Federal Housing News
March 23, 2015
NATIONAL HOUSING TRUST FUND
Catholic Bishops and Catholic Charities Urge Congress to Protect NHTF
In a joint letter to Congressional leaders, the U.S. Conference of Catholic Bishops (USCCB) and Catholic Charities USA expressed their support for the National Housing Trust Fund (NHTF) and their “concern with efforts to undermine or eliminate it.”
The letter is in response to the objections raised by several Republicans in both the Senate and the House to the decision by Federal Housing Finance Agency Director Mel Watt to direct Fannie Mae and Freddie Mac to begin setting aside funds for the NHTF and the Capital Magnet Fund (CMF). Specifically, Representative Ed Royce (R-CA) has introduced a bill that would prohibit Fannie and Freddie from funding the NHTF and the CMF as long as the companies remain in conservatorship (see Memo, 2/2).
The March 17 letter is addressed to Senate Banking Committee Chairman Richard Shelby (R-AL) and Ranking Member Sherrod Brown (D-OH) with an identical letter sent to House Financial Services Committee Chairman Jeb Hensarling (R-TX) and Ranking Member Maxine Waters (D-CA). The letter is signed by Archbishop Thomas Wenski, who chairs the USCCB Committee on Domestic Justice and Human Development, and Sister Donna Markham, the President Elect of Catholic Charities USA.
In the letter, Bishop Wenski and Sister Donna say that “Catholic tradition teaches that affordable and decent housing is a human right, and for over a decade our organizations have supported the NHTF because it could be powerful tool in advancing this right.” Both organizations are longtime members of the NHTF Campaign.
The letters are posted at http://nlihc.org/sites/default/files/USCCB-CCUSA_NHTF_repeal_to_BHUA_3.2015_FINAL.pdf and http://nlihc.org/sites/default/files/USCCB-CCUSA_NHTF_repeal_to_FSC_3.2015_FINAL.pdf
New Housing Finance Reform Bill Will Provide Billions for NHTF and CMF
Representatives John Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) introduced H.R. 1491, the “Partnership to Strengthen Homeownership Act,” on March 19. The bill would wind down Fannie Mae and Freddie Mac and replace them with a mortgage insurance program through Ginnie Mae. The bill would require that the first 5% loss be held by private entities.
A 10 basis point fee of the total principle balance of all insured mortgages would be charged in exchange for the insurance, creating a dedicated source of revenue for the NHTF, the CMF, and a new Market Access Fund (MAF). The NHTF will receive 75% of the funds, with 15% going to the CMF and 10% to the MAF.
Because the new program will cover Federal Housing Administration (FHA) insured mortgages as well as conventional mortgages, the volume of business going through Ginnie Mae will be greater than what has been estimated for other housing finance reform bills, including the Johnson-Crapo bill in the last Congress. Therefore the base on which the 10 basis point fee will be assessed is bigger, and has been estimated at $6 billion a year. That would provide $4.5 billion annually for the NHTF.
The bill would eliminate the affordable housing goals now required of Fannie and Freddie, but retain a duty to serve all markets. Fannie and Freddie’s current multifamily divisions would be “spun out” and operate as new entities with mortgage insurance provided by Ginnie Mae
The bill has an additional eight original co-sponsors, all Democrats. They are Representatives Denny Heck (WA), Greg Meeks (NY), Patrick Murphy (FL), Jared Polis (CO), Mike Quigley (IL), David Scott (GA), Kyrsten Simena (AZ), and Peter Welch (VT).
H.R 1491 is an updated version of a bill that Representatives Delaney, Carney, and Himes introduced in the last Congress. The bill has been referred to the House Financial Services Committee.
On March 19, the Senate and House Committees on the Budget passed their respective FY16 budget resolutions on party line votes. The two budget resolutions now head to the Senate and House chambers for consideration during the week of March 23. While there are many differences between the two resolutions, they have common characteristics that would be damaging to housing programs.
In a statement after Committee passage, Senate Budget Committee Chair Michael Enzi (R-WY) said, “Today we begin the monumental task of confronting our nation’s chronic overspending and exploding debt, which threatens each and every American.” House Budget Committee Chair Tom Price (R-GA) said, “By demanding Washington live within its means, we are forcing government to be more efficient, effective and accountable, providing our local communities the freedom and flexibility to improve the delivery of vital services and assistance to those in need, and saving and strengthening vital programs for America’s seniors.”
