NALHFA leaders and staff continue work on a variety of issues that impact members’ affordable housing and neighborhood revitalization programs. They include:
Aimed at Protecting the Tax Exemption for Municipal Bonds in Tax Reform
House and Senate tax-writing committees working on comprehensive tax reform
NALHFA id working diligently to protect the tax-exemption for municipal bonds,
including single-family and multifamily housing bonds and Low-Income Housing
the Fall of 2012 NALHFA became of founding member of the Municipal Bonds For
America (MBFA) Coalition, a group of national associations united to protect
the ability of public agencies of issue a variety of municipal bonds on a
tax-exempt basis. The Coalition is also
focused on preventing the capping the exemption at 28%, a proposal that has
been in the President’s FY 2013 and FY 2014 budget request.
The MBFA Coalition’s Executive Committee is chaired
by NALHFA Vice President Marc Jahr, who is President of the New York City
Housing Development Corporation. NALHFA
Executive Director John Murphy is also a member of the Executive Committee. The Coalition has been engaged in fly in’s to
meet with Congressional staff and members of Congress as well as submitting
statements to the House Ways and Means and Senate Finance Committees. Click here for NALHFA’s Statement to the
House Ways and Means Tax Reform Working Groups.
Deliberations over comprehensive tax reform is expected to begin in
earnest this fall.
Senate Appropriations Committee Approves FY 2013 HUD Appropriations Bill
As part of this year’s advocacy efforts on FY 2013 HUD appropriations, NALHFA and more than 1,700 organizations that advocate for transportation and housing and urban development programs signed-on to a letter to the leadership of the Senate and House Appropriations Committee urging them to provide the highest possible "302(b)” allocation to the Transportation and House and Urban Development Appropriations Subcommittee. 302(b) refers to that Section
Of the Budget Control Act of 1974 that provides for an allocation of the top line discretionary spending ceiling contained in that year’s congressional budget resolution. Se the links below to that and other advocacy tools that NALHFA is using in this year’s advocacy campaign.
In contrast with prior years the Senate Appropriations Committee has passed S. 2322, the FY 2013 Transportation and Housing and Urban Development (THUD) Appropriations bill. This is the first time in memory that the Senate has acted before the House. House Committee sources say that its THUD Subcommittee is waiting final action on the transportation authorization bill, which will soon go to a House-Senate conference committee. The Senate Appropriations Committee moved the THUD bill along with the Commerce-Justice-State appropriations bills to blunt criticism from Senate Republicans that Democrats had failed to pass a budget resolution.
Senate majority Leader Harry Reid (D-NV) countered that there was no0 need to pass a budget resolution in the Senate since the overall ceiling of $1.047 trillion was included in the Budget Enforcement Act of 2011, which resolved the debt ceiling crisis. Earlier this spring the House passed its version of the budget resolution with an overall discretionary ceiling $19 billion below that amount.
As reported earlier, the Senate bill includes a $152 million increase in Community Development Block Grant formula funds to $3.1 billion, compared to President Obama’s budget request for level funding at $2.948 billion. This increase partially restores the $1 billion cut in CDBG formula grants that occurred in FY 2011 and 2012. This is a hard-fought victory for NALHFA and others who lobbied individual members of the THUD Appropriations Subcommittee for the increase. Both Senate THUD Subcommittee Chair Patty Murray (D-WA) and ranking member Susan Collins (R-ME) said they were pleased to be able to find the funding to increase CDBG. This was not easy as the discretionary funding allocation for transportation and housing and urban development programs is set at $53 billion, $4 billion below the FY 2012 level.
In an attempt to pre-empt the House, the Senate bill contains specific language permitting grantees to spend up to 20% of their grant for planning and management. The FY 2012 House version of the THUD bill would have reduced that amount to 10%. NALHFA and others succeeded in knocking that provision out of the final FY 2012 bill.
The HOME program is level funded in the bill at $1 billion, the same amount as the President’s budget request. HOME continues to suffer from a series of one-sided articles in the Washington Post last year.
