NCSHA Washington Report | February 11, 2022
The real estate story of the moment is single-family built-to-rent (BTR), which is actually a bunch of stories wrapped up in one.
A Wall Street story. Hunter Housing Economics projected $40 billion of debt and equity flowed into BTR last year, seeing potential annual production of 100,000 new single-family rentals in the next few years. Big investors are expecting average risk-adjusted returns of eight percent, higher than any other real estate sector, according to the research firm Green Street.
A Main Street story. National Association of Home Builders (NAHB) chief economist Rob Dietz, who has been on the trend for years, noted in 2020 that BTRs are “more in the middle of the U.S. rather than the coasts; almost one-quarter of SFBFR homes were built in Texas, Oklahoma, Arkansas, and Louisiana.” A Yardi Matrix analysis shows almost all the activity is in “secondary” and “tertiary” markets: “No SFR communities are being built in gateway metros.”
A home builder story. The Wall Street Journal reported last summer, “The country’s largest home builders…will put down some $40 billion more during the next 18 months.” Name-brand builders like Lennar, LGI, Meritage, D.R. Horton, Taylor Morrison, and Toll Brothers all are in the game.
An apartment developer story. Walker & Dunlop, the largest multifamily loan originator, calls single-family BTR “an increasingly popular concept within the multifamily industry [that] currently makes up nearly 10 percent of new homes built.” Top-15 apartment developers Mill Creek Residential and Continental Properties are reportedly entering the business.
And for housing affordability, a complicated story. Clearly, single-family BTR is adding some supply where it’s desperately needed. “The build-to-rent space kind of serves its purpose as being entry-level housing in a market where new homes at a reasonable price point are few and far between,” says economist Ali Wolf of Zonda Economics.
The median household income for renters in new single-family units is $77,000 — 48 percent lower than the median income for owners in new single-family units ($114,000), according to Harvard’s Joint Center for Housing Studies. This reflects BTRs’ generally smaller structures and lot sizes (and probably their locations in some markets), although NAHB research suggests BTRs “represent an outsized share at both the lower and higher level of construction permit values.”
Still, some single-family BTR development is happening in far-flung areas where experience suggests transportation costs could erode the housing affordability benefits. At a recent Urban Land Institute event, “panelists agreed that investors are currently considering BTR sites that would have seemed like longshots years ago.”
And notwithstanding the bullish growth projections — Zelman & Associates tallies current capital commitments sufficient to develop 315,000 BTR homes — the sector still faces the same barriers to scale as for-sale homes: labor shortages, materials costs, and regulatory red tape.
We agree with Continental Properties CEO James Schloemer: “It is too early to tell if this model can be developed at costs that will significantly serve the needs of missing middle households.”
Stockton Williams | Executive Director
State HFA Emergency Housing Assistance
In This Issue
- NCSHA Urges Treasury to Fix ERA Reporting Process
- NCSHA to Host Meeting with IRS on Submitting Form 8610 for State Housing Credit Agency Staff
- HOME Coalition Urges Appropriators to Provide Maximum HOME Funding in FY 2022
- House Passes Continuing Resolution to Keep Government Running Until March 11
- GAO Raises Need to Balance Speed of ERA Assistance with Program Oversight
- FHFA Releases Proposed 2022–26 Strategic Plan
- New Paper Confirms Long-Term Benefits of HHF Mortgage Assistance Programs
- HUD Releases 2021 Homeless Assessment Report
- Looking Ahead
NCSHA Urges Treasury to Fix ERA Reporting Process
On February 8, NCSHA sent the Treasury Department a letter repeating concerns about the quarterly reporting process for the Emergency Rental Assistance (ERA) program and outlining specific technical problems ERA grantees have encountered while using Treasury’s reporting portal. These technical problems, including error messages when uploading bulk data and the inability to fix mistakes in the system or delete duplicate data elements, are resulting in what many grantees believe is poor quality data, while also taking substantial time away from other program operations.
