Housing Briefs - January 30, 2009
State Updates
Governor Releases House One; FY 2010 Budget Proposal Prioritizes Housing
On January 28th, Governor Patrick unveiled a $27.9 billion budget proposal for FY 2010. The Budget includes over $1.6 billion in cuts to state programs and local aid, $587 million in new revenue, a $490 million withdrawal from the Rainy Day Fund, and $700 million in anticipated federal aid from Congress’ stimulus package.
House One recognizes that affordable housing programs are an important part of the Commonwealth’s economy and critical to those most impacted by the economic downturn. CHAPA’s budget analysis demonstrates that overall spending on housing remains stable and some programs would receive increased appropriations under the Governor’s budget proposal to maintain current services amid rising costs.
Under the Governor’s budget, the Mass. Rental Voucher Program appropriation would be increased from the under-funded FY 09 appropriation of $33 million ($35.2 if you include off-budget MassHousing contributions) to $35.8 million, an amount adequate to ensure that the Commonwealth does not take vouchers away from program participants but would not be enough to reissue vouchers upon turnover. Public Housing Operating Subsidies would be increased from $66.5 million to $71.2 million, an appreciable increase but still short of documented needs to adequately maintain public housing.
The Alternative Housing Voucher Program, Division of Banks Foreclosing Counseling Grants, Residential Assistance for Families in Transition, and Mental Health Rental Subsidies would all be level-funded.
The SoftSecond Loan Program would receive a 44% appropriation cut, but this program can be funded through the capital budget, which CHAPA supports as a one-time solution. In addition, the Housing Consumer Education Centers would see a cut of $200,000, or 14% at a time when demand for services is extremely high. Get the Lead Out, Mass Housing’s program to provide low or no interest loans to remove lead paint from existing homes, is not funded in House One, but the Administration is exploring other solutions to continuing this important program.
House One transfers three shelter line items to DHCD: emergency assistance for families, individual shelters with Home and Healthy for Good consolidated under that line item, and a line item to fund the operation of homeless services. The Governor also filed a related Article 87 reorganization bill with his budget, which transfers shelter responsibility from DTA to DHCD. The Legislature has 60 days to act on the Article 87 reorganization proposal from the date of filing.
House One contains an outside section which would require greater reporting requirements for the state’s tax credit programs, including brownfields, historic, and low income housing tax credits.
The Governor also refiled legislation to reform state surplus land disposition with his budget proposal. Under the proposal, surplus land disposition would be expedited under smart growth principles. Proceeds from any sale would be split between Chapter 40R and a new infrastructure fund. CHAPA strongly supports the Administration’s efforts to return surplus state properties to productive uses.
Overall, House One maintains the Commonwealth’s commitment to affordable housing and recognizes the impact that housing instability and foreclosures have had on low and moderate income residents. However, the FY 2010 budget impact on human services will be difficult. We appreciate the Governor’s support and leadership during difficult times and will advocate with the Legislature to enact a budget that maintains housing stability for as many Commonwealth residents as possible.
Governor Announces Further Cuts to the FY ‘09 Budget
With revenue projections creating another significant budget gap, the Governor used his Section 9C authority a second time on January 28th to reduce state government spending and local aid. The second round of 9C cuts had a minimal impact on housing, with only select earmarks receiving cuts.
Governor Names Greg Bialecki to Succeed Dan O’Connell as Secretary of Housing and Economic Development
Today, Governor Patrick named Greg Bialecki to replace Dan O’Connell as Secretary of Housing and Economic Development. Greg formerly served as Undersecretary of Business Development, where he spearheaded several critical Administration initiatives, including the growth district initiative and zoning and permitting reform. CHAPA wishes to congratulate Secretary Bialecki on his new role. We also wish to extend our gratitude to Dan O’Connell for being a valued partner and effective leader at EOHED.
