NCSHA Washington Report | November 19, 2021

Data from several new reports illustrate a remarkable resilience among affordable rental properties and landlords more than 18 months into the pandemic.

CohnReznick’s latest biennial deep-dive into the portfolio of Housing Credit-financed apartments finds “while the COVID-19 pandemic presented operational challenges for many multi-family properties nationwide, the housing credit portfolio performed remarkably well.” The indispensable analysis indicates rent collection rates were down much less last year than feared, and in fact, overall net revenue modestly increased.

S&P Global Ratings, looking more widely at state HFA-financed affordable apartments, reports the loans underlying agency multifamily programs “continue to perform well through the second year of the pandemic.” The firm writes: “This better-than-expected performance is, in our view, largely due to prudent underwriting, active HFA program management, and loan-level surveillance.”

A JPMorgan Chase Institute study finds that small and medium-sized landlords overall are also doing better than many expected. After taking a big hit from the pandemic’s first wave in the spring of 2020, “revenues recovered quickly and the median landlord ended 2020 with a modest decline of 3 percent in rental revenue compared to 2019.” In addition, “as revenues were declining, landlords cut expenses by an amount greater than their rental income declined, which resulted in overall higher cash balances.”

Credit too rarely given is due landlords and HFAs for these results during a period of unprecedented uncertainty and challenge.

They didn’t do it alone though. It’s increasingly clear the extraordinary federal investment in the social safety net over the past 18 months has kept a solid floor under the sector.

Journalist Jason DeParle, who has covered poverty for decades, calls the expansion “a departure from business as usual so large it may not be fully appreciated even by those keeping close watch.” DeParle is talking mostly about the steps by Republican and Democratic administrations and congresses in a series of massive relief bills to provide $800 billion in stimulus checks — $11,000 for each eligible family of four, hundreds of billions more in unemployment, nutrition, and childcare aid, and a child tax credit.

Millions of vulnerable renters remained current on rent and utilities, and stayed safely housed, thanks in large part to these programs. In fact, the Center on Budget and Policy Priorities reports 45 percent of families with incomes below $35,000 are using expanded child credit payments for their rent or mortgage.

The Emergency Rental Assistance Program is also part of the reason renters, landlords, and their affordable apartments are hanging tough, covering more than $13 billion in back rent and utility bills to date. ERA has more work to do, and will have to work even harder, as earlier federal assistance is running out while rental arrears remain significant and home energy costs are rising. The JPMorgan Chase report rightly warns, “While many landlords were able to pull back on expenses as revenues declined, in many instances, they are simply delaying costs that they will need to make up down the road.”

Stockton Williams | Executive Director 

Washington Report will return December 3.

State HFA Emergency Housing Assistance

In This Issue

• • House Passes Build Back Better Act
    
  • New York State, Ohio HAF Plans Approved by Treasury
  • President Biden Signs Bipartisan Infrastructure Bill into Law
  • FHA Annual Financial Report Shows Growing Capital
  • FHFA Releases 2022 Scorecard for Fannie and Freddie
  • New CohnReznick Report Finds Consistent High Performance Among Housing Credit Properties
  • Looking Ahead

House Passes Build Back Better Act
This morning, the House passed the Build Back Better Act, which includes many of NCSHA’s top priorities, including temporarily raising the Housing Credit cap by approximately 41 percent phased from 2022 through 2024, lowering the bond financing threshold to 25 percent for bonds issued in calendar years 2022 through 2026, closing the Housing Credit qualified contract loophole and protecting nonprofit sponsors’ ability to purchase at Year 15 properties in which they are the general partner, enacting the Neighborhood Homes Credit, investing nearly $10 billion in the HOME program and nearly $15 billion in the Housing Trust Fund, and establishing the $10 billion First-Generation Downpayment Assistance program, along with investments in many other federal housing programs at HUD and USDA. For more information on the bill, read our blog published after the final text was released. 

The Senate must now consider the legislation and is likely to make modifications to earn the support of all members of the Democratic caucus, which is necessary for its passage in that chamber. Currently, the Senate parliamentarian is reviewing the bill to determine whether any provisions run afoul of Senate rules for reconciliation legislation. Any provisions that do not meet those requirements will have to be jettisoned. The Senate could begin considering the legislation after the Thanksgiving holiday, though given competition for Senate floor time by other priorities — including addressing the debt ceiling, another continuing resolution until Congress can fund the government for FY 2022, and the defense authorization bill — it is not known when the Senate may act on the bill. NCSHA encourages all HFAs and their partners to urge Senate Democrats to support the bill’s passage with these critical housing investments. 