Senate Budget Committee Ranking Member Bernie Sanders (I-VT) criticized the Committee’s budget resolution, saying, “While the rich get richer and corporate profits soar, millions of Americans are working longer hours for lower wages…Despite that, this morally repugnant Republican budget protects those on top who are doing the best while attacking the needs of the most vulnerable – working families, the elderly, the children, the sick and the poor.”
House Budget Committee Ranking Member Chris Van Hollen (D-MD) also was displeased with his colleagues’ budget resolution. In his opening statement at the mark-up, he said, “While this budget raises costs and further squeezes hardworking families, students, and seniors, it paves the way for the Romney-Ryan plan to cut the tax rates for millionaires. It is based on the tired and disproven theory that we can grow our economy through trickledown economics.”
The Senate and House FY16 budget resolutions would maintain the sequester spending caps for domestic discretionary spending, which will result in flat funding compared to FY15 levels. Both budget resolutions, which provide budget guidelines over the FY16 to FY25 timeframe, would lower the sequester spending caps in FY17 through FY25, resulting in even deeper spending cuts. The House budget resolution would reduce the sequester caps for discretionary spending by $759 billion over these years, while the Senate’s bill would lower caps by $236 billion.
Both budget resolutions threaten to use “Fair Value Accounting” when determining the cost of federal credit programs such the single and multifamily insurance programs offered by the Federal Housing Administration (FHA). Fair Value Accounting would require Congress to consider what programs would cost if the private market provided them rather than the federal government.
There are no private market programs that do what FHA does. Therefore any extrapolation on what these programs would cost on the private market is not real. According to the Congressional Budget Office (CBO), using the Fair Value Accounting method would result in having to spend about $8 billion on FHA programs, compared to FHA programs generating about $4.4 billion in revenue today. These funds are used to underwrite federal spending for HUD and other programs. Under Fair Value Accounting, CBO calculates that FHA programs cost the federal government about $3.5 billion. Therefore, not only would Congress have to identify that $3.5 billion to keep FHA programs running, but Congress would also have to find $4.4 billion in new offsets for federal program funding because FHA revenues would not exist under the Fair Value Accounting model. If the annual HUD appropriation was to begin the appropriations process $8 billion in the red because of Fair Value Accounting, funding for every HUD program is at risk.
The House budget resolution would also direct the House Committee on Financial Services to identify at least $100 million in savings from mandatory programs under its jurisdiction through the budget reconciliation process. While the resolution does not provide any specific instructions regarding where the Financial Services Committee might find such savings, the Budget Committee’s associated paper, A Balanced Budget for a Stronger America, suggests some savings might be found within the area of community development.
“Our budget thoroughly examines community and regional programs with a specific focus on eliminating those that perform non-core federal government functions, while also consolidating and streamlining duplicative programs wherever possible,” the paper says. The committee also recommends expanding the Moving to Work demonstration for high-performing public housing agencies and “support for efforts to end chronic homelessness by urging HUD to refocus efforts to accomplish the Administration’s goal of helping to end chronic homelessness by 2017.”
Given the wide disparity in the level of cuts between the two budget resolutions, it will be difficult for the two chambers to reconcile the differences and come up with a unified budget resolution.
The Senate Budget Committee’s budget resolution is at, http://www.budget.senate.gov/republican/public/index.cfm?a=Files.Serve&File_id=81b01032-186d-4166-b21b-8035b89853d9
The Senate Budget Chair statement is at, http://www.budget.senate.gov/republican/public/index.cfm/press-releases?ID=11e2b496-c2e3-46a4-979d-ee4e5cd9e580
The Senate Budget Ranking Member statement is at, http://www.budget.senate.gov/democratic/public/index.cfm/press-releases-news?ID=d846623e-bb12-4920-8917-9d9a68c257a8
The House Budget Committee statement is at, http://budget.house.gov/news/documentsingle.aspx?DocumentID=393931
A Balanced Budget for a Stronger America is at, http://budget.house.gov/uploadedfiles/fy16budget.pdf
More about the Congressional budget process is at page 2-3of NLIHC’s 2015 Advocates’ Guide, at http://nlihc.org/sites/default/files/AG_2015_FINAL.pdf
Minimum Rents in Rural Housing Discussed at Rural Development Hearing
On March 19, the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the House Committee on Appropriations conducted a hearing about the U.S. Department of Agriculture (USDA) FY16 budget request for Rural Development (RD). Witnesses included Under Secretary for Rural Development Lisa Mensah and Rural Housing Service Administrator Tony Hernandez.
