The work of its members keeps SAHF on top of policy and marketplace developments nationwide. Seeing the patterns and having the expertise, the members work together to develop policy solutions and financial products that work.
Please see below for some of SAHF's current policy initiativies.
Over its history, SAHF has worked with HUD and with other nonprofit housing advocates to propose and explain changes in federal policies that could foster the rehabilitation and preservation of affordable multifamily rental housing and improve the quality of life enjoyed by residents. The following are some recent improvements to federal housing policy for which SAHF advocated:
Many older affordable apartment properties are owned by smaller-scale, nonprofit owners who may want to leave the field because the needs of their projects have outstripped their capacities or because their charitable interests have changed. Under past HUD policies, the inability of these organizations to receive proceeds from a sale for application to their other nonprofit goals incentivized many of them to retain ownership until the mortgages matured and the properties could be sold free of HUD restrictions. This policy brought about a net loss of apartments from the affordable inventory. In a step forward for preservation long advocated by SAHF, HUD revised its policies in 2011 to permit these nonprofit owners to receive some proceeds from the sale for their charitable missions, in return for selling to organizations that commit to meeting the properties' rehabilitation needs and renewing their long-term affordability. One notice allows a nonprofit owner of property originally financed under the FHA Section 231, 236, and 221(d)(3) programs to sell the property during the term of the mortgage and retain the proceeds of sale to a qualified profit-motivated or nonprofit purchaser who signs an affordability use agreement that extends at least twenty years beyond any existing use restriction. A similar policy, affecting housing for the elderly originally constructed under the Section 202 direct loan program, facilitates the transfer of these properties to preservation-oriented purchasers.
In 2012, HUD launched the first phase of the Tax Credit Pilot Program mandated by the Housing and Economic Recovery Act of 2008, streamlining the review process for issuing FHA mortgage insurance under Section 223(f) of the National Housing Act for recently constructed properties, for preservation and moderate rehabilitation of properties with Section 8 rental assistance or for older, stabilized tax credit properties through the syndication of new credits.
Also in 2012, HUD published a proposal to revise its regulations on Section 202 mixed finance (combining the HUD capital grant with tax credit equity or other funds). An important revision brings HUD’s rules into alignment with IRS requirements by allowing capital grants to be used to collateralize and repay bonds or other interim financing. This will streamline processing, eliminating the need to request regulatory waivers for each project. HUD also extended the time allowed for completing construction of these complex projects, reducing the need to apply for time extension waivers. Another helpful change remove the ban on individual unit balconies and decks, trash compactors, washers and dryers in units funded with a HUD capital grant. This recognizes that in today's market these amenities cannot reasonably be regarded as excessive, and instead are essential to assure long-term marketability of these properties. The regulation would also permit mixed finance projects to apply non-§202 funds to the cost of health- related facilities such as infirmaries and nursing stations. This furthers HUD's new interest, long advocated by SAHF, in assuring that §202 projects can adequately serve frail seniors. SAHF, joined by four cosigning organizations submitted generally favorable comments on these regulations.
In 2012 HUD also revised its guidelines for permitting assumption, subordination, or assignment of Mark-to-Market (M2M) Loans. The most important and long-requested provision of this notice eliminates HUD's previous “three-year policy” that had severely limited the period during which qualified non-profit purchasers could obtain statutorily-authorized debt relief upon acquisition of properties previously restructured under the Mark-to-Market program . This change will make it much more feasible for nonprofits to acquire these properties and provide them with needed rehabilitation.
HUD will now allow the early termination of an existing Section 8 renewal contract and replacement of the contract with a 20 year contract plus a stub for the remaining term of the prior contract. As lenders rely on assured future income in underwriting loans, this change should be helpful to support long-term financing of rehabilitation. Another potentially helpful change removes a provision that capped mark-up-to-market rents at levels contained in LIHTC and other use agreements.
In 2012 HUD updated its rules for prepayment and refinancing of Section 202 direct loans. The change implements legislative reforms contained in the Section 202 Supportive Housing for the Elderly Act of 2010, and substantially increases the list of purposes for which the proceeds of refinancing can be applied. Refinancing proceeds can now, subject to HUD's consent, be applied to construct new facilities at other elderly projects of the same sponsor in the same local market, or to provide services to the elderly at other HUD-assisted senior housing. More of the proceeds may be used to provide new supportive services for elderly residents. Loan funds can be used for the addition or rehabilitation of related non-housing facilities, including cafeterias or dining halls, community rooms, or infirmaries or other inpatient or outpatient health facilities. Owners are encouraged to consider expenditures that would improve the utility of the project for the frail elderly. In recent years, HUD has also adopted a policy of permitting the assumption of existing Section 202 loans and their subordination to new financing where necessary to preserve the property as quality affordable housing.
