June 25, 2018

Capitol Express Newsletter: Senate Votes Down Rescission Package, White House Unveils Proposal to Overhaul Federal Government

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Senate Votes Down Rescission Package that Would Have Cut Critical Housing Funds

Last week, the Senate voted 50-48 to reject a $15 billion rescission package, the “Spending Cuts to Expired and Unnecessary Programs Act,” that would have recaptured $15 billion from dozens of federal programs, including $40 million from the USDA Section 521 Rental Assistance Program, $40 million from the Public Housing Capital Fund and $141 million from the Capital Magnet Fund. The House had narrowly passed the rescission package earlier this month. Enterprise strongly opposed these rescissions and thanks advocates for reaching out to their senators about this harmful legislation. At a time when housing affordability is a growing challenge for communities nationwide, Congress should be increasing investments in these programs — not clawing them back. The proposed rescission from the Capital Magnet Fund was particularly misguided, as the program is funded not through congressional appropriation but through a small fee on all new business at Fannie Mae and Freddie Mac, and the funds were only made available to the Department of Treasury a week before the Administration announced its rescission proposal. While these housing programs avoided rescissions this time, some lawmakers and the Administration are considering larger rescissions in the future. Enterprise opposes attempts to reduce funding for critical affordable housing and community development proposals, especially those that have already been agreed to, and will continue advocating against harmful rescission proposals.

Housing Agencies Send Letter to IRS on Income-Averaging in Housing Credit Properties

The National Council of State Housing Agencies (NCSHA) recently sent a letter to the Department of the Treasury and the IRS concerning the implementation of income averaging, a recently enacted provision from the Affordable Housing Credit Improvement Act. Prior to enactment of this new provision, Low-Income Housing Tax Credit (Housing Credit) units were available to residents earning up to 60 percent of Area Median Income (AMI). Income-averaging allows Housing Credit-qualified units to serve households earning up to 80 percent of AMI so long as the average income/rent limit in the property is 60 percent or less of AMI. This provision allows Housing Credit developments to maintain financial feasibility while providing a deeper level of affordability. NCSHA’s letter requests flexibility as IRS issues guidelines to implement income averaging so that state agencies can best meet local needs. The letter also discusses strategies for approaching compliance monitoring. Additionally, it provides recommendations for IRS action or guidance in clarifying income averaging requirements in practice, such as establishing a procedure for HUD to use in calculating area-specific income limits.

Income Averaging was enacted in the Consolidated Appropriations Act of 2018 and is one of nearly two dozen provisions in the Affordable Housing Credit Improvement Act (S. 548/H.R. 1661) that would strengthen the Housing Credit by enacting additional flexibilities to streamline the program. Enterprise encourages all stakeholders to thank your members of Congress who have co-sponsored the legislation, share examples of Housing Credit success stories in their state or district, and urge them to continue supporting the Affordable Housing Credit Improvement Act.

ACTION Campaign Releases Fact Sheet Linking Affordable Housing to Improved Health Outcomes

The ACTION Campaign, a coalition of over 2,200 organizations and businesses advocating to strengthen and expand the Housing Credit, has released a new fact sheet highlighting the role of the Housing Credit in improving health outcomes for low-income families and communities. The fact sheet explores the growing body of evidence linking affordable housing to positive health outcomes and public health care savings, as well as the potential benefits of the Affordable Housing Credit Improvement Act (S. 548/H.R. 1661) in creating healthy homes, including the adoption of provisions that would support the development of supportive housing for the chronically homeless. The ACTION Campaign has previously released fact sheets that document the Housing Credit’s benefits for rural, senior and Native American communities, and others that describe the benefits of using the Housing Credit for the recapitalization of existing affordable housing and the creation of supportive housing. Visit the ACTION Campaign’s Advocacy Toolkit to access these fact sheets, along with other advocacy resources to support the Housing Credit.

HUD Requests Public Comment on Disparate Impact Rule

HUD has issued an advance notice of proposed rulemaking  seeking public comment on whether the Disparate Impact Rule should be revised in light of the 2015 U.S. Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Inclusive Communities). The Disparate Impact Rule, established under the Fair Housing Act (FHA), creates liability for discriminatory lending practices, even if those practices are not motivated by discriminatory intent. However, while the ruling in Inclusive Communities held that disparate impact claims may be brought under the FHA, it also set forth limitations on the rule "to protect potential defendants against abusive disparate impact claims,” leaving it up to HUD to make necessary changes. The notice invites the mortgage industry and other stakeholders to address several critical concerns related to the rule, including: the rule's clarity; the burden of proof standard and burden-shifting framework; the definition of “discriminatory effect”; and whether the rule should provide defenses or safe harbors to claims of disparate impact liability. The public has until August 20, 2018 to submit a comment. Enterprise will be submitting comments to HUD – stay tuned to our blog for additional information.

