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The Maryland Affordable Housing Coalition (MAHC) held its annual Housing Day in Annapolis today.   The event brings together over 200 affordable rental housing advocates to inform legislators of the value of affordable housing and funding needs to continue to develop and rehabilitate affordable housing in Maryland.  Housing Day also provides the opportunity to hear from State representatives regarding current issues and legislation related to the affordable housing industry.  During today’s program, many State elected and appointed officials emphasized the need to continue to think creatively to meet the increasing demand for affordable housing in Maryland – including the opportunity to focus on work force housing.

A priority of the 2018 Housing Day was to advocate for increased funding for Rental Housing Works (RHW), subordinate gap financing used solely for projects utilizing 4% low-income housing tax credits and Maryland Department of Housing and Community Development’s Multifamily Bond Program.  The Governor’s current budget proposes funding RHW at $20 million, but MAHC is advocating for a $5 million increase in this amount to $25 million in order to keep up with the demand for this popular financing.   MAHC notes that for every $1 invested in RHW generates nearly $11 in new public and private investments and each RHW project creates 174 jobs.  We heard from a number of elected officials regarding the value of speaking about RHW projects that have closed in their districts and the linked map provides a snapshot of the impact of RHW within each Maryland County.

Turning to the national stage, Molly Bryson, a Partner at Ballard Spahr, provided attendees of the 2018 Housing Day with an update on the need to continue to advocate for the expansion and enhancement of the federal low-income housing tax credit through the passage of the Cantwell-Hatch Affordable Housing Credit Improvement Act (S.548) in the U.S. Senate and the U.S. House of Representatives companion bill (H.R.1661 – Affordable Housing Credit Improvement Act of 2017).  The Cantwell-Hatch Act was recently included in the Senate’s initial version of the budget bill, but it unfortunately did not make it into the House’s approved budget bill.  Continued outreach is needed to keep up the momentum of this important legislation.

Ballard Spahr will continue to monitor both Maryland and federal legislation related to affordable housing and provide updates in future blog posts.

Yesterday, the Trump administration released its proposed budget for the 2019 fiscal year. Overall, the budget proposes an $8.8 billion (18.3%) reduction in the HUD budget from the 2017 enacted level, a more drastic cut than the $6 billon HUD budget reduction the Administration proposed for fiscal year 2018. Significant proposals in the budget include:

  • Elimination of several programs including the Community Development Block Grant (CDBG), HOME Investment Partnership Program, Public Housing Capital Fund and Choice Neighborhoods
  • $17.5 billion in Section 8 annual contribution contract renewals (an $800+ million decrease from 2017 enacted level)
  • $10.866 billion in project-based rental assistance (a $50 million increase from the 2017 enacted level)
  • $110 million decrease in Housing Choice Voucher administrative fees
  • $100 million request for the Rental Assistance Demonstration (RAD) program to cover the incremental subsidy for public housing properties that would otherwise be unable to covert to Section 8 assistance
  • Proposed elimination of the unit cap for RAD conversions and September 30, 2020 deadline for RAD application submissions
  • In addition to the elimination of the Capital Fund, $1.7 billion in reductions to the Public Housing Operating Fund
  • $75 million request for the Family Self-Sufficiency program (same as 2017 enacted level)
  • $10 million request for the Jobs Plus Initiative (a $5 million decrease from the 2018 Senate recommendation)
  • Maintained funding levels for lead-based paint mitigation efforts
  • Unspecified funding request to evaluate and improve the EnVision Centers recently launched by Secretary Carson
  • $20 million increase to the Federal Housing Administration (FHA) operations (although a new fee would be imposed on FHA lenders)
  • Requirement that non-disabled persons receiving HUD assistance contribute more than 30% of their adjusted income to their housing costs

Other housing and community development components of this budget include an elimination of the Community Development Financial Institutions (CDFI) Fund grant and direct loan program, $1.8 billion request for veteran’s homelessness programs, and a funding increase for the U.S. Department of Agriculture (USDA) single family housing guaranteed loan program. A full copy of the budget proposal and related materials are available at be www.whitehouse.gov/omb/budget.

Remember that Congress is responsible for passing the budget; this is just a proposal. It remains to be seen if Congress will adopt the President’s proposal. We will continue to provide updates the budget throughout the appropriations process.

