FHFA Finalizes Amendments to FHLB Affordable Housing Program

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.

Allowable Expenses In MFH Properties USDA Multi-Family Housing Unnumbered Letter (UL)

USDA Partners –

Click here to view a recently published unnumbered letter (UL) dated September 21, 2018, titled “Allowable Expenses in Multi-Family Housing Properties”. This provides guidance to Multi-Family Housing owners and management agents to clarify allowable expenses that can be paid by project income in Rural Development-financed Section 515 and Section 514 multi-family properties.

We ask that you take a moment to read the UL and if you have any specific questions that you contact your local Rural Development Servicing official

How the Model for Ending Veteran Homelessness Applies to All Groups Nationwide

Since 2010, the U.S. has cut veteran homelessness in half. Leading the way were communities and states across the country that effectively ended veteran homelessness entirely. The model of increased investment, coordination and commitment, and a focus on the most vulnerable should inform all our efforts to end homelessness. The National Alliance to End Homelessness has three new profiles from communities that effectively ended veteran homelessness:

Stakeholders Consider the Potential of Opportunity Zones, Urge Transparency of Investments

With a first round of proposed rules for the new Opportunity Zones tax benefit now publicly available, potential investors, fund managers, community groups and other stakeholders are examining the potential benefits and challenges of this new investment tool. An article in The New York Times notes that Opportunity Zones could do a lot of good for people living in the zones and earn investors’ money, or simply enrich investors. Rob Lalka, cofounder and partner at Medora Ventures and Professor at Tulane’s A.B. Freeman School of Business, and Scott Shalett, managing partner and head of public affairs at Medora Ventures, write in The Hill that the private sector and communities must lead on impact reporting in the absence of the government requiring reports on metrics like job creation and poverty reduction. Lalka and Shalett write that “embedding an impact focus and seeking community input at the outset is far easier and more effective early on, rather than attempting to retroactively measure such non-monetary results or rebuild trust with communities after investments have been made.” The industry encourages the submission of comments on the initial set of regulations to the IRS by the December 28 deadline to identify ways to improve the regulations and prevent abuse of this economic development tool.

Enterprise Shares Priorities for a Modernized Community Reinvestment Act

At the end of August, the Office of the Comptroller of the Currency (OCC) released an advance notice of proposed rulemaking (ANPR) soliciting public feedback on possible regulatory changes to the Community Reinvestment Act (CRA), a 1977 law that requires financial institutions to lend and invest where they accept deposits, including in low- and moderate-income (LMI) communities. The affordable housing and community development industry has greatly benefited from CRA: the law has been an important driver of financial institution investments in nonprofit organizations, the Housing Credit, NMTC, and Community Development Financial Institutions (CDFI) among other critical activities benefiting LMI communities and residents. Estimates suggest that banks have made $796 billion in community development loans since 1996, supporting affordable housing and community development projects benefiting LMI communities and individuals. Enterprise’s aim for modernized CRA regulations is to ensure a consistent, transparent system that properly gives banks credit for sound community development work. This includes retaining a focus on affordable housing, updating assessment areas to address national challenges, and moving to a more metrics-based system that neither directly nor indirectly reduces total lending and investment under CRA. We strongly urge all industry stakeholders to submit comments by the November 19 deadline (next Monday) in support of retaining CRA regulations that emphasize robust investment in affordable housing and community development.

2019-2023 Oklahoma Plan to End Homelessness

The Governor’s Interagency Council on Homelessness (GICH) planning survey is now available at https://www.surveymonkey.com/r/PDBGVLJ through November 30. Please complete the survey, if applicable, and distribute broadly through your networks and encourage participation as responses will inform the 2019-2023 Oklahoma Plan to End Homelessness. The GICH will also be promoting through traditional media. Please ask your agencies/organizations to promote on their social media and other platforms as often as possible between now and November 30. We need your help in securing input from across the state. If your agency/organization has regional or local sites/staff, please also encourage their participation and assistance in promoting.

