NCSHA Washington Report | September 13, 2024

Wynne Senior Residences in West Philadelphia is at once exceptional and commonplace, and both are compliments. Exceptional because the conversion of an old theater and ballroom a few years ago achieved almost the highest possible standard of environmental building performance, while also providing homes to dozens of low-income seniors and adding to the revitalization of the Wynnefield – Overbrook community.

Commonplace because the way the award-winning project got done — with state and local funds invested through a partnership between a leading developer and a grassroots neighborhood group — is a formula that works, and is working, in thousands of similar projects all over the country.

A fact Pennsylvania Governor Josh Shapiro seemed well aware of during an event at the property I attended yesterday. Calling housing affordability his state’s “next great challenge,” the governor pointed to big moves made recently by Massachusetts, Michigan, and New York as one reason he believes Pennsylvania can and should build on significant new housing investments he signed into law only a few months ago.

The centerpiece Shapiro secured with bipartisan backing in that bill, hailed by housing advocates as a “monumental win,” was an increase to $100 million from $60 million for the state’s PHARE Fund, administered by the Pennsylvania HFA. The fund is capitalized by a combination of a share of natural gas impact fees and realty transfer tax revenues.

Other states are creating or expanding recurring funding. Colorado voters in 2022 approved dedicating 0.1 percent of annual state income tax revenue to affordable housing, which is expected to raise up to $300 million a year. In New Mexico, a recent annual commitment of financing derived from oil and gas drilling, the result of an advocacy campaign organized by the New Mexico MFA, will yield $20 – $30 million — 17 times more funding than had been appropriated.

In other states, recurring funding is coming from another source. A new report from the Center on Budget and Policy Priorities finds that 16 of the 33 states, plus the District of Columbia, with a real estate transfer tax “earmark part or all of the revenue collected to fund some combination of affordable housing development, rehabilitation, and ongoing operating costs (such as rent subsidies, utilities, and property management costs).”

The list may surprise: Florida, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Nebraska, New Hampshire, New Jersey, Nevada, Ohio, Pennsylvania, South Carolina, Vermont, and West Virginia.

State legislatures also are acting in other ways. The Mercatus Center at George Mason University in July counted “263 individual bills under consideration that would contribute to easing the regulatory burdens on home building, touching on areas from accessory dwelling unit (ADU) permitting to building code reforms.”

Based on this criteria, the center said these states enacted “housing supply bills” over the period July 2023 – July 2024: Arizona, California, Colorado, Connecticut, Iowa, Florida, Maine, Maryland, New Hampshire, New Jersey, North Carolina, Oregon, Tennessee, Utah, Vermont, Virginia, Washington, and Wisconsin.

There’s also activity these lists don’t capture. Surging state interest in housing affordability is commonplace. And exceptional.

Stockton Williams | Executive Director

In This Issue

• NCSHA Supports HUD Proposal to Incentivize Housing Credit Qualified Contract Waivers
• NCSHA Asks HUD to Extend Buy America Exemption for FY24 HOME, HTF Grantees
• Support for Housing Credit Legislation Continues to Grow
• Congress Working on End-of-Fiscal-Year Bills to Keep Government Running
• HUD Issues 2025 Qualified Census Tract, Difficult Development Area Designations
• Barr Outlines New Bank Capital Proposal
• Federal Agencies Mark VAWA’s 30th Anniversary with Interagency Statement on Housing Protections
• Looking Ahead

NCSHA Supports HUD Proposal to Incentivize Housing Credit Qualified Contract Waivers
This week, NCSHA sent the U.S. Department of Housing and Urban Development (HUD) a letter in support of its housing notice proposing new guidance that would require developers applying for Housing Credits to waive the qualified contract option as a condition of receiving either Federal Housing Administration (FHA) multifamily rental or risk-sharing insurance for their properties. The proposal would apply to FHA multifamily rental projects for which a firm commitment has not been issued and Risk Share insurance transactions with firm approval letters (FALs) issued on or after December 31, 2024. NCSHA urged HUD to expand its proposal to bar owners of existing developments for which they retain the qualified contract option from accessing FHA multifamily rental and Risk Share insurance if they exercise the qualified contract option after December 31, 2024 (also applicable to projects without a firm commitment or FAL issued after that date). NCSHA’s most recent data indicates that, as of the end of 2023, approximately 115,000 Housing Credit units have been lost from the affordable housing inventory due to qualified contracts.

NCSHA Asks HUD to Extend Buy America Exemption for FY24 HOME, HTF Grantees
NCSHA recently sent a letter to HUD Community Planning and Development Principal Deputy Assistant Secretary Marion McFadden asking for all FY24 HOME and Housing Trust Fund (HTF) grant funds to be exempt from Buy America Preference (BAP) requirements, in light of substantial delays by HUD in finalizing award agreements for these programs. Previous guidance from HUD indicated HOME and HTF grant proceeds obligated prior to August 23, 2024, would not be subject to BAP; however, not all HOME and HTF award agreements were in place with funds obligated prior to that date, potentially creating a situation where some participating jurisdictions, but not others, would be required to adhere to BAP requirements when using their FY24 HOME and HTF grants. NCSHA previously wrote to HUD urging broad application of its waiver authority and to the Office of Management and Budget arguing for a categorical exemption from Build America Buy America requirements for the HOME and HTF programs.

