NCSHA Washington Report | August 12, 2022
During the Clinton Administration, HUD, saying it had been “the poster child for inept government…plagued for years by scandal and mismanagement,” took steps to reform. One of the most significant was its move in 1999 to rely on other public agencies to take responsibility for the renter safety, housing quality, and financial integrity of more than one million apartments supported by federal “housing assistance payments.”
In every state, plus DC, Puerto Rico, and the U.S. Virgin Islands, a single “Project-Based Contract Administrator” (two in California), “play[s] a critical role in the oversight and preservation of [the] properties by conducting on-site management reviews, protecting and engaging tenants, ensuring properties are well-maintained and in decent physical condition, and leveraging affordable housing resources to recapitalize properties,” according to the House Financial Services Committee.
Most PBCAs are public housing authorities; 33 are state HFAs that operate as PHAs. Even though they have performed exceptionally well, HUD has suffered from periodic bouts of bureaucratic doubt about the arrangement, which have put properties and renters at risk.
From 2011 – 2016, the agency prohibited the PBCAs in 42 states from conducting annual property reviews while they protested HUD’s efforts to rewrite its procurement rules for their services. As a result, in the department’s Southwest Region, “HUD paid subsidies to property owners for nonexistent and unsupported tenants based on falsified, inaccurate, and unverified information…because when HUD suspended the reviews of the assisted properties, it removed a major tool used by the contract administrators to verify housing assistance payment subsidies,” the agency’s inspector general found in 2020.
Now, HUD has proposed a radical restructuring of the entire PBCA system that would escalate risks throughout. Instead of each state having its own service provider, most would have to operate under one of five regional entities. Public agencies that provide financing to assisted properties — ensuring their continued viability — would be discouraged, if not disallowed, from providing PBCA services. State HFAs, the main PBCAs for 20-plus years, wouldn’t even get a fair chance to compete to remain in that role.
HUD’s proposed approach would also require a costly transition to new management systems and lengthy issuance of new regulations at the worst possible time. The agency’s shrinking, overstretched staff would have to take on new responsibilities it simply isn’t in a position to perform.
Look what happened in the Southwest, where HUD’s IG found, “HUD did not adequately implement replacement procedures or its own on-site monitoring to the deterioration and mismanagement risks to the properties it subsidized. This lack of monitoring resulted in owners not meeting contract requirements and incurring more than $5.6 million in questioned costs.”
HUD is better managed than it used to be, with strong leadership today at the top and career staff throughout dedicated to its work. We take the department at its word that it wants “the highest quality of services for residents and HUD.” But cutting out longtime partners with proven track records who bring a mission commitment, additional capacity, and the affordable financing properties need is no way to deliver them.
Stockton Williams | Executive Director
State HFA Emergency Housing Assistance
In This Issue
- NCSHA Urges HUD to Extend PBCA/HAPSS Draft Solicitation Comment Period
- Treasury Discusses New Fiscal Recovery Fund Rules with HFAs
- Inflation Reduction Act Would Provide Renewable Energy, Energy Efficiency in Affordable Housing
- New Democrat Coalition Presses Administration to Do More to Lower Housing Costs, Increase Affordable Housing Supply
- Ginnie Mae Revises Capital Requirements, Exempts HFAs
- CFPB Issues Circular on Data Security
- NCSHA in the News
- Looking Ahead
NCSHA Asks HUD to Extend PBCA/HAPSS Draft Solicitation Comment Period
In a letter sent this week to Secretary Marcia Fudge, NCSHA urged the Department of Housing and Urban Development to extend from August 29 to October 28 the public comment deadline on the draft solicitation for Housing Assistance Payments Contract Support Services (HAPSS). NCSHA argued this extension is necessary and appropriate to give the public and potential commenters adequate time to consider the many administrative, legal, operational, and policy issues the draft solicitation raises and will result in better informed comments that will be more helpful to HUD as it designs the final solicitation. In the event HUD does not extend its solicitation deadline as NCSHA has requested, send input you would like NCSHA to consider for its comment letter to Garth Rieman by August 19.
Treasury Discusses New Fiscal Recovery Fund Rules with HFAs
On Tuesday, NCSHA held a briefing for HFAs and senior Treasury Department officials to discuss recent guidance allowing more flexible use of fiscal recovery funds for affordable housing. During the briefing, Treasury provided an overview of the new guidance, discussed specific updates in the recovery fund FAQs, described a new How-To Guide jointly published by Treasury and HUD, and answered states’ questions. Participating HFAs expressed their thanks to Treasury for the guidance and shared strategies for optimizing the use of recovery funds for affordable housing. Later in the week, Treasury held a public briefing that covered many of the same topics and provided more detail on project examples included in the How-To Guide. A copy of the Treasury presentation and a recording of the public briefing are available in NCSHA’s Resource Center here.
Inflation Reduction Act Would Provide Renewable Energy, Energy Efficiency in Affordable Housing
Last weekend, the Senate narrowly passed the Inflation Reduction Act, the much-streamlined reconciliation legislation focused on Democrats’ health and climate priorities. The House is poised to consider the bill today. Unlike the reconciliation bill’s previous iteration, the Build Back Better Act, which did not garner sufficient Senate support to advance there, the Inflation Reduction Act does not include NCSHA’s primary affordable housing priorities related to the Housing Credit, the Neighborhood Homes Credit, and HUD program spending. However, the bill does include several climate-related provisions that could have a significant impact on the use of renewable energy technologies and energy efficiency in affordable housing.
