Treasury Dept. Announces New Housing Efforts to Lower Housing Costs
Today, U.S. Secretary of the Treasury Janet L. Yellen announced new funding sources for affordable housing production during a speech in Minneapolis. Speaking at the recently completed Family Housing Expansion Project, developed by the Minneapolis Public Housing Authority, Secretary Yellen outlined several initiatives aimed at increasing the supply of affordable housing and reducing housing costs. The efforts Secretary Yellen announced include:
- A new Treasury program administered by the CDFI Fund that will provide an additional $100 million over the next three years to support the financing of affordable housing;
- An effort to provide greater interest rate predictability to state and local housing finance agencies borrowing from the Federal Financing Bank to support new housing development;
- A call to action for the Federal Home Loan Banks to increase their spending on housing programs;
- A new “Affordable Housing How-To Guide” to support state and local governments in using recovery funds provided by Treasury to construct housing; and
- An update to the Capital Magnet Fund to provide greater flexibility to CDFIs and non-profits that finance affordable housing.
New Treasury Program and Financial Support
Secretary Yellen introduced a new Treasury program administered by the Community Development Financial Institutions (CDFI) Fund, which will provide an additional $100 million over the next three years to support the financing of affordable housing. This program aims to extend the reach of the CDFI Fund, enabling it to support the production of housing that is affordable for low- and moderate-income households. The Treasury projects that this funding could support the financing of thousands of affordable housing units, significantly impacting communities in need.
Additionally, Yellen highlighted an effort to provide greater interest rate predictability to state and local housing finance agencies borrowing from the Federal Financing Bank (FFB). This initiative is designed to support new housing development by making borrowing costs more predictable and manageable. This measure is expected to lead to the creation of thousands of additional housing units in the coming years, enhancing the stability and affordability of housing finance.
Calls to Action and Legislative Urges
In her speech, Secretary Yellen called on the 11 Federal Home Loan Banks (FHLBs) to increase their spending on housing programs. Currently, the FHLBs are required to devote at least 10 percent of their net income to housing programs. However, the Biden-Harris Administration’s FY2025 budget proposed increasing this requirement to 20 percent. The FHLBs have voluntarily increased their commitment to 15 percent, and Yellen urged them to further increase this to at least 20 percent, with a particular focus on prioritizing new construction.
Secretary Yellen also called for further action by Congress to pass bipartisan legislation to expand the Low-Income Housing Tax Credit (LIHTC), a critical tool in building and preserving affordable housing. The expansion of LIHTC, along with other legislative proposals from the Biden-Harris Administration, aims to build and preserve over 2 million homes, addressing the severe shortage of affordable housing across the nation.
Guidance and Flexibility for Local Governments
To support state and local governments in their housing efforts, the Treasury Department released a new “Affordable Housing How-To Guide” to assist in using pandemic recovery funds provided by the Treasury to construct housing. This guide is part of a broader effort to help localities effectively utilize their resources to increase the supply of affordable housing. The guide includes practical information on how to layer State and Local Fiscal Recovery Funds (SLFRF) with other resources to support new construction projects.
Additionally, the Treasury Department updated the rules for the Capital Magnet Fund (CMF), providing greater flexibility to CDFIs and non-profits that finance affordable housing. This update is intended to reduce administrative burdens and allow recipients to focus more resources on the production and preservation of housing. In FY 2023 alone, the Capital Magnet Fund made over $320 million in awards, projected to leverage more than $11.1 billion in resources to support affordable housing, and planned to develop over 32,700 affordable housing units.
Impact and Future Projections
These initiatives build on previous efforts by the Treasury Department during the pandemic, which provided substantial support to keep Americans in their homes. Programs like the Emergency Rental Assistance program and the Homeowner Assistance Fund distributed over $40 billion in assistance to homeowners and renters, resulting in historically low foreclosure and eviction rates even at the height of the pandemic.
The measures announced today are expected to further strengthen the housing market, making housing more affordable and accessible for millions of Americans. By increasing the supply of affordable housing and providing targeted financial support, the Treasury Department aims to create a more stable and equitable housing market, contributing to broader economic growth and stability.
As Secretary Yellen emphasized, “addressing the housing crisis requires a comprehensive and sustained effort from all levels of government. The new initiatives and calls to action outlined today represent a significant step forward in tackling one of the most pressing economic challenges facing the United States.”
Senate Hearing Recap: Riskier Business: How Climate is Already Challenging Insurance Markets
In early June, the U.S. Senate Budget Committee, chaired by Sen. Sheldon Whitehouse (D-R.I.), convened a hearing titled “Riskier Business: How Climate is Already Challenging Insurance Markets.” This hearing was a follow-up to the committee’s March 2023 session, “Risky Business: How Climate Change is Changing Insurance Markets.” The hearing featured expert testimonies from Rade Musulin, Principal at Finity Consulting; Dr. Ishita Sen, Assistant Professor of Finance at Harvard Business School; Deborah Wood, a Florida resident; Glen Mulready, Commissioner of the Oklahoma Insurance Department; and EJ Antoni, Research Fellow at the Heritage Foundation’s Grover Hermann Center for the Federal Budget.
Hearing’s Focus and Challenges
The primary objective of the hearing was to brainstorm potential solutions to the escalating issues of affordability and availability of homeowners insurance. However, differing views on the impact of climate change on the insurance market sometimes clouded the clarity of the hearing.
Witnesses presented various suggestions aimed at mitigating the severity of insurance market disruptions. These included focusing on pre-disaster mitigation and updating building codes to make properties more resilient to natural catastrophes. The increasing concern over affordability and availability has been driven by insurers significantly scaling back or exiting business in high-risk areas.
