NCSHA Washington Report | October 11, 2019
Housing’s centrality to the economy and its interconnectedness with public policy means that the “law of unintended consequences” applies forcefully, with sometimes surprising “winners and losers.”
Financial journalist Allan Sloan, citing analysis by Mark Zandi of Moody’s Analytics and Hugh Lamle, formerly of M.D. Sass, argued this week that several provisions of the 2017 tax law have reduced U.S. home values by four percent overall, compared to what they otherwise would have been.
Sloan says that, while the law’s limitations on the benefits previously available for home mortgage interest and state and local taxes have hit high-cost and high-tax areas hardest, “homeowners all over the country are feeling the effects.”
Homeowners who had been benefitting from the pre-2017 tax advantages have reason to complain. On the other hand, if Sloan’s calculations are right — which he acknowledges is “impossible to prove” — the tax changes Zandi and Lamle modeled also delivered a significant affordability benefit to households who bought after they took effect, many of whom were first-time buyers.
Another case of unintended consequences may be rent control, which California passed on a statewide basis this week, following similar steps earlier this year by New York and Oregon.
It’s hard to argue against the notion that rent caps are beneficial for protected renters. But as Axios’ Kim Hart writes, “Most economists and property investors loathe rent control, arguing that it stops new construction and discourages landlords from maintaining their properties, causing an already tight supply to deteriorate.” Nevertheless, rent control is “on the rise in response to sky-high housing costs” as it’s “a relatively quick way for lawmakers to take action as tensions rise.”
The Trump Administration’s intentions in response could be consequential indeed. Under its housing finance reform plan, Treasury has asked the Federal Housing Finance Agency to “revisit [Fannie Mae and Freddie Mac’s] underwriting criteria for acquisitions of multifamily loans secured by properties in jurisdictions that adopt rent-control laws or other undue impediments to housing development.”
Speaking of FHFA, Michael Stegman and Richard Cooperstein warn in a brand-new paper, published by Harvard’s Joint Center for Housing Studies, that achieving the agency’s goal (shared by the Trump Administration) of reducing Fannie and Freddie’s market dominance may “unintentionally cause hemorrhaging in the existing pool of cross-subsidies upon which their broad mission and affordable lending programs rely.”
Stegman and Cooperstein quantify the particular importance played by cash-out refinance and investor loans — “the loan products most often pointed to by those who believe the GSEs are overreaching into areas of the market that should be funded by private unsubsidized capital” — in facilitating Fannie- and Freddie-backed lending to low- and moderate-income borrowers.
The sociologist Robert K. Merton, who pioneered the concept of unintended consequences, was especially concerned about “instances in which someone wants the intended consequence of an action so much that he purposefully chooses to ignore any unintended effects.”
Affordable housing policy is too important to let that happen.
Stockton Williams | Executive Director
In This Issue
- One-Quarter of House Members Have Cosponsored Housing Credit Legislation
- Montgomery to Be Nominated for HUD Deputy Secretary
- USDA Names Bodell Deputy Administrator for Multifamily Housing
- Treasury, IRS Priority Guidance Plan Indicates Housing Credit Focus
- Senators Introduce Rural Rental Assistance Legislation
- HUD Publishes Section 811 Project Rental Assistance, Capital NOFAs
- HUD Updates Shutdown Contingency Plan
- CFPB Extends Suspension of Certain HMDA Data Requirements
- Senators Collins, Reed Urge FHFA to Continue Housing Trust Fund, Capital Magnet Fund Contributions
- Congressional Democrats Express Concern about Possible CRA Changes
- NCSHA in the News
- Looking Ahead
One-Quarter of House Members Have Cosponsored Housing Credit Legislation
In the four months since the Affordable Housing Credit Improvement Act (H.R. 3077) was introduced, it has garnered the cosponsorship support of 118 House members — more than 27 percent of that chamber. Its Senate companion bill, S. 1703, has the support of 18 percent of the Senate, and we expect additional senators to join as cosponsors soon. NCSHA and our Housing Credit industry partners are doing everything we can to add to those numbers so this essential legislation is in the best position possible to be added to any end-of-year package that includes a tax title. But we need your help. NCSHA’s Jennifer Schwartz has been reaching out to HFA federal liaisons with lists of members from each state delegation whom we think are most likely to support the bill. Please keep up the calls, emails, letters, and most importantly, in-state meetings with members of Congress. Contact Jennifer with the feedback you get or if you need help.
Montgomery to Be Nominated for HUD Deputy Secretary
The White House announced October 7 that President Trump intends to nominate Brian Montgomery to become the HUD Deputy Secretary. Montgomery currently serves as deputy secretary in an acting capacity and also serves as the assistant secretary for Housing and the commissioner of the Federal Housing Administration (FHA). Montgomery’s nomination will go to the Senate Banking Committee, which is likely to hold a hearing to consider his nomination later this fall.
