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The Housing and Economic Recovery Act of 2008, H.R. 3221, passed by
Congress and signed by President Bush on July 30, marked a stunning
move forward for all of us involved in affordable housing. This
issue of My View presents a series of conversations with
both national affordable housing leaders and with advocates working
on the ground here in Washington State. They’ve shared their
perspectives on how many of the Act’s key provisions came into
being, and offer a first take on what this new legislation will mean
for our communities.
      
PUTTING 59 MORE AFFORDABLE UNITS ON THE
STREETS IN WALLA WALLA
I’ll begin this series of interviews with a local housing leader who
also provides a national perspective. Renee Rooker is the long-time
director of the Walla Walla Housing Authority (WWHA) and is in the
midst of a two-year term as president of the National Association of
Housing and Redevelopment Officials (NAHRO).
“…it feels like there is a future for housing in America:
That it truly is on the agenda of Congress.”
Renee Rooker, Director, Walla Walla Housing
Authority (WWHA);
President, National Association of Housing and Redevelopment
Officials (NAHRO)
The most immediate impact of H.R. 3221 that Renee saw for WWHA was
through the monies made available through the new $11 billion
increase for housing bond cap provided to states. Before the bill’s
passage, it was unclear to her whether WWHA was close enough to the
top of the state’s waitlist to be eligible for low-cost mortgage
financing for its latest low-income rental development. “It was
almost like a miracle to be able to have this in the bill to ensure
that we would get the funding,” she says.
“We’re looking at about $4 million in financing. For us in Walla
Walla, that will put 59 more affordable rental units on the street.”
Given that Walla Walla’s population is about 31,000, 59 more units
are “just another piece to our housing puzzle. Each year, we try to
make incremental steps.”
Here are several more of the Act’s highlights from Renee’s
perspective:
-
Section 8 Voucher Program flexibility. The
Act’s new provisions will allow project-based voucher rents in
Tax Credit developments to reach normally allowed maximum
voucher rents, even if that happens to be higher than the
stipulated Tax Credit rent limits. “It’s a positive move, and a
change that NAHRO and other organizations have been advocating
for. It just makes it easier to combine the two programs—given
that many state allocations call for targeting lower-income
families, but they can’t afford the rent, so marrying those
vouchers with the Tax Credit really helps.”
-
Additional monies for hard-hit neighborhood
stabilization.
“Providing about $3.9 billion to support local efforts
to stabilize neighborhoods that have high numbers of vacant and
foreclosed homes will be a big help. It’s basically a new
infusion to the CDBG program. The funding is very flexible, and
it’s going to go where there are the greatest percentage of home
foreclosures—where it’s needed most.”
-
The Public Disaster Relief Act. This was
another important legislative remedy that NAHRO had been
fighting for, Renee explains. By repealing Section 9-K of the
Housing Act of 1937, H.R. 3221 essentially requires FEMA to
permanently repair and reconstruct disaster-damaged public
housing.
“This goes back to the hurricanes of Rita and Katrina in 2005,”
Renee says. Based on a Memorandum of Understanding between HUD
and FEMA, local housing agencies were prevented from accessing
FEMA funding to repair or reconstruct their public housing by
virtue of their eligibility to receive funding through HUD’s
emergency capital fund reserve—even though Congress had
barred HUD from funding these reserves in every fiscal year
since FY 2000. “This is a big win, given that it’s been a
big fight for three years, ever since Katrina struck. FEMA and
HUD just dropped the ball. This won’t reconstruct what was
damaged prior to this legislation, but it will take care of the
damage by disasters like Hanna, Gustav, and Ike—and looking
forward.”
Recognizing the impact of housing on the vitality of communities
Nationwide, increased foreclosures are putting the squeeze on
affordable rental markets as people move out of homeownership. This
places even more pressure on those with limited means. In her own
community, though it’s not hard hit by foreclosures, Renee is
certainly seeing growing pressures on the supply of affordable
housing. “In Walla Walla, we’re just feeling a very tight market.
Our vacancy rate is below 3%. It’s been that way for about three
years. We’re just lacking affordable units. The cost of housing is
high in our area and salaries are not keeping up.”
