NCSHA Washington Report | December 13, 2024

President-Elect Trump’s campaign pledge to “open limited portions of Federal Lands to allow for new home construction” deserves more serious consideration than the media’s mostly facile treatment so far.

In the 12 westernmost states, where most federally-owned land is located, 2.7 million homes could be built if just 0.1 percent of it was made available for residential development, according to a 2022 projection by Congress’ Joint Economic Committee.

In California, to take one example, U.C. Berkeley’s Terner Center estimates the U.S. Postal Service alone controls 474 sites of at least 20,000 square feet each — totaling 77.5 million acres — including 264 that are located in largely residential areas.

For proof of concept, look at Nevada, where the federal Bureau of Land Management in October sold 20 acres appraised at $20 million to Clark County for $2,000 to support development of more than 200 homes serving buyers earning up to $70,000.

The bureau, by the way, is part of the U.S. Department of the Interior, which the president-elect has nominated North Dakota Governor Doug Burgum (R) to lead. Burgum recently put forward a comprehensive housing strategy to support his state’s growing economy, including new financial incentives through North Dakota HFA.

Outside the West, states where the federal government owns a significant chunk of ground include Arkansas, Florida, Michigan, New Hampshire, and Virginia. It stands to reason there could be more than a few developable sites among the millions of acres in each state, and in other states, too.

The Biden Administration seems to share the Trump team’s view that the opportunity is overdue for a serious look at least. Last summer, the president directed every federal agency “to assess surplus federal land that can be repurposed to build more affordable housing across the country…with a goal of quickly building more housing that is affordable for working families and climate resilient, which will bring down energy costs, while protecting local lands and waters.”

With the presidential transition now officially and fully underway, the agencies’ work to date should feed into the Trump Administration’s agenda for early action.

Even if federal lands outside the West offer relatively few opportunities for large-scale residential development, a comprehensive analysis of what’s possible and an effort to optimize viable sites where they exist could also spur state and local governments to be more pro-housing with real estate they control — which dwarfs what Uncle Sam owns.

One measure of that comes from the Center for Geospatial Solutions at the Lincoln Institute of Land Policy, which estimates the total buildable land owned by the feds and state and local governments combined that’s in “transit accessible” and “urban” areas alone could support up to seven million newly-built homes.

Lincoln Institute CEO George McCarthy makes the case: “People think that available land is a limiting agent to our ability to meet our housing needs. And it’s just not true.”

Stockton Williams | Executive Director

In This Issue

• Congress Continues Appropriations, Disaster Relief Negotiations as Deadlines Approach
• Treasury Endorses State Agency Qualified Contract Waiver Policies in Blog Post
• HUD Announces Final Rule for Single-Family Sale Program
• House Republican Steering Committee Endorses Hill for Financial Services Committee Chair
• HUD Publishes 2025 Operating Cost Adjustment Factors, Updates Methodology
• Looking Ahead

Congress Continues Appropriations, Disaster Relief Negotiations as Deadlines Approach
With time winding down before the current continuing resolution (CR) funding the federal government expires, congressional negotiators report getting closer to an agreement to extend the CR beyond the December 20 deadline and provide supplemental funding to address recent natural disasters. Congressional leaders appear to agree on a so-called “clean” CR extending government funding at current levels into March, without making any other major policy changes. House and Senate appropriators in both parties continue to discuss the appropriate size and scope of the disaster funding package. On November 18, the Biden Administration requested disaster funding totaling just under $100 billion, including $12 billion for the U.S. Department of Housing and Urban Development for the Community Development Block Grant Disaster Recovery program, but congressional negotiators have not yet agreed on the exact amount of funding to include in any final deal.

Treasury Endorses State Agency Qualified Contract Waiver Policies in Blog Post
On December 12, the U.S. Treasury Department published a blog post highlighting state Housing Credit agency best practices to discourage the use of qualified contracts as a means of removing the affordability restrictions from properties before the end of their extended use periods. The blog post states, “Treasury strongly supports efforts undertaken by state allocating agencies to adopt policies that prioritize credits for, or limit credit allocations to, projects for which the owner agrees to waive the qualified contract option.” The post goes on to note Treasury encourages agencies to apply waiver requirements for both 9 and 4 percent properties. Treasury highlights the tax code’s direction to state agencies to give preference to properties that serve qualified tenants for the longest periods possible. Given that qualified contracts curtail the affordability period, their use can be seen as contrary to the goal of producing properties that will remain affordable for as long as possible.

