NCSHA Washington Report | August 16, 2024

Testifying at a House subcommittee hearing last month, attorney Paul Compton, who served as HUD General Counsel in the Trump Administration, called attention to federal regulations’ complicity in making affordable housing more expensive than it needs to be, comparing “hundreds of federal government red tape impediments,” alongside the thousands of state and local ones they spur, to “the tiny ropes of Lilliputians in Gulliver’s Travels,” collectively constraining more efficient and affordable action by the giant of American entrepreneurship.

Fixing the problem has been a top priority for NCSHA for years. We’ve seen some progress recently. For instance, HUD, USDA, and Treasury under both the Trump and Biden-Harris administrations waived and streamlined some time-sucking, money-draining rules during Covid. Several streamlining improvements from that period are now permanent, to consumers’ benefit. HUD recently proposed significant simplifications to the HOME program regulations in line with our recommendations.

Various agencies over the past few years also have smoothed regulatory pathways in a number of programs and optimized the effectiveness of others as part of the White House’s “housing supply action plan” activities, the latest of which were announced this week. On the other side of the coin, some elements of the different industrial policies promoted by the Trump and Biden-Harris administrations have had effects that tend to make housing more expensive.

One of the most articulate voices for a lighter regulatory touch is Sara Bronin, who chairs the national Advisory Council on Historic Preservation. Bronin, an architect and lawyer by training who is an expert on zoning and land use, has decried the multibillion-dollar cost-increasing impacts of ossified implementation of “17 sentences, last updated almost 30 years ago”: the federal requirements, and their byzantine state and local interpretation, for rehabilitating historic properties.

Last week, the council proposed an accelerated approach for agencies to use in determining how to apply the historic standards to proposed projects they review for funding, which the White House says could lower development costs “for millions of federally-funded, licensed, or owned housing units across the country.”

Historic buildings already are an underrated source of new housing supply. One indicator is the impact of the federal tax credit for preservation projects, which the National Park Service reports has stimulated development of more than 356,000 new homes and 314,000 rehabs, nearly 200,000 of which serve low- and moderate-income households. State-level historic rehab credits have also taken off — jumping from 10 in 2002 to 39 as of last year — and eight of them “include some type of affordable housing provision,” according to the National Trust for Historic Preservation.

Historic conversions of all kinds currently face the same construction and financing challenges as other real estate projects, plus significantly less equity investment coming in from the federal credits as a result of the flood of new clean energy credits now available to the same investors, according to Mike Novogradac. All the more reason for the government at every level to do whatever it can to cut costs through faster approvals.

Stockton Williams | Executive Director

In This Issue

• NCSHA Asks GSEs, FHFA to Expand Duty to Serve Efforts
• White House Announces FFB Interest Rate Collar for Risk-Sharing Loans
• HUD Seeks Feedback on Proposal to Require FHA Multifamily Rental, Risk-Share Transactions Receiving Housing Credits to Waive Qualified Contract Option
• HUD Seeks Comments on Draft Handbook Update
• New VASH Policies to Improve Assistance to Veterans
• $140 Million Awarded to HFAs, Other State Agencies to Expand Housing Opportunities for Adults Living with Disabilities
• $100 Million Available Through HUD’s PRO Housing Program
• HUD Publishes FY25 Fair Market Rents
• Adeyemo Urges FHLBs to Increase AHP Investments
• USDA Issues Final Rule on Special Servicing Options
• NAEH Releases 2024 State of Homelessness Report
• NCSHA in the News
• Looking Ahead

NCSHA Asks GSEs, FHFA to Expand Duty to Serve Efforts
On Monday, NCSHA submitted comments on the Federal Housing Finance Agency’s request for input on Fannie Mae’s and Freddie Mac’s Underserved Markets Plans for 2025 – 2027. In the letter, NCSHA encouraged FHFA and the government-sponsored enterprises (GSEs) to further explore potential partnerships with HFAs to meet their Duty to Serve obligations. NCSHA expressed appreciation that both GSEs propose to remain active Housing Credit investors and urged FHFA to help the firms maximize their involvement in the Housing Credit market by seeking clarification the GSEs are not classified as tax-exempt controlled entities and by allowing the firms to receive Duty to Serve credit for investments that support other Duty to Serve activities in addition to those that support rural housing. The letter also suggested the GSEs provide more funding and equity for preserving affordable housing properties financed through the U.S. Department of Agriculture’s Section 514 and 515 programs, promoting rural homeownership, and financing affordable home improvement.

