Negotiations on Stimulus Package Stalls; Congress and White House Avert a Government Shutdown
Negotiations on an additional COVID19 emergency relief package between the White House and Congressional leaders have continued behind closed doors this week. While there is still no agreement between the two parties on how much funding should be approved for schools and state and local governments hit hard by the pandemic, Republicans and Democrats appear to be edging closer to a final deal, with negotiators reporting that the financial differences are now down to billions, rather than trillions of dollars. Democrats in the House, having passed various COVID-19 funding bills, have started growing anxious absent a deal in the Senate, with some rank and file members pressing Speaker Pelosi for a vote on alternative measures. House Republicans seem to have tired of the standstill as well—with Representative Jaime Butler (R-WA) having filed a discharge petition to force a vote next week on a standalone extension of the Paycheck Protection Program. The discharge petition is a tool of the House minority to force a vote in the chamber on a bill that has been languishing in a committee. If every Republican signs the petition, only 20 democrats would have to support it to force a vote, creating an added incentive for Speaker Pelosi to reach an agreement sooner than later.
Trying to break the deadlock, a group of 50 House members evenly divided between the parties, known as the Problem Solvers Caucus, have put out a $1.5 trillion proposal that seeks to be the compromise sought on key issues like unemployment and state aid. The Problem Solvers plan represents a halfway point between the $3.4 trillion bill the House passed in May and a $300 billion proposal Senate Republicans failed to pass on the floor last week. The proposal would provide $25 billion in rental assistance to complement the CDC eviction moratorium, with an automatic trigger to reduce the amount by $10 billion if certain metrics are met. Speaker Pelosi has called for $100 billion to help renters, while Republicans did not offer rental assistance. Low-income Americans would get another round of direct payments — $1,200 for adults and $500 for children, similar to the Democrats’ bill. Another identical round of checks could be sent out in March if progress towards tamping down the virus lags. The White House has also backed direct payments during these negotiations, but some Senate Republicans are still opposed. The plan would also extend the weekly federal enhanced unemployment benefit that expired in July at $450 for eight weeks, after which it would transition to $600 per week (but would be capped at 100 percent of a person’s previous wage). The benefits would expire at the end of January 2021. However, the plan also includes an automatic trigger that could provide an extra three months in benefits, if conditions warrant.
With no stimulus deal reached, the focus on Capitol Hill is on funding the government past September 30, when appropriations for all government agencies run out. Today, Congressional leaders and the White House agreed, in principle, to keep the government open after the new fiscal year begins on October 1. This stopgap measure, called a continuing resolution, will extend current levels of spending for federal agencies through December 11. Next week, a vote to pass the continuing resolution is set in the House of Representatives and then the bill will move to the Senate for passage.
FHFA Director Calabria Testifies on Response to COVID-19
On September 16, the House Financial Services Committee held a hearing, titled Prioritizing Fannie’s and Freddie’s Capital Over America’s Homeowners and Renters? A Review of the Federal Housing Finance Agency’s Response to the COVID-19 Pandemic and heard testimony from Mark Calabria, Director of the Federal Housing Finance Agency on his agency’s response to the COVID-19 pandemic. Director Calabria stated that in response to COVID-19, financial markets endured a severe dislocation. He stated that uncertainty over the public health and the economic impacts of the pandemic constrained financial liquidity, significantly disrupting the financing, lending, and hedging activities of mortgage lenders and many other market participants. Director Calabria indicated that the spreads between the 30-year fixed mortgage rate and the 10-year Treasury yield widened and that a market-wide demand for cash led investors to sell off their most liquid assets in response to redemption demands.
During his testimony, Director Calabria stated that FHFA’s top priorities have included supporting renters and homeowners struggling to pay for housing because of COVID-19 and that FHFA has directed the Enterprises to put in place certain protections. The Enterprises own or guarantee approximately $6.0 trillion in mortgages, including about 43 percent of multifamily units, about 8.6 million households, and more than half of single-family mortgages. Director Calabria stated that FHFA’s policies apply to all single-family homeowners and multifamily property owners with an Enterprise-backed mortgage.
To view the House Financial Services Committee hearing on the Federal Housing Finance Agency’s Response to the COVID-19 Pandemic, click here.
Senate Budget Hearing Examines Affordable Housing Programs
On September 16, the Senate Budget Committee held a roundtable hearing discussion examining federal housing assistance programs. Witnesses included Daniel Garcia-Diaz, Managing Director of the Financial Markets and Community Investment Team for the U.S. Government Accountability Office (GAO), Dr. Edgar Olsen, Professor of Economics and Public Policy at the University of Virginia and Diane Yentel, President and Chief Executive Officer for the National Low Income Housing Coalition. Chairman Mike Enzi (R-WY) stated that the federal government’s current approach to housing assistance is falling short and that Congress should initiate a review and take steps to improve this system. The U.S. Government Accountability Office (GAO) found housing assistance is fragmented across 160 programs and activities, with significant areas of duplication and overlap. The discussions focused on how best to assist people who are homeless (600,000 on any given night) and how to reduce barriers to accessing public housing, like years-long waiting lists. Members and witness did partially agree that housing assistance programs are scattered across agencies, creating unnecessary confusion and presenting significant challenges for those seeking assistance and for housing providers
To view the full Senate Budget Committee Roundtable Hearing to Examine Federal Housing Assistance Programs, click here.
Senator Ron Wyden Introduces LIHTC Emergency Disaster Bill
On September 17, Senate Finance Committee Ranking Member Ron Wyden (D-OR), along with cosponsors Senator Jeff Merkley (D-OR), Senator Dianne Feinstein (D-CA), Senator Patty Murray (D-WA), and Senator Kamala Harris (D-CA), introduced disaster relief legislation for areas affected by the Iowa derecho, wildfires in California and Oregon and areas affected by hurricanes Laura and Isaias. A portion of the 2020 Disasters Tax Relief Act would increase low-income housing tax credit (LIHTC) allocation by as much as 50 percent in 2021 for 2020 disaster areas. Specifically, the bill would increase the state credit ceiling for the Low Income Housing Tax Credit (LIHTC) for 2021 to provide for additional projects within 2020 disaster areas. The increase would be equal to the credits allocated to projects in disaster areas, up to 50 percent of the state’s total 2020 credit allocation. A competing bill introduced by Senator Chuck Grassley (R-IA) did not include the LIHTC provisions and covers a period beginning July 1, 2020, while Senator Wyden’s bill extends the disaster period to January 1, 2020. Senator Wyden’s bill would also allow an increase of up to 50 percent of the state LIHTC ceiling in 2021 to be allocated to projects in disaster areas. Representative Earl Blumenauer (D-OR) said he will introduce a companion bill to Senator Wyden’s legislation in the House of Representatives next week.
To view the 2020 Disasters Tax Relief Act, click here.