WWHA serves about 1,200 families per month, through a broad mix of
owned and managed units, and four rental assistance programs. The
authority owns and manages about 250 units of housing—and carries a
waitlist of more than 2,000 families. Renee and her organization are
trying to break ground every year on new affordable rental units.
Because of the way Walla Walla is zoned, no large parcels are
available for multi-family developments. “Our strategy is to help
revitalize neighborhoods. We find and use infill lots, both those
that are vacant and some with substandard homes. We will demolish
those and build new affordable units.”
For Renee, with the passage of H.R. 3221, “it feels like there is a
future for housing in America: That it truly is on the agenda of
Congress. This bill treats not only rentals but homeownership, and
recognizes the importance of the vitality of communities—it
understands those linkages. Priorities are intertwined.
Infrastructure, roads, schools are all important, but if you don’t
have a decent, safe affordable place to live, the rest of it falls
off the radar screen.”
OUR STATE'S FARMWORKER HOUSING SERVES AS TEST
CASE FOR LEGISLATIVE REFORM
One remarkable reform in H.R. 3221 was spearheaded by several
Washingtonians who took the case directly to Congress. They sought
clarifications in order to change the way the IRS was interpreting
the tax code—and disallowing the use of tax credits to raise
investment capital targeted for farmworker housing in our state. Our
Congressional representatives, in particular Senator Maria Cantwell
and her staff, were quick to see the significance of this issue, and
push for language in the Act that would remedy the IRS’s stance.
 
Mark Kantor (left), attorney, and Marty
Miller (right), director of the nonprofit Office of Rural
and Farmworker Housing (ORFH)
I’ll let these leaders—Marty Miller, director of the nonprofit
Office of Rural and Farmworker Housing (ORFH), and attorney Mark
Kantor—tell the story, but first, a little background. The Low
Income Housing Tax Credit Program (LIHTC), which is based on Section
42 of the Internal Revenue Code, was enacted by Congress in 1986 to
provide private investors with incentives to invest in affordable
rental housing. For the past 20-plus years, attorneys who specialize
in tax credit issues like Mark, along with hundreds of housing
developers like ORFH, have operated under the assumption that
special groups like farmworkers that are singled out by a nonprofit
organization for help don’t automatically violate HUD housing
policies governing non-discrimination.
But during the past several years, the IRS had taken a strong stance
against using Tax Credits for groups like farmworkers and artists.
And earlier this year, ORFH’s pending 51-unit low-income rental
development for farmworkers in Royal City was in the IRS’s
crosshairs for non-compliance with “public use” requirements.
A
threatened project
“This spring, we were trying to close the Royal City partnership for
the tax credit financing, which has a lot of technical components,”
Marty explains. “To do so, we needed Mark to write an opinion that
said he believed we were in conformance with IRS regulations. Mark
was concerned about his ability to write this letter. Quite simply,
what that meant was that we wouldn’t be able to close the
partnership. And therefore we would not have the financing to go
ahead with construction.”
Mark and an attorney partner, Tom Nelson, headed to Washington, D.C.
in mid-June. Along with an attorney representing the National Equity
Fund, they met with the IRS and argued that farmworker housing
didn’t violate the regulations and should be eligible for the LIHTC
Program. “We received a fairly firm response that this argument was
not going anywhere,” Mark recounts. “We left that meeting and went
directly to lobby our representatives on the Hill.”
A lesson
in civics
“Senator Cantwell and her staff, particularly her assistant Lauren
Bazel, were phenomenal—just tremendous on this issue,” says Mark. It
was clear what was at stake. “There are all kinds of programs
targeted to special needs groups. In Washington State, a top
priority for the legislature has been housing for agriculture, for
which there is such a huge need here. The Commission has points
awarded for farmworker housing, and the state Housing Trust Fund
(HTF) has a program targeted for farmworker housing. There are
housing projects for veterans, for example, for victims of domestic
violence, for the homeless.”
Crucially, the IRS’s position was threatening not only projects in
the works, but also past LIHTC-funded projects across the U.S.
“Senator Cantwell was the sponsor of the Senate version of this
bill. We’d been having indirect contact with her for a couple of
years. When all this started up, she really came through. We also
received significant help from lobbyists for Enterprise Community
Development and Local Initiatives Support Corporation (LISC).”