Mitigation and Resilience
Oklahoma Insurance Commissioner Glen Mulready emphasized the importance of creating a “business-friendly environment” as a strategy to stabilize the insurance market. He pointed out that while one insurance company exited business in Oklahoma, there are still 100 insurers operating in the homeowners market within the state. Mulready highlighted the Federal Emergency Management Agency’s (FEMA) findings that every dollar spent on federal mitigation grants saves six dollars on average. “Insurance isn’t a partisan issue,” Mulready stated. “Mitigation and resilience are not partisan issues.”
Climate Change and Insurance Market Dynamics
Sen. Mitt Romney (R-Utah) expressed skepticism about tackling climate change as a means to fix the insurance market, given the global nature of climate issues. “The idea that we’re going to fix climate and solve the insurance problem is pie in the sky,” Romney said. He suggested that efforts should instead focus on combating inflation and advised against providing subsidies for building in high-risk areas.
More Data Needed
A significant portion of the hearing also focused on the need for more comprehensive data collection to understand the extent of insurers’ exposure to climate risks. Dr. Ishita Sen from Harvard Business School emphasized the necessity of granular data collection to address local risks effectively. “We don’t even know the basic facts about this problem at a granular enough level,” she said. “The risks here are local, and so we need to know what’s going on ZIP code by ZIP code.”
Commissioner Mulready mentioned that the National Association of Insurance Commissioners (NAIC) is currently conducting a data collection effort covering at least 80% of the U.S. homeowners market, in collaboration with the Federal Insurance Office (FIO). This initiative aligns with the FIO’s proposal to examine the impact of climate change on insurance, following an executive order issued by President Joe Biden in 2021.
Previous Efforts and Ongoing Discussions
The June 5 hearing is part of a broader legislative effort to address insurance issues related to catastrophic events. Earlier this year, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing focused on the nation’s flood insurance problems. During that session, senators from both parties criticized various aspects of the current flood insurance system and called for comprehensive reforms.
Conclusion
Chairman Sheldon Whitehouse (D-RI) concluded the hearing by acknowledging the tough conditions consumers face in the current insurance market. “It is a hell of a tough time to be a consumer,” he remarked, underscoring the urgent need for effective solutions to address the affordability and availability challenges in the insurance market. The Senate Budget Committee’s hearing highlighted the complexity of addressing insurance market disruptions caused by climate change. While there is consensus on the importance of mitigation and resilience, differing views on climate change’s role and the best path forward illustrate the need for ongoing dialogue and data-driven decision-making to protect homeowners and stabilize the insurance market.
Senate Hearing Recap: Unlocking Department of Transportation Financing for More Transit-Oriented Housing Development
Last week, the U.S. Senate Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies held a hearing, Unlocking Department of Transportation Financing for More Transit-Oriented Housing Development. Hearing witnesses testifying included. Tracy Hadden Loh, Fellow, Brookings Institute, Adhi Nagraj, Chief Development Officer, McCormack Baron Salazar, Dr. Morteza Farajian, Executive Director, Build America Bureau at the U.S. Department of Transportation (DOT).
A major topic during the hearing was using DOT’s Transportation Infrastructure Finance and Innovation Act (TIFIA) and the Railroad Rehabilitation and Improvement Financing (RRIF) program for real estate development. More information on both programs can be found here. NAHMA’s summer intern, Raj, attended the hearing and shared thoughts on it below:
- I attended the Senate hearing on Transit-Oriented development and its intersection between the DOT and HUD. The Senate called this meeting to figure out how they could advance transit-oriented housing development and wanted to listen to the field experts. The Chair was Senator Schatz (D-HI), Vice Chair was Senator Hyde-Smith (R-MS), and Senator Reid (D-RI) as well as others were present and questioning the witnesses.
- The hearing was about the DOT’s role in affordable housing as they create accessible public transit to attract users to new areas and use affordable housing units. Major points of discussion included more financing of the DOT’s Transit-Oriented Housing Development program. I was most interested in the argument over the difference between DOT policy and HUD policy. Additional restrictions seemed to be a concern to the Senators and the witnesses received a lot of questioning regarding why they did not follow the experts from HUD.
- TOD has historically been proven to positively impact communities and attract people to affordable housing options. The DOT needs funding Senator Brian Schatz puts it best: “We need to simplify and streamline the credit review process, and we need to get DOT the resources it needs to make the programs as successful as they can be.” Vice Chair Senator Cindy Hyde-Smith shed light on the current transportation landscape stating that “only 1% of the residents living in that area use public transportation to commute to work, and only 2% walk to work. 90% commute to work using their personal vehicles, and we know what that does.” The TOD initiative aims to lower personal vehicle usage while also expanding affordable housing.
- From Mr. Farajian, I not only learned what the Build America Bureau does at the US DOT, but he is personally invested in information sharing. Many may not be taking advantage of the TOD housing assistance, so his information sessions impact our community in a unique way.
- From Mrs. Hadden Loh, I learned about “soft costs” that builders are paying due to immensely high regulations. Affordable housing has even higher soft costs, so anything that makes building affordable housing cheaper would be massively impactful. Less soft costs may be one of the best solutions for our current supply shortages
- From Mr. Nagraj, I learned about McCormick Baron Salazar’s (MBS) role in construction of affordable housing. His testimony included many suggestions for underwriting TIFIA loans to increase access for housing purposes. He also proposed changes to TIFIA to include regulations after the 15 year period.
In conclusion, I really enjoyed this hearing because of the link between transportation and housing. The concept is not one I had thought of before, but it makes a lot of sense now. The dual incentive to save emissions by using public transport while also creating affordable housing supply is truly brilliant. NAHMA members can view a recording of this hearing here.