Representative Robert DeLeo Elected Speaker of the House
Robert DeLeo, state representative for Revere and Winthrop, was elected Speaker of the House on January 28th. Speaker DeLeo is the past Chair of the Ways and Means Committee and a long-time supporter of affordable housing. CHAPA wishes to congratulate the new Speaker and looks forward to working with him in his new role.
We also wish to extend our gratitude to Salvatore DiMasi for his leadership on many critical affordable housing and community development issues. The former Speaker and representative from the North End resigned from the House earlier this week with many notable affordable housing achievements signed into law during his tenure.
Speaker DeLeo is expected to announce new Committee appointments in the coming weeks, which will include a new Chairman of the House Ways and Means Committee to craft the House budget.
Patrick-Murray Administration Releases Regional Economic Development Strategy
The Executive Office of Housing and Economic Development (EOHED) released a regional economic development strategy on Jan. 16th in Lowell. The Framework for Action takes a multi-faceted approach to attract businesses to the Commonwealth, focus strategic investments, and stabilize regional economic centers impacted by the economic downturn and foreclosures. CHAPA applauds the Administration for emphasizing the role that stable housing and community development play in bolstering the Commonwealth’s economic position. We are particularly encouraged by the strategy to revitalize small cities through community-based planning and targeted investment and his support for new tools to manage the foreclosure crisis.
Attorney General Coakley Files Foreclosure Legislation; Calls for State House Action
Attorney General Martha Coakley announced a package of foreclosure legislation before the Greater Boston Chamber of Commerce this week. The far-reaching legislation would require lenders to make “commercially reasonable” efforts to modify loans and would establish new databases for foreclosed properties and second-hand scrap metals that are often pillaged from foreclosed and abandoned properties.
CHAPA and several other groups have also filed legislation to improve neighborhood stabilization by addressing impacts created by foreclosures. We look forward to working with the Legislature, the Patrick-Murray Administration, and the Attorney General to create the tools the Commonwealth needs to manage foreclosures and the resulting neighborhood impacts.
Legislature Nears Feb. 4th Deadline to Co-Sponsor Legislation
CHAPA has ramped up efforts to secure co-sponsors for our legislative package as the February 4th deadline nears.
Please contact your legislators to ask them to support CHAPA’s legislative package, which includes bills to preserve expiring use affordable housing, provide foreclosure relief, enhance energy efficiency in multifamily housing, coordinate supportive housing, enhance the Community Preservation Act and ensure that communities can use their CPA funds for rental assistance or first-time homebuyer assistance, create Innovative Public Housing Programs, reform zoning to promote local housing initiatives and smart growth, clarify the condo law with respect to mixed income developments, and help standardize affordable housing covenants.
MHP Launches Project on Housing and Economic Growth
The Massachusetts Housing Partnership has launched a year-long project to analyze the relationship between housing and economic growth in Massachusetts, to propose housing production benchmarks needed to sustain a healthy economy, and to recommend realistic policy solutions for achieving these housing benchmarks based on the experiences of other states. Much of the analysis will be done by outside consultants. An RFP to procure research teams is available at www.massgrowth.net.
DHCD Releases Draft 2009 Qualified Allocation Plan
DHCD released its draft plan for allocating Low Income Housing Tax Credits in 2009 this week and has scheduled a public hearing on the plan on February 10, 2009 at 10 a.m. in conference room 2B at 100 Cambridge Street in Boston. It will also accept comments in writing at or prior to the hearing. Click here for details on the hearing and comment process.
The draft plan makes a number of changes from prior QAPs that are in line with new flexibility provided in the 2008 Housing and Economic Recovery Act (HERA) and in response to current market challenges. It includes a priority system for awards made to projects currently under review, giving first priority to projects that have an investor commitment, and giving projects without such a commitment until December 31, 2009 to line one up.
It will also allow projects unable to achieve anticipated pricing to apply for additional credit on a rolling basis. Projects where the percentage of extremely low income units exceeds 10% may also be permitted to apply for tax credits and subsidy funds on a rolling basis. It also adds 20 communities to its current list of “difficult to develop areas”.