The report accompanying the FY 2013 bill states:
The Committee has retained bill language from FY 2012 designed to reform and strengthen the HOME program. These reforms sought to address criticism raised by the HUD- OIG [Inspector General] and media about languishing projects, unqualified developers and lax oversight by the Department. The Committee notes that HUD has published a proposed rule that will permanently incorporate these and other reforms into HUD regulations. Once the rule is finalized the Committee will evaluate if the reform provisions included in this bill are still necessary.
The HOME program reforms include:
- Funds not used to complete projects within four years must be repaid. This deadline can be extended for one year if HUD determines that the failure to complete the project is beyond the control of the Participating Jurisdiction;
- The Participating Jurisdiction must certify that it has conducted an underwriting review, assessed developer capacity and fiscal soundness and examined neighborhood market conditions to ensure adequate need for each project;
- Homeownership units which cannot be sold to an eligible homebuyer within 6 months must be turned into rental units;
- No funds may be awarded to a Community Housing Development Organization (CHDO) that cannot demonstrate that it has staff with demonstrated development experience.
The report accompanying the bill further states that”… HUD has established a process that automatically cancels projects that have not spent funds in the first 12 months after funds are committed to them. HUD established this process to discourage Participating Jurisdictions from committing funds to projects before they are ready.” The report describes this as a useful oversight tool and directs HUD to require Participating Jurisdictions to validate project readiness for cancelled projects that they wish to restart.
The Senate bill provides $50 million for the "Sustainable Communities Initiative,” the same amount provided in FY 2012 and the President’s FY 2013 budget request. Of the total, $12.5 million is set-aside for metropolitan areas of less than 500,000 in population. The grants are intended to support regional planning activities that integrate transportation and land use planning to foster reform and reduce barriers to achieve affordable, economically viable and sustainable communities.
Section 8 tenant-based rent subsidy contract are funded at $19.4 billion under S. 2322, $482 million above the FY 2012 level. This is keeping with the THUD Subcommittee’s priorities to provide housing and services to the Nation’s most vulnerable. Included in this amount is $17.5 billion for renewal of current housing choice vouchers, $1.58 billion for program administration, $75 million for 10,000 new HUD-Veterans Affairs Supportive Housing (HUD-VASH) and $60 million for the Family Self-Sufficiency program. The bill also includes $9.8 billion for the project-based Section 8 program, $536 million above the FY 2012 level and, according to the committee, will be sufficient to renew all of these subsidy contracts for a full 12 months.
For homeless housing assistance the bill provides a total of $2.15 billion. Included in this amount is at least $286 million for the new Emergency Solutions Grant program to prevent families from becoming homeless, or rapidly re-house that are already homeless. The total funding level is $85 million below the President’s request but $244.8 million above the FY 2012 level. It includes full funding for all rent subsidy contract renewals.
A total of $135 million is included in the bill for housing counseling. This includes $55 million for HUD’s counseling activities and $80 million for the National Foreclosure Mitigation Counseling program that began in FY 2008.
The Public Housing Capital Fund gets $1.99 billion under the Senate bill, $110 million above the FY 2012 level. The bill also includes$4.6 billion for the Public Housing Operating Fund, up $629 billion over this year’s level. The Administration’s "Choice Neighborhoods Initiative,” which is an expansion of the HOPE VI demolition and replacement of severely distressed public housing to all distressed assisted housing gets $120 million, down $30 million from the amount requested in President Obama’s FY 2013 budget.
The Self-Help and Assisted Homeownership opportunity Program would be funded at $53.5 million to assist low-income homebuyers willing to contribute "sweat equity” toward the construction of their homes. The President’s budget did not request funding for this program.
Finally, S. 2322 includes $375 million for the Section 202 elderly housing grant program, the same level as FY 2012 but $100 million below the President’s request. The Section 811 disabled housing program would be reduced by $15 million below the President’s request of $150 million and the FY 2012 enacted level.
It is not clear if, or when, this bill may go to the Senate floor. Markup of a House alternative bill is not expected until a House-Senate conference committee resolves differences over a surface transportation appropriations bill. It is widely expected that Congress will postpone final action on the FY 2013 appropriations until a lame duck session following the November election.