Treasury’s position in the blog post is consistent with NCSHA’s board-adopted Recommended Practices in Housing Credit Administration, which encourage state agencies to require Housing Credit applicants to waive the qualified contract option as a condition of receiving credits for both 9 and 4 percent properties. NCSHA has long advocated for statutory changes to support preservation by eliminating the qualified contract option for all newly-financed properties and modifying the qualified contract price formula for existing properties that maintain a qualified contract option so that the price would be based on the property’s fair market value as restricted. As of the end of 2023, qualified contracts have resulted in the loss of approximately 150,000 affordable apartment homes from the Housing Credit program according to NCSHA survey data.

HUD Announces Final Rule for Single-Family Sale Program
On Thursday, the Federal Housing Administration (FHA) published its final rule establishing a Single-Family Sale Program, which transitions the U.S. Department of Housing and Urban Development’s single-family note sale program from a demonstration to a permanent program and provides comprehensive regulations for the sale of delinquent single-family mortgages. Key features of the final rule include requiring all note sale purchasers to adhere to post-sale requirements, including offering a “first look” to owner-occupants when selling properties following foreclosure on notes purchased from HUD. The final rule also creates a direct note sale program through which HUD will work directly with local governments and nonprofits to execute note sales tailored to meet local community needs, while maintaining HUD’s commitment to maximizing recoveries on challenging assets. The final rule becomes effective January 10, 2025.

House Republican Steering Committee Endorses Hill for Financial Services Committee Chair
The House Republican Steering Committee on Thursday endorsed Arkansas Republican French Hill to chair the House Financial Services Committee in the next Congress. The full House Republican conference must ratify the steering committee’s selection, which is virtually certain. Hill currently serves as Financial Services vice chair and leads the digital assets subcommittee. He defeated fellow committee members Andy Barr (KY), Bill Huizenga (MI), and Frank Lucas (OK). Hill founded a community bank and served as deputy assistant secretary of the Treasury for corporate finance from 1989 to 1991. He also served on President George H.W. Bush’s Economic Policy Council and as an aide on the Senate Banking Committee.

HUD Publishes 2025 Operating Cost Adjustment Factors, Updates Methodology
On Wednesday, HUD published the 2025 operating cost adjustment factors (OCAFs) used to adjust Section 8 contract rents annually. The national average OCAF for 2025 will be 4.8 percent, down slightly from the 2024 average of 5.3 percent. The 2025 OCAFs are applicable to properties with contract anniversary dates on or after February 11, 2025.

In addition, HUD has proposed a new methodology for calculating increases in the insurance component of the OCAFs. For the 2025 OCAFs and going forward, HUD will use the year-over-year change in insurance costs from audited financial statements of multifamily properties on a state-by-state basis, except in states with fewer than 100 multifamily properties with submitted financial statements in 2022 and 2023, in which case HUD will use the HUD regional average change. This compares with HUD’s use in recent years of the Producer Price Index for property and casualty insurance, which was a national index, and therefore failed to capture geographic variation in the cost of insurance. Comments on this new methodology are due by January 10; if HUD receives no adverse comments, the changes will go into effect along with the new OCAFs on February 11. To inform NCSHA’s comments, please send your feedback to Robert Henson by January 8.

Looking Ahead

Legislative and Regulatory Activities

• December 13 | Comments Due to NCSHA | FHA Single-Family Loss Mitigation Changes
• December 20 | Comments Due to NCSHA | USDA Proposed Rule to Preserve Affordability of Section 538 Multifamily Properties
• December 23 | Comments Due | FHA Single-Family Loss Mitigation Changes
• January 6 | Comments Due | USDA Proposed Rule to Preserve Affordability of Section 538 Multifamily Properties
• January 8 | Comments Due to NCSHA | HUD Notice on 2025 Operating Cost Adjustment Factors
• January 10 | Comments Due | HUD Notice on 2025 Operating Cost Adjustment Factors
• January 22 | Comments Due to NCSHA | FHFA Proposed Rule on FHLB Governance
• February 3 | Comments Due | FHFA Proposed Rule on FHLB Governance

NCSHA, State HFA, and Industry Events

• December 17, 1:00 pm ET | NCSHA Webinar: Affordable Housing Program Insights from NCSHA’s 2023 State HFA Factbook
• January 12 – 17 | NCSHA’s HFA Institute 2025 | Washington, DC
• January 29 – 30 | Affordable Housing Tax Credit Coalition 2025 Annual Meeting | Newport Beach, CA
  Jennifer Schwartz will speak at this event.