November 26, 2018

Capitol Express Newsletter: Enterprise Comments on CRA Modernization, Lawmakers Face Deadline to Fund the Government

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Enterprise Submits Comments on Modernizing the Community Reinvestment Act

Last week Enterprise Community Partners’ CEO Terri Ludwig and President Laurel Blatchford submitted a comment letter to the Office of the Comptroller of the Currency (OCC) on possible streamlining of and enhancements to the Community Reinvestment Act (CRA). CRA was enacted in 1977 largely as a response to “redlining,” the discriminatory practice in which banks denied loans to residents living in neighborhoods that they deemed hazardous, often solely based on the presence of large minority populations. The law requires financial institutions to meet the credit needs of the communities in which they operate, including low- and moderate-income (LMI) communities. CRA has produced substantial benefits for these communities and their residents, particularly by helping drive financial institution investments in nonprofit organizations, the Low-Income Housing Tax Credit (Housing Credit), the New Markets Tax Credit (NMTC), Community Development Financial Institutions (CDFI), and other critical activities benefiting LMI communities and residents.

In August, the OCC released an advance notice of proposed rulemaking (ANPR) asking the public to submit comments on possible regulatory changes to CRA by November 19. Enterprise’s aim for modernized CRA regulations is to ensure a consistent, transparent system that properly gives banks credit for sound community development work. Our three principles for CRA modernization are: 1) preserving a focus on affordable housing, 2) updating assessment areas to address national lending and investment challenges, and 3) retaining an explicit investment test with an emphasis on community development activities. The OCC must now review the more than 1,200 public comment letters submitted on CRA modernization, after which the agency will likely issue a proposed rule for further public input. Typically, all three banking regulators – the OCC, Federal Reserve Board of Governors, and the Federal Deposit Insurance Corporation (FDIC) – move forward together on significant regulatory changes. It is yet to be seen whether the Federal Reserve and FDIC will join the OCC in subsequent steps of the regulatory process.

Congress Returns to Washington with Limited Time to Fund the Government

Lawmakers return to Washington this week with only 12 working days in the House and 15 in the Senate before Congress adjourns for the year. Finalizing fiscal year (FY) 2019 appropriations legislation will be a top priority for members, as the current continuing resolution (CR) funding many government functions, including key affordable housing and community development programs, expires on December 7. There are a number of controversial provisions still to be ironed out however, including President Trump’s interest in including $5 billion to fund a border wall and efforts from Democrats to protect FBI special counsel Robert Mueller. If Congress is unable to reach an agreement on final FY 2019 spending before the current CR expires, they will need to pass another CR or face a partial government shutdown on Dec. 8.

Prospects for a Lame-Duck Tax Package Remain Uncertain

Leadership in both the House and Senate have previously expressed interest in completing a package to extend expired tax provisions, but the prospects for a tax package remain uncertain because of the limited legislative time remaining this year. It is also unclear if Republicans and Democrats will have the appetite to negotiate given the upcoming shift in power resulting from the midterm elections, particularly if Democrats decide to postpone legislative action until they assume control of the House in January. Changes in leadership on House and Senate tax-writing committees next year may also impact Congress’s appetite for finalizing a tax package during the lame-duck session. Senator Chuck Grassley (R-IA) announced he will take over as Chairman of the Senate Finance Committee following current Chairman Orrin Hatch’s (R-UT) retirement, and current Ways and Means Ranking Member Richard Neal (D-MA) will become Chairman of the House tax-writing committee. 

If a tax package does come together in the remaining weeks of 2018, Enterprise urges Congress to include provisions to strengthen and expand the Housing Credit, as well as permanently extend NMTC before it expires at the end of 2019. To support advocacy efforts in the lame-duck session and in the next Congress, the ACTION Campaign has released updated district fact sheets to show the Housing Credit’s impact in each congressional district and the affordable housing needs that still remain in every state. ACTION also updated its state fact sheets last month. And last week, Reps. Steve Stivers (R-OH) and Jose Serrano (D-NY) sent a letter signed by a bipartisan group of 34 House members to Ways and Means Chairman Kevin Brady (R-TX) in support of the permanent extension of NMTC. In the Senate, Roy Blunt (R-MO), Ben Cardin (D-MD), Roger Wicker (R-MS), Susan Collins (R-ME), and Kirsten Gillibrand (D-NY) have signaled their support for an NMTC extension to the Finance Committee.