Housing Permits in Massachusetts Drop 40% in 2008
On January 22, the Census Bureau released its December estimates for residential construction activity nationwide. Nationwide, the total number of residential units permitted in 2008 was 50.6% below the 2007 final estimate nationwide.
In Massachusetts, 9,241 units were permitted in 2008, down 40% from the 2007 final estimate. For Massachusetts, that is the lowest annual level of permits since at least 1969. (By comparison, in 2005, housing permits totaled 23,840 units). Single family homes continued to represent a declining share of new units permitted. Overall, permits for single family homes (5,007) accounted for 54% of all units, while permits for buildings with five or more units (3,728) accounted for 40%.
Federal Updates
House and Senate Economic Stimulus Bills Advance
[Click here for CHAPA’s comparison of the House and Senate bills]
The House approved an $819 billion stimulus bill (H.R.1) on January 28th that provides $16.3 billion in new funds for housing and another $6.2 billion for weatherization, among other things. It provides substantial new funding for public housing, the Neighborhood Stabilization Program, homelessness prevention, HOME, CDBG, and a new grant program for energy retrofits in Section 202, Section 811 and Section 8 project-based housing.
To address the funding gap that has arisen due to falling tax credit prices and limited investor demand, it also would allow States to elect to exchange unused nine percent low income housing tax credits for an upfront grant. The Congressional Budget Office estimates this provision would generate $3 billion in grants.
In the Senate, the Appropriations and Finance Committees approved bills totaling $825 billion; both are expected to be voted on by the full Senate next week. The Appropriations Committee bill (S.336) provides less new funding for housing than the House bill - $15.1 billion in new funds for housing (including $2.1 billion to ensure properties with Section 8 project-based rental assistance receive timely payments) and the Finance Committee bill does not provide for an LIHTC grant exchange. Instead it extends the credit carry-back period from 1 year to 5 years for housing tax credits as well as many other business credits. (The Senate Appropriations Committee provides $750 million more in new HOME funds than the House, which could help with gap filling).
HUD Secretary Confirmed
On January 22, by voice vote, the Senate confirmed Shaun Donovan as the new HUD Secretary.
Foreclosure Updates
Fannie Mae and Freddie Mac Extend Foreclosure Moratoria, Announce REO Rental Policy
On January 30, both Fannie Mae and Freddie Mac
announced that they are extending their current moratoria on
foreclosures of 1-4 unit owner-occupied properties through February 28
(they were originally scheduled to expire on January 31). Both
agencies also announced new policies this month that will allow renters
to stay on in properties they have foreclosed upon. Fannie Mae had
temporarily suspended evictions last month, pending development of a
formal policy.
Fannie Mae's REO Rental policy,
announced on January 13, will allow in-place renters in 1-4 unit
properties (but not the owner) to stay on with a month-to-month lease
during the marketing period, but will require that they pay market rate
rents based on local comparables. It will not, however, conduct credit
checks or require a higher security deposit. Renters who cannot pay
the higher rent or choose not to stay will be entitled to a relocation
payment.
The new Freddie Mac renter policy,
announced on January 30, differs slightly from Fannie Mae’s, in that it
does not exclude defaulting owner-occupants. Rents will be set at the
lesser of the current rent or market rent; former owners will pay
market rent. Rents will be established by property management firms
hired by Freddie Mac and renters will have to demonstrate that they can
afford the rent. Buildings must meet code or be able to be brought
into compliance “affordably”.
Foreclosures Deeds Reach 12,430 in 2008, Up 62% from 2007; Petitions Decline
The Boston Globe reported this month that foreclosure deeds in Massachusetts totaled 12,430 in 2008, a figure 62% higher than the 2007 total (7,653) and almost four times the number in 2006 (3,130). It noted that the monthly number of foreclosure deeds has been lower in recent months (less than 1,000 a month between September and December), relative to the numbers recorded earlier in the year.
