Housing Briefs - January 28, 2011
State Updates
Governor Patrick Releases FY’12 Budget
On January 26th, Governor Patrick released his FY’12 House One Budget proposal. The majority of affordable housing programs are level funded with some exceptions.
MRVP would be funded at $35.9 million, which would be a 3% cut from FY’11 when factoring in the supplemental budget appropriation for FY’11 that raised this year’s funding total to $37 million.
In addition, the MassAccess Accessible Housing Registry was once again proposed to be eliminated as a line item in the Governor's House One Budget.
Although the Governor’s funding recommendations for housing are far less than program demands, we greatly appreciate the Patrick/Murray Administration’s efforts to minimize reductions in affordable housing assistance despite historic budget challenges.
Governor Proposes Reforming Emergency Assistance; HomeBase Program Proposed
The Governor's budget proposal significantly alters the way families that are seeking emergency assistance and shelter would be served. Under the proposal, Emergency Assistance funding would be cut back from the original FY’11 budget amount ($115 million) or the current spending ($159 million) to $97.8 million in FY’12.
An additional $38.5 million would be dedicated to HomeBase, a short-term housing assistance program to prevent, divert and re-house homeless families or families at imminent risk of homelessness that would otherwise be eligible for Emergency Assistance if they became homeless. Potential uses for the funds include rental assistance, rent arrearages, and utility payments. The rental assistance cannot exceed 3 years, exceed $8,000 in the first year, and would come with supportive services.
CHAPA is encouraged by this new tool to house families who would otherwise reside in homeless shelters or state-funded budget motels. We plan to work with the Legislature and Administration over the coming months to refine the details and offer suggested improvements. We will also be working with partners to ensure there is a safety net for families with children that are not able to effectively use the Home Base rental assistance program or any other housing assistance.
Administration Proposes 7.5% Group Adult Foster Care Cut
Group Adult Foster Care, a MassHealth program that pays for personal care services for eligible seniors and adults with disabilities who live in GAFC-approved housing, is slated for a significant rate cut on March 15 under a proposal released by the Patrick Administration. This cut will make it difficult to provide this critical service, which helps many people live independently in the community. The Administration will hold a public hearing on the rate cut at 11 am on Tuesday, February 15th at 1 Ashburton 21st Floor in Boston.
CHAPA Announces Legislative Priorities for 2011-2012 State Legislative Session
CHAPA’s package of legislation aims to address challenges that impede working families, persons with disabilities, seniors, and veterans from affording the high cost of owning or renting a home in Massachusetts. If enacted, these proposals will reduce homelessness and housing instability, help persons with disabilities afford accessible housing, create jobs, and increase efficiency. We encourage members to contact State Representatives and Senators to request that they cosponsor the following bills.
An Act Relative to Public Housing Innovations
Rep. Jeffrey Sanchez and Sen. Harriette Chandler, House Docket 891 and Senate Docket 694
This legislation would create a pilot program for 10 housing authorities to implement innovative management and rehabilitation programs in state public housing. The legislation would authorize innovative program design on a variety of issues such as energy contract procurement, use of surplus housing authority real estate, administrative reporting, public/private partnerships, and rent calculation. Authorities implementing innovative programs could apply for streamlined regulatory and statutory requirements to overcome red tape that blocks innovation.
An Act Relative to Sustaining Community Preservation
Rep. Steve Kulik and Sen. Cynthia Stone Creem, House Docket 474 and Senate Docket 82
Many important local affordable housing initiatives have advanced as a result of the Community Preservation Act (CPA). CPA funds have helped create or rehabilitate 4,230 affordable housing units. This bill would ensure that there is sufficient funding to maintain a substantial state CPA match for funds raised through local CPA surcharges. The legislation also attempts to expand CPA participation by allowing localities to use other sources of funding to access state CPA funds, and clarifies ambiguities within the law.
An Act Relative to Community Housing and Services
Rep. Kevin Honan and Sen. Pat Jehlen, House Docket 882 and Senate Docket 807
Many elders, persons with disabilities and formerly homeless families and individuals need support services to live in community-based housing. This legislation creates a goal of producing at least 1,000 units of supportive housing within three years and provides for resident service coordinators to help meet that goal. The legislation calls for a coordinated and efficient process to produce supportive housing by establishing formal relationships and shared principles among the relevant state agencies involved in supportive housing.