Politico Highlights Six Ways the Federal Government Could Make Housing More Affordable

Last week Politico highlighted the growing housing affordability challenge nationwide and how a lack of affordable housing reduces wages and productivity, thereby damaging the economy as a whole. The article emphasizes six steps the federal government can take to address the need: 1) ease land-use regulations and zoning laws, 2) boost the Housing Credit, 3) increase funding for HUD programs, 4) boost the Housing Trust Fund, 5) ease tariffs and construction regulations, and 6) subsidize rent. Congress took important steps to address affordable housing in March, including expanding the Housing Credit for the first time in ten years and increasing funding for critical affordable housing programs. Recent legislative proposals have also sought to address some or all of these factors, including bills from Senators Elizabeth Warren (D-MA), Kamala Harris (D-CA), and Cory Booker (D-NJ), although none have gained bipartisan support.

Deadly Wildfires in California Destroy Homes and Exacerbate Housing Challenges

The Camp Fire in northern California has become the most destructive wildfire in the state’s history, with 85 deaths confirmed and 249 individuals missing or unaccounted for. While the Camp Fire has finally been contained, it has destroyed more than 14,000 homes and displaced over 50,000 people in one of the country’s most expensive housing markets. Tens of thousands of households are expected to lack permanent housing for several months. Some displaced households are finding shelter in hotel rooms and with relatives and friends, but many others are staying in shelters and parking lot tent encampments. Unsanitary conditions in temporary shelters have resulted in over 120 people admitted to hospitals with norovirus. HUD has announced that it will speed federal disaster assistance to California and provide support to homeowners and low-income renters forced from their homes by wildfires. President Trump has also issued a major disaster declaration for Butte, Los Angeles and Ventura counties, allowing HUD to offer foreclosure relief and other assistance to certain families living in these counties.

Like other disasters, wildfires most severely affect low-income households who are less likely to be able to afford fire insurance and have resources to find temporary housing. Additionally, the wildfires have caused parts of northern California ranging from the Sierra Nevada to the Bay Area to temporarily experience some of the worst air quality in the world last week. Inhalation of tiny particles from wildfires can harm the lungs, damage the immune system and cause chronic asthma and allergies. Experts are noting that wildfires in California are becoming more destructive as more development occurs in the fire-prone wildland-urban interface. Enterprise remains committed to helping communities recover from disasters and become more resilient to increasing natural hazard risks. 

Lawmakers Propose Disaster Tax Relief Bill, Additional CDBG-DR Funds Expected

The Senate delegations from Florida, North Carolina, South Carolina, and California introduced the Hurricanes Florence and Michael and California Wildfire Tax Relief Act (S. 3648) to provide financial relief and tax incentives to taxpayers in the areas affected by major natural disasters in 2018. The bill removes penalties on withdrawals from retirement savings accounts; encourages employers in hard-hit areas to retain employees; suspends limits on tax deductions for charitable contributions to disaster relief efforts; and would expand Opportunity Zones to the hardest-hit disaster areas. In addition to these proposed tools, Enterprise encourages lawmakers to increase Housing Credit allocations in disaster areas, similar to Gulf Opportunity Zones following Hurricanes Katrina and Rita.

While the timing and amount is unclear, Congress is expected to pass additional Community Development Block Grant – Disaster Recovery (CDBG-DR) funding to address the long-term recovery needs of communities affected by disasters in 2017 and 2018. Enterprise has been advocating to permanently authorize the CDBG-DR Program, expand technical assistance to grantees, and ensure that program funds are primarily spent on helping low and moderate-income households and communities. Enterprise urges Congress to pass additional funds quickly so that grantees can be certain about their long-term recovery funding as soon as possible.

