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NCSHA Washington Report | October 27, 2023

Published on October 27, 2023

Washington Report NCSHA

We’re releasing today a new edition of NCSHA’s Recommended Practices in Housing Credit Administration, comprehensive voluntary standards that guide each state’s administration of the Housing Credit.

The practices are a pillar of the strength the states have built over decades to deliver on their responsibility to run the most important resource for creating affordable housing in the United States today. They have been essential to maintaining Congress’ confidence in the program and establishing consensus among its many stakeholders.

The new edition includes expanded guidance to inform state administration in the most critical issues impacting affordable housing in 2023:

  • Skyrocketing development financing, insurance, and operating costs;
  • Escalating pressures on the continued long-term affordability of existing properties; and
  • Siting considerations related to renter opportunity, community revitalization, and disaster risk.

The new edition also includes, for the first time, guidance on how state Housing Credit administration can encourage and ensure meaningful renter protections that are also workable for landlords and developers.

The process to revise and expand the Recommended Practices — the seventh since 1992 — began in June 2022 and was led by a task force of state housing finance agency executive directors co-chaired by NCSHA board members Maura Collins, executive director of the Vermont Housing Finance Agency, and Christopher Nunn, commissioner of the Georgia Department of Community Affairs/Georgia Housing and Finance Authority.

The task force’s membership represented a total of 21 large and small states with urban and rural areas in all geographic regions of the country. Collectively, the states represented allocate more than two-thirds of Housing Credit authority annually.

In addition to inviting recommendations and comments from all state Housing Credit agencies, the task force solicited and received feedback from national organizations representing Housing Credit developers, landlords, property managers, investors, and syndicators. The task force also received and considered extensive feedback from civil rights, fair housing, and tenant advocacy organizations.

Although the task force has finished its work on this edition of the Recommended Practices, NCSHA is continuing efforts to explore additional practices related to the right of first refusal and implementation of the Average Income Test — two technical and critical elements of the credit statute.

And we continue to work with other leading Housing Credit stakeholders and a growing number of both parties in the House and Senate to expand the Housing Credit through the enactment of the Affordable Housing Credit Improvement Act.

Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

 

In This Issue

Federal Banking Regulators Publish Comprehensive CRA Overhaul
On Tuesday, the three major federal banking regulators — the Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency — approved a final rule substantially reforming banks’ obligations under the Community Reinvestment Act (CRA) regulations. The regulators say the rule, which they first proposed in May 2022, modernizes the CRA requirements to reflect market developments since the regulations were last overhauled in 1995 and to encourage more critical investment and lending to benefit low- and moderate-income households and communities. Notable provisions include a new framework for measuring large-bank CRA compliance, updated metrics to measure CRA compliance, lifting the asset threshold for banks to qualify as large banks, and expanding CRA assessment areas to include areas where banks do not have physical locations but are still active. The rule also includes detailed guidance on what affordable housing and other community development activities are eligible for CRA credit. Housing Credit investments and participation in other federal, state, and local affordable housing programs are explicitly included as eligible activities.

NCSHA is reviewing the rule to determine how it will impact the Housing Credit, Housing Bonds, and other HFA programs, as well as affordable housing generally. NCSHA summarized the rule’s major provisions on our blog and will provide a more detailed analysis soon. Most of the rule’s provisions take effect on January 1, 2026.

Outcome for Housing Tax Legislation Hinges on Whether Congress Will Consider Larger Tax Vehicle
Congressional cosponsorship for the Affordable Housing Credit Improvement Act (AHCIA; S. 1557 / H.R. 3238) stands at an impressive 174 House members and 30 Senators, evenly split between Republicans and Democrats in both chambers. The chairs and ranking members of the Senate Finance and House Ways and Means committees — which have jurisdiction over all tax issues — have each stated publicly their support for expanding and strengthening the Housing Credit. AHCIA support from the members of those committees is extremely strong, with 79 percent of the Ways and Means Committee and 63 percent of the Finance Committee officially on board. But whether Congress acts this year on this bill or other NCSHA tax priorities, including the Affordable Housing Bond Enhancement Act and the Neighborhood Homes Investment Act — both of which also have bipartisan support — as well as disaster tax support for states that have faced fires, floods, and other natural disasters, depends on whether tax writers can reach agreement on other non-housing tax issues and whether leadership in both chambers chooses to advance a tax package. Republicans and Democrats on the tax committees are yet to reach agreement on how to handle the Child Tax Credit — a priority for Democrats — and various business tax issues — priorities for Republicans. It’s also unclear whether a tax package will be able to move if it does not modify treatment of the state and local tax deduction set in the 2017 Tax Cuts and Jobs Act, which some members have said is critical to their votes. And of course, there’s always the question of what vehicle can be used to advance tax legislation. An appropriations omnibus — still the most likely vehicle for tax legislation — faces its own significant hurdles.