New York State, Ohio HAF Plans Approved by Treasury
This week, the Treasury Department notified two states — New York and Ohio — that their Homeowner Assistance Fund (HAF) plans have been approved. New York State Homes and Community Renewal will receive $539,458,518 and the Ohio Housing Finance Agency will receive $280,771,073 to assist qualified homeowners. Both programs include mortgage reinstatement/principal reduction, arrears satisfaction, and forward payments. The Homeowner Assistance Fund program was established under Section 3206 of the American Rescue Plan Act to mitigate homeowner financial hardships associated with the coronavirus pandemic.

President Biden Signs Bipartisan Infrastructure Bill into Law
On Monday, President Biden signed the Infrastructure Investment and Jobs Act (Public Law No.117-58), the bipartisan legislation the Senate approved in August and the House passed earlier this month. Total funding for infrastructure projects under the law is approximately $1.2 trillion, $550 billion of which is new investment and $650 billion of which is previously authorized funding. The law provides funding for roads, bridges, public transit, passenger and freight rail, clean drinking water, broadband, clean energy transmission, and electric vehicle infrastructure. A critical part of the president’s agenda, the legislation had been moving in tandem with the Build Back Better (BBB) Act, which the House passed today. 

The infrastructure law adds two new categories of exempt facilities that states may finance in part with their private activity bond (PAB) volume cap authority: qualified broadband projects and qualified carbon dioxide capture facilities. For both types of projects, 25 percent of the issue price of the bonds would need to come from the PAB volume cap.

FHA Annual Financial Report Shows Growing Capital
HUD on Monday released its FY 2021 annual report to Congress on the financial status of the Federal Housing Administration’s Mutual Mortgage Insurance Fund (MMIF). The MMIF backstops FHA’s single-family homeownership and reverse mortgage loan programs. The report finds the MMIF’s capital reserve ratio increased nearly two percent from FY 2020 to 8.03 percent in 2021. (FHA is statutorily mandated to maintain a capital reserve ratio for the MMIF of at least two percent.) The increase was driven largely by a boost in the value of the MMIF’s reverse mortgage portfolio, which had a valuation of six percent in 2021, after being negative in each of the previous five years. FHA believes the increase is primarily due to strong home price appreciation.

The report also notes that nearly 85 percent of all FHA-insured home purchase loans in FY 2021 went to first-time home buyers, an all-time high. Forty-two percent of FHA-insured home purchase loans went to borrowers of color. FHA served double the percentage of Black and Hispanic borrowers compared to those served by the rest of the housing market in this past fiscal year. Nearly 15 percent of FHA borrowers in FY 2021 received down payment assistance from a state HFA or other government program, nearly the same level as FY 2020.

FHFA Releases 2022 Scorecard for Fannie and Freddie
The Federal Housing Finance Agency (FHFA) on Wednesday released its 2022 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions, LLC. The scorecard lays out the criteria by which FHFA will determine whether Fannie Mae and Freddie Mac have fulfilled their core mission requirements. The 2022 Scorecard outlines two objectives for the firms, each to be weighted equally: 1) to promote sustainable and equitable access to affordable housing and 2) to operate in a safe and sound manner. On the objective to support affordable housing, FHFA will evaluate Fannie Mae and Freddie Mac on the extent to which they conduct business activities and other initiatives that support affordable single-family and rental housing, including developing high-quality Equitable Housing Finance Plans and carrying them out effectively, updating loan pricing to better support home buyers, improving the availability of small-dollar mortgages, and identifying strategies and activities to facilitate greater affordable housing supply.

New CohnReznick Report Finds Consistent High Performance Among Housing Credit Properties
This week, CohnReznick released its 2021 Affordable Housing CRedit Study which found that, despite the pandemic-related economic uncertainty experienced by the affordable housing industry, Housing Credit properties operated more successfully in 2020 than in any other period in the program’s history. The report says stabilized properties, on a median basis, are fully occupied at 97.7 percent; maintain healthy financial performance of only 1.52 debt coverage; and exhibit low foreclosure rates, with just 0.57 percent of properties having ever gone through foreclosure in the program’s 35-year history. The report also found only 10 percent of properties were on the watch list, meaning investors and syndicators watched those properties closely due to a suboptimal risk rating.

Looking Ahead…

NCSHA, State HFA, and Industry Events

• December 1 – 2 | 2021 Virtual Ohio Housing Conference
  Stockton Williams will speak at this event.
• December 1 – 3 | Novogradac 2021 Tax Credit Housing Finance Conference | Las Vegas
  Jennifer Schwartz will speak at this event.
• January 10 – 14 & 24 – 28 | NCSHA’s HFA Institute 2022 | Virtual

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