The GICH will be reaching out to a broad group of stakeholders, including but not limited to tribal governments, OCCY, child welfare staff, funders, social service organizations, law enforcement, emergency responders, schools, elected officials, hospitals, medical clinics, etc. The GICH wants to ensure inclusion of both traditional and nontraditional partners who may have some engagement and insight into relevant programs, services or needs.

The survey link is also posted to the GICH website which is now live. You can access it at gich.ok.gov. Please note there is more work to be done to the site, and it is a work in progress.

Please also consider providing a link to the GICH website on your agency/organization website.

NCSHA Urges OCC to Ensure CRA Continues to Support Housing Credit and Bond Investments

Any changes made to the Community Reinvestment Act (CRA) regulations should encourage banks to continue investing in Housing Credits and Housing Bonds, NCSHA argues in a comment letter submitted yesterday to the Office of the Comptroller of the Currency (OCC). NCSHA submitted comments in response to the Advance Notice of Proposed Rulemaking (ANPR) OCC published in September seeking public input on how it could best amend its CRA to fit modern market dynamics. NCSHA previously summarized the ANPR on its blog.

NCSHA’s comments express support for OCC’s goal of modernizing its CRA regulations while ensuring that low- and moderate-income communities continue to benefit from banks’ CRA activities. We also urge OCC to continue working with FDIC and the Federal Reserve to align their CRA policies.

The comments recommend that any amendments to OCC’s CRA regulations maintain a separate "investment test" requiring banks to make equity investments that benefit low- and moderate-income and other underserved markets. NCSHA’s letter argues that eliminating the separate investment test could substantially reduce the incentive for banks to make equity investments, such as in Housing Credits and Housing Bonds. "Maintaining the investment test," NCSHA writes, "will ensure that banks continue to participate in the Housing Credit and Bond markets…thus increasing the amount of resources that can be devoted to developing and/or rehabilitating affordable housing."

NCSHA also asks that OCC:

  • make it clear any investments, services, and lending activities banks provide in connection with HFA programs qualify as community development activities under CRA
  • allow banks to receive CRA credit for activities outside their assessment areas if, in their most recent examination, they received a rating of "Satisfactory" or better for serving the needs of their prescribed assessment areas
  • permit banks to continue to receive CRA credit for investing and/or purchasing mortgage-backed securities comp0sed of state HFA programs loans
  • clarify that bank support for naturally occurring affordable housing developments that do not receive any government subsidies qualifies for CRA credit
  • allow banks to receive CRA credit for letters of credit extended on HFA Housing Bonds or other HFA debt
  • acknowledge that equity investments in Opportunity Zones, as established pursuant to the Tax Cuts and Jobs Act, will receive positive consideration for CRA credit

Please reach out to Greg Zagorski with questions.

Housing Advisory Group

From our friends at Housing Advisory Group:

As we approach the Thanksgiving Holiday, with the mid-term elections in our rear view mirror, we believe this is a good time to acknowledge and thank those who have made the 115th Congress and 2018 a great success for affordable housing. Yes, we are not quite done with this Congress and we are hopeful to garner a few more successes before the calendar strikes January 1.

Our number one priority remains securing the 4% fixed LIHTC floor and Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT) are laser focused on this goal. What a wonderful farewell present it would be for Senator Hatch as he concludes 42 years of service in the U.S Senate. We are very thankful for his commitment to affordable housing and for his leadership. Senator Maria Cantwell, our LIHTC champion, easily won re-election to her Senate seat in Washington and immediately was marshalling the industry around our lame duck session strategy. More to come on this as we work through the lame duck.

We are also most appreciative of the House and Senate Leaders who championed our 9% LIHTC cap increase and income averaging in the Omnibus bill back in March. The support of Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Chuck Schumer (D-NY), in conjunction with the exemplary efforts of House Democratic Leader Nancy Pelosi (D-CA), made 2018 another winning year for the LIHTC.