Specifically, the Investment Tax Credit (ITC), which is used to finance renewable energy technologies such as solar panels, and the Section 45L new energy-efficient home credit would no longer reduce basis when used in conjunction with Housing Credit properties. Moreover, the bill provides a 20 percent bonus for ITC facilities used in conjunction with covered affordable housing programs and a 10 percent bonus for ITC facilities in low-income communities. It also appropriates $837.5 million through HUD to provide direct loans and grants to improve the energy and water efficiency and climate resilience of HUD-financed affordable housing properties. Additionally, the bill establishes a 15 percent alternative minimum tax for certain corporations. However, this should not negatively impact investment in Housing Credit developments as general business credits, such as the Housing Credit, still can be taken against this minimum tax.
New Democrat Coalition Presses Administration to Do More to Lower Housing Costs, Increase Affordable Housing Supply
The New Democrat Coalition, a House caucus of Democrats committed to economic growth, innovation, and fiscally responsible policies, sent President Biden a letter this week urging the administration to take action to lower the cost of housing and increase affordable housing development, which the coalition argues is key to fighting inflation. The letter called on the administration to take a number of actions related to the Housing Credit, including expediting the release of the Housing Credit Average Income Test regulations, providing deadline relief for Housing Credit properties that suffer a casualty loss, allowing relocation costs to be capitalized for rehabilitation projects, protecting the Housing Credit under implementation of a global minimum tax, and ensuring changes to the Community Reinvestment Act regulations do not discourage Housing Credit investments. The letter cited NCSHA-led ACTION Campaign comments to Treasury and IRS on the 2022–23 Priority Guidance Plan.
The coalition also urged the administration to take further actions to promote better zoning, planning, permitting, and affordable housing development through the Department of Transportation in conjunction with the Infrastructure Investment and Jobs Act enacted in 2021 and to take various actions related to promoting homeownership, including supporting manufactured housing and accessory dwelling units.
Ginnie Mae Revises Capital Requirements, Exempts HFAs
Ginnie Mae recently issued All Participant Memorandum (APM) 22-08 revising the institution-wide capital requirements in its Mortgage-Backed Securities Guide for financial institutions seeking approval as Ginnie Mae single-family, multifamily, manufactured home, and home equity conversion mortgage MBS issuers, as well as for existing issuers. It also revised its program risk parameters. Ginnie Mae excluded applicants and issuers that are instrumentalities of a U.S. state or territory, including but not limited to state housing finance authorities or agencies, from the institution-wide capital requirements. Instead, they must continue to maintain a “leverage ratio” of at least six percent, per the MBS Guide. As noted by Ginnie Mae, “…by exempting state HFAs from the capital requirements, Ginnie Mae is recognizing that the state sponsorship of these agencies enhances their counterparty standing.” All the APM 22-08 changes will be effective with issuer fiscal year-end December 31, 2022.
CFPB Issues Circular on Data Security
On Thursday, the Consumer Financial Protection Bureau issued Circular 2022-04 confirming financial companies may violate federal consumer financial protection law when they fail to safeguard consumer data. The circular provides guidance to consumer protection enforcers and explains how and when firms may be violating the Consumer Financial Protection Act with respect to data security, for example, if they fail to have adequate measures to protect against data security incidents. It also provides examples of widely implemented data security practices, such as multifactor authentication, adequate password management, and timely software updates.
NCSHA in the News
Novogradac, 8.3.22, Help Rewriting QAPs Provides Opportunity for Clarity, Simplification
Legislative and Regulatory Activities
- August 16 | Comments Due | SEC’s Proposed Rule on Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices
- August 19 | Comments Due to NCSHA | HUD’s Draft Solicitation on Housing Assistance Payments (HAP) Contract Support Services
- August 29 | Comments Due | HUD’s Draft Solicitation on Housing Assistance Payments (HAP) Contract Support Services
- October 22 │ Applications Due │ HUD Continuum of Care (CoC) Program Supplemental Funding Opportunity to Address Unsheltered and Rural Homelessness
NCSHA, State HFA, and Industry Events
- August 15 – 17 | US Bank HFA Symposium | St. Louis, MO
Rosemarie Sabatino will speak at this event. - August 17 – 19 | Arizona Housing Forum | Scottsdale, AZ
Jennifer Schwartz will speak at this event. - September 14 – 16 | 2022 New Mexico Housing Summit | Albuquerque, NM
Stockton Williams and Jennifer Schwartz will speak at this event. - September 27 – 29 | Oklahoma Housing Conference | Oklahoma City, OK
Stockton Williams will speak at this event. - October 18 | Ohio Housing Council Fall Symposium | Columbus, OH
Jennifer Schwartz will speak at this event. - October 19 – 21 | Affordable Housing Investors Council 2022 Affordable Housing Summit | Minneapolis, MN
James Tassos will speak at this event. - October 22 – 25 | NCSHA Annual Conference & Showplace | Houston
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