 

Our friends at NAHRO have alerted us that a new RAD notice will be issued tomorrow, August 23, 2017. The notice requires PHAs who already submitted a RAD letter of interest to preserve their spot on the wait list to submit a RAD application within 60 days if they want to continue in the RAD program. Guidance is also provided for setting rents for all RAD applications awarded outside of the previous 185,000 RAD cap, or for revocations or withdrawals after May 5, 2017 below that cap; rent levels for all such awards will be set at FY 2016 funding levels.  Per the appropriations notice that extended the RAD cap, the outside deadline for final submission of multiphase award applications is extended to September 30, 2020.

On August 9, HUD issued to Congress its 16th report on worst case housing needs in the United States, based on 2015 data.  Households with “worst case needs” are those that are very low income, do not receive government housing assistance and either pay more than 1/2 of their income for rent or live in severely inadequate conditions, or both.  Findings include:

  • Severe housing problems are increasing despite a decent economy.
  • In 2015, 8.30 million households had worst case needs. This is an increase from 7.72 million in 2013.  The record high for worst case needs is 8.48 million in 2011.
  • Worst case needs affect all types of households, whether examined by age and ethnicity, household structure, or location
    within metropolitan areas or region.

The report identifies a shift from homeownership to renting as the biggest cause of the increase in worst case needs.  For those of us who work with assisted housing or low-income families, its findings are unfortunately not a big surprise.  However, it underscores the significant unmet needs of so many low-income families.

The Senate Committee on Appropriations unanimously voted on July 27, 2017 to approve its FY2018 Transportation, Housing and Urban Development (THUD) bill.  The bill eliminates the cap in the Rental Assistance Demonstration (RAD) program, which has been supported by Secretary Carson, and also removes RAD’s sunset date.  In addition to the advancements in RAD, some additional rental assistance highlights of the bill include:

  • Increase in tenant-based Section 8 vouchers to $21.365 billion ($1.07 billion above the FY2017 enacted level);
  • Increase in public housing funding to $6.45 billion ($103.5 million above the FY2017 enacted level);
  • Increase in project-based Section 8 to $11.5 billion ($691 million above the FY2017 enacted level);
  • Increase in Housing for the Elderly to $573 million ($70.6 million above the FY2017 enacted level); and
  • Increase in Housing for Persons with Disabilities to $147 million for  (nearly $1.0 million above the FY2017 enacted level).

The Senate Committee on Appropriations released an overall summary of the bill that can be found here.  Unlike the drastic cuts seen in the House’s THUD bill, the Senate’s bill delivers increased overall funding of $60.058 billion ($3.5 billion higher than the House). This funding level represents an increase of $2.407 billion over current levels.  While many speculate neither the Senate nor the House will move their respective THUD bill to the floor, the Senate’s funding levels represent a step in the right direction for those that rely on many HUD programs.

On June 28, 2017, HUD issued Notice PIH 2017-10 (HA) (the “Notice”) providing guidance on the implementation of the Housing Choice Voucher (“HCV”) program funding provisions of the Consolidated Appropriations Act, 2017 (the “2017 Act”).

Under the 2017 Act, HUD received a total of $20,292,000,000 in funding for the Housing Choice Voucher program for the following budget items:

  • HAP Renewal Funding ($18,355,000,000)
  • Tenant Protection Vouchers ($110,000,000)
  • Administrative Fees ($1,650,000,000)
  • Mainstream 5 Year Program (120,000,000)
  • Tribal HUD-VASH Renewals ($7,000,000)
  • Veterans Affairs Supportive Housing ($40,000,000)
  • Family Unification Program ($10,000,000)

As evidenced in the Notice, the allocation methodology used to calculate housing assistance payments renewal funds, new incremental vouchers and administrative fees mostly continues the methodology established under the 2016 Consolidated Appropriations Act. We have highlighted some notable differences and new requirements below:

