Federal Housing News
April 13, 2015
Report Highlights Innovative Financing Strategies for Serving Extremely Low Income Households
The Technical Assistance Collaborative (TAC) released a report on April 9, co-authored by Ann O’Hara and Jim Yates, entitled Creating New Integrated Permanent Supportive Housing Opportunities for ELI Households: A Vision for the Future of the National Housing Trust Fund. The report highlights innovations in affordable housing financing strategies designed to benefit Extremely Low Income (ELI) households, including people with significant and long-term disabilities who need permanent supportive housing (PSH). Each financing strategy in the report can serve as a model for financing affordable ELI housing using National Housing Trust Fund (NHTF) capital and operating subsidy resources.
TAC’s report focuses on non-traditional financing strategies from Pennsylvania, North Carolina, and Illinois that are consistent with recommendations in a recent NLIHC companion report entitled, Aligning Federal Low Income Housing Programs with Housing Need. NLIHC calls for federal investments in housing to be better aligned with the nation’s need for housing affordable to ELI renter households.
TAC features the achievements of Pennsylvania, North Carolina, and Illinois because each state’s strategy added ELI renter units to the overall supply without relying on existing HUD subsidy programs, created integrated PSH units that can help states comply with the community integration mandates of the American With Disabilities Act, and is also suitable for the creation of non-PSH ELI units.
The Pennsylvania Housing Finance Agency (PHFA) created the Rent Subsidy Fund as part of its Low Income Housing Tax Credit (LIHTC) program. The Rent Subsidy Fund finances a 15-year ELI subsidy for a small number of units set aside within LIHTC properties. Rents at these set-aside units are 30% of the income of a household at 20% of area median income (AMI). To cover the cost of the 20% of AMI units, PFHA allows a developer to request an additional 5% developer’s fee. The LIHTC program allows an additional developer fee in order to generate equity to fund a rent subsidy escrow or reserve account. This approach has created 200-300 ELI units in approximately 60 properties since the program’s inception in 2005.
North Carolina’s Targeting/Key Program, administered by the North Carolina Housing Finance Agency (NCHFA), sets aside a small number of PSH units in every new LIHTC property financed by NCHFA. The Key Program offers developers state-level project-based rental assistance for these units so that tenants pay no more than 30% of household income for rent. Voluntary supportive services are made available to the PSH/Targeting residents through the North Carolina Department of Health and Human Services (DHHS). More than 2,400 Targeted PSH units have been created, with an average of 200 new PSH units added to the portfolio every year.
In Illinois, the Maryland-based Harry and Jeanette Weinberg Foundation (Weinberg) partnered with the Illinois Housing Development Authority (IHDA) to test an innovative philanthropic approach to funding integrated PSH units for ELI households with disabilities through the LIHTC program. IHDA uses Weinberg capital grant funds as an incentive for a LIHTC developer to establish rents for these units at 30% of household income. The grants are committed to the project by IHDA at the closing of the project’s permanent financing to enable the project to reduce permanent debt and apply the debt service savings to support the PSH units.
“With funds finally going into the National Housing Trust Fund, we have the opportunity to begin closing the enormous gap between the need for housing among extremely low income households and the supply,” said Sheila Crowley, President and CEO of the National Low Income Housing Coalition, in a press release about the TAC report. “We are grateful to TAC for identifying state agencies that are thinking outside of the box to build integrated permanent supportive housing, and for highlighting their successes in this illuminating new report. It is our hope that every state agency tasked with administering the NHTF will use this report as a guide when deciding on the most efficient use of funds.”
TAC’s report is available here.
NLIHC’s report is available here.
The joint press release from TAC and NLIHC about the report release is available here.
HUD Publishes Voucher Administrative Fee Study
On April 8, HUD released a “Final Draft Report” entitled, Housing Choice Voucher Program Administrative Fee Study. Abt Associates conducted the study. HUD, which began working on the issue in 2009, expects to publish the report for comment soon. The study is the first analysis of voucher administrative costs since the late 1980s. Congress appropriates funds every year for 2,300 public housing agencies (PHAs) to administer the Housing Choice Voucher (HCV) program, which serves 2.2 million households.
The study found that PHAs “have been significantly underfunded to run the HCV program.” For the past several years, administrative fee funding from Congress resulted in PHAs receiving less than the amount for which PHAs are eligible under the fee formula. For example, in FY15, PHAs received about 75% of the formula amount. The formula is based on the Fair Market Rent (FMR), “with no documented connection to what it costs to administer the HCV program.”
The study predicts that 92% of PHAs would have had greater administrative fees if the study’s proposed new fee formula had been in place and funded between July 2013 and June 2014. The proposed formula is based on seven factors that the authors determined drive the variation in costs of administering the voucher program. Two of the factors, program size and wages, explain 35% of the cost variation. The five other “cost drivers” explaining an additional 30% of the cost variation are health insurance, percentage of households with earned income, new admissions rate, number of voucher holders in high-rent neighborhoods, and percentage of voucher holders living more than 60 miles from the PHA’s headquarters.