Senators Hatch and Kaine Introduce Bipartisan Fair Housing Improvement Act 

A new bipartisan bill introduced by Senator Orrin Hatch (R-UT) and co-sponsored by Senator Tim Kaine (D-VA) would prohibit discrimination based on source of income or veteran status. The Fair Housing Improvement Act of 2018 (S.3612) would amend the anti-discrimination provisions of the Fair Housing Act to make it unlawful to discriminate against an individual based on their source of income or veteran status in real estate-related transactions. In municipalities without source of income protections, landlords are allowed to refuse to rent to Section 8 voucher recipients, an obstacle to effective voucher utilization. In September, the Urban Institute released a pilot study on source of income discrimination, showing that voucher refusal rates are significantly higher in areas that have not enacted local ordinances against the practice. The Fair Housing Improvement Act would make these protections uniform, providing voucher recipients with the ability to find housing across jurisdictions, secure in the knowledge that their right to rent is federally mandated. Enterprise supports this bill and thanks Senators Hatch and Kaine for their attention to this critical matter.

FHFA Publishes Final Rule Amending AHP Regulations

The Federal Housing Finance Agency (FHFA) has published a final rule amending some of the Federal Home Loan Banks' (FHLBanks) Affordable Housing Program (AHP) regulations. Earlier this year, FHFA proposed amending some AHP rules, and Enterprise submitted comments with a number of recommendations, including adopting the flexibility shown by other funding sources to address fluctuating costs during the development process. The final rule makes a number of changes that can benefit the production and preservation of affordable housing, including: providing additional flexibility at the local level for the FHLBanks to allocate their AHP funds and to design their project selection scoring systems to address affordable housing needs in their districts; authorizing the FHLBanks to establish special competitive funds that target specific affordable housing needs in their districts; and removing the requirement for retention agreements for owner-occupied units where the AHP subsidy is used solely for rehabilitation. The amendments also aim to make the program easier to use, both for the FHLBanks and award recipients, by reducing regulatory monitoring requirements that are redundant with other federal programs.  


Freddie Mac Multifamily Shines a Spotlight on Underserved Markets

Freddie Mac Multifamily has been releasing a series of reports to highlight the opportunities and challenges to providing affordable multifamily housing in underserved markets across the country. Its two latest studies examine developing mixed-income housing in areas of concentrated poverty as a method for helping to create economic opportunity and alleviating the concentration of poverty and creating affordable housing in high-opportunity areas as defined by FHFA in the Duty to Serve regulation. Freddie Mac Multifamily earlier released reports that look at the different definitions of opportunity and the methods used to promote opportunity housing in all 50 states and the District of Columbia through the Housing Credit, as well as the use of Housing Credits in Rural Middle Appalachia and in Indian Areas. Freddie Mac Multifamily is expected to release three more reports as part of this research series.

New Paper Looks at the Housing Credit in Rural Areas

As part of the Federal Reserve Board’s Finance and Economics Discussion Series, Andrew M. Dumont, senior community development analyst, released a new paper, Rural Affordable Rental Housing: Quantifying Need, Reviewing Recent Federal Support, and Assessing the Use of Low Income Housing Tax Credits in Rural Areas. Emphasizing the need for more affordable rental housing in rural communities, the paper notes that the Housing Credit has been an important and resilient tool for addressing this need in these areas. The ACTION Campaign has previously released a fact sheet that highlights the Housing Credit’s benefits for rural communities, showing that the Housing Credit has been used to develop and preserve more than 270,000 homes across 7,600 developments in rural communities nationwide.

