Housing Briefs - June 28, 2010

State Updates

Conference Committee Releases FY’11 Budget

The Conference Committee released the Commonwealth’s FY’11 Budget on June 23. The budget includes funding authorizations for the next fiscal year, but holds back some of the funds if and when Federal Medicaid Reimbursement legislation clears Congress. The reimbursement funding, also known as FMAP, is stuck in the Jobs and Tax Extenders bill and would provide almost $700 million to the state if passed. Similar to 30 other states, both branches of the legislature relied on the FMAP funds when balancing their budgets.

If Congress does not approve the FMAP funds, affordable housing budget priorities would be level-funded at the reduced FY’10 levels under the Conference Committee budget. If FMAP funds are included, several important priorities, including MRVP, Public Housing Operating Subsidies and Residential Assistance for Families in Transition would receive small increases to meet increased and/or unmet demand.

Outside Section 48 of the budget extends the historic tax credit for an additional six years, until 2017. Outside Sections 8, 39 and 47 create new transparency initiatives for tax credits and other grants.

We would like to thank the House and Senate, particularly Chairman Murphy, Chairman Panagiotakos, Senator Tucker, Senator Brewer, Senator Knapik, Representative L’Italien Representative Honan, and Representative Hargraves for their commitment to funding affordable housing and homelessness prevention.

The budget is now before Governor Patrick. The Governor can approve, veto, or recommend alternative language for each line item and section and must do so by the start of the fiscal year, July 1. We encourage members to contact the Governor’s Office to request that he approve the affordable housing funding appropriations.

Condominium Common Area Legislation Passes House

The House engrossed H. 1235, An Act Relative to Condo Fees. This bill would clarify how condominium percentage interest may be determined in mixed income condominiums. The bill provides options for new and existing mixed income condominiums to set percentage interest according to square footage instead of “fair value”. This somewhat ambiguous term has led to unnecessary litigation. For existing condominiums, 100% of the unit owners would have to agree to the change. For new developments, the condominium fees could be allocated more evenly among all owners, but the selling price for affordable homes would have to be reduced.

We would like to thank lead sponsor Rep. Peisch, Rep. Honan, Rep. Kafka, Rep. Pedone and Speaker DeLeo for their support. The bill is now before the Senate. Sen. Creem is the lead sponsor in the Senate.

Committee on Municipalities and Regional Government Releases Comprehensive Zoning Reform Legislation

For the first time in many years, comprehensive zoning and land use reform legislation has cleared the Committee on Municipalities. Chairman Paul Donato and Chairman Jamie Eldridge redrafted various zoning reform bills to balance the need for reasonable zoning and predictable permitting decisions with the desire for greater municipal control.

Key provisions of the 113 page bill include:

• Barring exclusionary zoning practices
• Requiring consistency between local planning and zoning
• Replacing “Approval Not Required” subdivisions with minor subdivision reviews
• Altering but not reducing the time for grandfathering and vesting rights, including requiring a definitive plan in order to receive protection
• Creating a presumption that requiring subdivision road width in excess of 24 feet is invalid
• Authorizing inclusionary zoning without impacting current inclusionary zoning ordinances
• Authorizing impact fees for a defined set of capital costs
• Allowing communities to opt-in to a system to create zoning districts that meet defined housing goals and smart growth objectives in exchange for additional controls on development in other areas of the municipality

The legislation, S. 2482, is now before the senate Committee on Rules and Ethics. We appreciate the many hours that Chairman Donato, Chairman Eldridge and their staffs committed to this challenging issue.

Unfinished Business Remains with 35 Days Left in the Legislative Session

There are just five weeks left in the 2010-2010 legislative session and several critical pieces of housing legislative remain unfinished. Atop the list is S. 2407, An Act Stabilizing Neighborhoods. The bill, which provides relief to homeowners, tenants and neighborhoods struggling from the foreclosure crisis, passed the Senate and is before the House Committee on Ways and Means. S. 90, An Act to Sustain Community Preservation is also before the House Committee on Ways and Means and deserves consideration to provide additional local funds for affordable housing, historic preservation, recreation and open space under the Community Preservation Act.

