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NCSHA Washington Report | March 17, 2023

Published on March 17, 2023

Web Washington Report Graphics - March 17, 2023

The most visible fallout from the failure of Silicon Valley Bank and Signature Bank affecting affordable housing so far has been local.

SVB reportedly had provided $2.7 billion to finance nearly 10,000 affordable homes over the past 20 years in its home state of California and committed more than $750 million there and in Massachusetts over the next five years. Pending projects in those states expecting financing from SVB are confronting what one developer called “a huge gap in the ecosystem of affordable housing.”

Signature Bank had an estimated 12 percent share of New York City commercial mortgage lending, and its collapse “eliminates the leading lender by far in NYC for apartments serving low-to-middle income households at a moment of maximum demand for affordable housing,” according to GlobeSt. “A rush by New York City real-estate investors to yank money out of Signature Bank last week played a significant role in the bank’s collapse,” the Wall Street Journal reported.

The lingering worry is whether systemic stress concentrated for the moment in regional banks like SVB and Signature — generally those with asset sizes between $10 billion and $100 billion — threatens a wider disruption of affordable home mortgage lending and apartment development financing, and may portend even deeper stress throughout the financial system.

Operating at scales between money center and community banks, regional and local lenders are enormously important sources of real estate financing. A 2020 report by the FDIC, which documented their “notable market shares” in retail and industrial lending, also showed they accounted for 12 percent of apartment loans between 2012 and 2019 — and did the most real estate lending overall of all bank types in smaller markets.

Any current list of the leading affordable housing lenders or equity investors will underscore the critical importance of regional banks to the buyers, builders, and markets HFAs serve.

Regional banks experienced a “relatively benign” business environment in the 2010s, according to a McKinsey analysis, and at the end of the decade, “regionals and mid-caps [had] kept pace with their larger competitors in terms of return on assets and return on equity.”

By the end of last year, though, the outlook was more pessimistic, due to disappointing fourth-quarter reports from a number of regional lenders and what Bloomberg called “shaky guidance” from a number of them in light of economic uncertainty “and also the behavior of deposits amid higher interest rates.”

As of late this morning, one day after 11 large banks “swooped in to rescue” another regional, First Republic Bank, and Treasury Secretary Yellen testified to the fundamental safety and soundness of the banking system before a skeptical Senate Finance Committee, there seemed, according to the New York Times, “little confidence that the banking crisis has fully run its course.”

Stockton Williams | Executive Director

Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

NCSHA Asks OMB to Exempt HOME, HTF from BABA Requirements 
On March 13, NCSHA submitted comments on an Office of Management and Budget (OMB) proposed rule to revise OMB guidance on implementation of the domestic procurement requirements for infrastructure programs contained in the Build America, Buy America (BABA) provisions of the Infrastructure Investment and Jobs Act. NCSHA argued in its comments that applying these requirements to critical affordable housing programs, including the HOME Investment Partnerships (HOME) program and Housing Trust Fund (HTF), “will significantly increase production costs for new units of affordable housing and make it much more difficult” to close the nation’s housing supply gap. NCSHA further noted OMB’s own guidance could be interpreted as precluding housing from the definition of infrastructure for purposes of BABA. NCSHA’s comments to OMB follow similar comments previously submitted to HUD in connection with its extension of waivers for HOME and HTF from application of BABA until August 2024 at the earliest.

Sign-On Open for HOME Coalition Letter to Support FY24 HOME Appropriations
The HOME Coalition invites interested organizations to sign on to a letter to senior appropriators asking for $2.5 billion in funding for the HOME Investment Partnerships program for fiscal year 2024. The letter argues that, “[i]n the current economic environment, with housing costs historically high and low-income households suffering, it is more important than ever for Congress to provide significant resources for this essential program.” The deadline to sign on to the letter is March 22. The HOME Coalition, which NCSHA chairs, works to increase awareness about HOME, its importance to the development and provision of affordable housing, and the need for funding.

Biden Administration Releases Additional FY24 Budget Details
On March 13, the Biden – Harris Administration released supplementary materials on its FY24 budget request. These documents, including appendices and agency congressional justifications, provide further details on the administration’s vision to address affordable housing challenges. Highlights include proposals for new mandatory spending on public housing, housing vouchers, and down payment assistance; expansions to the Housing Credit and a new Neighborhood Homes Credit; increased funding for HOME; and permanent resolution of the Performance-Based Contract Administration procurement issues. Further details can be found in NCSHA’s blog.