White House Announces FFB Interest Rate Collar for Risk-Sharing Loans
The White House announced Tuesday a number of actions to increase housing supply, including a change to provide more interest rate certainty for HFAs using the Federal Housing Administration’s risk-sharing initiative with the Federal Financing Bank to finance affordable housing production and preservation. The program amendment will establish an interest rate floor and a cap, called a “collar,” on the financing the U.S. Treasury Department will offer risk-sharing participants. The U.S. Department of Housing and Urban Development (HUD) posted a press release and housing notice to describe the program changes. NCSHA applauds the new financing option.

HUD Seeks Feedback on Proposal to Require FHA Multifamily Rental, Risk-Share Transactions Receiving Housing Credits to Waive Qualified Contract Option
HUD’s Office of Multifamily Housing has issued for comment a draft housing notice that would require owners seeking access to FHA multifamily rental and risk-sharing insurance for Housing Credit properties to waive their right to the qualified contract provision in Section 42 of the tax code. NCSHA has long pressed Congress and the Administration to take action to prevent the early termination of Housing Credit affordability and eligibility restrictions by owners who exercise the qualified contract option, which allows them to lift restrictions as early as 15 years after a property is placed in service. NCSHA applauds HUD for taking this important step to incentivize owners to waive their right to a qualified contract, which we had urged in a letter last September. Comments are due to HUD by September 20.

HUD Seeks Comments on Draft Handbook Update
On Tuesday, the Federal Housing Administration (FHA) posted a draft mortgagee letter (ML), “Modernization of Engagement with Borrowers in Default,” on its Single-Family Housing Drafting Table for review and feedback by September 13. The draft ML proposes changes to align the handbook with the final rule on “Modernization of Engagement with Mortgagors in Default” HUD published in the Federal Register on August 2, described in Washington Report. Please send comments you wish NCSHA to consider in its feedback to Rosemarie Sabatino by September 4.

New VASH Policies to Improve Assistance to Veterans
On August 8, HUD announced modifications to the Veterans Affairs Supportive Housing (VASH) program to improve access for more veterans experiencing homelessness. HUD will require public housing agencies (PHAs) administering VASH to set initial eligibility for veterans at 80 percent of area median income (AMI) rather than the previous standard of 50 percent and exclude the value of veterans’ service-connected disability benefits from income calculations to determine eligibility. The HUD announcement says the Treasury Department expects to soon issue guidance related to the income definition for application to Housing Credit developments in which VASH recipients may reside.

The guidance also provides additional flexibility to PHAs, allowing them to award in a non-competitive manner VASH project-based contracts to units in Veterans Affairs facilities that serve families, approve exception payment standards up to 140 percent of fair market rent, and set a separate minimum rent policy that could include a zero-dollar minimum rent for VASH participants. HUD also announced it is awarding $20 million for additional administrative fee funding to 245 PHAs that administer the VASH program. The changes will be effective upon publication of the notice in the Federal Register.

$140 Million Awarded to HFAs, Other State Agencies to Expand Housing Opportunities for Adults Living with Disabilities
On Wednesday, HUD announced it had awarded $138.5 million to 14 HFAs and four other state housing agencies through the Section 811 Project Rental Assistance for Persons with Disabilities program. The grantees will use the funding for rental assistance and supportive services for eligible households and to develop strategies to identify and refer them to eligible homes. The awardees also will collaborate with Medicaid and health and human services agencies to connect individuals with appropriate long-term support services and facilitate community integration.

$100 Million Available Through HUD’s PRO Housing Program
On Tuesday, HUD announced $100 million is available through the second round of funding for its Pathways to Removing Obstacles to Housing (PRO Housing) program. In June, 19 states and the District of Columbia received $85 million through the first round of competitive grant funding. The local governments, states, metropolitan planning organizations, and multijurisdictional entities selected for grant awards will use PRO Housing funding to address restrictive land use or regulatory policies, improve and implement housing strategies, facilitate new housing construction, repair existing homes, and reduce energy costs. The grants will range from $1 million to $7 million. The application deadline for this round of PRO Housing funding is October 15.

HUD Publishes FY25 Fair Market Rents
HUD published on Wednesday the FY25 Fair Market Rents (FMRs) for its Housing Choice Voucher and other programs. HUD annually establishes FMRs to help PHAs determine payment standards used to calculate the maximum monthly subsidy for HUD-assisted households in specific geographic areas. The FMRs also determine initial rents, rent ceilings, and award amounts for several HUD programs, including the HOME Investment Partnerships and Emergency Solution Grants programs. Interested parties may submit comments on the FMR notice by October 1; if no valid requests for FMR reevaluation for specific areas are received by that date, HUD will implement the FY25 FMRs as released.

