NCSHA Washington Report | July 15, 2022

As Covid’s most immediate impacts on the geography of housing demand come into clearer view, the longer-term implications remain uncertain, and hugely consequential, for regional economies and local housing markets.

It’s indisputable that the pandemic punched larger cities in the gut. Digging into the newest Census data, Bill Frey of the Brookings Institution observes: “Perhaps the most noteworthy finding for the prime pandemic year is the dramatic rise in the number of cities that lost population.” Of the 88 U.S. cities with populations exceeding 250,000, 51 saw their numbers drop in 2020–21, including some in “generally growing parts of the country.”

The trend was building before Covid. A Freddie Mac research note last month pointed out, “The pandemic amplified existing urban de-concentration by threefold from large, expensive metro areas to smaller, more affordable destinations.”

Today, even as public health concerns have eased, researchers at the Federal Home Loan Bank of Cleveland find that “migration to less populated areas appears to be continuing,” with the “number of migrants from high-cost large metro areas to small cities, towns and rural areas … about 15% higher during the four quarters ending in March compared with the average for the three-year period preceding the pandemic.”

The National Association of Home Builders’ latest picture of apartment construction illustrates the dynamic in terms developers as well as renters will feel. “Large metro area core counties lost significant market share in the first quarter of 2022, registering its largest year-over-year market share loss on the [home building geography index’s] record…and the largest such loss among all the regional submarkets throughout the span of the HBGI.”

Whether the oft-cited “urban exodus” (a media exaggeration even in light of trend) represents a lasting shift that will endure when the pandemic becomes endemic is hard to tell.

It’s conceivable, as some analysts suggest, that big cities “may not only lose their increasingly mobile high-skill workers, but also the local consumer service economies these workers support [and]… shrink in size unless they manage to provide advantages that justify the costs of urban density when residential choices are set free from proximity-to-workplace considerations.”

Yet large cities are still dynamic, amenity-rich talent magnets with deep appeal to many employers. A post-Covid wave of new urban residents and leaders may have unexpected opportunities to shape more affordable, equitable, resilient urban centers. Even recent leavers may be back; there’s evidence many who’ve moved from the densest city neighborhoods during the past few years relocated nearby.

Then too, the affordability problems — the lack of available homes and apartments — historically more common in urban areas and coastal states may be coming to a sunbelt suburb near you, if they haven’t already. A new report from Up For Growth suggests the “housing deficit” worsened in 230 metro areas between 2012 and 2019.

Wherever Americans live, and are moving, millions are, as Freddie Mac’s analysts put it, “a population in pursuit of affordable housing.”

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

• NCSHA Urges Fannie, Freddie to Work with HFAs to Mitigate Qualified Contract Losses of Housing Credit Properties 
• Treasury Posts New ERA Guidance
• House Lining Up Action on FY 2023 HUD, USDA Appropriations Bills
• Ways and Means Committee Focuses on Housing Crisis in Hearing
• House Subcommittee Examines Proposed Community Reinvestment Act Changes
• Looking Ahead

NCSHA Urges Fannie, Freddie to Work with HFAs to Mitigate Qualified Contract Losses of Housing Credit Properties
This week, NCSHA’s Jennifer Schwartz presented at a Federal Housing Finance Agency (FHFA) listening session on Fannie Mae’s and Freddie Mac’s duty to serve related to affordable housing preservation. The listening session, one in a three-session series FHFA held this week, focused on preservation challenges for Housing Credit properties, particularly qualified contracts and difficulties some nonprofits are facing in exercising their right of first refusal at Year 15. Schwartz noted that, as of the end of calendar year 2021, more than 100,000 Housing Credit homes had already been lost from the affordable housing inventory because of qualified contracts. She encouraged Fannie Mae and Freddie Mac to set policies of investing only in properties in which the owners have waived the right to a qualified contract, consider preservation concerns such as qualified contracts as part of the criteria used to determine which loans to purchase, and assist preservation-oriented buyers willing to make an offer to purchase a property at the qualified contract price.

Treasury Posts New ERA Guidance
On July 6, the Treasury Department updated its Frequently Asked Questions (FAQs) on the Emergency Rental Assistance (ERA) programs, ERA 1 and ERA 2. Notable updates include language clarifying ERA 2 does not restrict housing stability services assistance to only eligible households, as under ERA 1. Therefore, grantees do not need to document eligibility when using ERA 2 for housing stability services. NCSHA had long sought this clarification, first asking Treasury to adopt this policy in Spring 2021. Three new FAQs were added in this update, as well as a compliance requirement for Section 504. Of note, one of the new FAQs prohibits grantees from imposing additional eligibility criteria beyond that required by the statute and specifically bars employment or job training requirements as a condition of providing ERA assistance to households.

