NCSHA Washington Report | June 23, 2023

Published on June 23, 2023

Web Washington Report Graphics - June 23, 2023

In California, State Farm, the state’s largest home insurance provider, with a 20 percent market share as of 2021, announced last month it would stop selling new residential policies because of “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”

The company’s announcement follows similar recent ones from American International Group, Chubb, and others. “After the disastrous fires of 2017 and 2018, the number of Californians who were told by their insurer that their policy wouldn’t be renewed jumped up by 42% to almost 235,000 households,” according to CalMatters.

In Florida, “more than a dozen insurance companies have stopped writing policies in the state” and home insurance costs are up roughly 57 percent since 2015, triple the national average. As in California, the causes are a combination of more frequent and damaging storms, inflation and construction cost increases, and structural changes in the insurance industry.

In Texas, the Climatewire news service reports “huge losses from recent storms and litigation” have driven many smaller insurers into insolvency or forced them to stop selling coverage in high-risk areas, triggering “unprecedented growth in the region’s state-chartered insurance programs at a time of devastating storms.”

Texas, like Florida and California, is among the states that have created coverage options of last resort to fill in where insurers have pulled out. “Residents covered by these options transfer their risk to the state — meaning state taxpayers, who fund the state insurance programs, hold the risk directly or indirectly,” writes Arizona State University professor Melanie Gail.

Of course, the amounts residents of those states are on the hook for through those programs probably pales compared to the subsidy every U.S. taxpayer provides through the flawed structure of the National Flood Insurance Program.

And yet, the magnitude of flood risk alone may far outpace current coverage levels and valuation models. A recent paper by a group of researchers estimates at-risk homes may be overvalued by as much as $137 billion. “[T]he realization of these risks depends on institutional, policy, and regulatory adaptation responses to increasing flood hazards, all of which must grapple with moral questions about who should bear the costs of climate-related disasters,” they write.

A paper published in 2021 by the National Bureau of Economic Research suggested that, “in the aftermath of natural disasters, lenders are more likely to approve mortgages that can be securitized,” and as a result, “Fannie Mae and Freddie Mac may bear a substantial share of the increasing climate risk.”

FHFA’s annual report to Congress, released last week, reports no fewer than eight “cross-agency working groups” are assessing climate risk and related issues and pledges continuing work on “strategies to ensure the integration of climate risk within [Fannie and Freddie’s] decision-making.”

Stockton Williams | Executive Director

Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

Dewey Honored with Housing Visionary Award
HUD Awards $14 Million to HFAs, Other Housing Counseling Organizations
Warner, Moran Call for Clarification of Tax Rule to Continue Affordable Housing Investments
HUD Releases Final NSPIRE Inspection Standards
House Passes Bill to Roll Back FHFA LLPA Pricing Changes
House, Senate Set FY24 Spending Levels; Senate Appropriations Committee Reports Rural Housing Funding Bill
Waters, Others Introduce Comprehensive Housing Bill Package
House Housing Subcommittee Discusses HUD Oversight with Inspector General
HUD Issues NOFO for Research into Off-Site Construction Methods, Zoning’s Impact on Housing Supply
Joint Center for Housing Studies Releases 2023 State of the Nation’s Housing Report
NLIHC Report Documents High Housing Costs
NCSHA in the News
Looking Ahead

Dewey Honored with Housing Visionary Award
The National Housing Conference (NHC) recognized Susan Dewey, chief executive officer of Virginia Housing, with the Housing Visionary Award on Tuesday evening during its annual awards gala. Ralph Perrey, NHC Board Secretary, NCSHA Board Chair, and Gala Host Committee co-chair, presented Dewey with the award, which recognizes honorees for their commitment to affordable housing and innovative, comprehensive community development work. Lisa Rice, president and CEO of the National Fair Housing Alliance, also was named a 2023 Housing Visionary Award recipient, and Doug Bibby, former president of the National Multifamily Housing Council, received the Carl A.S. Coan Sr. Lifetime Achievement Award for Public Service.

HUD Awards $14 Million to HFAs, Other Housing Counseling Organizations
On June 21, the U.S. Department of Housing and Urban Development (HUD) awarded $14.4 million in housing counseling grant funding to 180 HUD-approved housing counseling agencies and intermediaries. The funding is provided through the second round of the Fiscal Year 2022 (FY22) Comprehensive Housing Counseling Awards. HUD has awarded more than $53 million for housing counseling in FY22. Seventeen HFAs were awarded nearly $3 million as part of Wednesday’s announcement. See the list of grant recipients.