Montgomery previously served as the FHA commissioner during the George W. Bush Administration from 2005 – 2009. He has also served as co-founder and partner at the Collingwood Group, deputy assistant to the president from 2001 – 2003, secretary to the Cabinet from 2003 – 2005, and a stint at the Texas Department of Housing and Community Affairs, NCSHA’s Texas HFA member.
USDA Names Bodell Deputy Administrator for Multifamily Housing
USDA announced October 10 that Nancie-Ann Bodell has been selected as deputy administrator for Rural Development’s (RD) Office of Multifamily Housing. In this role, she will oversee RD’s multifamily affordable housing production and preservation programs, as well as the existing RD portfolio of affordable rural rental and farm labor housing. Bodell will participate in multiple sessions during NCSHA’s Annual Conference later this month in Boston.
Bodell has worked at HUD for several years, serving as senior policy advisor to the associate deputy assistant secretary for Multifamily Housing and director of the Office of Asset Management and Portfolio Oversight. She joined RD in August 2018, most recently serving as assistant deputy administrator of Multifamily Housing.
Treasury, IRS Priority Guidance Plan Indicates Housing Credit Focus
The U.S. Department of the Treasury and Internal Revenue Service (IRS) have issued their 2019 – 2020 Priority Guidance Plan (PGP), which identifies guidance projects Treasury and IRS intend to actively work on between July 1, 2019, and June 30, 2020. The PGP includes three areas of focus related to the Housing Credit: guidance on Average Income Test implementation, compliance monitoring regulations, and an update to Revenue Procedure 92-31, which provides guidance on the method by which state Housing Credit agencies may request unused Credit authority through the National Pool.
NCSHA is seeking further clarification from IRS on whether the PGP reference to compliance monitoring regulations indicates a willingness to revisit the compliance monitoring final rule published in February 2019, as NCSHA has requested. The PGP also indicates IRS will be working on guidance related to private activity bonds but does not denote the nature of that guidance. NCSHA in June sent recommendations to Treasury and IRS on items the agencies should include in their 2019 – 2020 PGP, including requesting Average Income Test guidance and compliance monitoring rule reform.
Senators Introduce Rural Rental Assistance Legislation
Late last month, Senators Jeanne Shaheen (D-NH) and Tina Smith (D-MN) introduced the Rural Housing Preservation Act of 2019 (S. 2567). The bill would permanently authorize the Housing Preservation and Revitalization Program for USDA Section 514, 515, and 516 properties; allow tenants living in properties that have been foreclosed upon or have had their USDA mortgages mature to receive rental assistance vouchers; and require USDA to align Section 514, 515, and 516 property transfer requirements with the Housing Credit program. The legislation is similar to H.R. 3620, introduced by Rep. Lacy Clay (D-MO), that the House Financial Services Committee unanimously approved this summer.
HUD Publishes Section 811 Project Rental Assistance, Capital NOFAs
HUD on October 9 published two Notices of Funding Availability (NOFAs) for the Section 811 Persons with Disabilities Program: one for up to $37 million for project rental assistance (PRA) and one for up to $75 million in capital advance grants. The PRA NOFA will provide funding to state HFAs and other agencies for project-based rental assistance for extremely-low-income persons with disabilities. HUD expects to make approximately eight awards from these funds. Twenty-two state HFAs are already Section 811 PRA grantees under FY 2012 and 2013 NOFAs. According to the program notice, the only major change HUD made from previous NOFAs is that it will no longer rate applicants on leveraging but will instead rate them on aligning PRA with state housing initiatives.
The application deadline for both NOFAs is February 10, 2020. HUD plans to host NOFA overview webinars in November.
HUD Updates Shutdown Contingency Plan
HUD last week published a new contingency plan detailing its operations during a government shutdown. The updated plan incorporates lessons learned from last winter’s 35-day-long shutdown, providing more program-level details and outlining additional scenarios where HUD staff would be recalled to conduct business. The new plan will require program offices to compile “most-frequently-asked questions” to be posted on HUD’s website during a government shutdown.
All federal agencies, including HUD, are required to prepare for potential lapses in appropriations by developing and publishing contingency plans. The federal government is currently operating under a continuing resolution (CR) that extends funding for all federal programs through November 21, by which time lawmakers will have to finalize Fiscal Year 2020 spending bills or advance another CR to avoid a government shutdown.
CFPB Extends Suspension of Certain HMDA Data Requirements
The Consumer Financial Protection Bureau (CFPB) released a final rule yesterday extending through 2021 a provision of its Home Mortgage Disclosure Act (HMDA) regulations that exempts financial institutions that originate fewer than 500 open-end lines of credit (such as home equity loans) in a year from having to report on such activities.