Click on this link for a copy of the letter to the House and Senate Appropriations Committee leadership on the FY 2013 302(b) allocation to the THUD Subcommittee.
Click on this link for copies of letters regarding FY 2013 HUD appropriations funding levels.
President Sends Congress his FY 2013 Budget
On February 13, 2012 President Obama sent Congress his $3.8 trillion FY 2013 proposed budget to Congress. The budget, which will now be the subject of scrutiny by congressional committees, is not expected to be enacted in this highly charged election year.
The HUD portion of the budget totals $44.8 billion, 3.2 percent, or $1.4 billion, above the FY 2012 enacted level. In what he characterized as inadequate and the result of hard choices, HUD Secretary told a budget briefing attended by NACCED staff that the Community Development Block Grant formula funding and the HOME program are proposed to be level-funded at $2.948 billion and $1 billion, respectively, "to enable state and local governments to continue to address infrastructure, affordable housing and economic development needs in their communities.” Included within the Community Development Fund, but apart from formula funding, is a request of $100 million for the Sustainable Communities Initiative, a program to link affordable housing, transportation, energy and environmental planning at the regional level. Congress did not fund this Initiative in FY 2012. Also included in the fund is $60 million for Indian Tribes, and $35 million in capacity building grants for national non-profit intermediaries (such LISC and Enterprise Community Partners) to help strengthen the administrative capabilities of community development corporations to carry out community development and affordable housing activities to address local needs and priorities. The program requires a match of $3 in private funds for each $1 of federal funds.
Both the CCBG and HOME levels requested by the President could be the high water mark as Congress continues on its path toward sweeping deficit reduction. This not-with-standing, NALHFA and others will be pressing Congress to return funding for these programs to their FY 2011 levels of $3.3 billion for CDBG and $1.6 billion for HOME. From information NALHFA staff has gather from sources on Capitol Hill CDBG would have been funded at $3.3 billion in FY 2012 had not the House Republican leadership insisted on taking $300 million from formula grants to offset funding for disaster relief in the Northeast and Midwest last fall. HOME was dealt a $600 million cut in FY 2012 as a series of critical and biased stories in the Washington Post last year gave appropriators an excuse to make deep cuts.
In the narrative accompanying the budget HUD says it will propose statutory changes to HOME "… that would allow recaptured Community Housing Development Organization funds to be reallocated by formula, and facilitate eviction of HOME rental unit tenants who pose an imminent threat.”
Homeless housing assistance grants are a big winner under the budget, with a total request of $2.23 billion, up from the FY 2012 enacted level of $1.90 billion. This includes a $36 million increase to $286 million for the Emergency Solutions Grant program and $1.94 billion for the Continuum of Care and rural housing stability assistance programs. Also included is $8 million for the national homeless data analysis project. The Housing Opportunities Program for Persons with AIDS (HOPWA) gets $330 million under the budget request, down slightly from the $332 appropriated in FY 2012. The Administration proposes to "modernize” the HOPWA program to "better reflect the current understanding of HIC/AIDS and ensure that funds are directed in a more equitable and fair manner. This modernization includes a new formula that will distribute HOPWA funds based on current population of HIV-positive individuals, fair market rents and poverty rates in order to target funds to areas with the most need. It also makes the program more flexible, giving local communities more options to provide targeted, timely and cost-effective interventions.”
The budget again calls for congressional enactment of a $15 billion Project Rebuild that was proposed by the President as part of a larger jobs bill last fall. Project Rebuild is a "Round 4” of the Neighborhood Stabilization Program that would distribute funds by formula to states, urban counties and cities for the acquisition, rehabilitation of foreclosed residential and commercial properties to arrest blight and reclaim neighborhoods. The Administration claims the program would create 250,000 construction jobs.
Housing counseling would be funded as a separate program at $55 million under the budget request, a $10 million increase over FY 2012.
The budget proposes $19 billion for the Section 8 Housing Choice Voucher program, including $17.24 billion to renew expiring Section 8, tenant-based rent subsidy contracts. It also includes $75 million to support 10,000 new vouchers to house homeless veterans. Section 8 administrative fees are increased under the budget request to $1.76 billion, an increase of $225 million over FY 2012.