  1. The 2017 Act provides funding for Tribal HUD-VASH Renewals and the Family Unification Program. Per the Notice, further guidance for both programs will be issued at a later date. Guidance for the Tribal HUD-VASH Renewals will come from the Office of Native American Programs and a NOFA will be published directing the use of the Family Unification Funding.
  2. HUD is estimating that the $75 million dollar set-aside of HAP Renewal Funding will be necessary to prevent the termination of rental assistance for families as a result of insufficient funding of the voucher program. Applications for the other categories of set-aside funding: Unforeseen Circumstances, Portability Cost Increases, Project-Based Vouchers and HUD-VASH will not be accepted, unless there are remaining set-aside funds. The applications for shortfall funding will remain open throughout 2017, however PHA’s already within a Shortfall Protection Team with confirmed shortfalls in September, October or November of 2017 must submit an application no later than 5:00pm EST, Friday July 28, 2017 and those with confirmed shortfalls in December 2017, should submit an application no later than 5:00pm EST, Monday, January 22, 2018.
  3. The Tenant Protection Voucher set aside has also been increased to provide funding up to $110,000,000 to assist certain at-risk households in low-vacancy areas, who pay rents above 30% AMI as a result of certain conditions. The Notice clarifies that these TPVs are considered replacement vouchers and are not subject to the same re-issuance restrictions that apply to relocation vouchers. HUD noted that further guidance on the TPV set-aside is forthcoming and that until it is issued; HUD will not consider any applications for TPV set-aside funding.
  4. Section 6 of the Notice also provides significant detail on the process for awarding and applying for TPVs. It also explains under what circumstances tenants may be eligible for such vouchers.
  5. With respect to Administrative Fees, the Notice clarifies that no additional request may be made after the June 23rd deadline for Blended Rate Administrative Fees and Higher Administrative Fee Rates.

We will keep you posted as additional guidance is issued for these programs.

The U.S. Department of Housing and Urban Development (“HUD”) released the Fiscal Year 2017 Housing Trust Fund (HTF) allocation amounts on June 20, 2017, setting forth the amounts awarded to each state or territory under the HTF.  The total HTF allocation for Fiscal Year 2017 is $219,168,373.94, including $12,702,747.00 in unallocated funds from Fiscal Year 2016. The formula HUD uses to allocate funds is enumerated at 24 CFR Part 93; and based foremost on the ratio of the shortage of standard rental units both affordable and available to extremely low-income renter households in the state or territory to the aggregate shortage of standard rental units both affordable and available to extremely low-income renter households in the United States, with each recipient granted a minimum annual award of $3,000,000.00.

 

Specific allocation amounts are can be found at FR Doc. 2017–13180 (https://www.gpo.gov/fdsys/pkg/FR-2017-06-23/pdf/2017-13180.pdf).

In an interview with U.S. News and World Reports on “The Future of Affordable Housing in the Trump Era,” Amy McClain, who leads Ballard Spahr’s government-assisted housing practice (and is a frequent Housing Plus blogger), cautions that while she doesn’t expect budget cuts to be as severe as those proposed, funding for affordable housing is under threat. Amy notes that the proposed cuts to public housing funds could undermine the Rental Assistance Demonstration (RAD), which allows a public housing project to convert its subsidy to long-term Section 8 assistance and leverage debt and equity in order to finance the project’s rehabilitation or replacement. The post-conversion rents for RAD projects are based on the amount of public housing operating and capital funds allocated to the project pre-conversion. As Amy notes in the article, “If the public housing operating subsidy and the public housing capital fund get diminished [in the budget], then the rents are no longer viable to convert to the Section 8 platform.” Amy also emphasizes the role that affordable housing proponents can play in the budget debate. “It’s going to come down to what the advocacy groups do and the level of education for members of Congress to make sure everyone is aware of the benefit of programs and the impact that the cuts would have,” she says.

Read more about the proposed cuts to HUD’s budget here.

Last week, Ballard Spahr in conjunction with CSG Advisors hosted its 7th Annual Western Housing Conference in Phoenix, Arizona. The Conference brought together a wide range of public and private housing professionals facilitating a dynamic conversation on current developments in government-assisted housing.

The Conference opened with a “Washington Update” – a discussion on housing policy under the Trump Administration. Panelists Emily Cadik, Director of Public Policy at Enterprise Community Partners, and Peter Lawrence, Director of Public Policy and Government Relations at Novogradac & Company LLP, brought extensive insight into the political priorities driving forthcoming changes to government-assisted housing programs.