In addition to fixing the portal, NCSHA urged Treasury to provide technical assistance to grantees and give them more time between when Treasury makes changes to reporting guidance and when reports are due. Most recently, Treasury issued updated reporting guidance on January 27, just three business days before the reporting deadline for fourth quarter 2021. NCSHA originally brought these issues to Treasury’s attention in a November letter, in which NCSHA urged Treasury to limit quarterly reporting requirements to the data elements required by law and require a more detailed, cumulative report on both ERA programs after their respective sunset dates. NCSHA’s letter this week reiterated this recommendation.
NCSHA to Host Meeting with IRS on Submitting Form 8610 for State Housing Credit Agency Staff
On Wednesday, February 16, NCSHA will host a video meeting with senior Internal Revenue Service officials about submitting the 2021 Form 8610. This meeting is open to state HFAs and other state Housing Credit agency staff only. IRS will review and answer questions about the 2021 Form 8610 and address how to reflect deadline extensions and waivers from its COVID-19 relief guidance for the Housing Credit. Form 8610, which states provide annually to report on their Housing Credit program activity, is due to IRS by February 28. State HFA and other state Housing Credit agency staff who would like to participate in the meeting should contact NCSHA’s Deborah Yi for registration information.
HOME Coalition Urges Appropriators to Provide Maximum HOME Funding in FY 2022
Wednesday, 39 members of the HOME Coalition, led by NCSHA, sent a letter to leaders of the House and Senate Appropriations Subcommittees on Transportation, Housing, and Urban Development urging them to support $1.85 billion for the HOME Investment Partnerships program in the final FY 2022 appropriations package. The funding level was included in the House of Representatives’ omnibus appropriations bill (H.R. 4502), which passed in July 2021. The letter highlights the impacts of COVID-19 on the nation’s housing market and the need for robust funding for the HOME program to address rising rents, higher construction costs, labor shortages, and snarled supply chains.
House Passes Continuing Resolution to Keep Government Running Until March 11
Tuesday, the House of Representatives passed a continuing resolution (CR) funding the federal government through March 11, giving Congress more time to develop Fiscal Year 2022 appropriations bills. The CR continues funding all agencies at their FY 2021 funding levels. The Senate is expected to pass the CR next week. It must be signed into law before February 18 to avoid a government shutdown.
Congress is making progress on a full-year funding package. Wednesday, House Appropriations Committee Chair Rosa DeLauro (D-CT) and Senate Appropriations Committee Chair Patrick Leahy (D-VT) announced they had reached an agreement with Republican Appropriations Committee leaders on a framework for FY 2022 appropriations. Funding totals and other details of the framework have not been released, but the framework allows House and Senate Appropriations Committees to negotiate details and enact an omnibus by March 11.
GAO Raises Need to Balance Speed of ERA Assistance with Program Oversight
The U.S. Government Accountability Office on February 10 issued a report on the Emergency Rental Assistance (ERA) program, calling on Treasury to develop and implement procedures to monitor and evaluate ERA grantees’ controls, including through the ERA reallocation process, and noting the need to balance program flexibilities intended to spur speed in spending with accountability and oversight of the program. GAO raises concerns that administrative flexibilities allowed and encouraged by Treasury guidance, such as self-attestation of program eligibility, create risks of noncompliance with requirements, improper payments, and fraud.
Treasury officials say they plan to assess the risk of improper payments in the ERA program in FY 2022 as part of an effort to improve program integrity, but they do not believe there is an established connection between the use of self-attestation and increased risk that necessitates further oversight, given the requirement that grantees implement additional validation and fraud-prevention procedures. As part of its due diligence, GAO interviewed NCSHA as well as five state ERA administrators. The grantees interviewed said they employ a variety of controls, including pre-payment verification of recipients’ identities using tax records and post-payment reviews of a sample of applications, but that risk of improper payments still exists.
FHFA Releases Proposed 2022–26 Strategic Plan
The Federal Housing Finance Agency (FHFA) on Wednesday released its proposed strategic plan for 2022–26. The plan outlines the agency’s priorities as the regulator of the Federal Home Loan Bank system (FHLB) and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The plan says FHFA will strive to secure the FHLBs’ and GSEs’ safety and soundness, responsibly steward FHFA’s infrastructure, and foster housing finance markets that promote equitable access to affordable and sustainable housing, and it lays out a number of strategies FHFA will use to meet these goals. Notable strategies for promoting equitable access to affordable housing include overseeing the GSEs’ efforts to meet their affordable housing goals and duty-to-serve obligations and supervising GSE implementation of their equitable housing finance plans. FHFA will accept comments on the proposed strategic plan until March 11. Contact Greg Zagorski by March 4 with any feedback you would like NCSHA to consider for our comments.
