Washington Report | October 26, 2018

We’ve come to understand the nation’s central affordable housing challenge as essentially too much demand and not enough supply, which is driving rents and prices out of reach for millions. Yet in some places, the problem is not enough demand, as evidenced by the rising number of neighborhoods experiencing high levels of housing vacancy.

As researcher Alan Mallach’s most recent work shows, the number of vacant housing units surged in the years after the Great Recession, to 12 million, and today stands at about 11 million — 25 percent more than in 2005. The challenge is most concentrated in the formerly industrial “legacy cities” of the Northeast and Midwest, where vacancy rates average 15 – 17 percent and are much higher than that in some cities (a healthy range in most markets is 4 – 8 percent).

But by no means is vacancy an “urban issue”: Rural areas and small towns have an overall vacancy rate of 18 percent, compared to 10 percent for urban areas, according to a report from the Housing Assistance Council.

For communities dealing with serious housing vacancy, demolition is often needed. As Mallach observed in earlier research, “This need is driven by two factors: the macro issue of supply and demand, which has led to a vast oversupply of buildings in many cities, and the more micro issue of how vacant abandoned structures impact their blocks and neighborhoods.”

Demolition’s most immediate benefits can be a reduction in blight and an improvement in neighborhood safety. Research by Christina Plerhoples Stacy published last year by the Urban Institute found that tearing down one blighted building reduces crime, on average, by slightly more than nine crimes per year, including two violent and five property crimes.

Yet, as the bluntest of instruments, and often a costly one, demolition absent a thoughtful redevelopment strategy can have negative neighborhood effects. [PDF Report | Landing Page]

A 2016 study by Jason Hackworth of the University of Toronto that analyzed conditions in hundreds of neighborhoods across the United States cautioned that “ad hoc, stand-alone demolition as urban policy as a means to market and community improvement is highly questionable” and may be more likely to improve economic growth outside the affected neighborhoods than in the most impacted areas.

Nevertheless, as Mallach argues, “the rationale for a well-planned, strategic, large-scale demolition program in cities with large, long-standing, surplus building inventories appears to be sound.” State HFA blight elimination programs through the federal Hardest Hit Fund are tangible proof of that proposition, having delivered quantifiable results in Michigan, Ohio, Indiana, and several other states.

Other state HFAs have tapped additional sources of capital and aligned demolitions with new homeownership production. Delaware State Housing Authority’s Strong Neighborhood Housing Fund, which won an NCSHA Annual Award for Program Excellence last week, is a replicable example. DHSA’s success shows how hope for neighborhood improvement can begin one house a time. As a community leader working with DSHA put it, “Many residents in nearby neighborhoods asked, when is my block coming?”

Stockton Williams | Executive Director

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In This Issue

• NCSHA Honors HFA Innovation
• NCSHA Opportunity Zones Letter Calls for Clarification, Flexibility
• NCSHA Debuts Opportunity Zone Fund Directory and Resource Page
• Treasury Department Releases Initial Guidance on Opportunity Zones
• NCSHA Comment to HUD Supports Data-Based Fair Housing Planning
• NCSHA and IRS to Host Webinar on Housing Credit Form Submission
• Registration Is Open for HFA Institute
• President Trump Signs Legislation to Combat the Opioid Crisis
• Report Highlights Housing Credit Preservation Challenges as Year 30 Approaches
• Freddie Mac Releases White Papers on Housing Credit Use in Appalachia and Indian Areas
• NCSHA in the News
• Looking Ahead

NCSHA Honors HFA Innovation

Supportive housing for opioid addiction recovery. Defense of affordable housing in tax reform. Reimagination of employee performance reviews. Creative financing for workforce housing. These are just a few of the outstanding HFA initiatives that earned recognition during NCSHA’s 2018 Annual Awards for Program Excellence. On October 15 during its Annual Conference & Showplace in Austin, NCSHA presented awards to 15 HFAs for innovative programs in communications, homeownership, legislative advocacy, management innovation, rental housing, special achievements, and special needs housing. Read more in NCSHA’s news release and access this year’s nominated programs at https://www.ncsha.org/events/annual-awards-for-program-excellence/.