For Mark, this turned out to be an interesting lesson in civics.
“H.R. 3221 comprises 694 pages. The general public use language that
we worked on and got into the bill is 15 lines. I know Tom
and I spent well over 100 hours collectively on this. It makes you
realize what goes on in the legislative process.”
In the end, the language of H.R. 3221 was crafted to explicitly
allow tax credit developments that establish tenancy restrictions
for persons with special needs, as well as persons who are members
of a specified group under a federal or state program or policy that
supports housing for such a group. Mark points to one particular
item of interest. “For most provisions of the Act, the effective
date is after the date of enactment. But for this public use test,
the amendment applies before, on, or after the date of
enactment. Specifically, we needed to make sure all of those
previously built tax credit projects were okay. We felt confident
that if we had to go to court on that, we would prevail, but
certainly the legislative avenue was a much better approach.”
Rural
areas continue to have tremendous needs
For Marty Miller, this process “was a demonstration of how everyone
pulling together on an issue could really make an impact on federal
legislation. Senator Cantwell very quickly grasped and embraced
this, as did so many others.”
And the Royal City project? “Thankfully,” says Marty, “we were able
to complete the process of assuring investors of our compliance with
the LIHTC program. Now we’re finalizing the other standard due
diligence issues to close, and rapidly moving towards starting
construction. We had intended to start this fall and we’re still on
track to do that. We were truly fortunate that the opportunity for
this legislation came around when it did.”
Royal City, Marty points out, is an area where there’s a lot of
growth in agriculture and lots of labor-intensive crops—tree fruit,
vineyards, some row crops. Agriculture continues to be a major
economic engine for our state, responsible for billions in revenue
annually. The Royal City project is relying on a broad spectrum of
state and federal funding: state HTF monies, tax credits, CDBG
funds. “We were successful through HUD’s rural housing and economic
development program to secure some funding as well.” When it’s
completed in late 2009, Catholic Charities Housing Services will be
the owner/manager of the property.
The LIHTC program represents a huge portion of
the funding—more than 60%. “Without that, at best we would have been
stalled for quite a while,” Marty says.
In addition to the very specific breakthrough in general public use
language, Marty says he is heartened by H.R. 3221’s focus on
targeting tax credit funding to projects in communities with the
most pressing need for affordable housing. The Act gives tax credit
allocating agencies the discretion to award these projects a 30%
“basis boost.” Note
#1
“The bottom line is that there are still tremendous needs in rural
Washington State, and growing challenges in terms of securing
resources,” Marty says. “In smaller communities, we don’t have the
local resources that some of the larger cities in the state can
provide for housing. We don’t have citywide bond issues, for
example. This is where state and federal resources are absolutely
instrumental, in helping to provide affordable housing. Be it the
revision to the tax credit program, or the creation of the national
HTF, these are both very positive developments of H.R. 3221 that
will allow the creation of affordable housing to continue in rural
areas. That’s the big picture from my perspective.”
AT LONG LAST: A NATIONAL HOUSING TRUST FUND
H.R. 3221 provided another huge win for all of us who care about
ensuring a future for affordable housing production in the U.S. by
establishing the National Housing Trust Fund (NHTF).
The impetus for the NHTF grew out of the campaign for state and
local HTFs that Mary Brooks and the Center for Community Change
(CCC) have conducted since the 1980s. In the early 1990s, Mary,
National Low Income Housing Coalition (NLIHC) founder Cushing
Dolbeare, and many other advocates put together an ambitious
proposal for a national HTF. Unfortunately, that effort didn’t
succeed—but that hasn’t stopped people from campaigning for this
ever since.
Sheila Crowley, President, NLIHC (National Low
Income Housing Coalition)
Current NLIHC President Sheila Crowley walked me through the
National Housing Trust Fund Campaign’s lengthy and hard-fought
history since 2000. The goal of a national HTF has continued to have
its adherents in Congress, but—no surprises here—securing a
dedicated source of revenue has always been the sticking point. Over
the years, the NLIHC, the CCC and other groups, including the
Corporation for Supportive Housing, have been on the front-lines
working with federal legislators and developing grass roots support
for the NHTF Campaign. I’d like to commend Sheila and NLIHC members
for their unflagging commitment to this effort.
