State Updates
Legislature Gives Initial Approval to Bill that Doubles State Low Income Housing Tax Credits for Two Years
This week, the Massachusetts Legislature gave initial approval to a supplemental budget bill, which includes provisions to raise the cap on State Low Income Housing Tax Credits (LIHTC) by $10 million in 2013 and $10 million in 2014 (Sections 11,12,15,16,96 and 97). Without the increase in tax credits, DHCD would have been forced to choose between: 1) funding the HOPE VI developments in South Boston and Taunton; or 2) advancing other affordable housing developments that are also seeking LIHTC.
Over 50 non-profit and for-profit developers are seeking state and federal LIHTC to help address the affordable housing crisis. These worthy developments would have had to compete for the same resources as the Taunton and South Boston public housing redevelopments and one of the two categories would have lost out in the competition for scarce credits. Instead, the supplemental budget increases the cap on housing tax credits by $20 million over the next two years to allow an estimated 25 additional developments and the two HOPE VI redevelopments to advance. The awards will be made according to the Qualified Allocation Plan in future funding rounds.
The House and Senate each adopted identical language authorizing the LIHTC increase, and each created a new fund to offset some of the foregone revenue from raising the cap on housing tax credits. However, the Senate also allows DHCD to borrow from the new trust fund in anticipation of federal LIHEAP fuel assistance funds not yet delivered to the state. This issue will need to be resolved before the bill is sent to Governor Patrick’s desk for approval. Once the bill is enacted and placed before the Governor, it will be important for stakeholders to request the Governor’s support for this critical issue.
House Sets Aside Portion of Potential Gaming Revenues for Community Preservation Act Trust Fund
The Massachusetts House recently approved expanded gaming in the Commonwealth, voting to allow three casinos and a slot parlor to open in Massachusetts.
The House adopted a bipartisan amendment offered by Minority Leader Brad Jones to set aside 2% of the licensing fees from gaming and 5% of the ongoing revenue for the Community Preservation Trust Fund, the state fund that is used to match locally-raised CPA funds. While revenue projections vary by source, the House projects that this will create $5 million in licensing fees and eventually lead to $15 million per year in ongoing revenue for CPA.
The Senate is currently considering the gaming bill, and rejected an amendment offered by Senator Sal DiDomenico to accomplish the same goal. If this CPA revenue provision is signed into law, it could raise the state match from the current 26.6% state match to an estimated 40% state CPA match.
Legislation filed by Representative Steve Kulik and Senator Cynthia Creem to boost the state match to 75% and make it more likely for cities to adopt CPA is still pending before the House Committee on Ways and Means. Updated data shows that CPA has helped created or rehabilitate 5,080 affordable homes to date.
DHCD Announces $2 million Available to Re-occupy Vacant State Public Housing
DHCD is dedicating $2 million from the Affordable Housing Trust (AHT) to assist in re-occupying state-aided family public housing family units that have been vacant for 60 or more days and require capital repairs between $2,500 and $15,000. The goal is to maximize this funding to re-occupy as many family units within a short period of time as soon as possible.
Building Permit Activity in Massachusetts at Historic Low
Census Bureau data for residential building permits issued in 2011 suggest that Massachusetts will permit fewer units in 2011 than any year since Census record-keeping began in 1960, breaking the previous low reported in 2009.
Massachusetts permitted 4,234 units in 2011 through August, 6% below the number reported through August in 2009. As detailed in the Bureau report on annual units permitted by state, the past three years represent the lowest years to date, with units permitted totaling 9,833 (2008), 7,941 (2009) and 9,075 (2010). By contrast, 24,549 units were permitted in 2005 and 16,000-20,000 units were permitted every year between 1992 and 2006.
MAPC’s MetroFuture report in 2008 estimated that the Greater Boston region alone needed to add 349,000 units (11,600 units a year on average) between 2000 and 2030 to meet future demand through 2030.
Appeals Court Upholds Housing Appeals Committee Decision on Holliston Development
On September 16, the Massachusetts Appeals Court issued a decision (Zoning Board of Appeals of Holliston vs. Housing Appeals Committee) upholding a 2009 decision by the Housing Appeals Committee. The case involves a 200 home development proposed on a former brownfields site.
The Holliston ZBA denied the application in 2006, citing concerns about contamination on the site, and wetland and stormwater impacts, even though the developer would comply with the state environmental laws. The ZBA appealed the HAC decision to Land Court, and after losing, to the Appeals Court. The Appeals Court agreed with the HAC and Land Court that a developer cannot be required to meet more stringent local environmental regulations absent a showing that the project’s impact on local wetlands outweighs the need for affordable housing and that such a showing was not made. It further found that the project was likely to result in environmental improvements. The ZBA has asked the State Supreme Court to review the Appeals Court decision.