Adeyemo Urges FHLBs to Increase AHP Investments
During a July 31 meeting with Federal Housing Finance Agency Director Sandra Thompson and the leadership of the 11 Federal Home Loan Banks (FHLBs), Treasury Deputy Secretary Wally Adeyemo called on the FHLBs to increase their contributions to their affordable housing programs (AHPs) from 10 percent to at least 20 percent of revenue. Adeyemo also urged the FHLBs to use a portion of their existing unrestricted retained earnings to create a pool of capital that can lower the cost of new housing production across the country. The FHLBs are required by statute to contribute at least 10 percent of revenue each year to their AHPs but can choose to contribute more. In its comprehensive report on the FHLB system published late last year, FHFA called on Congress to increase the minimum to 20 percent and recommended the FHLBs voluntarily increase their contributions (which they are expected to do). NCSHA has long supported legislation to increase the FHLBs’ minimum AHP contribution to 20 percent and expressed support for the proposal in a recent comment letter sent to FHFA.

USDA Issues Final Rule on Special Servicing Options
On Thursday, the U.S. Department of Agriculture’s Rural Housing Service published its final rule regarding the Single-Family Housing Guaranteed Loan Program’s Special Servicing Options for Non-Performing Loans, which becomes effective February 11, 2025. Under the final rule, mortgage recovery advances executed on or after the effective date of the final rule will not be secured by a lien in favor of the USDA but will remain a part of the servicer’s first lien. Additionally, when processing a loan modification, a servicer may extend the term in one-month increments, up to a maximum of 480 months, until the targeted payment reduction has been achieved. NCSHA submitted comments on behalf of state HFAs on March 28, 2023, on the proposed regulation.

NAEH Releases 2024 State of Homelessness Report
The National Alliance to End Homelessness recently released its 2024 State of Homelessness Report, which finds more people than ever are experiencing homelessness for the first time. The report also shows a record-high number of people are living in unsheltered environments, the number of severely housing cost-burdened renters (i.e., those paying more than 50 percent of their income for rent) has increased dramatically, and the numbers of veterans and individuals experiencing chronic homelessness are rising again after years of declines due to targeted assistance for these groups.

NCSHA in the News
Liberal (KS) First Leader & Times, 8.8.24, Moran and colleagues introduce legislation to increase rural housing investment
Novogradac Journal of Tax Credits, 8.7.24, Approaches Vary Among Newer State-Level LIHTC Incentives
The Rippon Advance, 8.5.24, Moran, Young, LaHood offer bipartisan, bicameral bill to preserve rural housing investments
Notes from Novogradac, 8.5.24, Bipartisan Bills Recently Introduced in Congress would Turn Distressed and Vacant Commercial Real Estate into Affordable Housing

Looking Ahead

Legislative and Regulatory Activities

• August 28, 2:00 pm ET | FHA Stakeholder Briefing: Changes to the 203(k) Rehabilitation Mortgage Insurance Program | Register
• September 4 | Feedback Due to NCSHA | Draft HUD Mortgagee Letter on Modernization of Engagement with Borrowers in Default
• September 10 – 11 | FHFA Advisory Committee Meeting on Affordable, Equitable, and Sustainable Housing | Washington, DC, and Virtual
• September 13 | Feedback Due | Draft HUD Mortgagee Letter on Modernization of Engagement with Borrowers in Default
• September 20 | Comments Due | HUD Drafting Table Edits to HUD Guidance on Qualified Contract Loophole in the Low-Income Tax Credit Program

NCSHA, State HFA, and Industry Events

• August 20 – 22, 1:30 – 4:30 pm ET | NCSHA’s Housing Credit 101: Compliance | Virtual
• August 21 – 23 | 2024 Arizona Housing Forum | Fort McDowell, AZ
  Jennifer Schwartz will participate in this event.
• August 27 | Early-Bird Registration and Hotel Discounts End | NCSHA’s 2024 Annual Conference & Showplace | Phoenix
• September 4 – 5 | 2024 HousingIowa Conference | Des Moines, IA
  Jennifer Schwartz will participate in this event.
• September 19 | Ballard Spahr’s 2024 Housing Authority Summit | Washington, DC
  Jennifer Schwartz will participate in this event.
• September 24 – 26 | Oklahoma Housing Conference 2024 | Midwest City, OK
  Stockton Williams will speak at this event.
• September 26 – 27 | Novogradac 2024 Housing Tax Credit and Bonds Conference | New Orleans, LA
  Jennifer Schwartz will participate in this event.
• September 28 – October 1 | NCSHA’s 2024 Annual Conference & Showplace | Phoenix