director Evelyn Friedman, Representative Steve Walsh, Senator Sue Tucker, Representative Frank Smizik, Senator Sonia Chang-Diaz and many others advocated for additional tools to help prevent foreclosures and mitigate their impacts.

Various pieces of foreclosure legislation have been heard by The Joint Committees on Housing, Financial Services and the Judiciary. Despite a growing lag time that it takes for lenders to complete the foreclosure process, foreclosures are still being initiated at a rapid pace. According to The Warren Group, 21,600 foreclosure petitions were filed in the first 9 months of 2009. The impacts of abandonment and displacement continue to destabilize neighborhoods. CHAPA supports H. 3571, H. 3522 and S. 1848 and will continue to work with interested stakeholders to refine and enact meaningful foreclosure relief legislation.

DHCD Announces ARRA Tax Credit Exchange Grants to Ten Housing Developments

Last week, Governor Patrick announced that ten housing developments will receive American Recovery and Reinvestment Act (ARRA) Tax Credit Exchange funds to fill the financing gaps created by instability in the tax credit markets. The projects are located in Amherst, Charlton, Chelmsford, Lunenburg, Plymouth, Wareham, Watertown, West Boylston, Westfield and Worcester and will receive a total of $50.3 million in recovery funds.

Massachusetts Receives HUD Grant Funds for Housing Counseling

On October 14, the U.S. Department of Housing and Urban Development announced the award of housing counseling grant funds, including funds to CHAPA which serves as a regional intermediary for 22 housing counseling groups ($1.247 million). The grants support counseling for existing homeowners and families and individuals seeking to become first time homebuyers as well as technical assistance for counselors. Nationwide, HUD awarded a total of $60 million in such grants.

Massachusetts Housing Partnership Launches Foundation for Growth

MHP recently launched a new initiative, The Foundation for Growth. The multimedia project has three goals: 1) Analyze the relationship between housing and economic growth in Massachusetts; 2) Propose housing production benchmarks to sustain a healthy economy; and 3) Recommend policy solutions to achieve these housing benchmarks. You can learn more on the relationship between housing and economic growth at MassGrowth.net.

2009 Foreclosures Down but Petitions Have Increased

On October 20, Banker and Tradesman reported that September foreclosure deeds rose by 7% compared to August (702 versus 658), though year to date foreclosure deeds (6,778) are down 29.5% compared to the 9,610 recorded in January through September 2008. Petition filings in September totaled 2,527 (over 86 a day), up 5.5% from the July total, bringing the year to date total to 21,635, up 29% from a year earlier (when filings slowed for a few months after the state’s right to cure law went into effect on May 1, 2008).

Auction announcements also rose in September but are down 18% compared to the January through September 2008 totals. The paper advised analysts to treat rising petition figures as an early warning system, while noting loan modification efforts and a recent Land Court decision (see below) may be slowing foreclosures.

Land Court Affirms Wide-Ranging Ruling on Foreclosures

On October 14, Banker and Tradesman reported that Land Court Judge Keith Long reaffirmed his March decision invalidating two foreclosure actions in Springfield after finding that the servicers did not have proper title at the time they published the foreclosure petitions and auction notices for the properties involved. This decision leaves thousands of foreclosed homes with clouded titles. It remains to be seen whether the decision will be appealed.

Massachusetts Building Permits Up in August

According to U.S. Census Bureau estimates, Massachusetts outpaced the nation in building permit growth in August. While the units permitted nationally rose by less than 3% compared to July and by 15% in the Northeast, they rose by 30% in Massachusetts. Permits were issued for a total of 679 units in Massachusetts in August, up from 524 units in July. The August monthly total is 7% above the number permitted in August 2008. The August increase over July was entirely due to growth in the number of multifamily units permitted (single family units permitted fell).

Year-to-date units permitted (4,501) are still 38% below the January through August 2008 total (7,243 units) and 71% below the January-August 2005 total (15,290 units), though the 2008-2009 decline is less severe than the national decline. Nationwide, units permitted year to date dropped 43% percent and in the Northeast, the figure was 54%. Despite the August increase, however, multifamily (5+ units) units permitted in Massachusetts are still 55% below 2008 year to date levels. Figures for September building permit activity in Massachusetts will be released on October 27 (nationally, the Census Bureau reported on October 20 that the number of units permitted fell in September by 1.2% compared to August).