Subcommittee Chair Robert Aderholt (R-AL) questioned Ms. Mensah and Mr. Hernandez about USDA’s proposal to require a minimum rent of up to $50 for the residents of all of RD’s multifamily housing programs. Residents currently pay 30% of their income towards rent, with no minimum rent requirement. Mr. Hernandez explained, “We are trying to just make sure that everyone contributes to the success and stability of this program. We have 36,000 residents who can afford to make a minimum payment of $25. We think everyone contributes to the success of this program and that’s why we’re asking for the fee. [The proposal] allows us to go up $50 but we are proposing to only charge $25. The reason we do that is if things change, we don’t have to ask for more.”
Representative Aderholt asked, “And what if they can’t pay $50?” Mr. Hernandez did not directly respond, saying, “The fee can be upped to $50 but we will probably only ask for $25.”
The Administration’s FY15 budget request also proposed $50 minimum rents for RD residents, but Congress did not authorize the change last year.
NLIHC opposes minimum rents for RD units. Making the poorest households pay more for their housing is not how to achieve an adequate RD budget.
Mr. Hernandez’s written testimony is at http://docs.house.gov/meetings/AP/AP01/20150318/103115/HHRG-114-AP01-Wstate-HernandezT-20150318.pdf
Ms. Mensah’s written testimony is at http://docs.house.gov/meetings/AP/AP01/20150318/103115/HHRG-114-AP01-Wstate-MensahL-20150318.pdf
The hearing may be viewed at http://appropriations.house.gov/calendararchive/eventsingle.aspx?EventID=394042
More about RD programs is on page 4-37 of NLIHC’s 2015 Advocates’ Guide, http://nlihc.org/sites/default/files/AG_2015_FINAL.pdf
More than 3,000 Groups Urge Robust THUD Funding
On March 19, 3,020 local, state, and national organizations sent a letter to Senate and House appropriators, urging them to increase the FY16 302(b) allocation to their respective Subcommittees on Transportation, Housing and Urban Development, and Related Agencies (THUD) to the highest possible level.
The 302b allocation is a critical step in the appropriations process. Once Congress agrees on a top-line spending limit in its budget resolution (see related article), the House and Senate Appropriations Committees divide the top-line spending limit among their 12 subcommittees, including the THUD subcommittees.
“As members of the Appropriations Committees, and more importantly as elected representatives of your state and local communities, we urge you to invest in the success of America’s communities by increasing the 302(b) allocation to the Transportation, Housing and Urban Development, and Related Agencies Subcommittee to the highest possible level in FY 2016,” the letter says.
The letter was coordinated by the Campaign for Housing and Community Development Funding, as well as partners in the transportation arena.
The letter is at http://nlihc.org/sites/default/files/302b_THUD_final_031915.pdf
HUD Secretary to Testify before House THUD Subcommittee
The Transportation, Housing and Urban Development, and Related Agencies (THUD) Subcommittee of the House Appropriations Committee will hold a hearing on HUD’s FY16 budget request on March 24. HUD Secretary Julián Castro will be the sole witness. The hearing will take place at 10am ET in room 2358-A of the Rayburn House Office Building.
Stream the hearing live here at http://appropriations.house.gov/calendar/eventsingle.aspx?EventID=394074
MORE CAPITOL HILL
Representatives Request Hearing on Homelessness
On March 19, Democratic members of the House Committee on Financial Services sent a letter to Committee Chair Jeb Hensarling (R-TX) requesting the Committee hold a series of hearings on ending homelessness and on the progress made toward achieving this goal through the Administration’s Opening Doors federal strategic plan to end homelessness.