In its 26 year history, the Low Income Housing Tax Credit (Housing Credit) has become the nation’s largest and most successful rental housing production tool, facilitating the production and preservation of 100,000 – 120,000 affordable homes annually. Through public-private partnerships, the program has attracted over $75 billion of private equity capital to help finance more than 2.5 million affordable homes. SAHF is part of a campaign of over 300 state and local organizations working to encourage Congress to
-Protect and preserve the Housing Credit in whatever deficit reduction or tax reform plan Congress considers, and
-Enact a permanent fixed floor rate for allocated Housing Credits in order to enhance its efficiency and effectiveness at little or no cost to the federal government.
The Housing Credit is vital to the creation and preservation of affordable housing in every state in the Union. According to the National Council of State Housing Agencies (NCSHA), approximately 90 percent of all affordable rental housing produced annually is financed through the Housing Credit. In 2010, half of all multifamily starts were financed by the Housing Credit, according to the National Association of Home Builders (NAHB). Housing Credit properties are typically well managed, with an extremely low foreclosure rate, according to Ernst and Young.The need for affordable rental housing is acute and growing. Renters are constrained by a lack of income growth, and as more people to decide to rent, there has not been an accompanying increase in the supply of affordable apartments. Harvard’s Joint Center for Housing Studies recently documented an affordability crisis: 49 percent of renters in 2009 were at least moderately cost-burdened and 26 percent were severely cost-burdened. In the types of jobs currently hiring new workers, four out of the five most prevalent jobs do not pay workers enough to afford to rent or buy housing at typical prices nationwide, according to the Center for Housing Policy.
In addition to creating affordable homes, supporting jobs, and expanding local economies, the Housing Credit brings well-designed rental housing to a wide variety of communities. It builds new affordable apartments and saves valuable at-risk existing affordable housing, preventing displacement as rents outpace incomes. It provides affordable homes to working families and vulnerable populations with special needs—the elderly, people with disabilities, and people who are homeless. It is the key housing resource for transformative community redevelopment and revitalization efforts nationwide.
The focus on deficit reduction has raised tax reform on the national agenda. As Congress considers various options, it should recognize the Housing Credit as a proven, efficient means for creating affordable housing through public-private partnerships. For more than 25 years after President Reagan signed it into law in 1986, the Housing Credit has leveraged private capital, private development expertise, and private asset management to create affordable housing under the guidance of individual state allocating agencies. The Housing Credit’s place in the tax code is an essential part of its long-term success. Indeed, it has been so successful that it has become a model for subsequent programs.
For more information, please visit the A.C.T.I.O.N. Campaign website.
The financial crisis has triggered a wide-ranging, active debate on the future shape of the housing finance system. With the September 2008 decision by the government to place Fannie Mae and Freddie Mac in conservatorship, the discussion has focused principally on the future of these two institutions and the government role in the secondary mortgage market. SAHF and its members are particularly focused on ensuring that the housing finance system supports multifamily housing finance, in general, and affordable housing finance specifically.
Government Sponsored Enterprises (GSEs)—The Role of Fannie Mae and Freddie Mac in the Development and Preservation of Affordable Housing
In 2011, the Administration released a report titled Reforming America’s Housing Finance Market, which highlights their current thinking on the role of Fannie Mae and Freddie Mac. The historical focus by policy makers on the role that Fannie Mae and Freddie Mac play in the single-family mortgage market and in support of homeownership has obscured the large-scale, critical role that these two GSEs have played in financing of multifamily housing debt.
SAHF members are primarily concerned with the ready availability of reasonably priced short- and long-term credit to facilitate the construction, acquisition, and rehabilitation of subsidized affordable housing. The SAHF member properties typically receive some form of federal or state subsidy, such as Section 8 project-based or tenant-based rental assistance payments, HUD Section 202 grants and rental assistance, and/or Low-Income Housing Tax Credits. In virtually all cases, reasonably priced mortgage credit is essential to project feasibility. For this reason, SAHF has been an active supporter of the "duty to serve" provision enacted by Congress in 2008, requiring the GSEs to develop new approaches to affordable housing preservation transactions. SAHF submitted comments to Fannie Mae and Freddie Mac's regulator - the Federal Housing Finance Agency (FHFA) - on the preservation duty to serve provision on two separate occasions
Some of the issues we highlighted in our comment letters include:
Expansive and Inclusive Definition of Affordable Housing Preservation
We urged FHFA to write rules that encourage an expansive and inclusive set of properties that could qualify for affordable housing preservation treatment and a list of activities that would otherwise count toward the satisfactory fulfillment of the GSEs’ duty to serve requirement for affordable housing preservation. The rules should include properties not specifically enumerated by the Congress such as those properties supported by HUD’s rent supplement (Rent Supp), rental assistance program (RAP), and Section 8 moderate rehabilitation programs. We also proposed that FHFA make it clear that preservation activities can also include interventions that serve to conserve energy and reduce the operating costs of a development. And, we argued that the final rule should also make it clear that eligible activities could include a strategy of acquiring unsubsidized properties in order to preserve the properties as affordable housing over the longer term.
