NCSHA Washington Report | February 4, 2022
We were disappointed the Treasury Department’s final rules for the State and Local Fiscal Recovery Funds program missed a major opportunity we recommended to optimize the funds for affordable housing by addressing inflation pressures imperiling Housing Credit-financed transactions, at the worst possible time in the economic cycle.
As we work with members of Congress on potential legislative remedies, let’s not lose the plot: The recovery funds under the current guidance can still do an enormous amount of affordable housing good. So we’re also focused on educating the industry on the full range of opportunities under the rules and communicating with Treasury officials on issues that need further clarification.
We’ve got some of the smartest people in our business helping us. Next week, NCSHA members, including affiliate and associate members, are invited to a free webinar for a conversation with four of them. Registration and other information are linked here.
While it’s hard to get a precise picture of just how big the opportunity is, NCSHA estimates suggest the total amount of recovery funds committed by various jurisdictions to affordable housing so far exceeds $8 billion. That would represent the largest one-time federal affordable housing block grant ever.
And it’s nationwide.
We estimate, based on our own surveys and datasets from the National Conference of State Legislatures and Results for America, that upwards of 100 jurisdictions in upwards of 40 states have committed or planned to invest recovery funds in various affordable housing uses. Upwards of 20 states are putting some or most of the money into state-run programs, in most cases involving the HFA.
Best we can tell, construction and rehab are the dominant, although far from the only, intended housing uses. (An Urban Institute survey last year suggested more than half the largest cities with rental housing challenges planned to use recovery funds for housing production.)
That’s why the recovery funds’ compatibility with Housing Credit financing is so critical. Eight billion dollars is a lot of money, even in DC these days, but not enough to dent the housing supply shortage on its own. There’s a reason affordable developments typically rely on the Credit for 50 – 75 percent of their funding: It stretches scare subsidy dollars so they can do more good.
Credit financing also reduces the amount of debt projects need to carry (debt which may be getting more expensive soon), enabling even lower-income renters to benefit. “Ultimately,” according to CohnReznick, “the limited use of leverage allows developers to rent housing credit-financed apartments to tenants who could otherwise not afford to live in safe, decent, affordable housing.”
So, while a legislative fix may be needed to achieve an optimal alignment of recovery funds and Housing Credits, and NCSHA continues our work on Capitol Hill to get one made, state and local governments are starting to play the housing hand they’ve been dealt.
More next week.
Stockton Williams | Executive Director
State HFA Emergency Housing Assistance
In This Issue
- NCSHA to Host Webinar on Using Fiscal Recovery Funds in Housing Credit Development
- Treasury IG Report Concludes Oversight of Housing Credit Program Can Be Improved
- FHA to Publish Proposed Rule on Government DPA Programs
- HUD Guidance on CDBG-DR Funds Emphasizes Equity, Climate Change
- HUD Issues Notice Requiring Carbon Monoxide Alarms, Detectors in Assisted Housing
- HUD Releases New Section 3 Guidebook
- Looking Ahead
NCSHA to Host Webinar on Using Fiscal Recovery Funds in Housing Credit Development
On February 10, NCSHA is hosting a free webinar for members to explore strategies for using Coronavirus State and Local Fiscal Recovery Funds in Housing Credit financial structuring. Experts from Applegate & Thorne-Thomsen, CohnReznick, Kutak Rock, and Novogradac & Company will discuss tax issues associated with using Fiscal Recovery Funds for land or property acquisition, infrastructure, environmental costs, impact fees, operating funds, and development costs typically excluded from Housing Credit eligible basis. In addition, the webinar will address the impact of Fiscal Recovery Funds structured as grants, opportunities to offset basis reductions with the state-designated basis boost, and other potential structuring approaches, including short-term bridge loans, equity or capital contributions, land lease structures, and long-term loan options.
All current HFA, Associate, and Affiliate members are invited to participate. Advance registration is required by February 8.
Treasury IG Report Concludes IRS Oversight of Housing Credit Program Can Be Improved
The Treasury Inspector General for Tax Administration (TIGTA) recently released a report on IRS oversight of the Housing Credit program calling for improvements. The report raises concerns with data reliability, reconciliation discrepancies, and missing first-year elections that increase the risk of undetected errors and noncompliance.