An Act Promoting Accessible Housing for People with Disabilities
Rep. Kevin Honan and Sen. Michael Moore, House Docket 1016 and Senate Docket 353
Supportive housing capital programs that fund affordable housing for persons with disabilities and families and individuals that are homeless require reauthorization this session. The legislation reauthorizes the Community Based Housing Program, Facilities Consolidation Fund and Housing Innovations Fund. The legislation also addresses the Commonwealth’s insufficient supply of affordable housing that is accessible to persons with disabilities. The bill calls for 1) raising multifamily housing accessibility requirements to levels that meet or exceed federal fair housing requirements and 2) making the Massachusetts Architectural Access Board code structure consistent with the rest of the state building code to reduce confusion.
An Act Relative to Affordable Housing Energy Efficiency
Rep. Kevin Honan and Sen. Sal DiDomenico, House Docket 884 and Senate Docket 99
This legislation provides funding to make affordable housing developments energy efficient.
Comprehensive Land Use Reform and Partnership Act
Sen. James Eldridge, Senate Docket 574
This legislation updates Massachusetts land use laws (Ch. 40A, Ch. 41D) to reduce sprawl, reduce housing costs, make permitting less contentious, and reduce growing commuting time.
An Act Promoting Local Housing Initiatives for Economically Diverse Households
Rep. Carl Sciortino, House Docket 1272
This legislation would promote local land use policies that create housing for a range of incomes. Under the bill, cities and towns may establish large lot zoning but must address exclusion of families with limited incomes by designating places to develop homes on smaller parcels or in multifamily settings.
An Act Prohibiting Discrimination in Affordable Housing Permitting
Sen. Sonia Chang-Diaz, Senate Docket 1269
The legislation provides that it will be an unlawful discriminatory practice for government entities to reject housing developments on the basis that the developments will include households with lower incomes.
All bills will be posted on CHAPA’s website when they are publicly released on the legislature’s website. To learn more about a proposal, contact Sean Caron at 617-742-0820. CHAPA will also post testimony and fact sheets on this page as we submit it to the legislature over the coming months.
Senate President Murray Announces Leadership and Committee Appointments
The 2011-2012 Massachusetts Senate will see several leadership appointment changes. Sen. Jamie Eldridge (D-Acton) will co-chair the Joint Committee on Housing and Sen. Stephen Brewer (D-Barre) will chair the Senate Ways and Means Committee. Click here for a list of Senate Democratic Committee appointments.
Rep. Marc Lombardo (D-Billerica) and Rep. James Lyons Jr. (R- Andover) have been appointed to the Housing Committee. We have not yet received word about Senate Republican Committee appointments. House Democratic Committee Appointments and Leadership Appointments are expected Friday.
We look forward to working with the new Chairs, Leadership and members of the Housing Committee and congratulate them on their appointments.
SJC Decides Ibanez Foreclosure Case
On January 7th, the Supreme Judicial Court released their decision on US Bank National Association v. Ibanez, 458 Mass. 637, upholding the 2009 Land Court Decision that requires mortgage holders to be accurately identified in a foreclosure proceeding. Prior to Ibanez, it was common practice for lenders to proceed with foreclosure without proper documentation related to the assignment of the mortgage. A lender could convey marketable title to the prevailing bidder at a foreclosure auction provided that the lender was the holder of the promissory note evidencing the outstanding loan. In other words, it was not necessary that the lender also hold the mortgage which secures the promissory note prior to foreclosure proceedings.
The court specifically ruled that assignments that identify the assignor but not the assignee do not constitute a lawful assignment of the mortgages. The lender needs to obtain an assignment of the mortgage prior to initiating the foreclosure proceeding, including publishing the statutory notices, so that marketable title can be conveyed to the property following the foreclosure. Furthermore, a post-foreclosure assignment may not be treated as a pre-foreclosure assignment by declaring an "effective date" that precedes the notice of sale and foreclosure. The ruling casts doubt on thousands of foreclosures and thousands of transactions where new owners bought foreclosed properties that may not have been foreclosed on properly. Most lenders and services changed their foreclosures practices in 2009 after the Land Court made the original Ibanez ruling that there must be a proper assignment for the foreclosure to be valid.