In the midst of such uncertainty, how can housing advocates help? First, continue to build cosponsorship of the AHCIA. While our cosponsorship level is extremely impressive, it would be even more so if we were to reach the milestones of 200 House members and 40 Senators. Democrats are waiting in the queues in both chambers to get on the bills, but we need more Republican cosponsors to move them on officially and maintain party parity. Second, go back to the bill’s existing cosponsors and urge them to tell their leadership that expanding the Housing Credit is a top priority for them and must be done this year. While action early next year is still a possibility if Congress doesn’t act this year, the closer we get to the November 2024 election, the less likely it will be for Congress to pass bipartisan tax legislation.

Treasury Data Shows State HAF Programs Continue to Assist More Homeowners
Nearly 400,000 homeowners received assistance from state and tribal Homeowner Assistance Fund (HAF) programs through the second quarter of 2023, according to data released last week by the U.S. Treasury Department, up 23 percent from the first quarter. Through July, HAF programs provided more than $4.8 billion in assistance, up 30 percent from the first quarter. Ninety-one percent of homeowners assisted had incomes below area median income (AMI), while 51 percent earned less than 50 percent of AMI. In addition, 40 percent of HAF recipients were African American and 20 percent were Latino. Patrick Orr, a policy advisory with Treasury who works on HAF, discussed these numbers at NCSHA’s 2023 Annual Conference & Showplace in Boston last week.

Banking Agencies Allow More Time for Input on Bank Capital Proposal
Last week, the Federal Reserve, Federal Deposit Insurance Corporation, and Comptroller of the Currency extended the comment deadline on a proposed rule to increase capital requirements for banks with more than $100 billion in assets from November 15, 2023, to January 16, 2024. The agencies said they are extending the deadline to allow interested parties more time to prepare comments. The proposed rule also would adjust the risk weightings applied to single-family mortgages to determine how much capital a bank needs to hold for each loan by establishing a tiered system in which the risk weighting for loans would increase for mortgages with higher loan-to-value ratios. NCSHA intends to submit comments expressing concerns about this provision and other proposed changes that could hinder affordable homeownership lending. Please email any feedback by December 15 to Greg Zagorski to inform NCSHA’s comments.

USDA Publishes Proposed Rule Updating Insurance Requirements for Multifamily Housing Programs
On October 25, the U.S. Department of Agriculture’s Rural Housing Service (RHS) Office of Multifamily Housing announced a proposed rule that would update the insurance coverage and deductible requirements that have been in place since 2004 for its multifamily direct loan and grant programs. The proposed rule would update dollar value amounts, align RHS programs with affordable housing industry standards and insurance industry trends, establish higher deductible limits, and provide flexibility to owners to select deductibles that can lower their premium costs. USDA is accepting comments on the proposed rule through December 26. Please email any feedback to Glenn Gallo by December 5 to inform NCSHA’s comments.

Freddie Mac Launches Down Payment Assistance Finder
Freddie Mac recently launched DPA One, a free online catalog to help mortgage lenders quickly find, understand, and match down payment assistance (DPA) programs for their home buyers. State HFA DPA programs are included in DPA One, which may make it easier for mortgage lenders to connect their borrowers to HFA programs and ultimately better reach the underserved borrowers these programs were designed to help. Freddie Mac says all 48 state-level housing finance authorities’ programs and local and municipal programs in Texas and Minnesota have been added to DPA One. Local and municipal programs in California, Florida, Illinois, Virginia, and other states will be added over time.

Treasury Publishes Guide to Using Emergency Programs for Housing Stability, Supply
The U.S. Treasury Department recently released a guide highlighting how state and local governments are using the Emergency Rental Assistance program, Homeowner Assistance Fund, and State and Local Fiscal Recovery Funds to support affordable housing, including emergency shelter, wraparound services, utility relief, home repairs, and new homes for renters and homeowners as part of the economic recovery from the Covid-19 pandemic. The guide calls attention to numerous state HFA programs financed with these emergency funds and how these programs have been layered with other financing sources.