TIGTA made seven recommendations to IRS for improvement, with which IRS agreed on 5. IRS also stated that, while the Service recognizes its responsibility to review Housing Credit agency credit allocation practices and compliance monitoring processes, it does not plan to commit additional resources to these reviews due to competing resource needs. The report was conducted at the request of former Senate Budget Committee Chairman Michael Enzi (R-WY) — who has since retired from Congress — as part of his request for an evaluation of the economy, efficiency, and effectiveness of federal housing assistance programs broadly.
FHA to Publish Proposed Rule on Government DPA Programs
The Federal Housing Administration (FHA) intends in the near future to publish a proposed rule establishing underwriting standards for FHA loans in which the borrowers receive down payment assistance from government programs, the agency revealed in a letter sent to Native American tribes last month. Julienne Joseph, Deputy Assistant Secretary for Single-Family Housing, and Kevin Stevens, Acting Director of Single-Family Programs at FHA, addressed the proposed rule during NCSHA’s HFA Institute last week. The letter, sent in accordance with federal tribal consultation requirements, says the proposed rule will focus on maintaining FHA’s policy prohibiting any person or entity providing a borrower with down payment assistance from benefitting from the transaction, while also allowing programs to recoup de minimis administrative costs. The proposed rule also will clarify that federally recognized tribes are qualified to provide down payment assistance.
The impending FHA rulemaking will be consequential for HFAs, as down payment assistance is a key component of their homeownership programs. NCSHA intends to work diligently to ensure any rules put in place by HUD do not hinder the HFAs’ ability to effectively administer their down payment assistance programs and help underserved borrowers.
HUD Guidance on CDBG-DR Funds Emphasizes Equity, Climate Change
On January 31, the Department of Housing and Urban Development (HUD) issued its Consolidated Waivers and Alternative Requirements Notice for Community Development Block Grant Disaster Recovery (CDBG-DR), which outlines requirements for the use of disaster and mitigation fund allocations made last year to 10 states covering 15 separate major disasters that occurred in calendar year 2020. The consolidated notice includes changes in CDBG-DR policies to reflect the administration’s priorities of combating climate change and achieving more equitable disaster recovery outcomes. New requirements include incorporating disaster mitigation measures into all recovery activities, prioritizing underserved communities in the distribution of disaster recovery assistance, and incorporating green building standards in the construction, reconstruction, and rehabilitation of damaged housing.
The consolidated notice applies to 2020 CDBG-DR grantees. HUD plans to issue the concepts from the consolidated notice as a Request for Information to solicit public feedback and develop a notice that will apply to future CDBG-DR funds.
HUD Issues Notice Requiring Carbon Monoxide Alarms, Detectors in Assisted Housing
On Monday, HUD issued Notice PIH 2022-01 to HUD-assisted housing owners clarifying the requirement they install carbon monoxide alarms or detectors in their properties. The notice states HUD will be enforcing the requirements instituted by Congress that mandate all public housing, Housing Choice Voucher, Project-Based Voucher, Project-Based Rental Assistance, Section 202 Supportive Housing for the Elderly, and Section 811 Supportive Housing for Persons with Disabilities have carbon monoxide alarms or detectors installed by December 27, 2022. More information on installation standards and practices is available here.
HUD Releases New Section 3 Guidebook
Last week, HUD released its Section 3 Guidebook. Section 3 is a provision of the Housing and Urban Development Act of 1968 that ensures employment, training, and contracting opportunities for low- and very low-income workers and eligible businesses in connection with the planning, construction, and rehabilitation of housing and community development projects assisted by HUD. The new guidebook is a complement to the Section 3 Rule and provides the latest guidance, tools, and resources to support HUD grant recipients and sub-recipients, contractors, and Section 3 businesses in implementing and applying Section 3 to HUD-funded projects and activities.
Legislative and Regulatory Activities
- February 25 | Comments Due | FHFA Proposed Rule on Fannie Mae and Freddie Mac Annual Capital Plans
NCSHA, State HFA, and Industry Events
- February 10 | NCSHA Webinar: Fiscal Recovery Funds and the Housing Credit
Open to HFA, Associate, and Affiliate members; free of charge. - 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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