The letter, led by Ranking Member Maxine Waters (D-CA) states, “With the launch of Opening Doors in 2010, we have made significant progress towards our goals to end and prevent homelessness…This progress is in large part due to bipartisan efforts to support critical funding for homeless assistance programs, including the HUD-Veterans Affairs Supportive Housing (HUD-VASH) program as well as investments in major rental assistance programs needed to end homelessness, including the Section 8 Housing Choice Voucher (HCV) and Project-Based Rental Assistance (PBRA) programs.”
However, the lawmakers note in the letter that there is still much work to be done to achieve the nation’s goal of ending veterans’ homelessness by 2015, chronic homelessness by 2017, and homelessness among families and youth by 2020. To meet these goals, the letter requests that the Committee closely examine the tools and best practices communities have developed and what more is needed to better address and understand homelessness.
Section 3 Proposed Rule to Be Published
On March 19, HUD’s Office of Fair Housing and Equal Opportunity sent an email to Section 3 stakeholders offering a preview of long-anticipated amendments to the interim Section 3 regulations. HUD Secretary Julián Castro has announced imminent publication of the proposed rule. The email includes a link to the proposed rule, which is expected to be published in the Federal Register shortly. In 1994, HUD published an interim rule updating the Section 3 regulations in response to changes made by the Housing and Community Development Act of 1992.
The purpose of Section 3 of the Housing and Urban Development Act of 1968 is to ensure that when HUD assists housing and community development projects, preference for some of the new jobs, training, and contracting opportunities that are created go to low income people and to the businesses that hire them “to the greatest extent feasible.”
HUD states in the preamble to the proposed rule that the experience with Section 3 since 1994 has revealed features of the interim rule that could be modified to improve effectiveness, and that efforts since 2009 to improve Section 3 oversight without changing the regulations “have not been as successful as HUD hoped.”
The preamble summarizes 11 provisions of the proposed rule that HUD considers significant:
1. Establish a standard for the statutory language, “to the greatest extent feasible.” The statute uses the expression “make their best efforts” when referring to the Section 3 obligations of public housing agencies (PHAs). For other entities, such as local and state governments administering the Community Develop Block Grant (CDBG) or the HOME programs, the statute uses the expression “to the greatest extent feasible,” when referring to the Section 3 obligations of those entities. HUD considers the two expressions to be essentially the same. The proposed rule would use only “to the greatest extent feasible.” The proposed rule also lists actions PHAs and local and state governments (formally termed “recipients”) must take to demonstrate compliance with their Section 3 obligations.
2. Revise the definition of “new hire.” The current rule sets a goal of having 30% of new hires at a project to be “Section 3 residents,” but the rule has no provision concerning how long the Section 3 resident should be employed. A Section 3 resident is either a public housing resident or a resident whose household income is 80% of the area median income or less. Advocates have long asserted that the rule’s lack of attention to the hours worked, as well as the duration of employment, are loopholes that allow contractors to hire Section 3 residents for a short period of time. HUD concurs, proposing to redefine a new hire as someone who works a minimum of 50% of the average hours worked for a specific job category for which the person was hired, for duration of time that the work is performed on the project. The preamble offers an example. If a typical painter works 40 hours per week, then a Section 3 new hire must work a minimum of 20 hours per week for as long as a typical painter works at the project.
3. Change the dollar threshold for non-PHA recipients. For recipients of housing and community development assistance, such as cities, counties, and states receiving CDBG and HOME funds, the current rule has a $200,000 threshold that a recipient receives in a given year from all sources (CDBG, HOME, Lead Hazard Control, etc.). At that threshold, Section 3 obligations are triggered once any portion of those funds are used for any activity involving housing construction or rehabilitation, or other public construction, such as roads, water and sewerage projects. HUD notes that some recipients incorrectly apply the threshold on a per-project basis rather than on a per-recipient basis. In other words, some recipients evade Section 3 obligations at a given project that has less than $200,000 of HUD assistance.
The proposed rule would establish a new threshold. Section 3 requirements would apply to recipients of housing and community development financial assistance that plan to obligate or commit an aggregate amount of $400,000 or more in Section 3-covered housing rehabilitation, housing construction, demolition, or other public construction during a given reporting period. HUD notes that this would exempt 37% of all recipients, but these recipients receive less than 5% of all covered federal financial assistance.