NCSHA Opportunity Zones Letter Calls for Clarification, Flexibility

In a letter submitted to the IRS last week, NCSHA called for Opportunity Zones (OZ) guidance clarifying that residential real estate property qualifies as OZ property, confirming that OZ investments may be combined with other Credits, addressing key questions to provide certainty to OZ investors, defining abuse to prevent loss of affordable housing in OZs, specifying reporting requirements for OZ investments, and determining whether OZ investments qualify for Community Reinvestment Act credit. NCSHA developed the letter with substantial assistance from its Opportunity Zone Focus Group, co-chaired by Maryland Department of Housing and Community Development Secretary Kenneth Holt and Michigan State Housing and Development Authority Executive Director Earl Poleski.

NCSHA Debuts New Opportunity Zone Fund Directory and Resource Page

In response to state HFA interest in Opportunity Zones, NCSHA released a directory of newly-created Opportunity Zone investment funds. The Opportunity Zone Fund Directory provides initial details on 23 Qualified Opportunity Funds (QOFs), including their funding and investment focus. NCSHA is tracking only multi-project funds. We will continue to update the directory as additional QOFs are announced; please send us information on funds you hear about. The Opportunity Fund Directory and related resources are accessible to the public on a new resource page on NCSHA’s website.

Treasury Department Releases Initial Guidance on Opportunity Zones

Late last week, the Treasury Department released proposed regulations providing guidance on Opportunity Zones. The proposed regulations further define the type of gains that Qualified Opportunity Fund (QOF) investors may defer, the time by which corresponding amounts must be invested in QOFs, and the manner in which investors may elect to defer specified gains. The regulations also provide rules for self-certification and valuation of QOF assets and guidance on qualified Opportunity Zone businesses. More details are included in NCSHA’s blog on the proposed regulations.

NCSHA Comment to HUD Supports Data-Based Fair Housing Planning

NCSHA submitted to HUD last week comments in response to its Advance Notice of Proposed Rulemaking (ANPR) on streamlining and enhancing its Affirmatively Furthering Fair Housing (AFFH) Final Rule. The comment letter underscores NCSHA’s support for meaningful, data-driven fair housing planning that is also mindful of HUD program participants’ capacity, available resources, and jurisdictional authority. NCSHA urged HUD to continue to differentiate between state and local program participants as it works to design implementation systems for AFFH compliance and to ensure that AFFH planning requirements are not unreasonably costly for grantees. More information is available in NCSHA’s blog about the comment letter.

NCSHA and IRS to Host Webinar on Housing Credit Form Submission

HFA and Associate members are invited to participate in a webinar NCSHA is hosting with the Internal Revenue Service (IRS) on the submission processes for IRS Forms 8609, 8610, 8610 Schedule A, and 8823. The webinar will take place November 7 from 2:30 p.m. – 4:30 p.m. ET. George Lydford, senior program analyst for IRS Examination Quality and Technical Support, will lead the webinar, which will focus on streamlining form processing, reducing submission burden on Housing Credit allocating agencies, and addressing agencies’ questions about IRS forms and submission processes. To RSVP for the webinar, contact NCSHA Staff by November 2.

Registration Is Open for HFA Institute 

NCSHA is currently planning the agenda for its January 13 – 18 HFA Institute in Washington, DC. The Institute will include modules on the Housing Credit, homeownership programs, HOME and the Housing Trust Fund, and Section 8 contract administration and other federal rental housing programs. Sessions will feature key federal officials, leading trainers and consultants, noted industry professionals, and experienced HFA practitioners covering program basics, legislative and regulatory updates, industry perspectives, and solutions to the latest program administration challenges. Please send topic and speaker suggestions to Garth Rieman. For more information and to register, visit our conference website.