The budget reduces funding for project-based Section 8 rent subsidies by $640 million to $8.7 billion over FY 2012. According to the budget documents, this "savings” is generated by providing less than 12-months of funding on some contracts that straddle fiscal years. Although the documents state that "[t]his change will not reduce or delay payments to landlords nor impact the number of families served by the program,” Secretary Donovan admitted at the budget briefing that this might not be the case.
The budget includes a total of $6.6 billion for the Public Housing Operating and Capital programs and proposes that they be consolidated into a single subsidy stream. According to the budget documents, as a first step toward consolidation, public housing authorities would be provided with the flexibility to use their operating and capital funds for any eligible or capital expense. The budget also proposes a $30 million increase to $150 million for the Choice Neighborhoods program, an expansion of the HOPE VI demolition and replacement of severely Public Housing program to the broader assisted housing stock.
Finally, the budget proses to increase the Section 202 elderly housing program by $100 million to $475 million, but proposes a decrease the Section 811 housing program for persons with disabilities by $15 million to $150 million.
The President’s request is widely viewed in Washington as a campaign document intended to draw sharp distinctions in policies and priorities between the Administration and congressional Republicans. Over the next several months congressional committees will review its contents. House Budget Committee Chairman Paul Ryan (R-WI) propose to his Committee and the Republican-controlled House subsequently approved a congressional budget resolution which will cap overall domestic spending at $1.026 trillion level below the $1.047 trillion for FY 2013 that was included in the 2011 debt ceiling increase law.
Possible Round 2 of the New Issue Bond Purchase Program
As described under the NIBP tab in this section, NALHFA continues to press the federal government for another round of the highly successful New Issue Bond Purchase program.
Both Republicans and Democrats in Congress and President Obama support a wholesale rewrite of the Internal Revenue Code. When this effort begins (not expected until 2013 at the earliest) such tax code incentives as tax-exempt single-family and multifamily housing bonds and Low-Income Housing Tax Credits that stimulate private investment in expanding affordable housing opportunities are at risk. They were among the so-called "tax preferences” identified in 2011 by two deficit-reduction groups— the presidentially appointed Simpson-Bowles and the Bipartisan Policy Center’s Domenici- Rivlin. Both groups recommend elimination of tax preferences as part of a package of spending cuts and revenue increases. Through the Public Finance Network (PFN) and the A.C.T.I.O.N Coalition, NALHFA and others are hard at work educating members of Congress on the importance of maintain the tax-exemption and the housing credit.
In a related issue, NALHFA and other members of the Public Finance network have joined forces to convince Congress to reject a provision in President Obama’s FY 2013 budget that would cap at 28% the value of tax-exempt interest that a high income taxpayer could deduct. The provision would significantly raise borrowing costs for state and local governments and hamper their ability to meet the country’s infrastructure and affordable housing needs.
Click on this link for a copy of the PFN sign-on letter to Senate Finance Committee Chairman Baucus and Ranking Republican Hatch on preserving the tax exemption.
Click on this link for a copy of the PFN sign-on letter to House Ways and Means Committee Chairman Camp and Ranking Democrat Levin opposing the President’s recommendation to limit the value of the deduction for tax-exempt interest to 28%.
New Markets Tax Credit
At its April 25 th meeting the NALHFA Board of Directors approved an addition to the Association’s 2012 Legislative Priorities Agenda to support another round of the New Markets Tax Credit program at a funding level of $5 billion.
In December 2000 President Clinton signed the Community Renewal Tax relief Act, which authorized the New Markets Tax Credit (NMTC) program. Program has been extended several times since that year. The NMTC is intended to provide a tax incentive to stimulate private sector investment in low-income communities. The incentive provides to private investors a 39% tax credit over seven years – a 5% credit in each of the three years and a 6% credit in each of the last four years. The investor receives the credit when it provides a Qualified Equity Investment in a Community Development Entity. The CDC in turn uses the capital for the purpose of making loans or investments in businesses and projects in low-income communities. This competitive program is administered by the Treasury Department’s Community Development Financial Institutions Fund.