The NHTF provides a dedicated source of funding, with an emphasis on
rental housing production affordable to extremely low-income people.
The dedicated funding will come from set-asides generated from
Fannie Mae and Freddie Mac’s new business going forward; more on
that in a minute. However, as Sheila points out, the NHTF is the
first new federal housing production program since the HOME
program’s creation in 1990 and the first new production program
specifically targeted to extremely low-income households since the
Section 8 program was launched back in 1974.
Note #2
Getting
the National HTF through—and getting it adequately funded
“Getting any piece of legislation through is a matter of keeping
your ear to the ground and knowing when the opportunities arise,”
Sheila observes. “Some of it is careful strategy, some of it is just
luck. When the window opens, you’re able to move through.
“But what’s clear to me,” she says, “is that the process on the work
of the NHTF Campaign worked tremendously well—nearly 6,000
organizations across the U.S. endorsed the campaign. We could call
on these groups whenever there was a need to make calls to their
legislators. The time that it took to develop this grass roots
capacity was well spent. There wasn’t a single member of Congress
who didn’t know what was at stake. In the House we had the vote of
every Democrat, along with a substantial number of Republicans. This
continued through repeated votes in the House that were either
direct votes or proxies.”
Sheila also strongly credits the advocacy of House Financial
Services Committee Chair Barney Frank, who, at the beginning of the
110th Congress in 2007, “told us he would make the NHTF a priority.”
As an aside, I’d like to pass along Sheila’s praise for Washington
State’s congressional delegation and their support of the NHTF
Campaign. “The Washington delegation backed what we needed to do.
Washington advocates made the calls. They’re a powerful force. You
should know that Washington State is truly one of our models for the
rest of the country.”
But back to issue of funding. At the moment, because of the
uncertain status of Fannie Mae and Freddie Mac, it’s unclear what
the impact of their takeover by the Federal Housing Finance Agency
(FHFA) will mean. “The good news,” Sheila explains, “is that the new
Affordable Housing Fund, which comprises both the NHTF and the
Capital Magnet Fund, is not based on profits generated by Fannie and
Freddie, but on their volume of new business. They are doing a lot
of new business, because they’re practically the only game in town
for the secondary mortgage market, and are buying about 70% of the
mortgages right now.”
On the other side of the coin are the powers of the new regulator,
now the conservator of Fannie and Freddie. FHFA has the authority to
suspend contributions to the Fund should these pose financial risk
to the companies. But, Sheila points out, the funds were never going
to be released until 2010, which gives the markets time to
stabilize. “Our hope is that we can ride out this crisis, and that
decisions will be made that will stabilize Fannie and Freddie. And,
that we’ll end up with better GSEs [Government Sponsored
Enterprises] or whatever they are in the future, and the money to
fund the NHTF will stay there.”
Bear with me, because there’s yet another wrinkle to this story:
Even in a best-case scenario, with Fannie and Freddie stabilized and
housing markets in good working order, the funding generated by
these set-asides won’t be enough. If you do the math and subtract
all the large print and the fine print, including 25% of the funding
that will be taken off the top and placed into an FHA reserve fund,
the funding generated by the set-asides will amount to some $300
million to the NHTF in 2012. That’s before having to divide that
number among our 50 U.S. states, six territories, and Washington
D.C.
“The amount is totally inadequate,” Sheila says simply. “But it’s an
amount to get started and get up and running. Now that we’ve
achieved this important milestone, the NHTF Campaign can turn its
attention to identifying and advocating for additional sources of
dedicated revenue. Our goal for the NHTF is 1.5 million homes in the
next 10 years. To get there, we want to build this program to $5
billion a year.”
MODERNIZATION OF FHA—AND IMPORTANT CHANGES FOR
FIRST-TIME HOMEBUYERS
H.R. 3221 includes numerous positive changes on the homeownership
side of the affordable housing equation. The
Federal Housing Administration (FHA) Foreclosure Prevention
Refinancing Program authorized $300 billion for distressed borrowers
facing foreclosures. But what about people seeking to buy their
first home? What kinds of changes are they potentially facing?