Senate, House Moving on FY24 Appropriations
Congress continues to inch forward on Fiscal Year 2024 (FY24) spending legislation, with the Senate currently considering a “minibus” that includes the Transportation, Housing, and Urban Development (T-HUD) bill along with funding for a number of other agencies. Meanwhile, newly elected House Speaker Mike Johnson (R-LA) has circulated a proposed schedule for the rest of the 118th Congress that would see consideration of the House T-HUD bill as early as the week of October 30, although after several weeks of uncertainty, it may take additional time for that chamber to return to regular order. Johnson also suggested Congress may adopt another continuing resolution until January 15 or April 15 to keep government programs operating until it enacts separate appropriations bills for various federal agencies. The current continuing resolution expires November 17. NCSHA continues to advocate for funding for key HFA priorities such as the HOME Investment Partnerships program, as well as a legislative solution to the Performance-Based Contract Administration program.

IRS Allocates National Pool Credits
Earlier this month, the IRS published the amounts it has allocated to qualified states from the national pool of unused Housing Credit authority for calendar year 2023. The IRS allocated more than $3.2 million to 28 states, with Texas having the largest allocation at $450,294 and Vermont with the smallest at $9,702. This is the second year in a row the national pool was smaller than the previous year. Last year, the IRS allocated $5.4 million.

Biden – Harris Administration Supports Converting Commercial Properties to Affordable Housing
The Biden – Harris Administration today announced a set of initiatives by several federal agencies to support the conversion of high-vacancy commercial buildings to residential use, including through new financing, technical assistance, and sale of federal properties. The administration says these actions will create affordable and energy-efficient housing near transit and good jobs and will reduce greenhouse gas emissions, nearly 30 percent of which come from the building sector. The White House released a related Commercial to Residential Federal Resources Guidebook, with more than 20 federal programs across six federal agencies that can be used to support conversions, and announced training workshops will be offered this fall for local and state governments, real estate developers, owners, builders, and lenders on how to use federal programs for commercial to residential conversions and achieve additional goals including affordability and building zero emissions housing.

Treasury, Energy, IRS Open Applications for Tax Credits to Spur Clean Energy Investments in Underserved Communities
On October 19, the U.S. Department of Energy, in collaboration with the Treasury Department and Internal Revenue Service, opened a portal for interested parties to apply for a new tax incentive, authorized by the Inflation Reduction Act, for qualifying solar and wind facilities benefiting low-income communities.

The Low-Income Communities Bonus Credit Program under Section 48(e) of the Internal Revenue Code provides a 10- or 20-percentage point increase to the Investment Tax Credit for clean energy improvements depending on where they are located. Eligible solar and wind facilities installed in low-income communities or on Indian land will receive a 10-percentage point bonus, while facilities that are part of a qualified low-income residential building (including Housing Credit and most HUD and USDA properties) or low-income economic benefit project will receive a 20-percentage point bonus, with aggregate megawatt caps for each category of project.

Additional information on the Low-Income Communities Bonus Credit Program can be found here and the application portal here.

HUD Awards $100 Million Through Green and Resilient Retrofit Program
On October 19, the Department of Housing and Urban Development (HUD) announced the award of more than $100 million in new grants through the first “Leading Edge” round of its Green and Resilient Retrofit Program (GRRP). The GRRP was authorized by the Inflation Reduction Act and provides $800 million in grant and loan subsidy (which can support up to $4 billion in loans) for projects that improve energy and water efficiency and resiliency in HUD-assisted multifamily properties. See the list of awards.

HUD Provides $160 Million for Section 202 Capital, Rental Assistance
On October 3, HUD announced its award of $160.1 million to 25 nonprofit organizations through the Section 202 Supportive Housing for the Elderly Program. The funds will be used to build 526 new affordable and market-rate units and maintain and operate 1,262 rent-assisted units for low- and very low-income seniors. The funds are provided in two forms: capital advances, which cover the cost of the development, acquisition, or rehabilitation of units, and Project Rental Assistance Contracts, which cover the difference between the resident’s rent contribution and the cost of operating the project. More information about the organizations receiving funding is available here.