As with any election there are winners and losers. We are winners in that our lead Democratic sponsor in the House, Congressman Richard Neal (D-MA), will likely be the next chairman of the House Ways and Means Committee. We have been meeting with Mr. Neal and his staff on the housing agenda for the 116th Congress and pending our success in the lame duck session, are excited about potential housing legislation in the House next year. Unfortunately, we lost our lead Republican sponsor as Congressman Carlos Curbelo (R-FL) was defeated in his bid for re-election. We also saw Ways and Means members and H.R. 1661 cosponsors Pete Roskam (R-IL), Erik Paulsen (R-MN) and Mike Bishop (R-MI) lose their elections. On the Senate side of the Hill we lost Finance members and S. 548 cosponsors Dean Heller (R-NV) and Bill Nelson (D-FL). We are most appreciative of these Members of Congress and their support over the years for the LIHTC.

We also want to send a note of thanks to Senator Susan Collins (R-ME) for her stewardship of the THUD budget and support for housing programs. Her leadership has prevented significant cuts to these vital programs and has instead increased funding despite push back from the administration. We look forward to seeing how Senator Collins works with expected incoming House THUD subcommittee chairman David Price (D-NC), another housing supporter.

Opportunity Starts At Home Podcasts

Listen to the Latest Podcast Episodes Available Now on iTunes
Episode 7 features Andrew Sperling, Director of Legislative and Policy Advocacy at the National Alliance on Mental Illness (NAMI). NAMI is the nation’s leading voice on mental health. Mr. Sperling discusses NAMI’s commitment to housing affordability issues, why NAMI joined the campaign’s Steering Committee, the history of housing and mental illness, the current housing barriers facing those with a mental health condition, and the necessity of stable housing for recovery.
"Without access to decent, safe, affordable housing, all the aspirations we have for recovery and integration in the community just collapse," explains Mr. Sperling. "For the population I represent, no social determinant of health drives more bad health outcomes than unstable housing."
Listen to Episode 7 Now!
Episode 8 explores the intersections between food security and affordable housing with Alison McIntosh of the Oregon Housing Alliance and Jeff Kleen and Anneliese Koehler with Oregon Food Bank. The Oregon Housing Alliance is one of seven state partners receiving financial support from the national campaign. Oregon Food Bank is a key partner of the Alliance. Alison, Jeff, and Anneliese discuss their multi-sector collaboration to influence better housing policies, including best practices, recent successes, and challenges.
"Very nearly we talk about housing just as much as we talk about hunger," said Jeff Kleen, public policy associate with Oregon Food Bank. "The people we serve keep telling us it’s housing; it’s rent; it’s having a safe place to call home."
Listen to Episode 8 Now!

Treasury and IRS Plan Guidance on Income Averaging, Other Housing Credit- and Bond-Related Issues

On November 8, the Treasury Department (Treasury) and Internal Revenue Service (IRS) issued their 2018–2019 Priority Guidance Plan (PGP) which lists guidance projects on which Treasury and IRS will focus during the 12-month period from July 1, 2018, to June 30, 2019. The PGP prioritizes implementation of the Tax Cuts and Jobs Act (the 2017 tax reform legislation) and includes several projects related to HFA priorities, such as the Housing Credit and Housing Bonds.

First on the PGP project list are regulations related to the new Housing Credit income averaging minimum set-aside, which NCSHA encouraged in a letter to IRS earlier this year. Treasury and IRS also plan to address final regulations related to Housing Credit compliance monitoring and utility allowance issues. In 2016, IRS published proposed and temporary regulations for both compliance monitoring and utility allowances but has not yet finalized them.

The PGP includes planned guidance on private activity bonds (PABs) under Section 142 of the Internal Revenue Code, which focuses on exempt facility bonds including multifamily Housing Bonds. IRS indicated that it hopes to finalize a proposed rule to simplify the public approval requirements that apply to Mortgage Revenue Bonds (MRBs) and certain other PABs. NCSHA previously commented in support of these changes.

Finally, the PGP notes that IRS published Opportunity Zone (OZ) guidance earlier this year. NCSHA sent IRS comments requesting the OZ guidance and will review whether to recommend additional guidance.

In addition to the individual issue-related letters to IRS linked above, NCSHA sent comprehensive comments to Treasury and IRS last June when feedback was initially requested on which guidance projects Treasury and IRS should address in 2018–2019, including issues related to the Housing Credit and Housing Bonds, such as income averaging and the proposed streamlined public approval requirements for MRBs.