President Trump Signs Legislation to Combat the Opioid Crisis

President Trump on Wednesday signed into the law the Support for Patients and Community Act (SUPPORT) aimed at combatting the opioid crisis by reducing access to opioids and increasing access to prevention, treatment, and recovery services. The bill authorizes Congress to provide funding for a pilot program offering temporary housing assistance to individuals recovering from substance-use disorders. HUD would distribute the funds through the Community Development Block Grant program, based on a formula that prioritizes states with high rates of overdose deaths, high rates of unemployment, and low rates of work participation. SUPPORT also authorizes the Department of Health and Human Services to develop best practices for operating recovery housing, report to Congress on innovative state initiatives and strategies for providing housing-related services, and provide technical assistance to states to develop and expand these strategies.

Report Highlights Housing Credit Preservation Challenges as Year 30 Approaches

The National Low Income Housing Coalition and the Public and Affordable Housing Research Corporation have released a report, “Balancing Priorities: Preservation and Neighborhood Opportunity in the Low Income Housing Tax Credit Program Beyond Year 30,” considering the preservation needs of the existing Housing Credit stock, as early Credit properties near the end of their federal extended-use periods beginning in 2020. The report finds that nearly half-a-million Credit units — close to a quarter of the current stock — will come to the end of their 30-year affordability periods between 2020 and 2029. The report explores various preservation strategies and calls for sufficient federal resources for affordable housing preservation and new construction, including the passage of the Affordable Housing Credit Improvement Act, and for the collection of more data on property-level affordability restrictions.

Freddie Mac Releases White Papers on Housing Credit Use in Appalachia and Indian Areas

As part of its Duty-to-Serve efforts, Freddie Mac recently published two white papers highlighting how the Housing Credit is being used to bring affordable rental housing to underserved markets. “LIHTC in Middle Appalachia” reports on how the Housing Credit serves a high percentage of cost-burdened lower income Middle Appalachian renters. “LIHTC in Indian Areas” says the Housing Credit has helped provide more than 2,000 properties in Indian Areas, providing more than 80,000 units nationwide. However, not all of these properties specifically serve tribal members, and Native American housing needs persist.

NCSHA in the News

Solving the Home Affordability Crisis: A Guide for Policymakers & Local Government Leaders (Governing)

Looking Ahead…

NCSHA, State HFA, and Industry Events

• November 7 – 8 | Indiana HCDA’s Moving Forward Rural Development Workshop
  Jennifer Schwartz will participate.
• November 7 | Ohio Housing Conference
  Stockton Williams is speaking at this event.
• November 9 | Ballard Spahr National Housing Symposium
  Althea Arnold and Khloe Greenwood will participate.
• November 13 | AHF Live: The 2018 Affordable Housing Developers Summit (Chicago)
  Stockton Williams is speaking at this event.
• November 14 | Vermont Statewide Housing Conference
  Stockton Williams will participate.
• November 14 – 15 | Freddie Mac Affordable Housing Advisory Council Meeting
  Stockton Williams and Garth Rieman will participate.
• November 27 | National Housing Conference Solutions for Affordable Housing Conference
  Stockton Williams is speaking at this event.
• January 13 – 18 | NCSHA HFA Institute | Washington, DC

Legislative and Regulatory Activity

• October 29 | National Low-Income Housing Coalition congressional briefing, “Bold Housing Solutions: Opportunities to Expand the Housing Trust Fund”
  Minnesota Housing Commissioner Mary Tingerthal is scheduled to participate.
• October 30 | Comment deadline on USDA’s proposed rule modifying the income eligibility standards for Section 502 Guaranteed Rural Housing Loans and Section 502 Direct Home Loan programs
• November 7, 2:30 p.m. – 4:30 p.m. ET | NCSHA and IRS Webinar on Housing Credit Form Submission.
  To participate, contact NCSHA Staff by November 2.
• November 19 | Comment deadline on the Office of the Comptroller of the Currency’s Advance Notice of Proposed Rulemaking on the Community Reinvestment Act