Massachusetts Department of Veterans Services Looks to Increase Partnerships with Housing and Service Providers
Veterans Services Secretary Coleman Nee recently met with the CHAPA Homelessness Committee and described an array of benefits available to Massachusetts residents that served in the military, and the families of these men and women. These benefits include financial assistance towards housing and other needs, and shelter for homeless veterans. The Secretary is interested in working with housing and service providers to end veteran homelessness and help returning veterans secure affordable housing. Click here to learn more about Veterans Services.
Federal Updates
Congress Approves Two Temporary Continuing Resolutions for FY2012
Pending agreement on a full-year budget, Congress approved two short-term continuing resolutions (CRs) to keep federal agencies running. The first (H.R. 2017) covered October 1 through October 4 and the second (H.R. 2608) extended funding through November 18. Both CRs require agencies to reduce their rate of operation by 1.503% compared to FY2011 appropriations in order to hold spending at levels that meet the budget targets established in the debt ceiling agreement in August.
Senate Appropriations Committee Proposes Deep Cuts for FY2012 HUD Budget
On September 22, the Senate Appropriations Committee approved an FY2012 appropriations bill (S.1596) that, like the House Appropriations Subcommittee bill, deeply cuts key HUD programs. However, the Senate bill distributes its cuts differently, with smaller cuts to public housing programs, deeper cuts to HOME, Section 202 and Section 811 and a partial restoration of funding for Housing Counseling ($60 million). The National Low Income Housing Coalition has posted a detailed budget chart on its website.
The Senate bill also includes several important policy items related to preservation and to the voucher program. It authorizes a pilot Rental Assistance Demonstration (see below) and would allow HUD to institute a number of administrative changes to the voucher programs (many included in the proposed Section 8 Savings Act), potentially reducing program costs by more than $700 million over five years. It does not include the ban on HUD funding for recently federalized state public housing units, as contained in the House appropriations bill.
Senate Budget Bill Authorizes Rental Assistance Demonstration
The FY2012 HUD budget bill approved by the Senate Appropriations Committee on September 22 includes language authorizing a modified version of the Rental Assistance Demonstration (RAD) proposed by HUD.
The Senate committee bill authorizes a five-year demonstration covering up to 60,000 units but limits it to public housing and provides no new funding, instead requiring that conversion costs, including rental assistance, be funded from the savings realized by terminating public housing operating and capital funding for the affected units (both sources are already scheduled for deep cuts in FY2012 under House and Senate proposals). The National Low Income Housing Coalition has posted a discussion of the differences between the Senate committee and HUD proposals and a comparative chart.
Emergency Homeowners’ Loan Program Helps More Than 500 Families in Massachusetts
On June 20, 2011, HUD launched the Emergency Homeowners Loan’ Program (EHLP), which provides emergency mortgage relief to homeowners who are unemployed or underemployed (a drop in income of at least 15%) and at risk of foreclosure. EHLP offers a forgivable loan for up to $50,000 to assist eligible homeowners with: (1) payments of arrearages, including delinquent taxes and insurance; and (2) up to 24 months of monthly payments on their mortgage principal, interest, mortgage insurance premiums, taxes, and hazard insurance. $1 billion in funding is available for EHLP with a $61,036,001 set-aside for Massachusetts.
The program ended on September 30, 2011. HUD reported that over 100,000 EHLP pre-applications were submitted nationally, and HUD conditionally approved 11,824 awards. Of the $1 billion dollars, $432 million has been committed. For Massachusetts, HUD conditionally approved 568 awards, which falls short of the 1,260 EHLP awards allotted for the state (CHAPA estimates that approximately 4,650 pre-applications were submitted in Massachusetts). Unspent funds will return to the Treasury.
The program faced significant time delays in getting started. With the statutory deadline of September 30, 2011, housing agencies reported that there was not sufficient time to process all the applications. Furthermore, the program had very stringent requirements, which disqualified many applicants.
HUD Publishes Final Fair Market Rents
HUD published the final FY2012 Fair Market Rents (FMRs) in the Federal Register on September 30, keeping the same figures it proposed in August for Massachusetts.
As reported last month, FMRs for Greater Boston and Cape Cod will rise slightly (1.5%-1.7%) compared to FY2011, but will fall in most other parts of the state, including Western Worcester county (down 18%), Fitchburg-Leominster (down 17%), Lowell (down 15.6%) and Brockton (down 11%). The declines in Massachusetts, as in many other parts of the country, are due primarily to the use of more recent rent data for 2005-2009. In a separate “preliminary response to comments”, HUD declined to delay implementation of the new FMRs, citing a lack of funding for additional rent studies.