FY 2011 and FY 2012 HUD Funding
During 2011 NALHFA’s advocacy has been focused in three areas: fighting
to maintain federal funding for core affordable housing and
neighborhoods revitalization in both FY 2011 and FY 2012, impacting the
work of the congressional "Super Committee” and securing a second Round
of the Treasury/Government Sponsored Enterprises New Issue Bond Purchase
The FY 2011 funding for such programs as Community Development Block Grants (CDBG) and HOME Investment Partnership (HOME) funds was not completed until April 2011. Just prior to the 2010 congressional elections (in which the Republicans took control of the House of Representatives) the 111 th Congress decided to punt on funding decisions for FY 2011 and passed a "Continuing Resolution” (that funds programs at their current levels) into 2011. In February 2011 the House passed H.R. 1, which slashed funding in FY 2011 for CDBG, from the FY 2010 funding level of $3.9 billion to $1.5 billion (a 62.5% cut) and HOME from the FY 2010 level of $1.825 billion to $1.6 billion (a 12% cut). NALHFA members, working as part of the CDBG Coalition containing other program stakeholders, were already mobilized to reverse a 7.5% cut in CDBG and a 12% cut in HOME proposed in the President’s FY 2012 (presented to Congress in February 2011) redoubled efforts to try to restore as funding to CDBG and HOME in the Senate version of the FY 2011 bill. Actually, the Senate never produced a specific bill and the matter was referred to a House-Senate conference committee.
With extensive grass roots efforts from NALHFA members’ elected officials and after Congress went to the brink of a government shutdown CDBG funding was partially restored to a level of $3.3 billion and HOME was cut to $1.6 billion, the amount proposed by the President for FY 2012.
Attention turned immediately to the FY 2012 funding bills for HUD and other federal agencies.
First the House passed a FY 2012 congressional budget resolution, which again cut deeply into federal programs. Specific programs such as CDBG and HOME were not singled out in that legislation, but their funding would have to be included within the overall ceiling on domestic spending. By August Congress and the Obama Administration were in at a stalemate over legislation to increase the federal governments’ debt ceiling. Agreement was eventually reached adverting an 11 th hour default on the debt and included in the final agreement was a higher ceiling on domestic discretionary ceiling ($21 billion) for both FY 2012 and FY 2013 than that contained in the House-passed congressional budget resolution. Despite grumbling from House Republican freshmen (who wanted to abide by the lower domestic spending number in the budget resolution, the House Republican leadership decided to use the higher number agreed to in the debt ceiling negotiations. This paved the way for the House to debate and approve its version of the FY 2012 Transportation and Housing and Urban Development (YHUD) Appropriations bill. That bill increased CDBG to $3.5 billion, but it contained a 50% reduction in CDBG’s planning and administrative fee. It also reduced the HOME program to $1.2 billion largely as a result of a series of negative articles in the Washington Post criticizing lax oversight on the part of grantees and HUD over stalled projects.
Shortly after the House acted the Senate Appropriations Committee approved its version of the FY 2012 THUD bill. It slashed CDBG funding to $2.85 billion and HOME funding to $1 billion. However it did not contain the House bill’s reduction in the CDBG administrative cap.
NALHFA and other members of the CDBG Coalition lobbied extensively for preserving the higher CDBG and HOME numbers that were in the House bill and against the cut in the CDBG planning and administrative. In early November a House-Senate conference committee resolved the differences between the House and Senate versions of H.R. 2112. In that bill, which Congress passed and the President signed on November 18, CDBG formula grants were reduced by 11% to $2.948 billion and HOME funds were reduced to $1 billion, a reduction of 37%. The final bill left the CDBG planning and administrative cap unchanged at 20%.
The Budget Control Act of 2011 created a 12-member, bipartisan "Super Committee” consisting of 3 Republicans and 3 Democrats from the House and 3 Republicans and 3 Democrats from the Senate. The Committee was charged with agreeing on a plan to cut at least $1.2 trillion from the federal deficit over a 10-year timeframe. Under the Act, the Committee is required to approve its plan on November 23 and it is to be voted upon, without amendment by December 23. If it is approved by Congress it must be signed by the President on or before January 15, 2012.
