NCSHA Washington Report | July 14, 2023

Observers of the housing-related activities of two powerful congressional committees this week could be forgiven for feeling an acute sense of cognitive dissonance.

The House Financial Services Committee held a hearing this morning entitled “How Mandates Like ESG Distort Markets and Drive Up Costs for Insurance and Housing.” A background memo prepared by Republican committee staff members (which cites as examples of such mandates local exclusionary zoning practices and federal environmental and labor laws that predate by decades the first utterance of the term ‘ESG’) notes that “the U.S. faces acute shortages of affordable housing in every region of the country.”

Yesterday, the House Appropriations Committee approved a HUD funding bill for the coming fiscal year that would decimate the most important federal grant program for dealing with that acute shortage, the HOME block grant, cutting it by $1 billion (67 percent). The bill also would cut hundreds of millions from smaller HUD programs that finance housing for the elderly and people with disabilities and would eliminate the Choice Neighborhoods public housing redevelopment program.

The deepest cut hits HOME, for decades the Swiss Army knife of state and local housing agencies, capable of funding new construction and home repairs, down payment and rental assistance.

One underappreciated application of the tool is as “gap filler” in Housing Credit transactions, strengthening their feasibility and allowing more to achieve deeper income targeting to serve people experiencing homelessness, seniors, veterans, and those with disabilities.

HOME contributed $6.5 billion to Housing Credit developments from 2010 to 2021, providing an average of more than $900,000 per project. In half the states in 2021, HOME funds provided gap funding necessary for 20 percent or more of Housing Credit homes, and in 13 states HOME is in 40 percent or more of the units, according to NCSHA analysis.

HOME funds have been especially critical to keeping projects afloat during the more recent period of extraordinary high construction costs. A recent Moody’s Investors Service report found, “In 2023, HFAs have turned to their own funds as well as state and federal sources, such as the American Rescue Plan Act of 2021 (ARPA), HOME Investment Partnerships Program (HOME) and housing trust funds, to provide gap funding to support new construction and move projects through their pipelines.”

As impressive as HOME’s aggregate accomplishments are — more than 1.3 million homes completed and 360,000 renters assisted — its value proposition may be best expressed in a much smaller number: $4.59. That’s the amount of funding from other sources, including the private sector, that every dollar of HOME attracts, according to HUD.

HOME is coming off two consecutive years of its highest funding levels in more than a decade, which was still short of what states and cities need and, through the national HOME Coalition NCSHA convenes, are calling on Congress to deliver. The actions in the House this week have made that job harder – and all the more urgent.

Stockton Williams | Executive Director

Washington Report will return on July 28.

State HFA Emergency Housing Assistance

In This Issue

• NCSHA Joins Letter to FHFA Urging GSE Policies to Mitigate Qualified Contract Losses
• More State HFAs Sign Up for HFA1 Homeownership Initiative
  
• House Appropriations Subcommittee Considers FY24 HUD Funding Bill
• HUD Announces Availability of $3.1 Billion for Homeless Assistance
  
• HUD Publishes NSPIRE Administrative and Scoring Notices
• EPA Announces Funding Availability for $20 Billion in Clean Energy Financing
• NHT Finds More Housing Credit Agencies Implementing Policies to Protect Nonprofit ROFRs
• Senate Hearing Highlights Land Contract Abuse Concerns
• NCSHA in the News
• Looking Ahead

NCSHA Joins Letter to FHFA Urging GSE Policies to Mitigate Qualified Contract Losses
On July 13, NCSHA joined 14 other Housing Credit stakeholder organizations on a letter to Director Sandra L. Thompson urging the Federal Housing Finance Agency (FHFA) to adopt policies prohibiting the government sponsored entities — Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs) — from providing financing to Housing Credit properties for which the owner has not and will not waive its qualified contract rights.

Specifically, the letter recommends FHFA prohibit the GSEs from investing in and/or acquiring loans on properties in which the owner has not agreed to a qualified contract waiver and bar the GSEs from acquiring loans on properties originally financed with the Credit when the owner has already taken the property through the qualified contract process to prematurely terminate the development’s affordability requirements. The letter also asks FHFA to prohibit the FHLBs from providing Affordable Housing Program funds to Housing Credit properties unless the owner agrees to a qualified contract waiver.

NCSHA’s annual survey of state HFAs found that, as of the end of 2021, more than 100,000 affordable units nationwide had been lost due to owners using the qualified contract loophole to convert their properties to market rate prior to the end of the affordability period outlined in those projects’ extended use agreements, with approximately 10,000 units lost each year. 

More State HFAs Sign Up for HFA1 Homeownership Initiative
The number of participating states in the HFA1 Affordable Homeownership Lender Toolkit has grown to 18 with the addition of the Ohio Housing Finance Agency and the Pennsylvania Housing Finance Agency. State HFAs highlighted in the toolkit have reduced the complexity of their lending programs to facilitate multi-state lender participation. For more information and to request the HFA1 Lender Toolkit, visit NCSHA’s HFA1 webpage.

House Appropriations Subcommittee Considers FY24 HUD Funding Bill
On Wednesday, the House Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Subcommittee advanced Fiscal Year 2024 funding legislation that would make drastic cuts to a number of HUD programs, including a $1 billion cut to the HOME Investment Partnerships program, a two-thirds reduction from the FY23 enacted level. A date for full committee consideration of the legislation has not yet been set. Companion legislation is expected to be considered by the full Appropriations Committee in the Senate as early as the week of July 17. Read more about the markup in NCSHA’s blog post.

HUD Announces Availability of $3.1 Billion for Homeless Assistance
On July 5, the Department of Housing and Urban Development (HUD) announced the availability of more than $3.1 billion in competitive funding to providers for supportive services and housing programs for people experiencing homelessness, which marks the highest amount of Continuum of Care (CoC) funding in the program’s history.

