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NCSHA Washington Report | October 7, 2022

Published on October 7, 2022

Web Washington Report Graphics - October 7, 2022

The first comprehensive federal review of the Federal Home Loan Bank system is officially underway, with the completion this week of three days of public testimony from interested parties in housing finance, including us.

The system’s regulator, the Federal Housing Finance Agency, is assessing the “mission, membership eligibility requirements, and operational efficiencies of the FHLBanks,” all of which are subjects of considerable debate among industry groups.

Encouragingly, FHFA also intends to explore the banks’ “role or potential role in addressing housing finance, community and economic development, affordability, and other related issues.” We tend to agree with agency director Sandra Thompson that “there is more the banks can and should do.”

To be sure, the FHLBs’ flagship Affordable Housing Program and Community Investment Program are helpful sources of affordable financing and subsidy, together assisting 62,000 lower-income renters and homeowners in 2020. The fact they represent relatively small slices in the capital stack of a typical transaction doesn’t detract from their importance.

For more than a few speakers at FHFA’s “listening sessions,” though, it did call the question of whether the FHLB system shouldn’t be playing a bigger role in addressing the affordability crisis.

It certainly has the financial capacity. “As of July 31, the system’s borrowings came to about $937 billion, making it one of the world’s biggest debtors and the second-largest in the U.S. behind the Treasury Department,” according to the Wall Street Journal. “The money flows through 11 regional cooperatives, which feed it to their 6,500 member institutions — commercial lenders, thrifts, credit unions and insurers.”

And the banks have shown a willingness and ability to respond to systemic stresses in the U.S. economy — which housing affordability now qualifies as. An S&P Global Ratings report recalls that “the FHLB System’s critical public policy role to U.S. housing finance was clear in the U.S. mortgage crisis of 2008, during which advances (loans to client owner members) outstanding peaked at $1 trillion” and “further illustrated” during the dislocations caused by Covid-19.

It’s true these interventions have their critics, most notably former Federal Reserve Board governor Daniel Tarullo, who argues “the banks’ current business model of borrowing extensively in short-term funding markets and providing longer-term funding to their depository institution and insurance company members carries risks for the financial system.”

The best reason the FHLBs should lend more of a hand on housing affordability is that the system’s statutory mission clearly envisions it, from its Great Depression-era origins to more recent reforms. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 “included a number of structural and governance changes to the FHLB System designed to support and encourage the new affordable housing and community investment mission,” according to an account by the Consumer Federation of America.

During this week’s listening session, Illinois Housing Development Authority Executive Director Kristin Faust and NCSHA’s Greg Zagorski each suggested several ways HFAs, which have worked with the FHLBs since 1992, can help them fully achieve their essential purpose. We’ll remain active in FHFA’s review.

Stockton-Williams-Washington-Report

Stockton Williams | Executive Director

State HFA Emergency Housing Assistance

In This Issue

Administration Releases Housing Credit Average Income Rule and Deadline Extensions, Announces Progress on Housing Supply Action Plan
Today, the Biden-Harris Administration issued critical Housing Credit guidance: the final rule for the Housing Credit Average Income Test (AIT) minimum set-aside and Notice 2022-52 providing deadline extensions for Housing Credit properties requested by NCSHA. Both were published in conjunction with a progress report the administration released on its efforts to advance the agenda items in the May 2022 Housing Supply Action Plan. Both the AIT regulations and the deadline extensions closely mirror recommendations NCSHA made to Treasury and IRS on those issues. For more information, see our blog on the administration’s progress report and forthcoming blogs on the AIT rule and the deadline extension notice.

NCSHA and IHDA Present During FHFA Listening Session on Federal Home Loan Banks
The Federal Housing Finance Agency (FHFA) held a multiday listening session over the past two weeks as part of its comprehensive review of the Federal Home Loan Banks (FHLBs). The listening session featured testimony from a diverse array of stakeholders, including lenders, affordable housing advocates, FHLB board members, and developers. Both NCSHA and Kristin Faust, executive director of the Illinois Housing Development Authority (IHDA), spoke on Tuesday, October 4. NCSHA noted the importance of the FHLBs in supporting liquidity for affordable housing. We asked FHFA to maintain the regional structure of the FHLB system, which helps to ensure the banks support the specific housing needs of each part of the country, and suggested FHFA consider how the FHLBs can better partner with HFAs and support current affordable housing programs, such as the Housing Credit and HOME. Faust also spoke in support of the FHLBs’ regional structure and urged FHFA to give the FHLBs more flexibility to support innovative affordable housing efforts serving communities in their jurisdictions. She also discussed IHDA’s partnerships with the Chicago FHLB.