Significant takeaways from the discussion included:

  • The concern over a predicted decrease in HUD’s budget by $6 million, as outlined by the Washington Post on March 8th. Since the panel occurred, the Trump administration’s budget blueprint for fiscal year 2018 budget was released. Housing Plus posted a blog providing an overview of the budget blueprint on March 16, 2017.
  • The elimination of one or more of the tax credit programs, private activity bonds and/or the reduction of the corporate tax rate through tax reform will have significant impacts on the availability of equity financing needed to at least sustain affordable housing development at its current levels.
  • An infrastructure bill that includes housing may be an opportunity to meet any deficits created by HUD budget cuts to the Public Housing Capital Fund and Community Development Block Grant programs.
  • The spending caps under the existing Budget Control Act also pose a threat to government-assisted housing programs, especially in light of the proposed increases in defense spending and the resulting offsets that would be needed from non-defense discretionary spending.
  • Stakeholders should continue to invite legislators and members of Congress to ribbon cuttings and site visits in their districts. These visits are critical in gaining Congressional support for government-assisted housing programs.

The second session of the Conference focused on lessons learned from implementing the Rental Assistance Demonstration (RAD) program. Nicole Ferreira, Vice President for Development at the New York City Housing Authority, and Jenny Scanlin, Director of Development at the Housing Authority of the City of Los Angeles, each provided a case study from which they described the benefits and limitations of the program and the financial structures making each deal work. Beverly Rudman, Director of the Closing/Post Closing Department in HUD’s Office of Recapitalization, provided an update on the program and described particular challenges facing her office, which oversees the RAD program. The panel highlighted the following as effective tools for successfully underwriting a RAD deal and securing community and tenant buy-in: (1) Tenant Protection Vouchers, (2) the demolition and disposition process under Section 18 of the U.S. Housing Act of 1937, (3) seller take back financing from the Housing Authority and (4) federal and local redevelopment grants.

Panelists Tom Capp, Chief Operating Officer of Gorman & Company, C.J. Eisenbarth Hager, Director of Healthy Community Polices at Vitalyst Health Foundation, and Keon Montgomery, Housing Manager for the City of Phoenix Housing Department, then provided a local perspective on how private/public partnerships can be used to create sustaining change in communities. The panel emphasized the use of health studies in the predevelopment process to generate academic research on the specific needs of the impacted community and solicit funding from public and private partners to address those needs.

The last panel focused on the changes in the affordable housing finance market. Monty Childs, Director of Loan Origination and Structuring at Freddie Mac, John Ducey, Manager of Multifamily Affordable Housing-Credit at Fannie Mae, Sarah Garland, Senior Vice President at PNC Bank, Catalina Velma, Vice President of Public Housing at the National Equity Fund, and Cody Wilson, Director at Stifel, Nicolaus & Company, each provided a unique perspective on the impact of recent and prospective economic changes (e.g. tax reform, HUD budget cuts and rises in interest rates) on the equity, bond and lending markets, as well as the increased challenge in financing small and rural projects. The panel also discussed financing tools like Tax-Exempt Loans (Freddie Mac), Reduced Occupancy Affordable Rehab (ROAR) Execution (Fannie Mae) and FHA 221(d)(4) Loans (HUD), which have been found to address some of the challenges faced in the market.

A copy of the conference materials can be found here.

If you have any questions regarding the information above, or want more information on how to register for next year’s conference, please contact Jennifer Boehm at boehmj@ballarspahr.com.

Ballard Spahr is committed to facilitating and leading the conversation within the affordable housing community, which makes us thrilled to announce our Eleventh Annual National Housing Conference in Washington, D.C., from November 3 to 4. This two-day, complimentary event features engaging discussions, panel presentations, special insights, and networking opportunities with the key influences and power players of the affordable housing industry.

Day one is our Housing Authority Summit. Housing authority executives will join us to discuss the most critical issues and challenges they face and explore solutions to help push your housing authority into the future. Panels and roundtables will cover various topics, including property tax exemptions, strategic relationship development, financing strategies, fair housing, and RAD transactions. Registration for the Summit is limited to those in leadership roles at housing authorities; however we will curate blog content around the pertinent matters that will be covered. If you would like additional information on attending the Summit, please contact Jennifer Boehm.

Day two will feature our National Housing Symposium, an open event where our high-powered lineup of presenters will explore today’s housing market and look into the future, now that post-recession demand is driving exciting programs and initiatives. In addition to the popular Heard on the Hill discussion, panels will discuss the latest in RAD projects, fair housing problems, demographic trends, Year 15 issues, and multifamily housing bonds. Registration is free, and our detailed program description is available.

We are excited to provide an informative and collaborative forum for dialogue, exploration, and networking within an industry about which we feel so passionate. Though we will certainly blog about conference updates and insights, we hope you will join us in person!