While the legislature has passed CHAPA’s top priority to preserve expiring use affordable housing into law, legislation to promote energy efficiency in multifamily housing, a proposal to spur innovations in public housing, and a bill to coordinate the development of affordable housing and supportive services have not made it through the entire process and will need to be re-filed next year if not enacted.

House Ways and Means Releases Economic Development Legislation

On June 24, the House Committee on Ways and Means released comprehensive economic development and reorganization legislation. The bill is a redraft of S. 2380, which passed the Senate. It would create a $5 million tax credit program to subsidize market rate housing in gateway cities, fund the Growth Districts Initiative, reform Tax Increment Financing, codify a definition for Community Development Corporations, extend permits that were granted during the economic downturn and streamline the Commonwealth’s economic development agencies.

The legislation did not include provisions to bolster the State Low Income Housing Tax Credit. CHAPA is advocating for an amendment to remove a requirement that an investor in a State Housing Credit development does not also have to have an interest in a Federal Low Income Housing Credit development. This requirement serves no public policy purpose and limits the pool of investors in State Housing Credits. Please contact Sean Caron if you are interested in learning more about this proposal.

Campaign to Protect the Affordable Housing Law Gains Momentum

The Campaign to Protect the Affordable Housing Law has hired a campaign manager and organizers, launched a new website, held a kick-off event attending by over 300 people and held many community meetings to educate the public about the need to maintain the Massachusetts Affordable Housing Law, Ch. 40B. Please visit www.protectaffordablehousing.org and link to the page on your website. To learn more about how to help, please contact info@protectaffordablehousing.org.

Homebuilders Association Releases Study on Economic Benefits of Home Building in Massachusetts

The National Association of Home Builders issued a report last week on the economic benefits (jobs, income and public revenues) that home building generates in Massachusetts. The report estimated the benefits related to the construction of approximately 4,750 single family homes and 700 multifamily condominiums units in 2009. It concluded single family home construction at the level generated $1.6 billion in income for Massachusetts residents (including direct wages and purchases and multiplier effects), almost $280 million in taxes, permit fees and other revenue to state and local government and over 19,500 jobs. Condominium construction at the level was estimated to provide $217 million in income, $35 million in revenues to state and local governments and almost 2,600 jobs.

Massachusetts Smart Growth Alliance Launches Great Neighborhoods Initiative The Massachusetts Smart Growth Alliance (MSGA) has launched “Great Neighborhoods,” an initiative to establish partnerships with municipalities and community-based organizations to help create communities with a high quality of life that are affordable, diverse, and walkable. MSGA requests letters of interest from local groups and communities in the Greater Boston area who might like to partner with us to plan and implement transformative projects and strategies. Responses are due by Thursday, July 15. For more information, go to http://www.chapa.org/?q=node/1678.

Patrick Administration Announces Rental Developments Awards

Governor Patrick recently announced funding to create 32 new affordable housing developments in 19 cities and towns. The commitments total $189.9 million, which will help create 1,737 affordable homes for rent and over 2,400 construction jobs.

Massachusetts Home Sales Strong in May, Outpace Nation

On June 22, the Warren Group reported that year to date sales of single family homes and condos are up by almost 30% compared to 2009 (January to June), with strong growth in April and May due in part to the federal tax credit for first time buyers. It reported that 4,452 single family homes were sold in May, up 37% from the number sold in May 2009. Condominium sales (1,950) were also up 24% compared to May 2009 sales.

By contrast, the Census Bureau reported an 18% decline nationally in new home sales between May 2009 and May 2010, while the National Association of Realtors (NAR) reported that May sales of existing homes (including condos) rose by 19% compared to May 2009. NAR data indicates that Boston had the second highest sales growth in May of 20 major metro areas. Single family home prices also rose modestly in May, with a statewide median of $290,000 (up 2.6% compared to May 2009), while the median condominium price declined slightly to $255,000.

DHCD Issues Final Consolidated Plan

DHCD published the final version of the State 2010-2014 Consolidated Plan on May 28. The Plan provides information on current market conditions as well as on housing affordability and other needs for various income groups and populations. It also describes the state, federal and other resources expected to be available to the Massachusetts over the coming year to address housing and community development, its broad goals and priorities for this five year period and specific details on how it expects to invest its HUD block grant funds (HOME, CDBG, etc.) in FY2010. It also outlines its fair housing and anti-poverty strategies for 2010-2014.