I spoke with Leslie Martin, a senior loan officer with Eagle Home
Mortgage in Seattle, to get her take on how the inclusion of the FHA
Modernization Act in H.R. 3221 is impacting the first-time homebuyer
marketplace in our state. Leslie has been in mortgage lending for
close to three decades. Working with first-time homebuyers and
downpayment assistance programs is a special area of expertise for
her. She works with the Commission’s House Key programs as well as
other downpayment assistance programs to help clients purchasing
homes in King, Pierce, and Snohomish Counties.
Leslie Martin, Senior loan officer with Eagle
Home Mortgage
One of the first things that Leslie emphasizes is that, in this
market, change is the order of the day. “In general, the job of a
mortgage loan officer is so much more complicated now than it was
before. We’ve gone from the situation of being experts, familiar
with all the mortgage programs out there and able to advise a
particular homebuyer on which loans would work best for them. We are
now, essentially, having to relearn all of the parameters for
conventional lending.”
The good news is that during these challenging times, “FHA loans
have not seen the same type of rapid, erratic changes that we’ve
seen with conventional financing.” FHA continues to provide a
measure of stability in our hard-hit housing markets. It is, in
fact, the largest insurer of mortgages in the world. Many details
about the changes in the FHA programs set forth in H.R. 3221 are
still filtering down to Leslie and her colleagues, but she singles
out some of the key changes and offers her observations:
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The FHA’s loan limit has been increased from 95% of area median
home price to 115%, up to 150% of the GSE conforming loan limit
or $625,000, effective 1/1/09. “As far as the impact on
first-time homebuyers, this probably has a smaller impact in
Washington State than it may in other areas,” Leslie says. “For
the most part, the first-time homebuyers that we work with don’t
find current FHA loan limits an obstacle—and are well-served by
that limit.”
-
Streamlined processing for FHA condos is anticipated. “We
haven’t seen the details of that yet. But what we find in King,
Pierce, and Snohomish counties is that for low-income and
first-time homebuyers, condos are an affordable option. In the
last year or so, Freddie Mac and Fannie Mae have made their
guidelines for lenders more complicated and stringent for
reviewing and working with condos. So, having any additional
flexibility through FHA programs would be valuable.”
-
A downpayment of at least 3.5% for any FHA loan will be
required; the implementation date of this change is delayed to
loans with new case numbers issued after 1/1/09. “No portion of
closing costs can be factored into that minimum borrower
contribution,” Leslie explains. “One of the things that this
means is that downpayment assistance programs, including the
Commission’s House Key program, are more important than ever.”
-
A 12-month moratorium on HUD implementation of risk-based
premiums. This is in force 10/1/08 through 10/1/09. “During the
last six months or so, FHA instituted risk-based pricing for
buyers with credit scores below 620, with tiered fees based on
the degree of risk. This fee was added to the closing costs and
made it more expensive for first-time homebuyers to afford a
home. This temporary roll-back is important for first-time
homebuyers.”
-
Prohibition of seller-financed downpayments. “In a market where
housing prices are stagnant or declining, with these kinds of
programs, you can quickly owe more than a property is worth,”
Leslie says. “I read recently that 40% of the FHA loans going
into foreclosure during the last year involved this kind of
downpayment program.” Leslie points out, though, that Congress
is now trying to push through legislation to allow
seller-financed programs like HART and Nehemiah to continue with
some restrictions—such as making them available only to buyers
with higher credit scores.
More
good news for homebuyers and housing markets
Leslie also commented on other provisions of H.R. 3221 that should
help first-time homebuyers—and our housing markets:
-
New federal loan originator education, licensing, and oversight
requirements. “This is wonderful in terms of returning
competence to the system and elevating professionalism and
ethical standards. This creates a more uniform, consistent level
of oversight and licensing across the board.”
-
First-time homebuyer refundable tax credit equal to 10% of the
purchase price of a principal residence, not to exceed $7,500.
“This is a pretty powerful credit in the first year after
purchasing your home. But it’s important to note that it can’t
be combined with the Commission’s House Key Program.”
-
Stronger regulatory oversight for Fannie and Freddie. “Over the
past year and a half or so, it’s become harder and harder for
individuals—whether first-time homebuyers or those looking to
refinance their home—to qualify for financing. Currently, the
quality, from a risk standpoint, of loans being made today is
much stronger. Yet the market doesn’t really recognize that
quality in terms of pricing. Any recognition that new loans
being made today are of a higher quality could make a
big difference for first-time homebuyers.”