The JCHS Released A Report Exploring Housing for Older Adults

The Harvard Joint Center for Housing Studies (JCHS) has released a report, Housing America’s Older Adults 2018, which shows that nearly a third of households age 65 or older (9.7 million) pay at least 30 percent of their income for housing, and more than half of these pay over 50 percent. The report notes that cost burdens rise with age: in 2016, 36 percent of households age 80 and over faced cost burdens, compared to 31 percent of households age 65-79, and 29 percent of those age 50-64. According to the report, in 2016, 17 percent of households age 50 and over included someone who had difficulty climbing stairs or walking, but only 3.5 percent of U.S. homes had three key features for those with mobility challenges: single-floor living, no-step entries and extra-wide halls and doors. JCHS suggests that in the years to come, supportive and accessible housing will be in even greater demand.


Cities Seek to Provide Tenants Legal Counsel in Eviction Proceedings

Major cities are increasingly looking to implement programs that provide tenants access to legal counsel in eviction proceedings. This year, the City of Philadelphia set aside $500,000 to fund the Philadelphia Eviction Prevention Project, and advocacy groups and stakeholders are calling for an expansion of the program. A new study commissioned by the Philadelphia Bar Association found that spending $3.5 million to provide low-income tenants counsel would save the city as much as $45.2 million by reducing costs in healthcare, education, and shelter administration. New York is rolling out a citywide program that aims to provide as many as 400,000 tenants with legal counsel annually by 2022. Currently, the program is operating in 15 zip codes in the city — and in these zip codes, evictions are down 27 percent since the start of the program. This August, the Los Angeles City Council approved a measure advancing exploratory plans to create a “Right to Counsel” law. The LA Housing and Community Investment Department is developing recommendations that would create an outline for this ordinance, with a report expected soon.

Addressing Atlanta’s Housing Challenges Requires Commitment to Public-Private and Cross-Sector Partnerships 

Meaghan Shannon-Vlkovic, vice president and the Southeast market leader at Enterprise Community Partners, and Daphne Bond-Godfrey, director at the Urban Land Institute Atlanta, emphasize the importance of strengthening public-private and cross-sector partnerships to address Atlanta’s growing housing challenge. In a column published in the Saporta Report, Shannon-Vlkovic and Bond-Godfrey note that “to keep the Atlanta region affordable, local governments, businesses, and community groups need to come together to create funding, processes, and policies that ensure we remain a ‘City for All’.” The op-ed cites existing collaborative initiatives that aim to create new resources for affordable housing: HouseATL, launched in January 2018, has recently set a goal of investing $500 million in public resources and $500 million in private resources to build or preserve 24,000 affordable homes in the city over the next eight to ten years; and the Neighborhood LIFT program, sponsored by Wells Fargo and NeighborWorks America, which provides down payment assistance to homebuyers in the region.


News Updates from Community Developments

In recent Community Developments, we highlighted an increase in U.S. housing starts in October, analysis by CoreLogic that shows 4 percent of home mortgages in August were delinquent by 30 days or more, and much more. Sign up here to receive the Community Developments newsletter.


Upcoming Hearings and Mark-Ups

•    December 5: Oversight of Pilot Programs at Fannie Mae and Freddie Mac, Senate Banking Committee
•    December 5: Oversight of the Federal Housing Administration, House Financial Services Committee

Upcoming Events

November 2018
•    November 27: Solutions for Affordable Housing, National Housing Conference (Washington, DC)
•    November 29-30: 2018 Tax Credit Housing Finance Conference, Novogradac & Company (Las Vegas)
December 2018
•    December 3-7: Pittsburgh NeighborWorks Training Institute, NeighborWorks (Pittsburgh)
•    December 5-7: 2018 HAC Rural Housing Conference, Housing Assistance Council (Washington, DC)
•    December 12-13: 2018 Annual NMTC Conference, New Markets Tax Credit Coalition (Washington, DC)
January 2019
•    January 10-11: 2019 Affordable Housing Conference: Using RAD and the LITHC to Improve Communities, Novogradac & Company (Miami Beach, FL)
•    January 24-25: 2019 New Markets Tax Credit Conference, Novogradac & Company (San Diego)
•    January 28-29: 2019 AHTCC Annual Meeting, Affordable Housing Tax Credit Coalition (New Orleans)

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