4. Revise the definition of “Section 3 business.” The current rule defines a Section 3 business as one that meets one of three criteria: (a) Section 3 residents own at least 51% of the business, (b) at least 30% of the employees are permanent, full-time Section 3 residents, or (c) the business commits to subcontracting at least 25% of the dollar amount of all of its subcontracts to businesses that meet either of the other two criteria.
The proposed rule would eliminate the third option because HUD found “a pattern of misuse by contractors that initially indicated they would award 25% of subcontracts to Section 3 businesses in order to receive preference for contracts, but never provided contracts to them.”
The proposed rule would add two options to the current rule’s (a) and (b). They are:
c) The business meets the definition of “resident-owned business” in the public housing regulations (24 CFR 963.5).
d) At least 20% of the business’s permanent, full-time employees are Section 3 residents, and either:
i. The business sponsors a minimum of 10% of its current Section 3 employees to attend a U.S. Department of Labor (DOL)-recognized, or a state Apprenticeship Agency-approved, apprenticeship or pre-apprenticeship training program that meets DOL requirements; or
i. At least 10% of the employees are participants or graduates of a DOL YouthBuild program.
5. Give priority to Section 3 businesses at housing and community development projects that will retain a minimum of 75% of previously hired Section 3 residents and that will provide a minimum of 50% of on-the-job training or apprenticeship opportunities to Section 3 residents.
6. Replace the 3% goal with a 10% goal for awarding non-construction contracts to Section 3 businesses. The current rule has a goal of awarding at least 10% of the total dollar amount of construction contracts and at least 3% of non-construction contracts, such as accounting and engineering, to Section 3 businesses. HUD states that there is no statutory basis distinguishing goals for construction and non-construction contracts. In addition, interpreting the goal has been a problem for recipients. Therefore, the proposed rule would establish the 10% goal regardless of the type of contract.
7. Introduce a new term, “Section 3 local area.” Currently, a Section 3 resident or business anywhere in the nation can receive preference whether or not they live in or operate in the metropolitan area where the HUD-assisted work is carried out. The proposed rule would require the Section 3 resident or business to live in or be located in the “Section 3 local area,” defined as the metropolitan statistical area or the non-metropolitan county where the Section 3 project takes place.
8. Allow recipients to accept residents or businesses who self-certify that they qualify for Section 3 preference. The proposed rule would also allow recipients to presume that residents or businesses qualify if they live in or are located in disadvantaged census tracts. Recipients must examine a sample of those who self-certify or who are presumed qualified to verify compliance.
9. Monitor payroll data of developers and contractors. The proposed rule would require recipients administering Section 3 projects that are also subject to Davis-Bacon prevailing wage obligations to monitor a contractor’s payroll for changes in employment, such as terminations, retirements, transfers, and new job vacancies, in order to identify instances when Section 3 obligations are triggered. The intent is to improve contractor accountability.
10. Amend agreements with labor unions. HUD comments that recipients in jurisdictions that have bargaining agreements with labor unions typically have low rates of Section 3 compliance because unions operate outside of Section 3 obligations. The proposed rule would require recipients to amend all existing agreements with labor unions to ensure that Section 3 obligations are included to prevent labor unions from obstructing recipients’ ability to achieve compliance.
11. Establish penalties for recipients that fail to submit Section 3 annual reports. The proposed rule would seek penalties such as denying or withholding subsequent funds.
NLIHC will provide more details and analysis in the coming weeks, as well as provide a sample comment letter for advocates to submit to HUD.
A HUD media release is at http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2015/HUDNo_15-029
More information about Section 3 is on page 7-22 of NLIHC’s 2015 Advocates’ Guide, http://nlihc.org/sites/default/files/AG_2015_FINAL.pdf
HUD RAD Training about Relocation and Public Housing Conversions
On March 24, 2015, from 2:00-4:00pm ET, HUD will provide web-based training on relocation rules applicable to public housing conversions under the Rental Assistance Demonstration (RAD).
Public housing residents and advocates might benefit from the training, even though it is oriented to public housing agencies (PHAs) and their development partners who anticipate any resident relocation as part of the RAD conversion. The training is designed to help PHAs identify relocation issues early in the process in order to avoid processing delays and additional costs.