House Lining Up Action on FY 2023 HUD, USDA Appropriations Bills 
The House of Representatives’ Rules Committee is expected to meet next week to finalize the rule for House consideration of a package of six FY 2023 appropriations bills. The six-bill package, referred to as a “minibus,” includes the committee-passed FY 2023 Transportation, Housing and Urban Development, and Related Agencies (THUD) and Agriculture, Rural Development, Food and Drug Administration, and Related Agencies spending bills. The rule would pave the way for the bills’ House passage as early as next week. For specifics on the THUD appropriations bill, see NCSHA’s blog, and for details on HUD and USDA key programs, see NCSHA’s budget chart.

The Senate Appropriations Committee is likely to release its draft FY 2023 appropriations bills after the Senate’s August recess, even though leaders from both parties probably will not have agreed by then on the total amount of FY 2023 discretionary spending they will include — or how much each individual bill will spend. Republican committee leaders have said the committee is not likely to mark up the bills until they agree on those funding levels.

Ways and Means Committee Focuses on Housing Crisis in Hearing
On July 13, the House Ways and Means Committee held a hearing, Nowhere to Live: Profits, Disinvestment, and the American Housing Crisis, to consider the current state of the housing market. The witnesses included Audra Hamernik, president and CEO of Nevada Hand and former executive director of the Illinois Housing Development Authority, who focused her remarks on the essential role played by the Housing Credit in producing affordable housing as a sustainable solution to the crisis. Dr. Christopher Herbert, managing director of Harvard University’s Joint Center for Housing Studies, also testified and said the biggest housing problems our nation faces are the shortage of affordable housing and the economic conditions that led to the problems at hand. Numerous committee members stated their support of the Housing Credit, including Chair Richard Neal (D-MA); Representative Suzan DelBene (D-WA), the lead sponsor of the Affordable Housing Credit Improvement Act (AHCIA); and AHCIA original cosponsor Representative Don Beyer (D-VA), among others. Many of the Republican committee members focused their comments on the impact of recent inflation on home prices and rents, blaming Democrats for federal spending during the pandemic, which they maintain caused rising costs across the economy and higher housing costs in particular.

House Subcommittee Examines Proposed Community Reinvestment Act Changes
The House Financial Services Subcommittee on Consumer Protection and Financial Institutions held a hearing Wednesday to examine a joint rule issued by the federal banking regulators — the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency — to revamp their Community Reinvestment Act (CRA) requirements. Subcommittee Chair Ed Perlmutter (D-CO) noted in his opening remarks that Congress enacted CRA to address racial discrimination in lending, but discrimination in home and other lending continues and contributes to the racial wealth gap. He expressed his hope that reforming CRA could be a catalyst toward producing a more equitable banking system. Financial Services Committee Chair Maxine Waters (D-CA) said she was pleased “the agencies worked together on a new proposal to ensure that banks are meaningfully investing in all communities.” In his opening statement, Subcommittee Ranking Member Blaine Luetkemeyer (R-MO) said he agreed CRA regulations should be updated to reflect changes in the banking industry, but he expressed concern the joint rule would establish new CRA assessment areas for banks based on their lending activity rather than where they have a physical presence. Luetkemeyer asked two of the witnesses to comment on a recent article from the National Housing Conference suggesting the joint rule could disincentivize banks from making community development investments and loans because such activity would account for a smaller share of banks’ CRA ratings than retail lending.

Looking Ahead…

Legislative and Regulatory Activities

• July 15 | Comments Due to NCSHA | SEC’s Proposed Rule on Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices
• July 20, 10:00 a.m. ET | Senate Finance Committee Hearing on The Role of Tax Incentives in Affordable Housing | Washington, DC
  Oregon HCS Executive Director Andrea Bell will testify in person.
• August 5 | Comments Due | Joint Agency Proposed Community Reinvestment Act Regulations
• 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
• 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

• July 20 | Consortium for Housing Asset Management Policy Webinar | Virtual
  Jennifer Schwartz will speak at this event.
• July 27 – 29 | IPED Tax Credit Property Disposition Conference | Philadelphia, PA
  Jennifer Schwartz will speak at this event.
• August 3 | National Conference of State Legislatures’ Legislative Summit | Denver, CO
  Garth Rieman will speak at this event.
• 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 are speaking at this event.
• September 27 – 29 | Oklahoma Housing Conference | Oklahoma City, OK
  Stockton Williams is speaking at this event.

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