Subsidized Housing Inventory Updated

DHCD published an update of its Subsidized Housing Inventory (SHI), reflecting information received from municipalities through September 29, 2009. The SHI shows the percentage of a community’s year round housing that qualifies as subsidized for the purposes of Chapter 40B. The updated SHI indicates that 51 communities are currently at or above 10%, up from 24 in 1997, with another 40 at 8-9.99%. A number of communities have approved projects that are likely to enable them to reach 10% once market and financing conditions improve.

Boston Launches a Smoke-Free Homes Registry

The Boston Public Health Commission/Tobacco Control and Prevention Program announced this week that it has launched a Smoke Free Homes Website and Registry, free for both tenants and property owners/managers in Boston. Property managers and owners can list smoke free buildings at http://www.bostonsmokefreehomes.org/landlord.php. The site also includes information on the economic and health benefits of smoke free homes.

Federal Updates

House Committee Approves Scaled Back Consumer Financial Protection Agency Bill

On October 22, the House Financial Services Committee voted 39-29 to approve H.R. 3126, creating a new independent federal agency to protect consumers from certain abusive financial practices and regulate mortgages, credit cards, student loans and consumer credit reporting agencies. The agency will be advised by an Oversight Board composed of the Chairmen of the Federal Reserve, FDIC, NCUA and the FTC, the Secretary of HUD and people from the field of consumer protection, fair lending and civil rights, among others, as well as a consumer advisory board. It will also have an Office of Financial Literacy.

The final bill gives the new agency less authority than originally proposed, exempting community banks, retailers, auto dealers, real estate brokers, lawyers, cable companies and accountants from its oversight. However, it does cover businesses that resell credit (e.g. banks that issue store-brand credit cards or provide auto financing).

It no longer includes a requirement that lenders offer a “plain vanilla” product (e.g. 30 year fixed rate mortgages). It also authorizes the CFPA to participate in examinations by the regulators for the small banks and credit unions. In another compromise to win passage, it also gives the Office of the Comptroller limited authority to override stricter state regulations affecting national banks (the Administration had opposed any such federal override).

An amendment proposed by Representative Manzullo (R-IL.) to sunset the new agency after five years and expanded by Rep. Spencer Bachus (R-AL.) to apply to all regulatory agencies was defeated. The Committee also approved H.R. 3639 to accelerate credit card reforms scheduled to go into effect on February 22, making most effective on December, 2009.

Treasury/HUD Launch Initiative to Support Housing Finance Agency (HFA) Lending

On October 19, the Treasury Department and HUD announced two initiatives to enable state and local housing finance agencies (HFAs), including MassHousing, to expand lending to homeowners, homebuyers and affordable housing developers. Treasury estimates that the initiatives will enable HFAs to finance “several hundred thousand” more first time homebuyer mortgages and “tens of thousands” of affordable rental units.

The initiative is designed to address the dramatic decline in investor demand that has reduced the ability of HFAs to issue new bonds and refinance older variable rate bonds (The Bond Buyer reports that HFA financing activity has fallen by 75%).

The initiative has two components. The New Issue Bond Program (NIBP) will enable HFAs to issue new bonds (Treasury will purchase new Fannie Mae and Freddie Mac securities backed by the new HFA bonds). The Temporary Credit and Liquidity Program (TCLP) will enable HFAs to reduce the cost of existing bonds by providing temporary credit through Fannie Mae and Freddie Mac until markets recover. Operational details are still in development.

HFAs interested in using the new programs will have to develop a participation request in consultation with Treasury, HUD and Fannie Mae and Freddie Mac. All new bond issues and Treasury purchases under NIBP must be completed by December 31 of this year.