Warner, Moran Call for Clarification of Tax Rule to Continue Affordable Housing Investments
A bipartisan group of 20 Senators, led by Mark Warner (D-VA) and Jerry Moran (R-KS), today wrote Secretary Janet Yellen to ask the Treasury Department to clarify that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac are not tax-exempt controlled entities (TECEs) and therefore not subject to a rule that would limit their Low Income Housing Tax Credit investments. The relevant rule says investors who partner with TECE organizations are not entitled to benefits including accelerated depreciation, bonus depreciation, historic rehabilitation tax credits, or certain energy credits. The possibility the GSEs are TECEs threatens how much Housing Credit investment activity they would be willing to make and requires Treasury action to avoid this consequence. NCSHA thanks the many HFAs that helped persuade their Senators to sign the letter.

HUD Releases Final NSPIRE Inspection Standards
On June 22, HUD published a notice containing final inspection standards for the National Standards for the Physical Inspection of Real Estate (NSPIRE) protocol, which is intended to consolidate and align housing quality requirements across various programs, pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. HUD previously published the corresponding final NSPIRE rule on May 11. The notice also includes a list of specific inspectable items, including detailed descriptions and classifications as life threatening, severe, moderate, or low risk. The NSPIRE protocol, once fully implemented, will replace both the Uniform Physical Condition Standard and the Housing Quality Standards for all HUD housing portfolios, including privately owned properties where HUD-assisted residents reside using vouchers. Along with adoption of NSPIRE, HUD will implement a new three-year notice and review cycle to provide an opportunity for the public to comment and propose changes at regular intervals.

The effective dates for NSPIRE implementation are July 1 for HUD’s public housing portfolio and October 1 for the majority of other HUD-assisted programs, including the Housing Choice Voucher, Project-Based Voucher, HOME Investment Partnerships, Housing Trust Fund, Emergency Solutions Grants, and Continuum of Care programs. In addition, NCSHA is in regular communication with HUD, the Treasury Department, and the Internal Revenue Service to urge coordination among the agencies as it relates to the applicable physical inspection standards for Housing Credit properties.

House Passes Bill to Roll Back FHFA LLPA Pricing Changes
The U.S. House of Representatives today passed the Middle-Class Borrower Protection Act of 2023 (H.R. 3564), which would direct the Federal Housing Finance Agency (FHFA) to repeal the upfront loan level pricing adjustments (LLPAs) instituted by Fannie Mae and Freddie Mac on May 1 and reinstate the fee structure in place prior to that date through the end of 2025. The bill directs the Government Accountability Office to review the process FHFA uses to set LLPA fees, makes future LLPA fee changes subject to a standard Administrative Procedure Act notice and comment process, requires FHFA to base future LLPA fee changes on mortgage risk, and prohibits FHFA from basing new LLPA fees on borrowers’ debt-to-income ratios.

House, Senate Set FY24 Spending Levels; Senate Appropriations Committee Reports Rural Housing Funding Bill
Having secured a deal to suspend the debt ceiling and establish spending levels for the next two fiscal years, Congress is moving forward with the appropriations process for Fiscal Year 2024 (FY24), albeit with very different House and Senate visions for the appropriate amount of spending on domestic priorities. Despite the debt ceiling deal providing for more or less flat funding in FY24 compared to FY23, the House Appropriations Committee recently proposed much lower spending levels overall than the maximum amount the deal allows. The House-proposed cuts would fall especially hard on the Transportation, Housing, and Urban Development (THUD) and Agriculture subcommittees, which would see funding reduced by 25 and 30 percent, respectively, compared to FY23 levels. Meanwhile, the Senate Appropriations Committee is hewing closely to the agreement struck in the debt ceiling deal, which would result in modest increases of 0.9 and 2 percent for the THUD and Agriculture subcommittees, respectively, over FY23 funding.

During the same business meeting where they approved subcommittee allocations, Senate appropriators also reported favorably by a unanimous vote the FY24 Agriculture and Related Agencies appropriations bill, which would provide:

$1.6 billion in Section 521 rental assistance (compared to $1.488 billion in FY23)
$850 million in Section 502 Single Family Direct Loans (compared to $1.25 billion in FY23)
$30 billion in Section 502 Single Family Guaranteed Loan authority (the same as FY23)

In addition, the Agriculture appropriations bill as reported would “decouple” Section 521 rental assistance from Section 515 mortgages, allowing residents living in a property with an expiring/expired Section 515 mortgage to retain their rental assistance.