DOE Hosting March 30 Buildings UP Information Session for HUD Stakeholders 
The Department of Energy (DOE) is hosting a Buildings UP information session exclusively for HUD stakeholders on March 30 to provide an overview of the prize program and its application process. Registration information can be found here. Buildings UP will award more than $22 million in cash prizes and technical assistance to support the transformation of existing U.S. buildings into more energy-efficient and clean energy-ready homes, commercial spaces, and communities. Community-based organizations, state and local governments, tribes, building owners, utilities, nonprofit organizations, energy-efficiency program implementers, and other organizations are invited to apply on a rolling basis until all funding has been awarded.

Treasury Celebrates Second Anniversary of American Rescue Plan Act
This week, the Biden – Harris Administration marked the second anniversary of enactment of the American Rescue Plan Act (ARPA), which authorized key emergency housing programs, including the Emergency Rental Assistance 2 program, Homeowner Assistance Fund, Coronavirus State and Local Fiscal Recovery Fund, and HOME-ARP program. The Treasury Department, which has jurisdiction for most of these and other ARPA programs, released a report highlighting the accomplishments of ARPA programs over the last two years. The report details how Treasury designed and administered the programs in partnership with state and local governments and the outcomes they have achieved. In the report, Treasury elevates examples of strong state and local programs using ARPA resources, including some administered by state HFAs. See NCSHA’s blog to learn more.

NLIHC “Gap” Report Shows Worsening Affordability Challenges
This week, the National Low Income Housing Coalition (NLIHC) released The Gap, a report detailing its research on the shortage of housing for extremely low-income households (defined in the report as households with incomes below 30 percent of the median area income or below the poverty line). The report found extremely low-income renters in the United States are facing a shortage of 7.3 million affordable homes, a shortage that worsened by 500,000 units during the pandemic. Additionally, the report found Black, Latino, and Indigenous households are disproportionately impacted by this shortage. NLIHC recommends increased federal investment in the preservation and expansion of the affordable housing stock, more Housing Choice Vouchers, a national housing stabilization fund, and federal tenant protections.

House Housing Subcommittee Discusses Flood Insurance Reauthorization
The House Housing and Insurance Subcommittee last Friday held a hearing to consider possible reforms to the National Flood Insurance Program (NFIP). In his opening remarks, new Subcommittee Chair Warren Davidson (R-OH) argued the NFIP does not adequately cover the country’s flooding risk. It is imperative, Davidson said, that Congress find ways to address this coverage gap, including by making it easier for homeowners to access private flood insurance. Later, Davidson lamented that the NFIP has been subject to a series of short-term reauthorizations and discussed a bill he intends to introduce that would extend NFIP’s current authorization through 2024. The bill, Davidson contended, would give Congress time to consider further reforms to the program as part of a long-term reauthorization. The witnesses, which included representatives from industry and academia, all expressed support for such an approach. The witnesses also discussed ways to increase consumer interest in flood insurance and to keep coverage affordable for lower-income households.

NCSHA in the News
National Mortgage News, 3.16.23, Where the Homeowner Assistance Fund stands two years in
Newsismybusiness.com, 3.15.23, Puerto Rico marks milestone participation in Homeowner Assistance Program
Yahoo.com, 3.13.23, Puerto Rico reaches milestone in Puerto Rico Homeowner Assistance Program
Notes from Novogradac, 3.10.23, LIHTC, NHTC, MIHTC Extolled as Necessary Tools to Address Affordable Housing Supply Gap During Senate Finance Hearing, Wyden Reintroduces DASH Act
Perry County News, 3.9.23, Young, Cardin introduce legislation to encourage revitalization of distressed homes nationwide

Looking Ahead…

Legislative and Regulatory Activities

NCSHA, State HFA, and Industry Events

  • March 27 – 29 | NCSHA’s 2023 Legislative Conference | Washington, DC
  • March 30 | National Community Reinvestment Coalition Just Economy Conference 2023 | Washington, DC
    Garth Rieman will speak at this event.
  • April 12 | E&A Team’s Annual Accessibility Summit | Virtual
    Jim Tassos will speak at this event.
  • April 17 – 19 | Nebraska Investment Finance Authority’s 2023 Annual Conference | Lincoln, NE
    Jennifer Schwartz will speak at this event.
  • April 25 – 27 | Affordable Housing Investors Council’s 2023 Spring Meeting | Baltimore, MD
    Stockton Williams will speak at this event.
  • April 27 – 28 | Novogradac 2023 Affordable Housing Conference | San Francisco, CA
    Jennifer Schwartz will speak at this event.
  • May 9 | Ballard Spahr National Housing Summit | Washington, DC
    Jennifer Schwartz will speak at this event.

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