Systems Transformation Grant Releases Final Recommendations to Improve Access to Housing and Services for People with Disabilities and Elders

As the five year term of Massachusetts Systems Transformation Grant comes to a close at the end of June 2010, the Housing Subcommittee of the grant released its final recommendations around access to affordable housing for people with disabilities and elders.  Throughout the duration of the grant, funds supported strategic planning and implementation activities related to transforming and strengthening the system of long-term supports for people with disabilities and elders in Massachusetts.

Final recommendations of the Housing Subcommittee include 1) that Massachusetts move to ensure there exists substantial equivalency between the required Massachusetts code and federal codes for building or renovating accessible housing; and 2) that the Commonwealth foster the creation of more integrated community-based housing options. Grant staff and members will present their final products and educational tools to legislators at a culminating State House event June 30, 2010.

Federal Updates

Senate Filibuster Stalls Tax Extender and Jobs Bill

On June 24, efforts to pass the “American Jobs and Closing Tax Loopholes Act” (H.R. 4213) – which would extend the Low Income Housing Tax Credit Exchange program through 2010 and provide new unemployment and Medicaid funding - stalled when the Senate failed to get the 60 votes needed to end debate as a result of unified Republican opposition. The Boston Globe reported that it is unclear when the Senate will take up this effort again. The bill also included $1 billion to capitalize the National Housing Trust and $65 million for new project-based vouchers for Trust-funded projects.

Conferees Agree on Financial Reform Bill, Include $1 Billion in new NSP Funding

House and Senate conferees reached agreement on financial regulatory reform on June 25. While the final text of the conference report for H.R. 4173 is not yet online, it does include a new consumer protection bureau within the Federal Reserve and $1 billion for a new low-interest loan program to help homeowners to continue mortgage payments when temporarily unemployed.

The bill also includes $1 billion in new funds for the Neighborhood Stabilization Program (NSP), though with less targeting than originally hoped for (it will again include a minimum 0.5% setaside for each state). The bill also includes language to allow vacant properties to count toward the NSP the low-income set-aside. The President and Democratic leaders are pushing for approval by the July 4 recess.

OMB Begins FY2012 Budget Development, Orders 5% Reductions

The National Low Income Housing Coalition reported on June 11 that the Office of Management and Budget (OMB) has directed all departments to prepare FY2012 budgets that are at least 5% lower than their proposed FY2011 budget levels. Agencies must achieve these reductions by eliminating programs least critical to agency goals. They must submit the list of programs on September 13 and may be allowed to keep half the 5% savings to use for higher priority programs.

Joint Center Releases 2010 “State of the Nation’s Housing” Report

Harvard University’s Joint Center for Housing Studies issued its annual assessment of the State of the Nation’s Housing on June 15. The Center finds that the housing market is likely to face many challenges in the coming year, due to high unemployment, weak housing demand as economic uncertainty suppresses household formation, falling prices that are putting more owners underwater and a large foreclosure inventory. It also found that affordability problems have continued to rise despite home price declines and softness in the rental market, in part due to a “lost decade” of income growth (real median household incomes fell 5% between 2000 and 2008) and rising unemployment.

One bright note is its finding that the homeowners are investing in energy efficiency improvements (energy consumption per square foot in pre-1990 homes fell by 20% between 1993 and 2005) and advances in green design and technology offer new opportunities to continue the trend. It concludes that the key to recovery in the housing market will be job growth and that the demand for new housing production will grow as the economy improves.

HUD Issues NOFA for Sustainable Communities Regional Planning Grants

On June 24, HUD released its NOFA for $98 million in regional planning grants under the new Sustainable Communities Initiative. Applications are due by August 23. The goal of the Initiative is to foster the development of sustainable communities that are consistent with six “Livability Principles” (e.g. transportation choice, affordable housing, economic competitiveness, supporting existing communities, coordinating policies and enhancing neighborhoods and communities).