Support for Housing Credit Legislation Continues to Grow
With Congress back for its final work period before the election, congressional support for the Affordable Housing Credit Improvement Act continues to increase. Cosponsorship has grown to 242 members of the House, of which 126 are Democrats and 116 are Republicans, including Representatives Michael Guest (R-MS) and Nikki Budzinski (D-IL), who came on this week. Senate support remains at 34 cosponsors, evenly divided between Republicans and Democrats. NCSHA continues to work to maximize cosponsorship in the 118th Congress, with the goal of having all returning cosponsors renew their support for the bill upon its reintroduction when the 119th Congress convenes next year. We expect more members, including Democrats in the queue to join the bill, to be added before the end of the current Congress.

Congress Working on End-of-Fiscal-Year Bills to Keep Government Running
Congress returned to Washington this week facing an October 1 deadline to enact legislation to avoid a government shutdown at the end of the current fiscal year. In the House, the Republican leadership is struggling to pass its preferred measure, a continuing resolution (CR) through March 28, 2025, paired with legislation designed to make it illegal for noncitizens to register to vote in federal elections. In the Senate, meanwhile, Republican and Democratic appropriators appear to agree on a so-called “clean” CR (i.e., free from extraneous policy provisions) that would fund the government through December 13, 2024, but seem intent to wait until the House acts first.

HUD Issues 2025 Qualified Census Tract, Difficult Development Area Designations
This week, HUD’s Office of Policy Development and Research released the 2025 designations for Qualified Census Tracts (QCTs) and Difficult Development Areas (DDAs). Housing Credit properties located in a QCT or DDA are eligible for a basis boost of up to 30 percent. HUD designates DDAs and QCTs each year. DDAs are areas with high development costs relative to area median gross income (AMGI), while QCTs are census tracts with a poverty rate of at least 25 percent or in which 50 percent of the households have incomes below 60 percent of AMGI. These designations will take effect for Housing Credit allocations made after December 31, 2024, or for tax-exempt bond-financed buildings for which bonds are issued and properties are placed in service after December 31, 2024. More information about the methodology for determining QCTs and DDAs is available in HUD’s notice.

Barr Outlines New Bank Capital Proposal
Speaking at a Brookings Institution event Tuesday, Federal Reserve Board Vice Chair for Supervision Michael Barr announced he would recommend the board consider modifying and republishing a proposed rule federal bank regulators released last year to adjust capital standards for large banks. The new proposal would include lower overall capital requirements compared to the original proposal, which Barr said reflects widespread feedback from the industry. Barr noted specifically that the new proposed rule would not include the same increased risk weighting for higher loan-to-value ratio (LTV) single-family mortgages included in the initial proposal. NCSHA expressed strong opposition to this change in our comments on the proposed rule, arguing the higher risk weighting was unnecessary and would hinder access to homeownership for low- and moderate-income households. Barr said the new proposed rule would lower the risk weighting for loans with an LTV of 90 percent or below and maintain the same weighting for mortgages with LTV ratios above 90 percent and up to 100 percent.

It is not yet clear when the Federal Reserve will consider whether to publish the new proposal and if the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency will follow suit.

Federal Agencies Mark VAWA’s 30th Anniversary with Interagency Statement on Housing Protections
On September 12, the 30th anniversary of the Violence Against Women Act (VAWA), the Secretaries of the U.S. Departments of Agriculture, Housing and Urban Development, Justice (DOJ), Treasury, and Veterans Affairs jointly issued an interagency statement on the housing protections the law applies to programs under the jurisdiction of each of the signing agencies, including programs administered by state housing finance agencies such as the HOME Investment Partnerships program, rental assistance, and the Housing Credit. The statement highlights housing rights and protections the law provides to those who have experienced domestic violence, dating violence, sexual assault, or stalking. It also notes each agency is responsible for implementing VAWA’s housing protections for their covered programs consistent with the agencies’ legal authorities. This includes approving a self-certification form for status as a VAWA victim, establishing model emergency transfer plans for housing providers, developing a process for reviewing VAWA compliance, and other guidance responsibilities.

While HUD has issued various VAWA guidance documents, the Treasury and Internal Revenue Service (IRS) have not previously issued guidance related to VAWA for the Housing Credit program, which NCSHA has strongly urged. In the absence of Treasury/IRS guidance, NCSHA adopted in 2017 a recommended practice in Housing Credit administration related to VAWA implementation. This joint statement could be used by Treasury as the launching point for further direction related to VAWA implementation for the Housing Credit.

In addition to the joint statement, the Biden – Harris Administration issued a fact sheet outlining other actions it is taking to mark the law’s anniversary, which President Biden championed when he was in the Senate in 1994 at its initial passage. These actions include $690 million in DOJ grant funding for gender-based violence and trauma training for law enforcement and pilot programs for VAWA protection implementation, the launch of a new DOJ National Resource Center on Cybercrimes Against Individuals authorized in the VAWA reauthorization legislation in 2022, collaboration with the private sector to combat image-based sexual abuse generated by artificial intelligence technology, and other programs aimed at preventing gender-based violence.

Looking Ahead

Legislative and Regulatory Activities

• 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 the Qualified Contract Loophole in the Low-Income Housing Tax Credit Program
• October 14 | Comments Due to NCSHA | Fannie Mae and Freddie Mac Affordable Housing Goals, 2025 – 2027
• October 28 | Comments Due | Fannie Mae and Freddie Mac Affordable Housing Goals, 2025 – 2027

NCSHA, State HFA, and Industry Events

• 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
  Jennifer Schwartz will participate in this event.
• September 28 – October 1 | NCSHA’s 2024 Annual Conference & Showplace | Phoenix
• October 21 – 22 | ProLink Technology Live 2024 | Virtual
  Jennifer Schwartz is speaking at this event.