Federal Housing News
February 28, 2013
NATIONAL HOUSING TRUST FUND
House Tax Chair Takes on Mortgage Interest Deduction, Would Limit LIHTC and EITC
House Ways and Means Committee Chair Dave Camp (R-MI) recommends reducing the cap for the mortgage interest deduction (MID) in his proposed “Tax Reform Act of 2014,” which was released on February 26. Today, tax itemizers can deduct interest paid on mortgages of up to $1 million from their taxes. Mr. Camp would lower it to $500,000. “Mr. Camp’s willingness to change the mortgage interest deduction indicates that it is no longer the untouchable third rail of tax policy and is ripening for reform,” said NLIHC President and CEO Sheila Crowley in a February 26 statement.
The reduction to the MID cap proposed by Chair Camp would be phased-in over four years, becoming $500,000 in 2018 and would only be applied to new mortgage debt. The tax reform proposal would also eliminate the deduction of interest paid on home equity loans.
According to Ways and Means Committee materials, “The provision would preserve a substantial tax benefit for homeownership without affecting most taxpayers, who either do not itemize their deductions or who live in moderately priced housing markets.”
Mr. Camp would also increase the standard deduction, and thus predicts that “far fewer taxpayers” compared to today would be impacted by the MID cap reduction. Under his plan, 95% of taxpayers would find “they are better off by taking advantage of the larger, simpler standard deduction instead,” according to the discussion draft summary. “By reducing the current-law $1 million limitation, the provision would more effectively promote homeownership, rather than also promoting leveraged purchases of larger homes than taxpayers otherwise would acquire without the tax benefit,” the summary says.
The proposal’s summary also dismisses arguments that altering the MID is harmful to the housing market. “Indeed, historical data show that the strength of the nation’s housing market is tied more closely to the health of the overall economy than to any specific tax policies that may be in place,” it says.
The United for Homes campaign proposes modifying the MID by decreasing the cap to $500,000 and converting the deduction to a 15% non-refundable credit. Unlike the United for Homes campaign proposal which would direct the revenue generated through those modifications to fund the National Housing Trust Fund, Mr. Camp’s proposal would direct revenue generated to lowering individual tax rates. The United for Homes proposal is reflected in H.R. 1213, the Common Sense Housing Investment Act of 2013.
The Camp proposal would maintain the Low Income Housing Tax Credit, but would eliminate the 4% credit and tax-exempt bonds, key tools for affordable housing preservation and development. He also would spread the housing tax credit over a 15-year period, versus the 10-year period today, pushing a third of the program’s cost into the next 10-year federal budget window. This lowers the federal tax expenditure on paper, but lengthens by five years the time it would take for LIHTC investors to realize the full tax benefit.
Other proposed changes to the LIHTC would be to eliminate the current up-to-30% boost to eligible basis for the amount of tax credits that go into a development in a difficult-to-develop or high cost area, and to eliminate any preferences for artists in housing credit developments, while allowing preferences only for special needs households and veterans.
Affordable Rental Housing ACTION, the group that has been working to ensure the LIHTC survives any broad tax reform plans, issued a statement on the draft Tax Reform Act of 2014 on February 26. “While we are very pleased with the Chairman’s support for the Housing Credit, the draft has proposed some key changes that will in some instances make building and preserving affordable housing more difficult or impossible to accomplish. In addition, we are deeply concerned that the discussion draft would eliminate the ability of states and localities to issue tax-exempt private activity bonds to finance affordable housing. Tax-exempt Housing Bonds support the financing of 40 percent of all Housing Credit development annually and are often essential to the preservation of affordable housing.”
The proposal would also reduce Earned Income Tax Credits for working poor households, a cut that the Center on Budget and Policy Priorities estimates would cost a working mother earning $14,500 a year with two children about $2,000 when the plan is fully in effect in 2018, even with the plan’s proposed increases to the Child Tax Credit for working households.
“Dead on arrival” is the ubiquitous status report for Chair Camp’s plan. However, it does lay the groundwork for when Congress does decide to take up tax reform.
View House Ways and Means Committee’s Tax Reform Act of 2014 documents at: http://tax.house.gov/
Read NLIHC President Sheila Crowley’s February 26 statement at: http://nlihc.org/press/releases/4087
Read about H.R. 1213 at: http://nlihc.org/unitedforhomes/legislation
Read the ACTION campaign’s February 26 statement at: http://bit.ly/1mDk6ua
Republican Senators Send Letter Opposing Funding the NHTF
Countering the letter sent to Federal Housing Finance Agency (FHFA) Director Mel Watt from 33 Democrats urging him to lift the suspension of Fannie Mae and Freddie Mac’s obligation to contribute to the National Housing Trust Fund (NHTF) and the Capital Magnet Fund (CMF) (see Memo, 1/24), thirteen Republican Senators signed a letter to Mr. Watt authored by Senator David Vitter (R-LA) urging just the opposite. The letter says that lifting the suspension “would be huge mistake. Ending the suspension while the companies are still in conservatorship and benefiting from a direct line of credit to the United States Treasury would put the American taxpayer at further risk in what is already the most expensive bailout of the financial crisis.”