The CoC program is the largest source of federal grant funding for supportive services and housing programs for people experiencing homelessness, with awards made to nonprofit providers, states, tribes or tribally designated housing entities, and local governments. In addition to regular CoC activities, this year’s notice of funding opportunity (NOFO) includes funding specifically targeted for survivors of domestic violence, sexual assault, and stalking; youth; and people experiencing homelessness in rural areas. Find the NOFO here; applications are due September 28.

HUD Publishes NSPIRE Administrative and Scoring Notices
In recent days HUD has published two of the key notices needed for implementation of the National Standards for the Physical Inspection of Real Estate (NSPIRE) protocol: The scoring notice and the administrative procedures notice, both of which supplement the NSPIRE final rule published June 22. NSPIRE replaces both Housing Quality Standards, previously used for the Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs, and Uniform Physical Condition Standards, previously used for public housing and properties under the jurisdiction of HUD’s Office of Multifamily Housing Programs and Community Planning and Development (CPD) for purposes of the physical inspection.

The scoring notice outlines the methodology Real Estate Assessment Center inspectors are to use in scoring and ranking properties upon physical inspection by converting observed defects into a numerical score. The administrative procedures notice covers the process and operational requirements for public housing and multifamily housing assistance programs, including Section 202 Supportive Housing for the Elderly and Section 811 Supportive Housing for Persons with Disabilities.

HUD will issue additional notices on implementation for HCV, PBV, and CPD programs before those programs’ October 1 effective date. NCSHA is continuing its outreach to both HUD and the Internal Revenue Service regarding NSPIRE’s impacts on Housing Credit development monitoring. 

EPA Announces Funding Availability for $20 Billion in Clean Energy Financing
Today, the U.S. Environmental Protection Agency (EPA) announced the opening of competitive awards totaling $20 billion in available funding for the final two components of its Greenhouse Gas Reduction Fund (GGRF). This follows EPA’s recent announcement of $7 billion in funding available for its Solar for All competition.

The announcement includes notices of funding opportunity for a $14 billion National Clean Investment Fund (NCIF), which will provide grants to two or three national lending facilities that will, in turn, provide financing for clean technology projects, and a $6 billion Clean Communities Investment Accelerator (CCIA) which will provide grants for two to seven nonprofit organizations that will, in turn, provide funding and technical assistance to a variety of community lenders, including potentially state housing finance agencies. Applications for both programs are due by October 12. Review the NCIF NOFO and the CCIA NOFO.

NHT Finds More Housing Credit Agencies Implementing Policies to Protect Nonprofit ROFRs
The National Housing Trust has updated its Right of First Refusal Toolkit based on NHT’s most recent analysis of state Housing Credit agencies’ qualified allocation plans. The number of states implementing policies to protect and strengthen the nonprofit ROFR has increased from 10 to 21 agencies. The toolkit outlines various strategies state agencies have employed to implement protective and clarifying language, review investor eligibility, protect property reserves, ease the process by which offers can be made to trigger the ROFR, and ensure state policy can be changed to reflect federal law should Congress act to provide additional protections through legislation as NCSHA has advocated. The toolkit also lists ideas for early intervention to identify properties approaching Year 15 and technical assistance state agencies can provide to nonprofits. For each topic, NHT calls out state agencies that have implemented what it considers to be best practices.

Senate Hearing Highlights Land Contract Abuse Concerns 
The Senate Housing, Transportation, and Community Development Subcommittee held a hearing Tuesday to examine the use of alternative home purchase methods, including land contracts and rent-to-own initiatives, and their impact on consumers. In her opening statement, Subcommittee Chair Tina Smith (D-MN) argued such products usually offer consumers a bad deal, including significant financial risk without common homeownership benefits and protections. Very few families who enter such contracts, she said, end up owning their homes outright, as the contracts are designed to make that exceedingly difficult. Smith said the purpose of the hearing was to learn about these products and what Congress can do to combat their abuses. Ranking Member Cynthia Lummis (R-WY) said Congress should focus on reducing inflation and eliminating regulations, arguing these actions would reduce housing costs and help more working families access traditional home financing options.

The three witnesses, Sarah Bolling Mancini, senior attorney, National Consumer Law Center; Elizabeth Goodell, supervising attorney, Mid-Minnesota Legal Aid; and John Green, managing principal, Blackstar Stability, shared Smith’s assessment of land contracts. All agreed that one step Congress could take to prevent consumers from entering such arrangements is to increase access to small-balance mortgage loans.

NCSHA in the News
Route Fifty, 7.7.23, The federal government has more than 8,000 vacant properties. Why aren’t they being used to house the homeless?

Looking Ahead…

Legislative and Regulatory Activities

• July 17 | Comments Due to NCSHA | FHFA RFI on Multifamily Property Tenant Protections
• July 24 | Comments Due | HUD Proposed Changes to the Methodology Used for Calculating Fair Market Rents
• July 17 – 19, 1:00 – 3:00 p.m. ET | FHFA Virtual Duty-to-Serve Listening Sessions | Registration
  Greg Zagorski will speak at this event on July 19.
• July 31 | Comments Due | FHFA RFI on Multifamily Property Tenant Protections

NCSHA, State HFA, and Industry Events

• July 17 | Tennessee Housing Development Agency’s 2023 Housing Education Symposium | Nashville, TN
  Garth Rieman will speak at this event.
• July 18 | National League of Cities and American Planning Association’s Housing Supply Accelerator Convening | Tacoma, WA
  Greg Zagorski will speak at this event.
• July 24 – 26 | Texas Affiliation of Affordable Housing Providers’ 2023 Texas Housing Conference | Austin, TX
  Jennifer Schwartz will speak at this event.

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