One Month Continuing Resolution Passed for HUD Budget

The President signed a one month continuing resolution to keep HUD and other agency programs running, pending development of a conference committee FY2010 Appropriations bill for T-HUD (Transportation, Housing and Urban Development and Related Agencies). The resolution will expire on October 30. It remains unclear whether Congress will have an approved appropriations bill by the end of the month.

Survey Finds 2009 LIHTC Investment Down by 50% since 2007, Need for Legislation

A new study of low income housing tax credit investment activity over the years has found that demand for low income housing tax credits has fallen dramatically since 2007. The study, conducted by Ernst & Young on behalf of LISC and Enterprise Communities, describes changes in the profile of investors since the program began and the dominant role assumed since 1994 by major financial institutions with income and/or subject to CRA.

Investor demand has fallen precipitously since 2007, as the number of large banks has declined and the number with income to shelter has declined even more. Based on a survey of investors, it estimated that equity volume fell by 34.5% between 2007 and 2008 and will fall by another 22% between 2008 and 2009 absent legislative changes, for a cumulative drop of 50%. It found that projects using 4% credits face particular difficulty (investment fell by 44% between 2007 and 2008 and continues to fall).

A broad coalition of national and local groups (ACTION) is urging Congress to adopt legislation to address these problems, including a one year extension of the tax credit exchange program to also include 4% credits.

New England Network Urges Stronger Housing Provisions for Climate Change Bill

The New England Housing Network sent a letter on October 16 to all members of the New England congressional delegation urging them to strengthen the housing and energy efficiency provisions in the climate change legislation currently before them (H.R. 2454 – the American Clean Energy and Security Act - passed by the House on June 26 and S.1733, released in draft form last month with hearings scheduled to begin on October 27).

The letter makes three major requests: 1) It urges members to raise the percentage of cap and trade allowance revenues that will go for state-approved energy efficiency programs. 2) It urges them to strengthen the requirement that states to use auction revenues to improve energy efficiency in affordable housing by requiring them to make that use a priority. 3) It calls for a broader definition of affordable housing to ensure funds can assist properties receiving either federal or state housing assistance.

Background material on the House bill, ranging from short summaries to detailed analyses, as well as summary information on the Senate bill, is available on the Pew Center on Global Climate Change website. The National Low Income Housing Coalition has prepared a brief description of the affordable housing provisions in both bills.

HUD Proposes Rule to End Tax Credit Escrow Requirement for FHA Loans

On October 9, HUD published a proposed rule in the Federal Register intended to make it easier to use Low Income Housing Tax Credits, Historic Tax Credits and New Market Tax Credits with FHA-insured loans.

As detailed in a Nixon-Peabody alert, HUD had, until recently, required borrowers to escrow most or all of the syndication proceeds from Low Income Housing Tax Credits at the time of the closing of the FHA-insured loan. Since investors often make their equity available post-construction, developers had to obtain bridge funds to comply.

In September, HUD cut the required escrow percentage to about 20%. The proposed rule now eliminates the escrow requirement for LIHTC proceeds entirely, consistent with statutory changes enacted under HERA. It goes beyond HERA, however, by eliminating it for historic and new market tax credits as well. Comments on the proposed rule are due by December 9.

HUD and Treasury Report Progress on Loan Modifications though Some Servicers Lag

On October 8, HUD and the Treasury Department announced that the number of trial and permanent homeowner mortgage modifications started under its Making Home Affordable initiatives had reached 500,000 as of September 30.

The announcement noted that a rising percentage of eligible homeowners were receiving modification, but reiterated that servicers need to do more. The agencies also released a performance report on the extent to which the 63 servicers participating in the HAMP program are modifying loans (measured by the number of trial modifications started through September as a percentage of the servicer’s total number of loans that are 60+ days delinquent).

Program-wide, 16% of delinquent loans serviced by participants had begun at least trial modifications. Among the servicers with the largest numbers of modified delinquent loans, Citibank had the highest rating (33%), followed by JP Morgan Chase (27%). Bank of America (11%) and Wells Fargo (20%) were among the low performers.