Enterprise Involvement with Low Income Housing Tax Credit Properties
While it is hard to argue that Fannie Mae and Freddie Mac should return to the markets as equity investors in the LIHTC program until they return to profitability, there are numerous ways in which the GSEs could support the housing credit market consistent with their new preservation duty to serve. The GSEs could participate in housing-credit related affordable housing transactions on the debt side. Secondly, Fannie Mae and Freddie Mac are owners of many affordable housing properties – many of which have reached, or will reach, the end of their 15-year tax credit compliance period during the period of time covered by the duties to serve. The duties to serve could make it clear that the GSEs get credit in those instances where they transferred or sold their ownership interests to a nonprofit owner for the purpose of continued affordability of the property. And, we recommended that the Enterprises could serve a powerful and needed role in helping to restore a healthy LIHTC market by introducing a secondary market for trading tax credit equity positions.
Multifamily Real Estate Owned (REO) and Loss Mitigation Opportunities
The Government Sponsored Enterprises have another powerful opportunity to support affordable housing preservation through the creative disposition of their real estate owned (REO) portfolios. The transfer or sale of these properties to long-term stewards of the properties as affordable housing, with seller financing, should be strongly encouraged in the duties to serve provisions. Fannie Mae is currently implementing a REO Pilot Program. More Information is available through FHFA’s website.
More Flexibility in Underwriting
The duties to serve provisions are clearly meant to encourage greater underwriting flexibility in order to support the enumerated market segments. The GSEs should apply more flexibility in their underwriting requirements for deals involving affordable housing preservation. Increased flexibility does not imply that the GSEs need to take on additional risk. Previously, the GSEs required inordinate operating reserves to cover the Section 8 appropriations risk, for example, taking significant resources out of the transaction for unproductive uses. Affordable housing preservation transactions often come with preexisting conditions or quirks that make them not strictly compliant with one or more of the many underwriting standards. If GSE underwriting standards apply in a "one-size-fits-all" manner, preservation transactions will be rejected out of hand.
Community Reinvestment Act (CRA)
In the 15 years since regulators last updated the Community Reinvestment Act (CRA) rules, the financial services industry has undergone dramatic changes. Likewise, the nation’s housing and community development needs have changed in profound ways.
The challenges today are often larger and more complex. We have learned a great deal about what works and does not work. Financial institutions have increased their understanding of the needs of communities and enhanced their product offerings, while the nonprofit institutions that are doing much of this work in the nation’s communities have grown in strength and capacity. There is much more work to be done. The upcoming rewrite of the rules represents an opportunity to update CRA based on the changes in the market, to better align CRA with national housing and community development policy priorities, and, ultimately, to achieve greater positive outcomes for America’s communities.
Click here to read SAHF's comment letter on efforts to modernize the rules guiding the Community Reinvestment Act (CRA).
SAHF’s principal recommendations can be summarized as follows:
Add a new Community Development Test that encourages financial institution participation in a broad range of activities, including affordable housing and community development lending, investments, and services.
Better align CRA with other national housing and community development priorities, programs, and subsidies.
Provide greater incentives for banks to address national priorities and underserved communities that include communities outside their current assessment areas.
Provide full CRA credit for investments in qualified mission-oriented Community Development Financial Institutions (CDFIs) and nonprofit affordable housing development entities, even if these entities are located outside of the bank’s assessment areas.
Reemphasize the practice of sustainable homeownership for low-income households, defined by responsible lending products and practices and coupled with housing counseling services.
The current approach to affordable housing fails to take full advantage of the belief that housing can be a platform for people to improve their lives. For many low-income renters, the need and the opportunity is more complicated than simply having safe, decent and affordable housing. Because affordable housing programs put relatively little focus on opportunities and outcomes for those who are lucky enough to become residents, they generally fail to engage residents in ways that help those residents achieve a better future for themselves. Housing-based solutions receive no credit for savings that accrue to other programs, so the providers of those solutions cannot tap into resources made available for those programs. Incentives are misaligned and efficiencies are stymied.
