On November 20, the Federal Housing Finance Agency (FHFA) released a final rule amending the Federal Home Loan Banks’ (FHLB) Affordable Housing Program (AHP). The rule gives the FHLBs more flexibility in administering and targeting their AHP programs to meet specific housing needs.
FHFA does not include in the final rule an outcomes-based framework for allocating AHP awards that would have required FHLBs to use 55 percent of their AHP funds to meet certain prescribed housing activities. NCSHA expressed opposition to this framework in our comments on the proposed rule, arguing that it was overly rigid and would reduce the FHLBs’ flexibility and hinder their efforts to meet the unique housing needs of their markets. FHFA cites such arguments, which many housing advocacy and industry groups raised, in explaining its decision not to go forward with the framework.
The final rule lowers from 65 percent to 50 percent the amount of AHP funding each FHLB must distribute through a competitive application program. It also allows each FHLB to establish up to three targeted funds dedicated to meeting specific housing needs within its district.
The percent of AHP funds FHLBs can extend toward providing down payment assistance or other home purchase assistance for low- and moderate-income consumers remains at 35 percent after FHFA proposed increasing it to 40 percent in its original proposed rule. The final rule also maintains the requirement that AHP-assisted homebuyers repay the FHLB a portion of their benefit should they sell or refinance their home within five years of purchase, which the proposed rule would have eliminated. The rule rescinds this "retention requirement" for homeowners who receive AHP grants to pay for home repairs. It increases the maximum amount of assistance a homebuyer can receive from $15,000 to $22,000 and indexes the maximum amount to increase according to FHFA’s home price data.
The final rule requires banks using AHP financing in connection with Housing Credit properties to report to their FHLB if a project they financed with AHP is out of compliance with program income and rent requirements. However, it also streamlines the initial monitoring requirements for Housing Credit projects that also receive AHP subsidy.
In addition, the final rule establishes streamlined monitoring requirements for AHP-assisted projects that also receive financing through HUD’s Section 202 Supportive Housing for the Elderly Program, Section 811 Supportive Housing for Persons with Disabilities Program, the United States Department of Agriculture’s (USDA) Section 515 Rural Multifamily Program, and Section 514 Farmworker Multifamily Program. FHFA pledges to work with other federal and state affordable housing programs to identify other opportunities for reducing AHP monitoring requirements, which NCSHA requested in our comments.
Federal law requires each FHLB to contribute ten percent of their annual earnings to their own AHP. The FHLBs use these contributions to finance homeownership opportunities for low- or moderate-income households (those with incomes at 80 percent or less of the area median income) and the development and rehabilitation of affordable multifamily housing (in which at least 20 percent of units are affordable to renters earning 50 percent of area median income or below). From 1990 through 2016, the FHLBs used $5.4 billion in AHP financing to subsidize the development of 660,000 affordable rental units and assist 167,000 homebuyers.
The FHLBs must comply with most of the final rule’s requirements by January 1, 2021. The FHLBs can choose to implement the rule’s provisions sooner if they wish to do so.