The Senators do not want FHFA to lift the suspension “until these two failed financial entities are reformed by Congress, the taxpayers are repaid and no longer required to provide a line of credit from the Treasury.” Joining Senator Vitter as signatories are Senators Tom Coburn (R-OK), Mike Enzi (R-WY), John Barosso (R-WY), Pat Roberts (R-KS), Richard Burr (R-NC), Mike Johanns (R-NE), Mike Lee (R-UT), Richard Shelby (R-AL), Jeff Flake (R-AZ), John Thune (R-SD), Ted Cruz (R-TX), Thad Cochran (R-MS), and Saxby Chambliss (R-GA).
NLIHC and others assert that the financial conditions under which the contributions were suspended in 2008 no longer apply now that the companies are making profits again. Under an agreement between FHFA and the Treasury Department, the profits are going into the Federal Treasury. The statute that governs the NHTF and CMF requires the assessment from the companies be “an amount equal to 4.2 basis points for each dollar of unpaid principal balance of its total new business,” with 65% to go to the HTF and 35% to the CMF. The assessment precedes other claims on the companies and is a cost of doing business, just like paying the electric bill. NLIHC estimates that the total amount owed the NHTF as of the 4th quarter of 2013 is $761,187,609.
To read the Republican letter, go to: http://1.usa.gov/1gN9x3U
Secretary Donovan Cites $5 Billion to be Gained from Housing Finance Reform
In an address at the Center for American Progress (CAP) on February 28, HUD Secretary Shaun Donovan reaffirmed the Obama Administration’s support for housing finance reform and for raising revenue to “dedicate at least $5 billion a year through a range of housing funds.” The event entitled “Housing Finance Reform: What Does It Mean for Rental Housing?” was an opportunity to focus on the often overlooked role of Fannie Mae and Freddie Mac in supporting rental housing. Secretary Donovan spoke on the Administration’s agenda to close the wealth gap and counted affordable rental housing as part of this agenda.
Following the Secretary’s address, CAP Housing and Finance Policy Director Julia Gordon led a discussion about the need for rental housing and a federal guarantee for multi-family housing finance. All panelists, NLIHC President Sheila Crowley, Andrew Jakobovics of Enterprise Community Partners, and Shekar Narisimhan of Beekman Advisors, agreed that a federal guarantee for multifamily housing was essential. Mr. Narisimhan thinks the multifamily departments at Fannie and Freddie should be spun off now and allowed to operate on their own.
Ms. Crowley reminded the audience of the great variance in income among households classified as low income. She cited NLIHC data on the gap between the number of extremely low income households and the number of rental homes they can afford. In response to a question posed by Ms. Gordon, Crowley said that it was apparent that the market could not solve this problem, because if it could, it would have done so by now, given the huge pent up demand. She noted the shrinking of the already insufficient HUD programs and the inability of the Low Income Housing Tax Credit to reach this population without other subsidies, and called for robust funding for the National Housing Trust Fund (NHTF) in housing finance reform.
Housing finance reform legislation is expected to be forthcoming soon from Senate Banking, Housing, and Urban Affairs Committee Chair Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID). If current indications are correct, the legislation will provide dedicated revenue for the NHTF and the Capital Magnet Fund, both of which were supposed to be funded by an assessment on Fannie Mae and Freddie Mac. The bill also could establish a third fund. The NHTF is the only fund that is deeply targeted to reach extremely low income households. NLIHC is advocating for the maximum possible total funding of at least $5 billion, and for at least 50% to go the NHTF.
President’s FY15 Proposed Budget Due Out on March 4
President Barack Obama is scheduled to deliver his budget request to Congress on Tuesday, March 4. Office of Management and Budget Director Sylvia Mathews Burwell will testify on the proposed budget on Wednesday, March 5 before both the Senate and House Budgets Committees.
The Administration is expected to propose an “Opportunity, Growth, and Security Initiative” as part of its budget request that would provide $28 billion in non-defense discretionary and $28 billion in defense spending. This $56 billion would be above the FY15 spending caps set by the Bipartisan Budget Act of 2013 (BBA), but would be offset by mandatory cost savings and increased revenue.
Advocates will have several opportunities to learn the details of the FY15 budget request during the week:
On March 4, HUD will host a “Stakeholder Briefing” on the details of the President’s HUD budget request. The briefing will be webcast 3 to 4 pm ET.