Changes
cause confusion
Unfortunately, much of the new legislation is confusing to both
homebuyers and realtors. “I have gotten many calls from clients in
the last few weeks, indicating that they think that all
downpayment assistance programs are going away,” Leslie says.
“That’s not the case. I’ve had Realtors call me in a panic. One
broker apparently made an announcement at a sales meeting that the
House Key program was gone! Misunderstandings are out there in the
media. I’ve had some pre-approved clients step out of the market
because it’s just too scary for them. They don’t understand all this
information. I’ve been trying to get the word out that all of the
House Key downpayment assistance programs are still available, along
with a handful of programs like Pierce County’s.”
Right now, though, Leslie sees a pattern of more education and
common sense on the part of first-time homebuyers. “More first-time
buyers are really thinking about: Given my budget, what can I
afford?” she notes. “In the past, people thought prices were
going to go up and up and up. They saw housing as an investment as
opposed to shelter. Now there’s been a real switch in outlook. I
credit this not just to homebuyer education, but also to information
in the media. People are realizing that buying a home is a long-term
commitment. And it has to make sense for the long term.”
HOUSING BOND AND TAX CREDIT
MODERNIZATION:
More
resources, greater flexibility for states
Two crowning achievements of H.R. 3221 are the changes made to the
federally authorized tax-exempt housing bond programs and the LIHTC
program. The new powers, flexibility, and resources granted are
significant. This legislation is the result of years of concerted
effort to gain a strong consensus among state housing finance
agencies (HFAs) and other constituencies on what was needed—and what
works.
Barbara Thompson is the extremely capable Executive Director of the
National Council of State Housing Agencies (NCSHA). She has provided
consummate leadership on these issues at the national level. Credit
also particularly goes, she asserts, “to the state HFAs that we
represent and that worked shoulder to shoulder with us through their
congressional delegations to get these changes accomplished.”
“The real victory in this legislation is that we were able to
get critical new resources and more flexibility to use them in this
bill. Just because there was a big focus on housing, it did not
automatically translate that the bond and credit programs would be
such beneficiaries within H.R. 3221.”
Barbara Thompson, Executive Director,
National Council of State Housing Agencies (NCSHA)
In the preceding pages, I’ve already mentioned a number of these
changes, including $11 billion in new housing bond authority, the
clarification of public use language, and a 30% “basis boost” to
low-income housing developments under the tax credit program that
require more support. There are many, many more valuable provisions
in this legislation, not the least of which are a large increase to
the tax credit cap for 2008-2009, and abolishing the
Alternative Minimum Tax (AMT) on both bonds and credits.
A big part of the work for Barbara and her staff—and all of us who
work at the state level as allocating agencies—was convincing
legislators that the changes we were asking for were key to making
these programs more effective—and to securing healthier housing
markets. “At the end of the day,” says Barbara, “the real victory in
this legislation is that we were able to get critical new resources
and more flexibility to use them in this bill. Just because there
was a big focus on housing, it did not automatically translate that
the bond and credit programs would be such beneficiaries within H.R.
3221.
“When we first started talking about this to lawmakers, they would
say: ‘That’s not a stimulus. We’re looking for things like
giving people rebates, and tax credits to buy homes.’ We had to
fight every step of the way to make the case that these programs,
the additional resources, and the additional powers that the
legislation gives states to run these resources, made sense within
the stimulus context.”
Here’s an overview of these major wins:
The
bond cap increase
Last fall, as part of its response
to the housing crisis, the Bush administration proposed that states
could use Mortgage Revenue Bonds (MRBs) for refinancing subprime
loans. Barbara explains that their proposal was to give states the
re-fi authority, plus some additional injection of cap that could be
used for that purpose. “One of the many great victories accomplished
in this legislation, was taking that kernel of an idea, and going to
Congress and saying: ‘Build on this. We need more. Re-fi authority
is not enough,’” she says. “With the market today, there is
virtually no flexible, affordable mortgage money out there for
first-time homebuyers. So we said, let’s not just address the re-fi
side of things—we recognize that’s important, but let’s make sure
that we can continue to get money to first-time homebuyers, who are
on the margin, and who might need a little more flexibility with
underwriting.”