FHA Allows ADU Income in Mortgage Insurance Underwriting
The Federal Housing Administration (FHA) announced October 16 it will allow lenders, when underwriting a mortgage for FHA insurance, to count income from accessory dwelling units (ADUs), defined as small units of housing built inside, attached to, or on the same property as a primary residence. HUD says this change allows ADU rental income to be included in the borrower’s qualifying income and would allow more borrowers to qualify for FHA financing for properties with ADUs, including 203(k) rehabilitation mortgages. The changes, released in Mortgagee Letter 2023-17, apply to FHA Title II forward and home equity conversion mortgages, are effective immediately, and expand financing options for borrowers seeking to purchase a property with an ADU, rehabilitate an existing structure to add an ADU, or construct new homes with ADUs.

Fannie Mae Introduces 5 Percent Down Payment Option for 2- to 4-Unit Homes
Fannie Mae recently announced it will finance loans with down payments as low as five percent of the loan amount for owner-occupied two-, three-, and four-unit homes. The policy change applies to standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied transactions. (HFAs participating in Fannie Mae’s HFA Preferred program already have this term in their variance.) Currently, Fannie Mae requires down payments of 15-25 percent for duplexes, triplexes, and four-plexes. The change will apply to loan casefiles submitted or resubmitted on or after the weekend of November 18.

Policymakers, Industry Increase Focus on High Insurance Costs
Members of Congress, executive branch officials, and industry groups this month brought renewed focus on increasing property insurance costs and their impact on affordable housing. The Federal Housing Finance Agency announced last week it will hold a symposium November 14 and 15 to discuss the growing challenges associated with the affordability and availability of property insurance. The agency expects to announce more details about the symposium soon.

Earlier this month, the National Leased Housing Association published a report documenting owners’ and managers’ views on insurance cost increases and their impact. The report finds that 29 percent of housing providers experienced property insurance premium increases of 25 percent or more from 2022 to 2023 and 93 percent of housing providers expect to take action to mitigate the impact of higher insurance costs, including by increasing rent.

In Congress, the House Financial Services Subcommittee on Housing and Insurance postponed to November 2 a hearing it was scheduled to hold October 24 on the factors influencing insurance costs.

CDFI Fund Announces Availability of Funds for New Markets Tax Credits
The Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) has announced $5 billion will be available for the calendar year 2023 round of the New Markets Tax Credit Program (NMTC Program). The program provides a tax credit to corporate and individual taxpayers who make qualified investments with designated Community Development Entities (CDE). The capital raised is then invested in businesses operating in low-income communities. Applications to be considered a designated CDE are due November 8, applications to register for the NMTC Program are due November 15, and allocation applications are due December 19. The CDFI Fund will hold a webinar about the application process on November 16. More information about the application process is available here.

PRRAC Issues Report on Housing Credit QAPs
The Poverty & Race Research Action Council issued a report, Building Opportunity III: Affirmatively Furthering Fair Housing in the Low Income Housing Tax Credit Program, which found state Qualified Allocation Plans (QAPs) were less likely than previously to concentrate Housing Credit developments in high-poverty and segregated neighborhoods and more likely to include incentives for development in high-opportunity communities, contain stronger affirmative marketing and tenant selection practices, and define requirements for concerted community revitalization plans accompanying developments in low-income neighborhoods. The report, based on a survey of all 50 states, reviewed fair housing-related provisions in Housing Credit QAPs based on four categories: local contribution and approval requirements and incentives, encouragement towards siting in high-opportunity areas, tenant selection and affirmative marketing, and contribution to concerted community revitalization plans.

NCSHA in the News
Banker & Tradesman, 10.17.23, Freddie Mac Launches Down Payment Aid Navigator for Lenders
Housing Wire, 10.16.23, Freddie Mac rolls out down payment assistance tool
Yahoo Finance, 10.16.23, Freddie Mac Launches New Tool to Help Millions of Homebuyers Take Advantage of Down Payment Assistance Programs Nationwide

Looking Ahead

Legislative and Regulatory Activities

NCSHA, State HFA, and Industry Events

  • November 7 – 8 | ProLink Technology Live 2023 | Virtual
    Stockton Williams is speaking at this event.
  • November 16 – 17 | National Association of Home Builders Mortgage Roundtable | New York, NY
    Stockton Williams is participating in this event.
  • December 13, 12:00 – 5:30 pm ET | NCSHA’s AI and Affordable Housing: A National Symposium | Virtual

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