On July14, 2014 HUD issued Notice H 2014-09/PIH 2014-17 outlining RAD relocation requirements for public housing conversions (see Memo, 7/18/14)
MEMBERS OF CONGRESS QUESTION BUDGET’S SELF-HELP FUNDING, MINIMUM RENTS, AND MORE. Appropriations Committee Chair Hal Rogers (R-KY) called the proposed reduction in funding for Section 523 self-help housing “troublesome” at a March 18 House Agriculture Appropriations Subcommittee hearing on the Administration’s FY16 budget request. Housing Administrator Tony Hernandez said carryover from FY15 will help fund self-help contracts, and that RD’s effort to improve underwriting and automation will lead to reduced wait times for loan approvals. Subcommittee Chair Robert Aderholt (R-AL) questioned funding decreases that have “been rejected [by Congress] many times in the past,” and also asked about the proposed $50 minimum rent. Hernandez said about 36,000 households would be eligible for hardship exemptions, where a rent of $25 would likely be required, and noted USDA is asking to access HHS income verification databases to confirm program eligibility. Rep. Andy Harris (R-MD) inquired about RD’s reevaluation of how "rural in character" is defined to determine housing program eligibility. Hernandez replied the requirement is currently suspended and should be reinstated by September 2015. Subcommittee Ranking Member Rep. Sam Farr (D-CA) pointed out this was the only hearing addressing rural poverty.
CASTRO INCLUDES RURAL IN BUDGET TESTIMONY. On March 11, HUD Secretary Julián Castro testified on HUD’s FY16 budget request before the Senate Transportation-HUD Appropriations Subcommittee. His written testimony, like the testimony prepared for the House Subcommittee on February 25, includes a section on rural America, focusing on Native American programs, colonias, and partnerships with USDA.
HOUSE AND SENATE REPUBLICANS RELEASE FY16 BUDGETS. Neither document includes specific spending levels for individual housing programs. The Senate Republicans’ budget proposal does not discuss housing. The House version says it will reform housing programs, without details except for positive mention of HUD’s Moving to Work program. It would also privatize Fannie Mae and Freddie Mac.
VA EXPANDS ELIGIBILITY FOR SSVF NOFA. The Department of Veterans Affairs has made current Supportive Services for Veteran Families grantees with three-year, non-renewable grants eligible to apply under its February 3 NOFA (see HAC News, 2/4/15). The deadline is April 10. Contact SSVF staff, 877-737-0111.
HUD REQUESTS INPUT ON HOPWA FOR ABUSE VICTIMS. Comments are due April 13 on a demonstration that will award grants to states, local governments, and nonprofits to provide temporary housing to low-income victims of abuse or assault living with HIV/AIDS. Grantees must coordinate with local domestic violence and sexual assault service providers for client outreach and supportive services. Contact Amy Palilonis, HUD, 202-402-5916.
USDA STRIKEFORCE INITIATIVE ADDS COUNTIES IN OKLAHOMA AND PUERTO RICO. StrikeForce targets assistance to rural areas with chronic poverty. Parts of 21 states and the entire island of Puerto Rico are now included.
COMMENTS REQUESTED ON REDUCING USDA REGULATORY BURDENS. Comments are due May 18 on ways to modify regulations to streamline reporting and increase flexibility. Contact Michael Poe, USDA, 202-720-3257.
GAP BETWEEN SUPPLY OF AND DEMAND FOR AFFORDABLE RENTAL UNITS CONTINUES TO GROW. Affordable Housing is Nowhere to be Found for Millions, published by the National Low Income Housing Coalition,highlights the gaps at the national and state levels. Nationwide, only 31 affordable and available rental units exist for every 100 extremely low-income renter households. NLIHC says that, without government intervention, this gap will continue increasing.
HOUSING COSTS INCREASING FOR EMPLOYED RENTERS. Housing Landscape 2015, by the National Housing Conference’s Center for Housing Policy, reports housing affordability has improved slightly for low- and moderate-income working households, but costs continue to increase for working renters. Minority-headed households – except for American Indians and Native Alaskans – have a notably higher housing cost burden than white-headed households.
HAC RELEASES CONFERENCE REPORT. Events from the 2014 HAC Rural Housing Conference are reviewed briefly in the final report, which includes links to videos of each plenary session as well as materials from select workshops.