Applicants must be a multi-jurisdictional consortia of government and nonprofit entities that includes the regional planning agency, the principal city and other localities and nonprofits to work with the consortium and general public. The NOFA sets out two funding categories: (1) Regional Plans for Sustainable Development and (2) Detailed Execution Plans and Programs.

The first will provide funds to develop new regional plans that incorporate the full range of sustainable community concerns. The second will support fine-tuning existing plans to better integrate livability principles, preparing more detailed execution plans and limited predevelopment planning for “catalytic” projects. Grantees will have up to three years to complete the work. Awards will vary by the size of the region, ranging from $100,000 to $1 million for small areas and from $500,000 to $5 million for large metropolitan regions.

HUD will score applications for (1) organizational capacity; (2) regional need (including a number of housing measures such as costs, the percentage of the population paying more than 45% of income for housing and transportation, and the availability of subsidized housing near major employment centers); (3) soundness of the proposed approach; and (4) ability to evaluate outcomes.

HUD Issues Choice Neighborhoods NOFA Pre-Notice

On May 21, HUD issued a “pre-notice” for its upcoming NOFA for the Choice Neighborhoods demonstration program. The $65 million program is funded through a setaside within the HOPE VI account. Its goal is to transform high-poverty neighborhoods by revitalizing severely distressed public and/or other HUD assisted housing and supporting investments to ensure quality services, schools, public transportation and access to jobs. Eligible applicants include local governments, PHAs, non-profits or public-private partnerships.

The pre-notice is intended to help potential applications to prepare for the NOFA and describes the types of grants HUD intends to award, its timeline, eligibility criteria and selection process. Applicants will have 60 days to submit an application after the NOFA is published sometime this summer. HUD will fund two types of grants – planning grants and implementation grants – using two competitive rounds. It expects to award $3 million in planning grants of up to $250,000 – all to be awarded in the first round. It expects to award $62 million in implementation grants (for applicants that already have done comprehensive planning), using the first round to narrow the field to about 10 finalists and the second round to make actual awards to two or three.

HUD Creates Transforming Rental Assistance Website

HUD has established a website with extensive information on its proposed Transforming Rental Assistance (TRA) Initiative, including details on the proposed authorizing legislation (the Preservation, Enhancement and Transformation of Rental Assistance Act of 2010 [PETRA]), webcasts and a Frequently Asked Questions (FAQ) section. Recently added documents include a summary of changes to PETRA made in response to stakeholder concerns. The National Low Income Housing Coalition has also established a PETRA website.

HUD Publishes Strategic Plan to End Homelessness

On June 22, HUD published its strategic plan for ending chronic homelessness and veteran homelessness by 2015 and family and youth homelessness by 2020. The plan summarizes recent data on trends in the number of people experiencing homelessness – including information from the 2009 Annual Homelessness Assessment Report issued earlier this month.

It notes that while chronic homelessness has fallen by over 30% since 2005, family homeless has risen by 13% in the past two years. It describes the negative consequences of homelessness and the social and fiscal benefits of prevention. The strategy discussion outlines general principles that will guide efforts to end homelessness (more use of prevention and rapid re-housing, deeper income targeting for housing subsidies, provision of supportive services and ensuring access to health care), but does not detail the types and levels of new resources that may be required.

Federal Bank Regulators to Hold Hearing on Modernizing CRA Regulations

On June 17, the four major federal bank regulatory agencies announced that they will hold a series of public hearings in four cities in July and August to discuss how to update their joint Community Reinvestment Act (CRA) regulations to reflect changes in the financial services industry and to meet current housing and community development needs. The four agencies are the Board of Governors of the Federal Reserve System (FRS), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). They will also accept written and electronic comments through August 31.

The hearing announcement and Federal Register notice both include a list of topics and questions on which the agencies would like to receive comments (each hearing will focus on a specific subset of those topics). The topics include: geographic coverage; CRA performance tests, asset thresholds and designations; affiliate activities; small business and consumer lending evaluations and data; access to banking services; community development; ratings and incentives; the effect of evidence of discriminatory or other illegal credit practices on CRA performance evaluations; and CRA disclosures and performance evaluations.