Advocates Urge Revisions to the Neighborhood Stabilization Program (NSP)

The National Foreclosure Prevention and Neighborhood Stabilization Task Force is urging HUD and members of Congress to address key operational issues that are impeding the ability of NSP grantees to stabilize neighborhoods with large numbers of foreclosed, abandoned or vacant housing units.

On the statutory side, they are asking Congress to revise the income targeting language to allow units created by the redevelopment of vacant properties to count toward the goal (currently units count only if they have gone through foreclosure). They are also asking that language limiting the use of financing mechanisms and land banking to foreclosed properties be revised so these mechanisms can be used for vacant properties that have not gone through foreclosure.

On the regulatory side, they are asking HUD to revise the definition of abandoned properties to eliminate the vacancy requirement so they can assist properties that have been functionally abandoned by the owner even if still occupied by tenants. They are also asking it to clarify that “affordable rents” are not limited to HOME rents and to clarify that lease-buy contract terms can run longer than 36 months.

Recent Research

MHP Finds Rising Numbers of At-Risk and Foreclosed Units Outside Cities

A new analysis by the Massachusetts Housing Partnership, published on October 21, shows that while foreclosed and at-risk units remain concentrated in Massachusetts’ largest cities, a number of smaller communities have experienced notable increases in the past year (October 2008 to October 2009), including some in Central Massachusetts and on Cape Cod.

The analysis also found that some of the cities with the largest numbers of distressed units (subject to a foreclosure petition, bank-owned or scheduled for auction) a year ago, are beginning to see declines in the number of distressed units. The biggest drops occurred in Lawrence (14%) and Everett (22%), though Lawrence still has some of the most distressed census tracts in the state.

GAO Study Urges Coordinated Federal Effort to Preserve Affordable Housing near Transit

A new report by the Government Accountability Office, Affordable Housing in Transit Oriented Development, urges HUD and the Federal Transportation Administration (FTA) to develop a detailed joint plan to encourage states and localities to preserve, and create, affordable housing near public transit. It emphasizes that the plan should include monitoring of outcomes.

The study points out that it is important to integrate affordable housing goals into transit planning as lower income households tend to be more transit dependent and more vulnerable to changes in housing and transportation costs. It notes the importance of preserving existing affordable units as well since property values tend to rise with the introduction or upgrading of public transit. It found that some housing program rules may need revisions to remove barriers to transit-oriented siting.

AARP Study Finds Expiring Use Restrictions Threaten Affordable Housing near Transit

A new study by the AARP Public Policy Institute looks at the benefits of providing affordable housing within a quarter mile or a half mile of “high quality” public transit (in terms of frequency, reliability and physical accessibility of service and areas served).

In a review of federally subsidized housing (Sections 8, 202 and 811) in 20 metropolitan areas, including Boston, it found almost half of the areas have substantial percentages (40% or more) of units near transit, and that overall almost 200,000 units in the 20 areas are located within a quarter mile of public transit and another 50,000 located within a half mile, but that federal subsidies will expire on more than two-thirds of these 250,000 units within five years.

Boston ranked eighth among the 20 areas studied, in terms of the percentage of affordable units (52% or almost 20,000 units) within a quarter mile of high quality transit.

The report urges federal, state and local governments to take steps to preserve this stock. It also urges them to expand the supply of affordable housing in mixed-use walkable communities near transit. It notes that achieving this requires aligning land use, transportation and affordable housing policies (e.g. giving preference to transit oriented housing when awarding funds) and will take time.

Upcoming Events

MHP Workshop – How A Local Housing Trust Can Help Your Community – November 17

The Massachusetts Housing Partnership is holding a workshop on how a municipal affordable housing trust can help communities maintain and increase their supply of affordable housing. The workshop will take place on Tuesday, November 17 from 9:30 a.m. to 1 p.m. at the United Church of Christ Conference Center, One Badger Road, Framingham.

Registration is $25 and includes continental breakfast and lunch. To sign up for this event or for answers to questions, contact Connie Kruger at 617-330-9944 ext. 281.

New England Housing Network Annual Conference – December 4 – Save the Date

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. Numerous national, regional, and state housing leaders will be speaking at the training. A brochure with registration information will be available in approximately one week.