As part of its review, FHFA is also accepting written comments until October 21. By October 14, send Greg Zagorski any input you would like NCSHA to consider as we draft comments on behalf of all HFAs.

FHA Issues RFI on Small Mortgage Loans
On October 4, the Federal Housing Administration (FHA) published a Request for Information in the Federal Register soliciting ideas for how to reduce barriers to originating small mortgage loans (i.e., those with an original principal obligation of $70,000 or less) and improve FHA policies and programs that support affordable homeownership opportunities in underserved markets with lower housing prices. FHA is accepting comments until December 5. By November 28, please send Rosemarie Sabatino any input for NCSHA to consider in our comments.

HUD Announces $379 Million for Choice Neighborhoods
On Thursday, the Department of Housing and Urban Development (HUD) announced it will award $379 million for the Choice Neighborhoods program in FY 2022, the highest funding level since the program was established in 2010 and $150 million more than last year. The program is designed to transform public and other HUD-assisted housing by spurring community restoration and growth through housing revitalization. Since 2010, the program has created 10,000 new mixed-income units across 44 cities and generated an additional $400 million in public and private investment in those communities. Public housing authorities, local governments, and tribal entities are encouraged to apply by the January 11 deadline. More information about the application process is available here.

HUD Announces $5 Million in Technical Assistance for Thriving Communities Initiative
HUD announced Thursday the availability of $5 million for the Thriving Communities Technical Assistance program, which will fund technical assistance providers to work with jurisdictions across the country to consider housing needs and boost supply as part of their larger infrastructure investment plans. Technical assistance providers are eligible to apply, and there will be a separate process for jurisdictions to request technical assistance from the providers selected. Applications are due November 22. The Department of Transportation (DOT) released a similar funding opportunity.

On October 12, HUD and DOT will host a webinar for interested applicants to learn more about the Thriving Communities program and the specific requirements of each funding opportunity. Register for the webinar.

BPC Action Adopts Housing Credit Expansion and Improvements, Neighborhood Homes Investment Act in Housing Policy Platform
BPC Action, the advocacy arm of the Bipartisan Policy Center, this week released a set of housing policy recommendations it views as the key elements of comprehensive, evidence-based housing legislation building on ideas from both Republicans and Democrats to respond to the housing affordability crisis. The platform includes three primary goals: increasing production of affordable homes, preserving existing affordable housing, and helping families afford and access housing.

Expanding the Housing Credit is a pillar of BPC Action’s agenda, much of which is identical to long-time NCSHA and ACTION Campaign priorities. The group calls for a 50 percent cap increase in Housing Credit authority, lowering the bond financing threshold, and a 50 percent basis boost for developments serving extremely low-income households, all of which are components of the Affordable Housing Credit Improvement Act (AHCIA). BPC Action also supports perpetual affordability for new Housing Credit properties and calls on Congress to ensure sufficient funding or credit authority for re-syndication of these properties as needed, which is not a provision of the AHCIA. Other proposals include enacting the Neighborhood Homes Investment Act, encouraging communities to remove restrictive regulations and land use policies, meeting Native Americans’ housing needs, preserving manufactured housing, and boosting landlord participation in the Housing Choice Voucher program.

NCSHA in the News
Notes from Novogradac, 9.22.22, Novogradac LIHTC Working Group Comments on NCSHA’s Recommended Practices

Looking Ahead…

Legislative and Regulatory Activities

NCSHA, State HFA, and Industry Events

  • October 18 | Ohio Housing Council Fall Symposium | Columbus, OH
    Jennifer Schwartz will speak at this event.
  • October 19 – 21 | Affordable Housing Investors Council 2022 Affordable Housing Summit | Minneapolis, MN
    James Tassos will speak at this event.
  • October 22 – 25 | NCSHA Annual Conference & Showplace | Houston, TX
  • October 25 – 28 | National Affordable Housing Management Association Fall Conference | Washington, DC
    Jennifer Schwartz will speak at this event.
  • November 9 – 10 | ProLink Technology Live 2022 | Virtual
    Jennifer Schwartz will speak at this event.
  • November 15 | New Hampshire Housing’s Housing & Economy Conference | Manchester, NH
    Jennifer Schwartz will speak at this event.
  • November 16 | 2022 Vermont Statewide Housing Conference | Burlington, VT
    Jennifer Schwartz will speak at this event.

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