April 2, 2018

Capitol Express Newsletter: Congress Passes Spending Bill with Significant Increases for Affordable Housing

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CONGRESSIONAL AND ADMINISTRATION NEWS

Congress Passes Provisions to Expand and Strengthen the Housing Credit

The president signed a fiscal year (FY) 2018 omnibus spending package into law at the end of March with provisions, taken from the Affordable Housing Credit Improvement Act (S. 548/H.R. 1661), that will strengthen and expand the Low-Income Housing Tax Credit (Housing Credit). The omnibus authorizes a 12.5 percent increase in Housing Credit allocation for four years (2018-2021) and allows income averaging in Housing Credit properties on a permanent basis. Novogradac and Co. estimates that this temporary expansion will increase affordable housing production by approximately 28,400 rental homes over the next decade.

This is the first expansion of the Housing Credit in ten years and was championed by Senator Maria Cantwell (D-WA), the lead sponsor of the Affordable Housing Credit Improvement Act (S. 548). Senator Cantwell points out that “the increase couldn’t come at a better time. This down payment will help us deal with the tremendous deficit we have in affordable housing.” While the temporary 12.5 percent increase will not fully make up for the projected loss of Housing Credit production that is resulting as an indirect effect of the reduction of the corporate tax rate enacted in the Tax Cuts and Jobs Act, it is a very significant first step and offers an important down payment on the nationwide shortage of affordable rental housing. The ACTION Campaign released a statement thanking Congress for including these provisions in the omnibus and expressed continued commitment to advancing the remaining provisions in the Affordable Housing Credit Improvement Act.

FY 2018 Omnibus Increases Funding Levels for Many Housing and Community Development Programs

The omnibus spending package also includes significant funding increases for many affordable housing and community development programs, including $1.36 billion for the HOME Program and $3.3 billion for the Community Development Block Grant (CDBG) Program, the highest level of funding either program has seen in seven years. Additional appropriations for FY 2018 include:

  • Section 4 Capacity Building Program (Section 4) is funded at $35 million, level with FY 2017.
  • Community Development Financial Institutions (CDFI) Fund is funded at $250 million, up from $248 million in FY 2017.
  • Tenant-Based Rental Assistance (TBRA) is funded at $22.015 billion, up from $20.292 billion in FY 2017.
  • Project-Based Rental Assistance (PBRA) is funded at $11.515 billion, up from $10.8 billion in FY 2017.
  • Section 202 Housing for the Elderly is funded at $678 million, up from $502 million in FY 2017. This includes $105 million for new construction.
  • Choice Neighborhoods Initiative is funded at $150 million, up from $137.5 million in FY 2017.
  • The Public Housing Operating Fund is funded at $4.55 billion, up from $4.4 billion in FY 2017.
  • The Public Housing Capital Fund is funded at $2.75 billion, up from $1.942 billion in FY 2017, a significant increase of $810 million over FY 2017 enacted levels.
  • The Rental Assistance Demonstration (RAD) cap will be raised to 455,000 units, up from 225,000 units. In addition, RAD authority is extended to the Project Rental Assistance Contract (PRAC) inventory, which would make it possible for approximately 120,000 units of senior housing to be preserved.

For more information, see Enterprise’s updated appropriations chart and blog post on funding levels in the FY 2018 omnibus.

Enterprise President and CEO Terri Ludwig released a statement on the passage of the omnibus, noting that “the expansion of and flexibility provided to the Housing Credit, as well as the increased funding for critical HUD and USDA programs, will be significant in addressing the vast and growing needs nationwide.” In addition, Enterprise’s Vice President for Public Policy Marion McFadden points out that “it is exciting to see that Congress is responding to calls from constituents around the country to address the gap between what people can afford with their wages and what rents really cost.”

Affordable Housing Advocates to Hold National Housing Week of Action in May

The second annual Our Homes, Our Voices National Housing Week of Action will be held May 1 - 8. The Housing Week of Action aims to bring attention to the severe shortage of affordable homes and urge increased investments in solutions. Last year, advocates hosted more than 60 rallies, press conferences, letter writing campaigns and other events across the country. For more information about participating in the event, please visit the Our Homes, Our Voices website for sample materials and guidance on how to get involved.