The Committee deadlocked and failed to produce an agreement because of irreconcilable differences over increasing revenues (which the Democrats demanded) and cuts to entitlement programs (which the Republicans demanded). Thus, under the Act automatic cuts (called sequestration) of $1.2 trillion, roughly half from military spending and half from domestic spending beginning in 2013. The Office of Management and Budget is charged with determining how the cuts are to be made.
Because domestic spending is at risk, as well as tax code incentives such as the exemption for interest on housing bonds and Low-Income Housing Tax Credits NALHFA joined forces with other stakeholders (through the CDBG Coalition and the Public Finance Network) and the Action Coalition) in an effort to spare CDBG and HOME from further cuts and to protect tax-exempt bonds and Low-Income Housing Tax Credits. Meetings were held with staff to the authorizing, appropriations, tax writing committees as well as staff to the members of the Super Committee pointing out the good these programs do to expand affordable ownership and rental housing opportunities and neighborhood revitalization.
Treasury/Government Sponsored Enterprises New Issue Bond Purchase Program
Local Housing Finance Agencies (HFAs) continued implementing the Treasury/Government Sponsored Enterprises New Issue Bond Purchase Program (NIBP). Part of Obama Administration’s response to the Nation’s housing crisis and launched in October 2009, NIBP was designed to create a capital market where local HFAs could sell tax-exempt single-family and multifamily housing bonds. HFA’s were provided an additional $11 billion in tax-exempt bond volume cap by the Housing and Economic Recovery Act of 2008, but they couldn’t use the additional cap because conventional interest rates were so low that HFAs would incur negative arbitrage which they couldn’t afford. Having treasury buy $15.3 billion in bonds that were securitized by Fannie Mae and Freddie Mac enabled HFAs to borrow at the Treasury’s cost of funds (well below market) and provide interest rates that were lower than conventional rates.
Click on this link and see the report that NALHFA prepared in collaboration with Freddie Mac entitled "Local Housing Finance Agency Participation in the Treasury New Issue Bond Purchase Program (NIBP): A Tremendous Success Story.” [November 2011].
The report found that, as of September 30, 2011, forty-four of forty-seven local Housing Finance Agencies (HFAs) have created nearly 17,000 affordable housing opportunities for first-time homebuyers and very low-income renters. This includes 33 of 35 local HFAs that have used $269,870,000 of a total $1,018,740,000 allocated for single-family to assist 7,540 homebuyers, 97% of whom are first-time homebuyers with average incomes that are 78% of the area median income, purchase affordable homes.
Several local HFAs reported that their NIBP programs helped builders clear some of their inventory of newly-constructed homes, while other local HFA NIBP programs have been used to purchase foreclosed homes. In addition, many local HFA’s were able to use their initial NIBP allocation to leverage an additional $265,500,337 in funding to serve additional qualified borrowers.
For the multifamily portion of the program, as of September 30, 2011, 11 local HFAs have used $794,850,000 of $1,139,110,000 allocated for multifamily to finance 71 new construction or preservation projects containing 9,427 units, 91% of which are affordable to households with incomes at or below 60% of median income. The Total Development Cost for these projects is $2,007,146,082, with most using 4% Low-Income Tax Credits as equity. While not every agency surveyed was able to estimate the number of jobs created by NIBP, those that did reported at least 4,736 construction and/or permanent jobs.
Local HFAs anticipate using most of their NIBP allocations by the end of 2011.
NIBP has been a critical tool in expanding affordable homeownership and rental housing opportunities, stabilizing blocks and neighborhoods as well as generating significant economic activity in response to the Nation’s housing crisis. Without it much of this economic activity would not have occurred.
NIBP 1 was a tremendous success, and it is a clarion call for an additional round of NIBP.
As 2011 came to a close NALHFA leaders and staff are working diligently to convince the Treasury, or alternatively the Federal Reserve, to create a Round 2 of NIBP.