Trump Administration Unveils New Proposal for Overhauling the Federal Government

Last week, the White House unveiled a new proposal to overhaul the federal government that includes several provisions that would impact affordable housing and community development programs. These proposals include: moving the U.S. Department of Agriculture’s rural housing loan guarantee and rental assistance programs to HUD; consolidating the Community Development Block Grant (CDBG) Program into a new “Bureau of Economic Growth” within the Department of Commerce; and establishing a permanent Council on Public Assistance, composed of HUD and other agencies that administer public benefit programs, which would set statutory cross-program policies, including uniform work requirements. The proposal also promotes the legislative changes supported by Secretary Carson earlier this year that would modify rent structures to “reduce administrative burden, incentivize work, and place HUD’s rental assistance programs on a more fiscally-sustainable path.”

The proposal also includes plans to reform the federal housing finance system, including ending the conservatorship of Fannie Mae and Freddie Mac (the GSEs), providing an explicit but limited federal guarantee for mortgage-backed securities, focusing the GSEs on secondary market liquidity for mortgage loans to qualified borrowers, and moving unspecified affordable housing objectives to HUD.

Certain aspects of this proposal could be accomplished through Executive administrative action, while others require legislative changes. It is unlikely that Congress would enact many of the ideas put forth in this proposal, but Enterprise will continue to monitor the proposals because of the potential impacts they could have on the country’s affordable housing and community development delivery systems.

Treasury Announces Final Round of Opportunity Zones 

The U.S. Department of the Treasury and the IRS have announced the final round of Opportunity Zone approvals, with designations in Florida, Nevada, Pennsylvania and Utah. Opportunity Zones have now been designated in all 50 states, the District of Columbia and five U.S. territories. According to data from the 2015 American Community Survey, the nearly 35 million people living in the designated census tracts had an average poverty rate of over 32 percent 15 percentage points higher than in the average census tract. Further, the designated tracts had a median family income that was on average 37 percent below the area or state median family income, and an unemployment rate that was 1.6 times higher than the average census tract.

Enterprise and other stakeholders continue to call for further guidance and clarification on qualifying investments from Treasury and the IRS, with the anticipation that the Administration will release additional FAQs, revenue procedures or other forms of guidance over the coming months. Learn more about the final round of Opportunity Zone approvals in Enterprise’s blog post and visit our Opportunity Zones webpage for information and updates on the tax incentive.

Enterprise Submits Comments on Proposed Amendments to the Federal Home Loan Banks’ Affordable Housing Program

Earlier this year, the Federal Housing Finance Agency (FHFA) proposed amending some of the Federal Home Loan Banks’ Affordable Housing Program (AHP) rules. As the proposal would dramatically change how organizations across the country access AHP funds to support the provision of affordable, well-designed rental homes, Enterprise has submitted comments to the FHFA. In our comment letter, we recommend: extending the simplification of the compliance regime to the underwriting process; adopting the flexibility shown by other funding sources to address fluctuating costs during the development process and providing comparable discretion at the Bank level to address deficiencies; retaining the current caps on homeownership set-asides, to preserve the amount of funding for increasing the supply of affordable rental housing; and providing additional, detailed guidance to Banks on developing their new scoring systems in order to achieve the flexibility intended by the proposed rule.

This rulemaking process offers an opportunity to make the overall development process and compliance period of affordable housing more efficient and cost effective. Enterprise looks forward to ongoing engagement with FHFA as it finalizes the rule.


Enterprise Releases Paper on Strategies for Boosting the Supply of Affordable Homes and Containing Development Costs

The Enterprise Policy Development & Research team has released a new white paper, Proven Local Strategies for Expanding the Supply of Affordable Homes and Addressing Cost Challenges, which highlights proven local strategies for boosting the supply of affordable housing and reducing costs. It draws on the successes of some of the country’s most expensive cities to offer options for communities working to address the scarcity of affordable homes and the rising cost of development. The paper focused on four key strategies: leveraging existing assets, creating public funding opportunities, utilizing land use controls and improving the approval process. The white paper, which builds on recent Enterprise research on Bending the Cost Curve: Solutions to Expand the Supply of Affordable Rentals and Public Benefit form Publicly Owned Parcels: Effective Practices in Affordable Housing Development, was informed by the High-Cost Cities Housing Forum’s 2018 convening, which focused on strategies for containing the cost of housing development.