Federal Bank Regulators Propose Temporary CRA Credit for NSP Activities

On June 17, the four federal banking agencies (see above) also announced plans to issue a proposed rule that would revise Community Reinvestment Act (CRA) regulations to encourage financial institutions to undertake activities to support the Neighborhood Stabilization Program (NSP) by allowing such activities to count as a community development activity under CRA.

The proposed rule would expand the definition of “community development activities” to include loans, investments, services and donations of property by financial institutions that support, enable, or facilitate NSP-eligible activities in designated areas. This treatment would be temporary--only available for two years after the last date appropriated funds for the program are required to be spent by grantees. The agencies will take comments for 30 days after the notice is published in the Federal Register (not published as of June 24).

New England Housing Network Sets FY2011 Federal Budget and Legislative Priorities

The New England Housing Network (NEHN) published its federal budget and legislative priorities for FY2011 earlier this month and advocated for these priorities with key policymakers in Washington, D.C. last month. The Network represents a diverse coalition of supporters of affordable housing from all six New England states and focus on educating the entire New England Congressional delegation about critical legislative and budget issues.

Foreclosure Updates

Massachusetts Foreclosures Continued to Rise in May

The Warren Group reported on June 16 that 1,283 foreclosure deeds were recorded in May, down slightly compared to a month earlier but were more than double the figure reported for May 2009. Overall, 6,007 foreclosure deeds have been recorded in 2010 (January through May), up by 48% compared to the same period in 2009 (4,114). Petition filings continue to slow, with 2,110 filed in May, down 13% from April and 9% from May 2009. Year to date, 11,118 petitions to foreclose have been filed, only 1% more than the number filed during the same period in 2009.

May Data Shows Drop in Active HAMP Loan Modifications

On June 21, HUD released its monthly report on loan modification activity under the Home Affordable Modification Program (HAMP). The number of households with active trial or permanent modifications fell to just over 808,000, down 13% from a month earlier, primarily as a result of the cancellation of over 150,000 trial modifications in April as servicers worked to comply with Treasury guidance to make permanent conversion decisions more quickly. Total active permanent modifications rose by 45,000 to just over 340,000 and default rates to date on those have been below 2%.

In Massachusetts, the number of households with active modifications (trial or permanent) fell to just under 19,000, down from about 21,700 at the end of April.

The report cited servicer reports that indicate most borrowers with cancelled trials either became current or entered an “alternative modification” and that less than 10% move to foreclosure sale.

MHP Report Finds “Market Appetite” for Three Family Homes in Foreclosure

A new report commissioned by the Massachusetts Housing Partnership (MHP) examines the volatility in prices for three family homes in Massachusetts in recent years and finds solid demand for three-family homes in foreclosure.

It found that three family homes were more likely to be in default in recent years than other property types, and that defaults were disproportionately concentrated, with close to half (43%) occurring in the 100 census tracts with the highest foreclosure rates. However, it also found that three-families were more likely to sell before going into foreclosure than other types of properties.

It concludes that it might be advisable for policymakers to try to ensure these distressed three-unit properties are sold to responsible non-profit or for-profit developers to avoid a repeat of the price boom and bust in recent years.

Study Finds High Home Losses to Foreclosure by Minorities in 2007-2009

On June 18, the Center for Responsible Lending released a new report - “Foreclosures by Race and Ethnicity: The Demographics of a Crisis” – examining the demographic characteristics of owner-occupants who have lost their homes to foreclosures in the past three years (2007-2009).

The study found that foreclosures have had a much bigger impact on the ownership rates of African-Americans and Latinos, as eight percent (8%) of each group lost their homes to foreclosure, compared to 4.5% of white, non-Hispanic homeowners. It found that these differences held even after controlling for income. It also found that these households are over-represented in estimates of borrowers imminently at risk of foreclosures, with 21.6% of African-American and 21.4% of Latino homeowners in this category, compared to 14.8% of white, non-Hispanic homeowners. The authors cite a number of factors likely to play a role in these differences, including the fact the minority households received a higher percentage of subprime mortgages, have been harder hit by the recent growth in unemployment, and tend to have fewer financial resources to fend off foreclosure.

The authors point out that foreclosures tend to have long-lasting spillover effects on both the homeowners’ families and often their neighborhoods, wiping out wealth, reducing property values and local property tax receipts, and making it difficult to pay for college or retirement.