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NCSHA Washington Report | July 12, 2024

Published on July 12, 2024

Web Washington Report Graphics - July 12, 2024
Housing analysts tend to cite sweeping themes and broad trends to make their arguments. People who do housing for a living typically talk in more concrete terms. Here’s what some of the smartest people who own and operate affordable apartments have been saying lately.

“Excessive rent loss will decimate Seattle’s community of nonprofit housing providers,” according to longtime developer and owner Sharon Lee. “We will not have the financial resources to maintain the housing, make mortgage payments, or meet the obligations of our lenders.”

“This is the first time that I have ever seen such high percentages of nonpayment of rent,” says Denise Muha, head of the National Leased Housing Association, which represents hundreds of for-profit and nonprofit owners nationwide, and who has been in the business for decades.

“Our properties are aging, and the effects of the pandemic years — including more time spent at home, struggling tenants, and eviction moratoriums — have taken a toll,” wrote National Housing Trust CEO Priya Jayachandran in May. “The greatest threat to affordable housing is not the lack of resources to build, but the lack of resources to operate, maintain, and repair.”

“Among nine of our nonprofit members, past due rent now exceeds $57M (336% increase since 2018),” Stewards of Affordable Housing for the Future CEO Andrea Posner has reported. Partly as a result, the share of members’ properties operating at a deficit is up 79 percent and “those numbers do not tell the full story of the cost of rent concessions, advances to the properties and reserves used to address property needs.”

“For our [Housing Credit] asset management portfolio, which includes more than 1,300 developments across 44 states, total operating expenditures rose 21% over four years, while insurance costs rose more than two-and-a-half times faster over the same period,” Enterprise CEO and President Shaun Donovan said, also in May.

Optimists hope some of the main causes of this “perfect storm” — higher interest rates, spiking insurance premiums — may moderate in the near future, but few expect them to get meaningfully better any time soon. And one-time federal and state funds for emergency relief, which have injected billions into the low-income apartment system in the last several years, are almost all gone and won’t be replenished in anything near that amount.

Expecting owners to operate at a loss apartments meant to be decent and affordable for low-income people is untenable — they won’t be decent for long. Expecting their renters to pay more for their housing than they reasonably can manage is illogical — it won’t be affordable for many.

So the stresses these and other leaders are giving voice to may well get worse in the coming months and years. This is not your grandmother’s “preservation challenge” (which is still around, too). It’s a new dynamic that will test the resiliency and creativity of affordable apartment operators and all their partners, including state HFAs, like nothing we’ve seen.

Stockton-Williams-Washington-ReportStockton Williams | Executive Director

Washington Report will return July 26.

In This Issue

NCSHA Asks FHFA for Robust Mission Goals, Stronger FHLB‒HFA Partnerships
The Federal Housing Finance Agency (FHFA) should establish an explicit affordable housing mission for the Federal Home Loan Banks (FHLBs) and encourage more FHFA‒HFA partnerships, NCSHA argued in a comment letter submitted Thursday in response to a request for input FHFA published in May. In its comments, NCSHA recommended the FHLBs’ mission statement be amended to explicitly include funding for affordable housing and to continue to mention the FHLBs’ duty to serve its housing associate members, including HFAs. NCSHA also asked FHFA to require the FHLBs to report annually on their activities with housing associate members, encourage the FHLBs to provide liquidity for down payment assistance, and make HFAs eligible for any member incentive program that offers benefits for FHLB members who support affordable housing and community development.

CFPB Proposes Changes to Servicer Loss Mitigation Requirements
The Consumer Financial Protection Bureau (CFPB) Wednesday published a proposed rule that would amend federal servicing regulations pertaining to loss mitigation options for struggling homeowners. The proposed rule would codify some of the protections Congress enacted temporarily to help Covid-19-impacted homeowners avoid foreclosure. Under the proposed rule, large servicers would not be allowed to start foreclosure until they have exhausted all possible options for helping the homeowner or the homeowner has stopped communicating. HFAs and other small servicers would be exempt from the proposed rule’s changes. CFPB will hold a stakeholder briefing on the proposed rule July 18 and is accepting comments until September 9. Please email Rosemarie Sabatino with any questions or input.

DOJ Announces Funding Available for Reentry Housing Programs
The U.S. Department of Justice recently announced funding available for its FY24 Smart Reentry: Housing Demonstration Program, which provides funding for state, local, and tribal governments to build capacity for improved housing options for adults released from prison or jail. Proceeds from the grants, which may be for up to $1 million, can be used for a variety of purposes, including short-term housing services, wraparound services such as treatment for substance use disorders and mental health, planning, and implementation. Applications are due July 25.

HUD Provides $1.5 Million to State, Local PHAs to Help Voucher Recipients Find High-Opportunity Neighborhood Housing
The U.S. Department of Housing and Urban Development (HUD) announced Monday it would award $1.5 million for housing mobility services to 25 public housing agencies (PHAs) across 14 states, including the Michigan State Housing Development Authority. The funds will enable PHAs to help Housing Choice Voucher recipients find housing in better-resourced opportunity neighborhoods.