HUD 2012 Income Limits to be Released December 1st
In the same notice announcing the final FY2012 FMRs, HUD also announced that it will release its annual (2012) Section 8 income limits on December 1. It reached this decision after seeking comments in an August 19 Federal Register notice on whether it should set a fixed date for releasing the limits. The August request for comments noted that the release date had been slipping later into the calendar year as HUD began using American Community Survey (ACS) data and suggested two possible fixed dates (October 1 or December 1) while pointing out that moving to either would require the use of older data.
GSE Mortgage Guarantee Fee Increases Likely in 2012
On September 19, the President unveiled the Administration’s proposal for long term deficit reduction. The plan calls for gradual increases to the fees Fannie Mae and Freddie Mac charge lenders when acquiring a mortgage for securitization (“g-fees”), starting with a 10 basis point increase in 2012 (1/10 of 1 percent), which would raise the average monthly cost of a new $220,000 mortgage by less than $15 a month. The Administration estimates this change would reduce federal costs by $28 billion over ten years. (G-fees were increased by 4 basis points in 2010).
Edward DeMarco, director of the Federal Housing Finance Agency (FHFA) overseeing the GSEs, outlined the agency’s longer term thinking about fee increases in a speech the same day, citing a desire to bring the agencies closer to what the private market would charge and a desire to reduce the various forms of cross-subsidization that currently characterize the GSE fee structure. He noted that fee increases would help offset the cost of the GSE conservatorship to taxpayers.
Over 72,000 Helped by Section 8 Vouchers in Massachusetts in 2010
The Center on Budget and Policy Priorities (CBPP) published fact sheets on the number of Section 8 vouchers in use nationally, by state, and within states, by housing authority.
In Massachusetts, 72,352 households used housing choice vouchers in 2010 – a utilization rate of 96% of the 75,764 authorized. DHCD, which administers 25% of the state’s vouchers (19,099), had a utilization rate of 99% and a waiting list of over 92,000 households. Overall, the statewide utilization rate was down slightly from FY2008 and FY2009, when the rate was 97%, though higher than the national average of 91%.
Updated Low Income Housing Tax Credit Database Released
On September 22, HUD issued an updated version of its database on Low Income Housing Tax Credit (LIHTC) developments placed in service. The database includes both 4% and 9% tax credit developments as far back as 1987, but the most complete data covers projects placed in service in 1995 or later. The update added 1,598 projects (112,696 units) placed in service in 2008 and 2009 and almost 21,000 projects placed in service between 1995 and 2007.
The database includes an online lookup query system to allow users to download data for specific projects or locations (including states). HUD also issued a summary report profiling program characteristics (annual production, average project size, bedroom mix, use of HOME and other funds) over time and relative to the overall rental inventory. Nationally, units placed in service have ranged from 105,000 to 130,000 a year since 1997, with 112,592 in 2007.
The average project size is 75 units and on average of 95% of the units per project are tax-credit eligible. New construction projects have accounted for just under two-thirds of all projects since 1995. In Massachusetts, the program has produced or preserved over 730 projects with over 50,000 affordable units since 1987, including 562 projects with over 42,000 affordable units from 1995-2007.
Recent Research
New AARP Report Examines Impact of Recession on Older Adults
AARP released a study in September on the impact of the recession on the housing situation and cost burdens of Americans aged 50 and above. The report examines relative costs and incomes in 2000 and 2009 and includes state-specific data for every state including Massachusetts. It also looks at the relative rank of every state in terms of cost burdens and the availability of affordable housing.
The study finds that like all populations groups, older households have higher cost burdens in 2009 than in 2000 and that a lower percentage own their homes free and clear than did in 2000. Cost burdens are higher among households over age 65 due to their lower incomes compared to the under-65 group. Massachusetts has twice the national average number of federally subsidized units per capita for older persons, ranking third in the nation.
Study Finds CRA and GSE Affordable Housing Goals Did Not Cause Subprime Crisis
A new study by two Federal Reserve economists, “The Subprime Crisis: Is Government Housing Policy to Blame?” found no evidence for assertions that the Community Reinvestment Act (CRA) and the federal affordable housing goals for Fannie Mae and Freddie Mac caused the subprime crisis. It specifically examined whether the programs were associated with inferior mortgage market outcomes, including delinquency rates and measures of loan quality. It concluded that there is “little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis” and that in fact “areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes.”
