January 23, 2008

State Roundup

Governor Patrick Releases Proposed FY09 Budget

Public Housing Sees Significant Increase; Most Other Programs Are Level-Funded

The Governor filed his second budget recommendation today. Most housing programs are level-funded, with modest increases for a few programs. Public Housing received a significant boost with a $13 million increase in operating subsidies to ensure that these assets are maintained properly.

The Massachusetts Rental Voucher Program (MRVP) would see an increase of approximately $2 million totaling $31,947,202 and the Alternative Housing Voucher Program would see a $500,000 increase totaling $4 million. At this funding level, the Commonwealth will have difficulty meeting existing MRVP commitments and will not be able to expand the program to meet the growing need. The Soft Second Loan Program, Housing Services and Counseling, Mental Health Rental Subsidies and Residential Assistance for Families in Transition are all level-funded. This will create a difficult fiscal year for the families that benefit from these programs if the Legislature does not increase funding beyond the proposed amounts.

CHAPA is pleased to see that the Governor's budget includes $5,000,000 for the Division of Banks to address the foreclosure crisis; the funds will be used towards a pilot program for best lending practices, first-time homeowner counseling for non-traditional loans, and foreclosure education centers in 10 locations across the state. In the event that there is surplus revenue at the end of the fiscal year, the Affordable Housing Trust Fund and the Heating Assistance Trust Fund would each receive $15,000,000 in much needed funding.

The Governor has also included a recommendation to provide $8.25 million in appropriations and $1.75 million in MassHousing funding to implement the recommendations of the Homelessness Commission, in collaboration with the Interagency Council on Homelessness and Housing. Eligible activities include rental assistance, emergency assistance and the development of assessment tools but the actual spending plan is not defined under the proposal and must gain subsequent approval from A&F.

The House Committee on Ways and Means, headed by Chairman Robert DeLeo, will now consider the Governor's budget recommendations and craft its own plan. The House Committee on Ways and Means is expected to release its budget in April.

Over 7,500 Massachusetts Homes Foreclosed in 2007

According to a January 19th article in the Boston Globe, 7,563 homes in Massachusetts were foreclosed in 2007, almost triple the number foreclosed in 2006 and almost nine times the number foreclosed in 2005. Analysts expect an even higher number in 2008, as more loans reset.

The article noted that relatively few borrowers appear to have been assisted to date under current programs by lenders to prevent foreclosures, citing a recent Mortgage Bankers Association (MBA) study. The MBA reported lenders agreed to reduce loan payments for 917 Massachusetts borrowers between July and September 2007. During the same period, they approved repayments plans for another 3,252 borrowers that allowed deferral of past due amounts as long as the borrowers make their current monthly payments. However, these plans do not help borrowers unable to afford their current payments. As a result, lenders initiated foreclosure proceedings against 7,467 borrowers during the same period. Of these, 29% had previously received lender foreclosure assistance.

DHCD Announces Public Hearing on its FY2008 Action Plan

DHCD has published its Draft FY2008 Action Plan, which outlines how it proposes to allocate the formula grant funds it receives from the U.S. Department of Housing and Urban Development under four programs: the Community Development Block Grant (CDBG) program, the HOME program, the Emergency Shelter Grant program and the Housing Opportunities for Persons with AIDS (HOPWA) program.

DHCD will hold two public hearings on the draft plan. One will be held at the Municipal Office Building Auditorium (26 Central St) in West Springfield on Thursday, January 31 at 11:00 am. A second will be held in Boston at DHCD on Friday, February 1 (from 11 am to noon). It will also accept written comments through February 11, 2008.

UMass Study Finds State Economy Slowing

A new study by the University of Massachusetts Donahue Institute has found that economic growth in Massachusetts has slowed significantly in recent months. The study, published in MassBenchmarks, finds that growth fell from an annualized rate of 4.0 percent in the first quarter of 2007 to 2.2 percent in September through November 2007 and is likely to stay at 2.2 percent at least through May. The state growth rate for the third quarter of 2007 overall (3.0 percent) was also well below the national growth rate for the same period (4.9 percent). The study attributes the state slowdown to the housing market decline, the impact of subprime mortgage problems on the finance sector, and high heating oil and gasoline prices.

Federal Roundup

House Passes HOPE VI Reauthorization and Reform Bill

On January 17, the House passed the HOPE VI Improvement and Reauthorization Act of 2007 (H.R. 3524) by a wide margin (271-130). The bill revises current statutory requirements for HOPE VI and reauthorizes the program through FY2015. It includes a number of new provisions to address criticisms of the program, such as adding a requirement for one-for-one replacement of units (retroactive to units on the revitalized site as of January 1, 2005) and adding language allowing residents of the original housing to remain or return without being subject to new eligibility requirements.

PHAs can provide the replacement housing in the form of project-based vouchers and can also seek a waiver for up to 10% of the one-for-one replacement requirement if compliance would violate a court order, or they lack sufficient land or obtain HUD approval.

The bill requires that all residential construction comply with "green building" standards for construction and operation, including all mandatory items on the national Green Communities criteria checklist, and that non-residential buildings meet Silver LEED standards, and exempts the cost of such compliance from overall program cost limits. It also bans "demolition only" grants.