View the webcast on March 4: http://1.usa.gov/1mQiKA2
View a captioned version of the webcast on March 4: http://1.usa.gov/1bssZQ4
NLIHC will host a webinar on March 5 at 2 pm ET in which the President’s FY15 budget request for HUD and USDA Rural Development programs that serve the lowest income households with rental housing will be reviewed. The webinar will also include policy proposals in the FY15 proposed budget, as well as steps advocates can take to educate their Members of Congress about the impact of what the President has proposed.
Register for NLIHC’s webinar: https://attendee.gotowebinar.com/register/683641502521212417
The National Alliance to End Homelessness will host a webinar on March 6 at 1:30 pm ET to review the President’s budget proposal for affordable housing and homeless programs. The webinar will also cover the federal budget process. NAEH will also launch this year’s McKinney Appropriations Campaign on the webinar.
Register for NAEH’s webinar: https://www2.gotomeeting.com/register/510308178
The Center on Budget and Policy Priorities also will hold a webinar entitled “The President’s FY2015 Budget Proposal and Low-Income Housing” on March 7 at 2 pm ET. CBPP will discuss how the Budget Control Act, as amended recently, affects funding prospects in 2015 and later years.
Register for CBPP’s webinar: https://www4.gotomeeting.com/register/336673559
Appropriations Come Next
Once the President’s budget is received, Congressional appropriators will start to craft their FY15 bills. The first step is divide the total spending amount for the fiscal year among the twelve appropriations subcommittees, resulting in what is called the 302(b) allocations. However, even before it gets its 302(b) spending level, the House Appropriations Transportation, Housing and Urban Development, and Related Agencies (THUD) Subcommittee is expected to hold a hearing on HUD’s budget request during the week of March 10, with HUD Secretary Shaun Donovan testifying.
More than 1,350 organizations have already joined an organizational sign-on letter to House and Senate appropriators that calls for an increase in the FY15 THUD 302(b) subcommittee allocation. The Campaign for Housing and Community Development Funding (CHCDF), a coalition of national organizations staffed by NLIHC, and other national housing and transportation organizations, circulated a similar letter in 2013 that was signed by more than 2,400 organizations. NLIHC urges organizations to sign and to share the FY15 letter with their networks by the sign-on deadline of March 12.
The urgency of increased funding for HUD programs is highlighted in a new analysis that the Center on Budget and Policy Priorities (CBPP) released on February 26. CBPP projects that due to sequestration cuts, 70,000 fewer vouchers were in use as of December 2013 compared to December 2012. The analysis includes state-by-state voucher use data and an interactive map.
View the 302(b) letter: http://bit.ly/1gAmxvP
Sign the letter: https://nlihc.wufoo.com/forms/thud-302b-signon-letter/
View the FAQ on the 302(b) letter: http://bit.ly/1jMmWvW
View the CBPP blog: http://bit.ly/1pua29h
Senator Murray’s Fiscal Forecast
Senator Patty Murray (D-WA), Chair of the Senate Budget Committee, issued a memorandum to Senate Democrats on February 27 describing the current fiscal outlook for the United States. She reports that that the nation’s economic outlook has improved since 2009 and that the government has already taken measures to reduce the deficit by $3.3 trillion. While long-term deficit projections have improved, more work needs to be done, include raising revenue from the highest earning corporations and individuals.
Senator Murray calls on Congress to focus on “other growing deficits” that affect struggling families. She cites the gap between wages and rental housing costs as a challenge for employed families saying, “Earning the minimum wage, an American worker would have to hold two and a half full-time jobs to be able to rent a two-bedroom home.” She also says that Congress “cannot afford to underestimate the very real impact” that deficit reduction efforts have had on families, and present and future communities.
View Senator Murray’s memo: http://1.usa.gov/1dJ9Haj
MORE CAPITOL HILL
House Scrutinizes HUD for Lobbying Allegations
The House Financial Services Subcommittee on Oversight and Investigations held a hearing on the issue of lobbying improprieties by HUD staff on February 26. Subcommittee Chair Patrick McHenry (R-NC) had requested that the HUD Office of Inspector General (OIG) investigate an email sent by then-HUD Deputy Secretary Maurice Jones that called for opposition to a bill under consideration by Congress. The hearing was entitled "Inspector General Report: Allegations of Improper Lobbying and Obstruction at the Department of Housing and Urban Development.” HUD Inspector General David Montoya was the sole witness.
Mr. Montoya testified that his office investigated the actions taken by the Deputy Secretary and other HUD employees who were involved in the preparation and distribution of the email in question. The IG found that the HUD employees under investigation had violated an internal HUD policy regarding lobbying, but Mr. Montoya said that there was nothing in his findings that warranted a criminal investigation.