New Report by NLIHC Documents the Gap Between Wages and Rents

The National Low Income Housing Coalition’s (NLIHC) Out of Reach 2018 report documents the gap between wages and the cost of rental housing across the country. According to the report, renters need to earn an hourly wage of $22.10 – nearly $15.00 higher than the federal minimum wage of $7.25 per hour – in order to afford a modest two-bedroom apartment in the U.S. The report analyzes and maps the estimated full-time hourly wage a household must earn by state, metropolitan area and county to afford a decent rental home at HUD’s Fair Market Rent while spending no more than 30 percent of their income on housing costs. The report notes that in no jurisdiction can a worker earning the federal minimum wage or prevailing state minimum wage afford a two-bedroom rental home at fair market rent by working a standard 40-hour week. Out of Reach 2018 also finds that a renter earning the federal minimum wage would need to work 99 hours per week to afford a one-bedroom rental home at the national average Fair Market Rent and 122 hours per week – that is, three full-time jobs – to afford a two-bedroom apartment. Read a more detailed summary of the report in Enterprise’s blog post.

JCHS Report Highlights Continued Affordability Challenges in the Rental Market

The Joint Center for Housing Studies (JCHS) at Harvard University has released the State of the Nation’s Housing 2018, an annual assessment of the housing market, demographic trends and housing challenges faced by U.S. households. This year’s findings include that renter households are still widely cost-burdened, spending more than 30 percent of their income on rent; the nation’s multi-family housing inventory remains tight at the lower end of the market, making it difficult for low- and moderate-income households to access affordable housing; and federal housing assistance to low-income households continues to fall short of demand. According to JCHS, 20.8 million renter households were cost-burdened in 2016, paying more than 30 percent of their income on housing, and nearly 11 million renter households were severely cost-burdened, paying more than 50 percent of their income on housing. Learn more about JCHS’ new housing report in Enterprise’s blog post.

Union of Concerned Scientists Publish Paper on Risk of Rising Seas to Coastal Real Estate

The Union of Concerned Scientists (UCS) has released a new report, Underwater: Rising Seas, Chronic Floods and the Implications for US Coastal Real Estate. The report estimates that within the next 15 years, nearly 147,000 existing homes and 7,000 commercial properties, currently worth $63 billion, are at risk of chronic, disruptive flooding — defined as flooding that occurs 26 or more times per year. The report also estimates that by the year 2100, as many as 2.4 million of today’s residential properties that house 4.7 million people and 107,000 commercial properties, together worth $1.07 trillion today, will be at risk of chronic flooding. The report concludes that rising sea levels and the resulting displacement of households and businesses will result in a shrinking tax base that will prevent jurisdictions from being able to fund infrastructure maintenance, schools and emergency services.


Seattle Repeals Recent Employer Tax to Fund Affordable Housing

In response to an employer-led campaign to reverse the recent “head tax,” the Seattle City Council has repealed a new employer tax just one month after passing it. This tax on the city’s largest employers would have raised an estimated $45 million over five years to fight homelessness. Businesses, including Amazon and Starbucks, campaigned against the tax  and within weeks opponents collected enough signatures to place a repeal of the tax on the November ballot. In response, the city-council repealed the measure. Homeless advocates are now renewing their search for solutions to the growing homeless crisis in the city.

Massachusetts Commits $1.8 Billion to Addressing Affordable Housing Shortage

Last month, the Massachusetts legislature authorized a $1.8 billion bond bill that would fund a mix of affordable housing efforts such as workforce housing, community development and the state’s housing trust fund. The measure also includes $25 million for the state’s low-income housing tax credit program. The historic bond bill – the largest bond authorization in the state’s history – is expected to increase housing production for low-income residents, homeless populations and persons with disabilities. Governor Baker signed the measure into law last month, adding Massachusetts to a growing list of states that have recently committed large bond issuances for local affordable housing needs.

New Ordinance in Boston Limits Use of Short-Term Rentals

The City of Boston has passed an ordinance placing limitations on short-term rentals through platforms such as Airbnb. The ordinance would limit short-term rentals to owner-occupied properties – including units that are in, or adjacent to, a homeowner’s residence – and ban nightly rentals and so-called “investor units”, homes rented by nonresidential property owners. The ordinance also imposes permit fees and creates a publicly available registry. Officials noted that the ordinance is just a start, and the city will soon need to tackle the issue of enforcement. Supporters of the measure cite short-term rentals as a contributing factor to the growing affordable housing crisis in the city.


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