RESEARCH AND REPORTS

HUD Reports on Housing Credit Tenants 

HUD has released a new report, Understanding Whom the LIHTC Program Serves: Data on Tenants in LIHTC Units as of December 31, 2015, which highlights the importance and impact of the Housing Credit. The report shows that between 2013 and 2015, the vacancy rate of Housing Credit properties dropped from 5 percent vacant to 4 percent vacant, which indicates that there is high demand for these homes. The report also documents that the Housing Credit targets extremely low-income households – those earning 30 percent of the area median income or less – noting that in 2015, 44.5 percent of tenants in Housing Credit properties were extremely low-income.

Freddie Mac Study Examines Rents in Housing Credit Properties

An analysis by Freddie Mac shows that the average rent for Housing Credit properties is 38 percent lower than average market-rate rents. The study, which analyzed nine markets, notes that households who live in Housing Credit properties also benefit from more stable and predictable rent increases. While market-rate rents in the nine markets grew 5 percent on average per year between 2012 and 2017, Housing Credit property rents rose an average of 0.9 percent annually during the same period. The study points out that the substantial market-rate rent increases are causing serious financial hardship in particular for lower-income households that qualified for but were unable to move into Housing Credit units because too few were available.

JCHS and Enterprise Publish Paper on Affordable Housing Design

The Harvard Joint Center for Housing Studies (JCHS) and Enterprise have jointly published a new paper that looks at how funding and review processes shape the design of affordable housing. The paper reviews the ways in which Massachusetts allocates its annual allotment of Housing Credits by interviewing leading local experts and observing Enterprise’s Affordable Housing Design Leadership Institute. The report’s findings underscore how the complex interplay of funding, design, regulatory processes and local politics creates both opportunities and challenges to ensuring that affordable housing developments are designed in ways that benefit both residents and neighborhoods. 

STATE AND LOCAL POLICY 

California Anticipates $250 Million Annual Increase for Affordable Housing

Matt Schwartz, president and CEO of the California Housing Partnership, estimates that the 12.5 percent increase to the Housing Credit, along with the funding increases for affordable housing included in the federal government's recent omnibus spending package, could generate around $250 million annually for affordable housing in California. The expansion will result in more homes for low-income households in California – vital for a state in the midst of an affordable housing and homelessness crisis. Schwartz notes that, while this is an important start, more resources are needed to address the reduced production of affordable housing resulting from last year’s tax reform bill.

New York City Council Votes to Affirm Rent Stabilization Efforts

The New York City Council recently voted to extend rent regulation laws in the city, which are an important system for protecting low-income tenants from sharp rent increases and promoting neighborhood stability. Judi Kende, vice president and New York market leader at Enterprise Community Partners, urges the New York State Legislature to strengthen rent laws and provide enough funds for enforcement efforts, with the goal of preventing affordable units from leaving the rent stabilization system and curbing tenant harassment. Outdated rent laws and loopholes have allowed thousands of affordable units to exit rent stabilization each year. Kende emphasizes the importance of using the 2019 legislation renewal period to update state laws, such as vacancy allowance and preferential rents, to reflect today’s housing market and allocate additional resources for enforcement.

Washington State Ends 2018 Legislative Session with Big Wins for Affordable Housing

Affordable housing advocates in the state of Washington have achieved significant policy wins that will spur the production of new units, provide more tenant protections and improve services for the homeless, according to Flora Arabo, national state and local policy director at Enterprise, and M.A. Leonard, vice president and Pacific Northwest market leader at Enterprise. In the 60-day session that recently concluded, the Washington legislature sent a package of housing bills to Governor Inslee’s desk. Included in that package are bills to provide $106.8 million for the Housing Trust, ban source of income discrimination, increase the real estate document recording fee that funds homeless services and is expected to generate $26 million in new funds, require the state to inventory underutilized and surplus publicly owned property, and authorize state and local entities to discount the price of land if it will be developed for a public benefit. Learn more about these policy wins in an Enterprise blog post

IN CASE YOU MISSED IT

News Updates from Community Developments

In recent Community Developments, we highlighted a new down payment assistance program in Massachusetts, a decline in new home sales in February, New York City’s Community Retrofit program, which aims to simplify the energy and water efficiency retrofit process, and much more. Sign up here to receive the Community Developments newsletter.

HEARINGS AND EVENTS

Upcoming Hearings and Mark-Ups

There are no housing and community development-related hearings scheduled at this time.

Upcoming Events

April 2018

May 2018

June 2018

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