Foreclosure petitions in 2008 totaled 21,804, down 26% from 2007 (29,572). Many attribute the decline at least in part to the 90 day “right to cure” law that went into effect on May 1, 2008.
MHP Foreclosure Monitor Highlights Trends in Massachusetts
The Massachusetts Housing Partnership quarterly update on foreclosure trends, issued in January, includes a detailed profile of properties subject to foreclosure petitions in the year ending September 30, 2008.
Overall, it found that while Massachusetts had an average proportion on subprime and Alt-A loans, compared to the nation as a whole, it had a much higher default rate. It also found that 2- and 3- family homes accounted for 43% of the properties subject to foreclosure petitions in that period. Communities with high number of foreclosures a year ago have tended to remain high on the list, but the study also found declines in some with increases in others not on the list.
New Rule Revises HOPE for Homeowners Program and Extends to 2-4 Unit Properties
On January 7, the Board of Directors of the Home for Homeowners (H4H) program published an interim rule in the Federal Register intended to boost program use. The rule was effective immediately, with comments due by March 9.
H4H is an FHA program designed to help borrowers at risk of foreclosure to refinance into a more affordable mortgage but its use to date has been limited. The new rule addresses some barriers by allowing more flexible underwriting, with higher loan to value ratios and longer mortgage terms allowed (up to 40 years), and extends eligibility to 2-4 units owner-occupied properties. It also addresses the challenge of second liens.
Under H4H, holders of subordinate liens (e.g. second mortgages) must release their lien and until now were only offered a share of potential future appreciation in exchange. The new rule allows lien holders to choose between an upfront payment of 3% or 4% of the outstanding principal (depending on the combined loan to value ratio) or future appreciation of 9% or 12% of the outstanding principal and interest. It also revises the appreciation calculation to tie it to appraised value and to exclude pre-existing equity.
New CRA Guidance Encourages Foreclosure Mitigation
Federal financial regulatory agencies issued final updated guidance on activities that qualify for CRA credit on January 6 in the Federal Register, which are effective immediately. It is a revised version of proposed guidance published on July 11, 2007.
The new “Interagency Questions and Answers on Community Development”, among other things, encourages actions to prevent home foreclosures by offering CRA credit for all loan programs that help homeowners (even if not low- or moderate-income) facing foreclosure on their primary residence. Foreclosure prevention counseling is also an eligible community development service. The January 6 notice also includes new proposed language with comments due by March 9.
New Jersey Passes New Foreclosure Prevention Bill with Rent-to-Own Program
New Jersey’s governor signed a new bill (S.1599/A3506) into law on January 9 that requires creditors seeking to foreclose on properties with high-risk mortgages to give owners six months to work on solutions and that allows municipalities to impose code enforcement liens on REO properties. It also creates two new programs to help at-risk households.
It establishes a Mortgage Stabilization Loan Program, funded at $25 million, to encourage lenders to write-down the mortgages of owners facing imminent foreclosure to current appraised value. The State will provide a non-amortizing second loan of up to $25,000 to further reduce the first mortgage to a level the household can afford. The funds can also be used to provide incentives to holders of subordinate liens.
It also creates a $15 million Housing Assistance and Recovery Program (HARP) to help non-profits and public entities purchase homes from owners facing foreclosure and allow the owners to remain in place under a rent-to-own agreement of up to three years. HARP funds can be used to help non-profit or public purchasers defray the cost of acquiring, rehabbing and insuring the property. The programs will start up in April.
Recent Research
New Study Highlights Importance of GSEs in Multi-Family Housing Finance
The Joint Center for Housing Studies at Harvard University released a policy brief this month. “Meeting Multifamily Housing Finance Needs During and After the Credit Crisis” highlights the critical role the federal government and GSEs have played as a “liquidity backstop” in multifamily finance and the risks presented by the current crisis in financial institutions. It discusses ways to think about how that role can be improved to better serve national public policy goals in terms of financial stability, increased energy efficiency, and community stabilization.