The further victory was in
convincing Congress that in order to stimulate the economy and the
housing market, and help people who were struggling, the
multi-family bond part of the market should not be overlooked.
Ultimately, Congress also significantly broadened the way in which
states can use the new authority from the Administration’s original
proposal.
“The two people who truly led that
effort within Congress were Senators John Kerry of Massachusetts and
Gordon Smith of Oregon. They carried it for us, all the way through
the Committee—and, there were a number of tries to get it removed
from the bill on the Senate floor.” Oregon, like Washington State,
is not experiencing the level of foreclosures like Florida and
California. States have had differing needs. “It was important that
when the authority went out to states, that they’d be able to use it
for the needs that were the most pressing for them. And that’s what
the bill does. Some states have needed more re-fi authority. Others
can put some of it to productive use to help first-time homebuyers.”
Housing credits:
From top to bottom, major enhancements to an
already successful program
Here’s the background story on the
tax credit program: After the last cap increase for the LIHTC
program in December 2000, NCSHA began to consider what could be done
to make this very successful program even stronger. About four years
ago, NCSHA formed a task force; I served on it, along with
representatives of about 18 other states. We worked on this for well
over a year, looking at the program from top to bottom and
repeatedly soliciting input from the housing industry. We did this
as well for the tax-exempt bond program, but ended up with more
recommendations for the housing credit area.
Barbara puts it this way: “The goal
was to have a set of changes that wouldn’t cost too much, but
would significantly improve the program. We’ve been talking about
this effort, and urging Congress to adopt these changes for a number
of years, but H.R. 3221 gave us the opportunity and a legislative
vehicle. It was more important than ever given the state of the
housing market and the economy. Again, our recommendations didn’t
fit neatly into the stimulus context. Multi-family housing is a
long-term strategy. Congress was looking for quick fixes to
stimulate the economy in the housing sector. It took a little bit of
convincing, but we had a great advocate in Chairman Rangel of the
House Ways and Means Committee.”
She continues, “The other big help
we had on the credit side? Do not overlook Washington’s own Senator,
Maria Cantwell. Although the Senate bill was initially crafted in
such a way that it was much narrower, ultimately, Senator Cantwell
was instrumental in convincing the Senate to accept what the House
sent over on this. She had introduced a bill earlier in the session
that contained virtually everything that Chairman Rangel’s bill
contained. She had put her mark in the sand and was right there to
make the case in the Senate.”
Senator Cantwell and many other
legislators recognized that the states were successfully using the
discretion that the housing credit program already gave them. It was
the right time to give the states more discretion in a number of
areas, to allow them to extend the reach of the program—to enable it
to serve more people and more areas.
“We had the advantage: We had
agreement,” Barbara concludes. “We’d already vetted these proposals
within our own organization and within the industry. We could hit
the ground running. We were all fighting for the same thing.”
LOOKING AHEAD: Boldness is called for
Last month, during Housing Washington 2008, our annual statewide
housing conference, I asked my long-time colleague Norm McLaughlin
for his insights. Norm is director of the Kitsap County Housing
Authority (KCHA) and the immediate past president of the National
Association of Local Housing Finance Agencies (NALHFA). He was quick
to laud the work accomplished by H.R. 3221—and to emphasize that we
can’t rest on these laurels.
“I want to celebrate Senator Cantwell for
her new position, for being a leader and taking action, less than a
year after getting on that committee – It was magnificent!
Norm McLaughlin, director of the Kitsap County
Housing Authority (KCHA)
“All of the tax credit changes, for example, are things that will
make the program much easier to work with, and more accessible, and
they’re giving us more resources,” Norm says. But he is concerned
about the gap in many ongoing tax credit projects across the
country—and those in the future. It’s not that these projects are
bad deals, or that the sponsors aren’t good sponsors, he explains.
It’s a double whammy: Construction costs are on the rise, while at
the same time, the markets have shifted dramatically. The appetite
investors have for these projects has waned, and as a result, “the
amount of money low-income housing developers can get for the sale
of their credits has gone down.”
Right now, he points out, although most of the 18 Washington State
tax credit projects allocated for 2008 are moving forward, at least
a few of them are struggling under these difficult setbacks.