Federal housing programs should enable low-income families with the capacity to do so to improve their lives and, where appropriate and possible, eventually afford market rents and free up housing assistance for others. Supportive housing for the chronically homeless, including veterans, is now broadly recognized as effective for residents and cost-effective for society. In addition, housing can be a platform for families with children to improved employment opportunities, education, asset building, English proficiency, and other key elements of success.
Mission-committed high capacity owners, including SAHF members, have pioneered cost-effective housing–based delivery systems that meet the other urgent needs of their residents and support them as they strive to improve their lives. With the right program design and incentives, they would be eager to take their pilots to scale.
SAHF recently provided potential administrative and legislative reforms around this issue in our paper to the Bipartisan Policy Center’s (BPC) Housing Commission including the following:
-Support programs designed to enable residents to graduate from assisted housing.
-Create incentives for outcome‐oriented services such as Medicaid/Medicare savings, increased earnings, and improved educational results.
-Allow and expand the use of Medicaid and other programs for cost‐efficient supportive housing
A one-page summary of the paper can be found here.
Reinvention of the Section 202 Program-Housing for Low-Income Elderly
HUD’s Section 202 program has a distinguished history of providing quality housing to low-income seniors since 1959. Over the last three decades, however, the program has produced progressively fewer apartments in ever smaller properties, making it especially difficult for providers to meet the needs of seniors cost-effectively and at scale. Accordingly, over the last two years, HUD has undertaken to re-envision the program as providing the platform for meeting the needs of frail seniors.
On April 2, 2010, SAHF and LeadingAge (formerly AAHSA) outlined in a letter to HUD their recommendations for an improved Section 202 program.
In October, 2010, HUD sought comment on a more detailed version of the revised program. SAHF, Leading Age and Enterprise Community Partners provided detailed comments on how best to make the program work well with low-income housing tax credits.
In May 2012, HUD sought additional feedback on the revised program as framed in the FY2013 HUD budget proposal. SAHF and other national partners provided comments.
The Administration's Choice Neighborhoods Initiative provides new tools for the revitalization of affordable rental housing as part of an overall neighborhood revitalization strategy. This new effort is an important and logical extension of successful elements of the HOPE VI Public Housing revitalization program. Like distressed public housing, privately- owned assisted housing is sometimes located in opportunity-starved neighborhoods with weak schools, poor transportation access, and substandard services.
A comprehensive neighborhood approach that aims to rehabilitate and deconcentrate assisted housing— whether public, private, or both—combined with making housing a platform for transformative services for both residents and nonresidents alike, provides the focus, attention, and support that poor neighborhoods have long needed.
SAHF manages the Choice Neighborhoods coalition, a group of more than 30 public, private, nonprofit and for-profit organizations that advocates for the passage of the Choice Neighborhoods Initiative Act and for federal funding for HUD’s Choice Neighborhoods program.
Progress on SAHF's Administrative Reform Agenda
On July 31, 2012, SAHF signed a joint letter from Preservation Working Group members on Section 8 reform for the Senate Banking Committee hearing on streamlining and strengthening HUD’s rental assistance programs. View the letter here.
On May 9, 2012, HUD released a notice revising HUD's guidelines for authorizing assumption, subordination, or assignment of Mark-to-Market (M2M) Loans.
On May 4, 2012, HUD issued a notice updating their rules for prepayment and refinance of Section 202 direct loans.
On March 28, 2012, HUD released a proposed rule that would amend HUD’s regulations governing the Section 202 and the Section 811 programs by streamlining the requirements for mixed-finance development. For more information, view the proposed rule here. SAHF and national partners submitted comments on the proposed rule. In 2010, SAHF and national partners also submitted comments on the reinvention of the Section 202 Program.
On February 23, 2012, SAHF signed a joint letter supporting full funding for the Project Based Section 8 program.
On February 4, 2012, SAHF submitted comments on the proposed HOME rule.
In February, HUD launches the first phase of the Tax Credit Pilot Program which streamlines the review process for issuing FHA mortgage insurance under Section 223(f). For more information, view the notice here.
November 10, 2011, HUD issues a notice regarding the use of sale proceeds from a property originally financed under the FHA Section 231, 236, and 221(d)(3) programs.
On May 1, 2011, SAHF submitted comments on HUD’s Regulatory Burdens.
For more information on other funding and regulatory announcements, please visit HUD's website.
For additional information about SAHF's policy work, please contact Clare Duncan at email@example.com or 202-737-5974.