Waters, Others Introduce Comprehensive Housing Bill Package
Rep. Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, and many of her Democratic colleagues introduced legislation Wednesday to address the nation’s affordable housing and homelessness challenges and racial wealth gap. Her bill, the Housing Crisis Response Act of 2023, would provide more than $150 billion to several affordable housing programs, including HOME, CDBG, Project-Based Rental Assistance, USDA’s rural rental housing programs, and fair housing initiatives and technical assistance. Another bill introduced as part of the package is the Downpayment Toward Equity Act of 2023, a measure that would invest $100 billion through state agencies and nonprofits to offer direct financial assistance to first-generation buyers purchasing their first home, and the Ending Homelessness Act of 2023, which would expand HUD’s Housing Choice Voucher Program and prohibit housing discrimination based on source of income and veteran status.

House Housing Subcommittee Discusses HUD Oversight with Inspector General
On Wednesday, the House Financial Services Committee’s Subcommittee on Housing and Insurance held a hearing on HUD Oversight: Testimony of the Housing and Urban Development Inspector General. HUD Inspector General Rae Oliver Davis testified. Her testimony and the committee members’ questions and statements focused on findings issued by the Office of Inspector General about a variety of HUD programs, including public housing; improper rental assistance payments; health and safety issues; HUD’s program administration capacity; and technology. Several Republicans raised questions about providing HUD with additional funding in light of potential fraud, waste, and mismanagement, while several Democrats focused on the need to provide HUD with additional resources to increase its capacity to run its programs.

HUD Issues NOFO for Research into Off-Site Construction Methods, Zoning’s Impact on Housing Supply
Last week, HUD published a Notice of Funding Opportunity (NOFO) for assistance to state and local government agencies, nonprofit organizations, public and private universities, and other research organizations to help build evidence-based practices and policies to increase the supply of affordable housing. Specifically, HUD seeks to (1) assess the potential for off-site housing construction methods to increase housing supply, reduce housing expenses for low- and moderate-income households, and/or reduce the cost of construction; and (2) learn how reforms to zoning and other land-use regulations positively impact housing opportunities in local communities. HUD has made $4 million available under this NOFO, with each recipient eligible to receive between $150,000 and $500,000. The deadline to apply for program funding is August 1.

Joint Center for Housing Studies Releases 2023 State of the Nation’s Housing Report
On June 21, Harvard University’s Joint Center for Housing Studies (JCHS) released its annual report, The State of the Nation’s Housing 2023, which evaluates the housing market and housing cost pressures homeowners and renters experience throughout the country. JCHS found homeownership and rental demand softened by early 2023 due to rising interest rates and declining affordability. Home sales, construction levels, and the pace of home price appreciation are all down from last year, while rental properties are experiencing reduced rent growth and growing vacancy rates. Despite sharp declines, JCHS reports home prices and rents remain higher than pre-pandemic levels. This has resulted in historic housing cost burdens, pricing many out of shelter altogether, including a disproportionate share of people of color. The report suggests more housing assistance from all levels of government is necessary to counter the loss of affordable units and the rise of homelessness, as appropriations for HUD rental assistance and longer-term affordability programs are currently insufficient to meet the scale of the challenge. Learn more about the report and the virtual release event.

NLIHC Report Documents High Housing Costs
Last week, the National Low-Income Housing Coalition released its annual report, Out of Reach: The High Cost of Housing. This year’s report shows that, despite minimum wage increases over the last few years, nearly half of all U.S. workers do not earn enough to afford a one-bedroom apartment. High rent and the end of many pandemic-era rental housing benefits have made housing unaffordable for many minimum wage workers. According to the report, a full-time worker must earn $23.67/hour to afford a one-bedroom apartment. Currently, in only seven percent of the country’s counties can a full-time minimum wage worker afford a market-rent, one-bedroom apartment. The report calls on Congress to increase funding for the national Housing Trust Fund, expand housing vouchers, and create a permanent emergency rental assistance program.

NCSHA in the News
The Bond Buyer, 6.9.23, Housing bond reform bill revived in Senate
The Ripon Advantage, 6.8.23, Cassidy unveils bipartisan bill to enhance affordable housing bonds

Looking Ahead…

Legislative and Regulatory Activities