Another case - Bevilacqua v. Rodriguez - is moving through the judicial system to decide the issue of whether a faulty foreclosure means that a new owner that had nothing to do with the faulty foreclosure can rightfully own a property. The results of this litigation will have a significant impact on thousands of households that purchased foreclosed properties.
DHCD Accepting Comments on Draft Qualified Allocation Plan
The Department of Housing and Community Development has posted its draft 2011 Qualified Allocation Plan for the Federal and State Low Income Housing Tax Credit programs. It held a public hearing on the draft on January 21 and will accept written comments through February 4 by mail or e-mail.
DHCD anticipates receiving a federal 9% credit allocation of $14.176 million in 2011 ($2.15 per capita) and also expects that it will have allocated the entire amount by the time the 2011 QAP becomes final. It will also have $10 million in state credits for allocation in 2011.
The proposed 2011 plan retains the goal of allocating 60% of the available credits to new production and 40% to preservation projects, but differs from the 2010 plan in a few ways. It caps the number of applications per sponsor at two per round, in response to the many applications received in 2010 (requests exceeded credits available by 4 to 1). It also raises the minimum project size from 8 units to 12. The first funding round deadline will be March 31, 2011.
Division of Banks to Hold Hearings on Foreclosure Law Implementation Regulations
DOB will hold public information hearings next week to obtain comments on implementing certain provisions of Chapter 258: An Act Relative to Mortgage Foreclosures. The hearings will take place: Tuesday, Feb. 2, 10 a.m., Fitchburg State University, Hammond Campus Center, 160 Pearl Street, Fitchburg; and Tuesday, Feb. 2, 3 p.m., Springfield State Office Building, 436 Dwight St. in Springfield.
Federal Updates
House Votes to Cut FY2011 “Non-Security” Spending to FY2008 Level
On January 25, the House approved a resolution (H. Res. 38) which would reduce FY2011 “non-security” spending to the amounts allowed in FY2008 or less. The vote follows a proposed ten-year $2.5 trillion spending reduction plan released by the House Republican Study Committee on January 20 that would reduce FY2012 domestic spending to FY2006 levels and freeze it at that level for 10 years.
A Center on Budget and Policy Priorities (CBPP) analysis indicates that spending on the frozen programs would fall by 42% in real terms by 2021. In the interim, federal agencies continue to operate at FY2010 spending levels under a continuing resolution that is valid through March 4. Analysts predict rescissions of unspent HUD funds are likely.
Treasury Department Defers GSE Reform Proposal; CAP Issues Recommendations
News sources reported this week that the Treasury Department’s proposal for reforming or replacing Fannie Mae and Freddie Mac will not be released until sometime in February. However, as reported in the Wall Street Journal, a “potential road map” for a new system was released by Center for American Progress (CAP) Mortgage Working Group on January 27. The House Financial Services Committee, meanwhile, revamped its website under its new chair and has prominently posted Republican recommendations for GSE reform.
Financial Crisis Inquiry Commission Report Released
The Financial Crisis Inquiry Commission, established by Congress to investigate the causes of the financial meltdown of 2008, issued its findings on January 27th. The 662 page full report finds multiple causes, including “widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policy makers who were ill prepared for the crisis; and systemic breaches in accountability and ethics at all levels.”
Among other things, the Commission’s 15 page conclusion explicitly examines the role of government housing policy in the crisis. It finds that while Fannie Mae and Freddie Mac contributed to the crisis through poor corporate governance, they were not a primary cause and notes that GSE mortgages have proven far less likely to be seriously delinquent than non-GSE securitized mortgages. It also concluded that HUD affordable housing goals contributed only marginally to GSE participation in risky mortgages and that the Community Reinvestment Act was not a significant factor in the crisis.
Overall, it concludes that the failure in government housing policies was that “As a nation, we set aggressive homeownership goals with the desire to extend credit to families previously denied access to the financial markets. Yet the government failed to ensure that the philosophy of opportunity was being matched by the practical realities on the ground. Witness again the failure of the Federal Reserve and other regulators to rein in irresponsible lending.”