After 2021, the exemption will apply only to those financial institutions that originated fewer than 200 such loans in the previous calendar year. CFPB has said it is extending the temporary 500-loan threshold, which was raised from 100 in 2017, to give smaller institutions more time to adjust to new HMDA reporting requirements, which took effect in 2018. CFPB also expects next year to release a final rule increasing the threshold exemption for reporting on closed-end mortgage loans, a category that includes most mortgages originated each year.
Senators Collins, Reed Urge FHFA to Continue Housing Trust Fund, Capital Magnet Fund Contributions
Senators Susan Collins (R-ME) and Jack Reed (D-RI) on September 27 sent a letter to Federal Housing Finance Agency Director Mark Calabria urging the agency to continue contributions to the Housing Trust and Capital Magnet funds regardless of any housing finance reforms the administration pursues. The senators sent the letter in response to the administration’s announcement it would allow the GSEs to keep any net revenue they earn until Fannie Mae has accumulated $25 billion in capital and Freddie Mac $20 billion.
Congressional Democrats Express Concern about Possible CRA Changes
In a letter sent last week to federal banking regulators, 29 congressional Democrats, including Senate Banking Committee Ranking Member Sherrod Brown (OH), seven other Democratic members of the Senate Banking Committee, and 21 members of the House Financial Services Committee, expressed “grave concern” about potential changes to the regulations governing the Community Reinvestment Act (CRA). The letter, which was sent to the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (OCC), urged the agencies to issue a joint proposed rule for amending CRA and not to publish any proposal until they have received the backing of community development and civil rights organizations. OCC Comptroller Joseph Otting has said his agency will propose its own separate rule if it cannot reach an agreement with the other agencies.
The lawmakers also expressed opposition to any evaluative framework that measures banks’ CRA compliance solely on the aggregate dollar value of their CRA activity. NCSHA has also expressed misgivings about such an evaluative approach in our comments on OCC’s Advanced Notice of Proposed Rulemaking on CRA.
NCSHA in the News
Tax Credit Tuesday Podcast (Novogradac)
Legislative and Regulatory Activities
- October 16 | House Financial Services Committee Hearing | Who Is Standing Up for Consumers? A Semi-Annual Review of the Consumer Financial Protection Bureau
- October 17 | House Appropriations Transportation, Housing and Urban Development, and Related Agencies Subcommittee Hearing | The Department of Housing and Urban Development’s Community Development Block Grant – Disaster Recovery Program
- October 18 | Comment Deadline | HUD Proposed Rule on Disparate Impact Standard
- October 18 | Registration Deadline | FHFA Duty-to-Serve Listening Sessions | St. Louis, MO; Los Angeles, CA; Washington, DC; and via Webinar
- October 21 | Comment Deadline | HUD Notice of Demonstration to Assess the National Standards for the Physical Inspection of Real Estate (NSPIRE) and Associated Protocols
- October 22 | House Financial Services Committee Hearing | The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America
- October 30 | House Financial Services Subcommittee on Oversight and Investigations | Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing
- October 31 | Comment Deadline | IRS Housing Credit Disaster Relief Revenue Procedures
- November 1 | Deadline to submit comments to NCSHA | HUD Proposed Rule on HOTMA
- November 14 | Deadline to submit comments to NCSHA | GASB Exposure Draft on LIBOR Replacement
- November 18 | Comment Deadline | HUD Proposed Rule on HOTMA
- November 27 | Comment Deadline | GASB Exposure Draft on LIBOR Replacement
NCSHA, State HFA, and Industry Events
- October 19 – 22 | NCSHA Annual Conference & Showplace | Boston, MA
- October 23 – 24 | Affordable Housing Investors Council’s 2019 Fall Affordable Housing Summit | Nashville, TN
Jennifer Schwartz will attend.
- October 28 | National Affordable Housing Management Association’s Fall Conference | Washington, DC
Jennifer Schwartz will speak at this event.
- October 29 – 30 | South Dakota Housing Development Authority Annual Housing Conference | Pierre, SD
Stockton Williams will speak at this event.
- November 18 – 20 | Prosperity Now I’M HOME Conference | Portland, OR
Greg Zagorski will speak at this event.
- November 20 – 22 | Virginia Governor’s Housing Conference | Hampton, VA
Stockton Williams will speak at this event.
- November 20 | American Bar Association Forum on Affordable Housing and Community Development Law, “Income Averaging in LIHTC Projects — Where Are We Now?” | Webinar
Jennifer Schwartz will speak at this event.
- December 2 | Federal Housing Finance Agency Duty-to-Serve Listening Session | Washington, DC
NCSHA will speak at this event.
- January 12 – 17 | NCSHA’s 2020 HFA Institute | Washington, DC