For this reason, Norm and several of his colleagues asked Senator
Patty Murray to place $250 million in the HOME program for 2009 to
help fill the gap for tax credit projects that are struggling across
the nation. Senator Murray, as Chair of the Transportation, Housing
and Urban Development Subcommittee of Appropriations, has allocated
$240 million for this purpose in the 2009 HOME budget. Of course we
don’t yet know if any appropriations bills will be passed this year,
but “we need to continually tell our leaders in Congress that they
need to be bold, they need do more, and they need to do it quickly,”
says Norm. “Affordable low-income housing projects are in jeopardy.”
That said, there are many things about H.R. 3221 that Norm is
pleased about. One aspect of the tax credit modifications is
directed specifically at helping employees of the U.S. military. “It
deals with the way that their income is counted, and it will be of
great benefit to us in Kitsap County,” he says.
We’re
not yet out of this crisis
Another potentially significant stimulus for KCHA’s mission is the
section of H.R. 3221 entitled “Emergency Assistance for the
Redevelopment of Abandoned and Foreclosed Homes”: it provides $3.92
billion in grants to states and localities for these homes and $180
million for housing counseling. Among its stipulations is that at
least 25% of the funds used for home purchase and redevelopment will
be used to house individuals and families with incomes no higher
than 50% of area median income. For Norm, this means that housing
authorities and nonprofit organizations could purchase and manage
these homes to provide rentals to low-income special-needs groups
like homeless people, seniors, and the chronically mentally ill.
“We expect Washington will receive about $28 million and it offers a
great opportunity,” Norm says.
Norm’s agency is the only provider of HUD-certified foreclosure
counseling in Kitsap County. “We get almost 80 calls a day to help
people in foreclosure. Our counselors can’t keep up. We need to hire
more,” he says. “This bill has some funding for that—and we need to
get it.”
U.S. Senator Maria Cantwell
Norm has two things to say in conclusion. One is his kudos to
Senator Maria Cantwell for her work in representing the people of
our state on the Senate Finance Committee. “I want to celebrate
Senator Cantwell for her new position, for being a leader and taking
action, less than a year after getting on that committee,” he says.
“It was magnificent! We’ve been working on some of these tax credit
changes for many years. Then all of a sudden our senator gets on the
committee, sponsors a bill, and gets it grafted onto this omnibus
housing bill. It knocked everybody’s socks off.
“The most important thing we need to tell people is to continue to
communicate to our representatives in the Senate and the House to
take steps quickly to save the economy—and the housing sector.”
Pay-off
after years of work
Clearly, the crisis now roiling the U.S. financial markets is
casting a very long shadow over the legislative gains made by H.R.
3221. Plenty of work lies ahead. But many huge strides were made by
this Act, and we are right to celebrate them because many of the
landmark provisions are the result of years of hard work by local
advocates and national leaders.
We successfully laid the groundwork
for the time when Congress would focus on affordable housing. The
sub-prime crisis and the slowing economy finally provided that focus
and we were ready. Yet many in this country are still struggling and
the financial markets have been in crisis. Clearly, our work is not
done. However, thanks to everyone who participated in the making of
H.R. 3221, and who continue to make their voices heard in
Washington, D.C., we have new tools and new resources to bring to
the table. It was a huge step forward. Our challenge now is to put
these changes and resources to work!
Note 1.
H.R. 3221 gives allocating agencies
like the Commission the authority to increase the amount of tax
credits provided to projects that might not otherwise be financially
feasible. The Commission will use this authority to benefit projects
in rural areas in 2009.
Note 2. Here are some key aspects of the NHTF:
-
Because the funding is not
discretionary, it is not subject to Congress’s annual
appropriations process and will not be competing with other HUD
programs for funding.
-
It is aimed primarily at
producing rental housing for the poor: a minimum of 90% is
designated for that purpose. Up to 10% may be applied to
homeownership.
-
The housing is targeted to
extremely low-income families: At least 75% must be affordable
to people at 30% or below their community’s AMI, or at the
federal poverty level, whichever is higher; the remaining 25%
must be used for housing for very low-income people.
-
The distribution formula to
states and communities will be determined by the HUD Secretary
by July 30, 2009.
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