Foreclosure Updates
GAO Calls for Better Data on Neighborhood Stabilization Program (NSP1) Outputs
The Government Accountability Office (GAO) issued a monitoring report in December on the first round of the Neighborhood Stabilization Program (NSP1) created in 2008 and funded at $3.92 billion.
It found that grantees have obligated 99% of funds and that HUD’s management of the program has been adequate. It noted, however, that HUD guidance to grantees on reporting program results, such as the number of housing units acquired and the number of households assisted, needs to be improved.
NeighborWorks Issues Report on Innovative NSP Programs
A new NeighborWorks report, “Implementing the Neighborhood Stabilization Program (NSP)” profiles innovative strategies being pursued in 12 communities across the nation, including the Nuestra CDC program in Roxbury and North Dorchester. It notes that successful programs address all destabilizing forces in a community, concentrate efforts for maximum impact and successfully find new sources of capital.
New Fannie Mae Video Helps Homeowners at Risk of Foreclosure Understand Options
On January 6, Fannie Mae released a new interactive video, WaysHome, to educate homeowners about their options to avoid foreclosure and encourage them to seek help.
The video is part of Fannie’s “Know Your Options” initiative to help homeowners at risk of foreclosure. Participants can simulate situations and decisions and see the consequences through interactive role playing and learn about potential options to help avoid foreclosure. DVDs can be requested by e-mail (ways_home@fanniemae.com).
Recent Research
Report Finds Massachusetts At Risk of Losing 9,500 Units by 2019 Due to 40-year Mortgage Maturity
The Community Economic Development Assistance Corporation (CEDAC) released an analysis this month of outcomes when housing developments in Massachusetts have reached the end of their 40-year HUD-subsidized mortgage with no other affordability restrictions.
“The Year 40 Problem in Massachusetts– Analysis of the First Wave of Housing Projects” reports that 17 of the 19 projects that have reached year 40 with no other restrictions lost some or all affordability and that 55% of the affordable units (2,105) were lost. It found that having a Section 8 contract was the strongest predictor that units would be preserved while location and market rents were not predictive. Overall, 70% of the Section 8 units in the 19 developments were preserved, but only 13% of the shallow subsidy units. The report details the economic logic of this finding and estimates that Massachusetts could lose 9,500 of the 13,200 affordable units in 110 projects that will reach maturity by 2019 (1,200 with Section 8 and 8,300 shallow subsidy units).
Action for Regional Equity Releases Report on Who Lives in State-Assisted Housing
Action for Regional Equity has released a report that analyzes data collected by the Department of Housing and Community Development that examines equity considerations in state assisted housing and rental assistance programs, including whether these housing resources exist in high opportunity areas. The report highlights racial segregation in state assisted housing and rental programs and the potential impact on access to jobs and education for minorities and persons with low incomes.
Urban Institute Finds Affordable Homeownership Programs Provide Important Benefits
A recent study by the Urban Institute of seven affordable homeownership programs nationwide where resale prices are restricted to affordable levels (‘shared equity”) found that the programs provided stable sustainable homeownership opportunities that allowed owners to build equity and realize a reasonable return on investment (more than they would have earned if they had rented and put invested the extra cost of ownership).
Resale prices were affordable, requiring the next buyer to have less than a 10% more income required than that of the seller at their time of purchase. The programs provided an ongoing supply of affordable housing, foreclosures rates were low, and buyers were not “trapped” (resales occurred at the same frequency as resales by other first time homebuyers).
Review Finds Affordable Housing Boosts Local Economies during and after Construction
A January 2011 brief from the Center for Housing Policy (CHP) summarizing the findings of a more exhaustive new literature review reports that affordable housing development provides significant short and long-term benefits to local economies.
Short-term benefits include job creation during construction (building 100 low income tax credit units creates more than 120 jobs) and afterwards (100 residents support 30 jobs in local retail, etc.). Other benefits include employee attraction and retention by expanding the affordable housing supply, municipal revenue gains through permits and fees, more stable homeownership, and more local spending as reduced housing costs increase discretionary income.