$40 Million Available for HUD Eviction Protection Grants
On Thursday, HUD announced $40 million is available through a notice of funding opportunity for its Eviction Protection Grant Program (EPGP). The funding is available to local, state, and tribal agencies and courts and eligible nonprofit and governmental entities to increase low-income tenants’ housing stability through prevention, justice, diversion, and relief. HUD anticipates making approximately 25 awards of $500,000 to $2,500,000 each, with at least half going to applicants who did not receive FY21 or FY22 EPGP funds. The application deadline is August 20. HUD will hold a webinar about the NOFO on July 18; no registration is required.

FHFA Announces Tenant Protections for Fannie, Freddie-Financed Multifamily Properties
The Federal Housing Finance Agency (FHFA) announced today that housing providers with new multifamily loans financed by Fannie Mae and Freddie Mac (the GSEs) on or after February 28, 2025, must provide tenants 30-day written notice of a rent increase, 30-day written notice of a lease expiration, and at least a five-day grace period for rent payments. The GSEs will publish a detailed description of the tenant protection policies in August. FHFA’s new policies resulted from its engagement with stakeholders, including responses to a request for input published in 2023. NCSHA’s comment letter encouraged FHFA to protect tenants against displacement, rent increases, and possible evictions and to consider the potential impact of such protections on tenants, housing providers, lenders, and the GSEs. FHFA says it will consider additional tenant protections in the future.

House Appropriations Committee Approves FY25 HUD Funding Bill
On Wednesday, the House Appropriations Committee approved FY25 legislation providing $64.8 billion for HUD, including decreased funding levels for many programs compared to FY24 and a reduction in the HOME Investment Partnerships program from $1.25 billion to $500 million. The legislation, which passed on a party-line vote, was largely unchanged from the bill previously reported out of the House Appropriations Subcommittee on Transportation, Housing and Urban Development. You can read more about the House FY25 THUD funding legislation in this NCSHA blog post.

House, Senate Appropriations Committees Pass FY25 Agriculture Appropriations Bills
On Wednesday and Thursday this week, respectively, the House and Senate Appropriations Committees passed legislation providing funding for the U.S. Department of Agriculture (USDA), including for programs under the Rural Housing Service (RHS). The legislation passed in the House Appropriations Committee was unchanged from the bill previously passed by the subcommittee, discussed here.

The Senate bill, as passed by the full Senate Appropriations Committee, would fund relevant RHS programs as follows:

  • The Section 502 Single-Family Guaranteed Loan program would receive $25 billion, the same amount as the FY24 enacted level and $5 billion less than the President’s Budget Request.
  • The Section 502 Single-Family Direct Loan program would receive $1 billion, $120 million more than enacted in FY24 but $250 million less than the President’s Budget Request.
  • The Section 521 Rental Assistance program would receive $1.691 billion, $83 million more than in FY24 and $37 million less than the President’s Budget Request.
  • The Section 538 Multifamily Guaranteed Loan program would receive $400 million, the same level of funding as in FY24 and the President’s Budget Request.
  • The Section 542 Rural Development Voucher program would receive $50.4 million, $2.4 million more than in FY24 and $50.4 million above the President’s Budget Request.
  • The Section 515 Multifamily Direct Loan program would receive $65 million, $5 million more than in FY24 and $5 million less than the President’s Budget Request.
  • The Multifamily Housing Revitalization Demonstration program would receive $36 million, $2 million more than FY24 and $54 million less than the President’s Budget Request.

Of note, the number of units eligible in FY25 for the Section 515 decoupling pilot program was increased from 1,000 to 5,000 in the Senate bill, pursuant to an amendment offered by Senator Shaheen (D-NH).

HUD Announces Changes to FHA 203(k) Rehabilitation Mortgage Insurance Program
HUD published a mortgagee letter Tuesday outlining several changes to its 203(k) Rehabilitation Mortgage Insurance Program. The changes are designed to increase usage of the program and help boost the supply of affordable for-sale homes. Specifically, the mortgagee letter increases the loan limit from $35,000 to $75,000 and establishes an annual review process for updating the limit; extends the maximum allowable rehabilitation period from six to 12 months (nine months for the limited 203(k) smaller-loan product); and expands the allowable fees that can be financed through a 203(k) loan. NCSHA sent the Federal Housing Administration a letter supporting these changes when they were first proposed last November. The new policies will apply to all mortgages that receive FHA case numbers on or after November 4. FHA will hold two identical stakeholder briefings on the updates on July 24 and August 28.

NSPIRE Compliance Deadline Extended for HOME, HTF, Vouchers, Other Programs
On July 5, HUD published a notice in the Federal Register providing participating jurisdictions, grantees of other HUD Community Planning and Development programs, and public housing agencies an extension to the deadline for compliance with the National Standards for Physical Inspection of Real Estate. The new deadline — applicable to the HOME Investment Partnerships, Housing Trust Fund, Housing Opportunities for Persons With AIDS, Emergency Solutions Grant, Continuum of Care, Housing Choice Voucher, Project-Based Voucher, and Section 8 Moderate Rehabilitation programs — is October 1, 2025; the previous deadline was October 1, 2024. Rationale for the extension for certain programs, additional information about voluntary compliance before the deadline, and instructions on notifying HUD if circumstances warrant are included in the above-linked notice.

NCSHA in the News
FORsights, 7.2.24, From the Hill
Novogradac Journal of Tax Credits, 7.1.24, Community Development Work Driven by Purpose and Passion to Make a Difference

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