Mr. Montoya said that the “department should have more fully scrutinized the decision to send the email and the people the email was sent to.” According to Mr. Montoya, the email was sent to a list that included 46 HUD employees and recipients of federal funding. One of the recipients was a public housing agency that was recently the subject of a HUD OIG investigation regarding use of federal funds to lobby.
Mr. Montoya indicated there may have been a broader lobbying effort involving HUD, but that the Deputy Secretary was not aware of it. He also said that this effort was an “isolated case, an aberration” for HUD employees and that steps were taken “essentially [by] one person who decided to act on [his] own.” When asked by Representative Joyce Beatty (D-OH) whether there was a culture of lobbying at HUD, Mr. Montoya said, “No, I don’t believe there is a culture… most of the HUD employees I’ve met, if not all, are very well intentioned, very dedicated, very ethical.”
Mr. Montoya identified one person as the primary coordinator of the email. The same person also took steps that constituted interference in the OIG investigation.
Mr. Montoya said that HUD Secretary Shaun Donovan was not aware of the email and was not pleased when he learned of it. Mr. McHenry asked if HUD had taken disciplinary action and Mr. Montoya indicated that he believed HUD is waiting for a GAO report, which could call for a civil penalty such as requiring payment related to the expense of the HUD activities in question.
View the OIG report: http://1.usa.gov/1hG8GUF
DEBT CEILING INCREASED WITHOUT OTHER CHANGES. No spending reductions or other trade-offs were included in the measure, signed into law by President Obama on February 15.
FY15 ADMINISTRATION BUDGET TO BE ISSUED IN TWO PARTS. Initial reports stated that detailed figures would not be available until March 11. According to Bloomberg, however, an OMB spokesman said that on March 4 the Administration will release proposals, agency-level information, and the comprehensive appendix that provides figures for every program. Historical tables and supplemental analyses will be released on March 11.
PRESIDENT REPEATS ENVIRONMENTAL JUSTICE COMMITMENT. A proclamation by President Obama recognizes February 11 as the twentieth anniversary of President Bill Clinton’s Executive Order 12898 on Environmental Justice, renewing the federal pledge to address disproportionate environmental impacts on low-income and minority populations.
USDA RD OFFERS EMAIL INFORMATION ON SECTION 502 GUARANTEE PROGRAM. To receive Countdown: 7 CFR 3555, an email newsletter preparing for the September 1 effective date of the new interim final regulations (see HAC News, 12/18/13), and other email announcements, subscribe at http://www.rdlist.sc.egov.usda.gov.
FREQUENTLY ASKED QUESTIONS ABOUT HOME PROGRAM UPDATED. HUD’s HOME FAQs cover program requirements, CHDOs, homeownership, rental housing, and more.
RESOURCES AVAILABLE FOR COMMUNITY INTEGRATION OF PEOPLE WITH DISABILITIES. The Community Integration Center at the Technical Assistance Collaborative provides an online library and also offers technical assistance to government agencies and others. Contact Kevin Martone, CICTAC, 617-266-5657, ext. 122, or send email through the organization’s website.
WEALTH-BUILDING TAX INCENTIVES GO MOSTLY TO HIGHEST EARNERS. “Upside Down: Tax Incentives to Save & Build Wealth,” a policy brief from CFED, reports that in FY13 the bottom 40% of earners received less than 3% of tax incentives related to investment, homeownership, retirement, and college. The paper includes recommendations for improving the incentives that reach lower-income families.
REPORT EXPLAINS USE OF SURPLUS PROPERTY PROGRAM. This Land is Your Land: How Surplus Federal Property Can Prevent and End Homelessness, published by the National Law Center on Homelessness and Poverty, describes the impact of the McKinney-Vento Title V program, which allows vacant federal property to be used, free, by eligible groups to provide housing or services to homeless persons.
UPCOMING HAC EVENTS COVER ENERGY, 502, SENIORS, AND VETERANS
March 25-26: “Energy Efficiency and Renewable Energy Systems for Affordable Housing Development” in Memphis, TN, will cover energy efficient development practices and renewable energy technologies in rural affordable housing. The course will include site visits.
March 25-27: “Section 502 Packaging Training for Nonprofit Developers,” held in Memphis, TN, will
be an advanced course teaching participants to assist potential
borrowers and to work with RD staff, as well as other nonprofit
organizations, to deliver successful Section 502 loan applications.
April 9: “Serving Veterans in Rural America: A Symposium,” held on Capitol Hill in Washington, DC, will draw attention to our rural veterans and showcase programs and initiatives that help with housing, health, and employment needs. Senior federal officials from HUD, USDA and VA are confirmed speakers.
April 22-23: “Housing Seniors and Veterans in Rural America: Preservation, Development, and Services,” held in Phoenix, AZ, is targeted to rural housing providers. The agenda will feature discussions of federal and other housing programs for veterans and the aging, including home repair, rental housing, and services for the homeless. Successful best practices will be featured. Online registration.