On average in 2013, it took a PHA 13.8 hours per voucher per year to administer the program. The average cost of administering a voucher was $70.03 per month, while the average amount received for administering a voucher was $51.64 per month.
A HUD briefing about the study is scheduled for April 17, 10-11:30am ET. This briefing will also be webcast live. More information about the briefing is at http://www.huduser.org/HousingChoiceVouchers/index.html.
The study is at http://www.huduser.org/portal/hcvfeestudy.html.
Homeless Rates Decreasing Nationally, But Not For All States
The National Alliance to End Homelessness released a report on April 1 titled, The State of Homelessness in America 2015. This is the fifth in a series tracking the nation’s progress toward ending homelessness. On a single night in January 2014, 578,424 people in the country were homeless, a 2.3% decline from the previous year. Every subpopulation also experienced a decrease in homelessness, including families (2.7%), chronically homeless individuals (2.5%), unsheltered persons (10%), and veterans (10.5%).
Although homelessness decreased nationally, significant variation existed among states, with homelessness decreasing in 34 states and increasing in 17 states. States with the largest increases were Nevada (25%), Idaho (18.1%), and Washington D.C. (12.9%). States with the largest decreases were North Dakota (39.2%), Arkansas (23%), and South Carolina (22.7%).
The report tracked four economic and housing indicators that may predict future need for homeless assistance: unemployment rates, poverty rates, the number of poor renter households paying more than 50% of their income for housing, and the number of poor households living doubled up with family and friends. From 2012 to 2013, the number of unemployed people decreased 8.4% and the unemployment rate fell to 7.4%. Despite these improvements in employment, the poverty rate remained steady at 15.8%.
In 2013, 6.4 million renter households in poverty faced a severe housing cost burden, paying more than 50% of their income for rent and utilities, a 2.8% decrease from 2012. Alaska (50.8%) and Illinois (48.5%) had the largest decreases in households with severe housing cost burden, while Indiana (87.6%) and North Dakota (31.2%) had the largest increases in households with severe housing cost burden.
The number of poor households living doubled up with friends or family due to financial constraint rose by 3.7%. Delaware (40.3%), Massachusetts (29.5%), and New Hampshire (27.7%) had increases in doubled-up population greater than 25%, while Wyoming (30%) and Alaska (25.3%) had the largest decreases.
Between 2013 and 2014, the number of homes available through permanent supportive housing increased by 5.6% and the number of emergency shelter beds increased by 4.5%, while the number of transitional housing beds decreased by 6.5%. The number of rapid re-housing beds nearly doubled, from 19,847 beds in 2013 to 37,783 beds in 2014.
According to the report, decreases in homelessness may be due to improvements in the homeless assistance system. However, this system alone cannot overcome the affordable housing crisis. The authors urge communities, states, and the federal government to prioritize investment in affordable housing to reduce the risk of homelessness among low income renters.
The full report is at http://endhomelessness.org/library/entry/the-state-of-homelessness-in-america-2015.
Bill Would Create GSE Reserve Fund, End Treasury Sweep
On March 26, Representative Marsha Blackburn (R-TN) introduced a bill that would stop profits made by Fannie Mae and Freddie Mac from being swept into the U.S. Department of the Treasury. Instead, the Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015 (H.R. 1673) would require profits to be placed in a secondary reserve fund that would cover any losses incurred by Fannie Mae and Freddie Mac due to a housing downturn.
The current agreement between the Treasury Department and Fannie and Freddie’s conservator, the Federal Housing Finance Agency (FHFA), directs all profits into the U.S. Treasury. As of December 31, 2014, the two companies had paid a combined $227 billion to the Treasury, almost $40 billion more than their “bailout.”
Under H.R. 1673, the FHFA Director would decide whether to use funds held in the reserve if Fannie Mae’s or Freddie Mac’s losses exceed their capital reserves. The FHFA Director would also issue regulations delineating the standards and procedures for doing so.
Funds in the secondary reserve would not be considered part of Fannie Mae’s and Freddie Mac’s “capital, capital reserve, or otherwise an asset of the enterprise” other than as part of an approved capital restoration plan.
Once the conservatorship ends, the FHFA Director would dissolve the secondary reserve fund. Any amounts left would be used first to meet capital requirements as required by law, and then be devoted to earnings.
NLIHC continues to track all legislative and regulatory activities related to Fannie Mae and Freddie Mac in order to protect current funding for the National Housing Trust Fund (NHTF), and to ensure that the NHTF is treated favorably in any housing finance reform that advances in the 114th Congress. The NHTF is to be funded not by GSE profits, but by an assessment of 0.042% on new business of Fannie Mae and Freddie Mac.
H.R. 1673 was referred to the House Committee on Financial Services.
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.