New Paper Confirms Long-Term Benefits of HHF Mortgage Assistance Programs
Mortgage payment assistance through the Hardest Hit Fund (HHF) reduced homeowners’ chances of mortgage default by more than 40 percent, according to an analysis published last month in the Journal of Policy Analysis and Management. The study’s authors compared homeowners who received HHF assistance to similar homeowners in the same metropolitan statistical area (MSA) who lived in a state that didn’t participate in HHF. They found receiving HHF assistance made a household 41 percent less likely to default after four years.
A second analysis comparing those who received assistance through the Ohio Housing Finance Agency’s HHF programs to those who applied but did not receive assistance suggested an even stronger effect, with those receiving assistance being 46 percent less likely to default after four years. The researchers concluded their findings supplement previous studies that demonstrated the effectiveness of mortgage assistance in helping families avoid foreclosure and remain in their homes.
HUD Releases 2021 Homeless Assessment Report
On February 4, the Department of Housing and Urban Development (HUD) released Part 1 of its 2021 Annual Homeless Assessment Report (AHAR), which provides findings from the point-in-time (PIT) count, a survey of the number of sheltered and unsheltered people experiencing homelessness on a single night in January. The pandemic severely disrupted the 2021 PIT count, which means the AHAR reflects a more limited snapshot of homelessness than is usual. The U.S. Interagency Council on Homelessness reports 40 percent of communities did not complete a full count of unsheltered people living in tents, cars, or on the streets in 2021. As a result, the 2021 AHAR report does not conclude whether the overall number of unsheltered people experiencing homelessness increased or decreased between January 2020 and January 2021. Nearly every community completed a 2021 count of sheltered people in emergency shelters, transitional housing, or other temporary settings.
The AHAR report found the number of sheltered individuals decreased by eight percent from 354,386 in January 2020 to 326,126 in January 2021 and points to COVID-19 relief policies — eviction moratoria, stimulus payments, and expanded unemployment benefits — as potential reasons for the decline. While the findings suggest the positive impacts of pandemic relief, HUD underscored homelessness remains an urgent crisis and pointed to the Biden Administration’s House America initiative to accelerate progress toward ending it.
Legislative and Regulatory Activities
- February 25 | Comments Due | FHFA Proposed Rule on Fannie Mae and Freddie Mac Annual Capital Plans
- March 4 | Comments Due to NCSHA | FHFA Proposed Strategic Plan for 2022–26
- March 11 | Comments Due | FHFA Proposed Strategic Plan for 2022–26
NCSHA, State HFA, and Industry Events
- February 14 | NCSHA Legislative Conference: Early-Bird Registration and Hotel Discounts End | Washington, DC
- February 16 | NCSHA Meeting with IRS on Submitting Form 8610 for State Housing Credit Agency Staff | Videoconference
Open only to state HFA and Housing Credit agency staff; contact NCSHA’s Deborah Yi to register. - March 9 | Institute of Real Estate Management’s Advocacy Impact Day | Virtual
Jennifer Schwartz will speak at this event. - March 9 – 11 | National Affordable Housing Management Association’s Winter Conference | Washington, DC
Jennifer Schwartz will speak at this event. - March 14 – 16 | NCSHA’s 2022 Legislative Conference | Washington, DC
- March 24 – 25 | IPED Learn the Basics: Housing Tax Credits 101 | Boston, MA
Jennifer Schwartz will speak at this event. - March 29 – 30 | Nebraska Investment Finance Authority 2022 Housing Innovation Marketplace | La Vista, NE
Jim Tassos will speak at this event. - March 30 | National Housing Conference: Solutions for Affordable Housing Communications Convening | Washington, DC
Jennifer Schwartz will speak at this event.
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