Congress Seeks to Avoid Government Shutdown
Members of Congress continue their negotiations on a short-term funding bill to keep the federal government operating past September 30th. It is expected that the temporary funding bill would provide funding through December 16. This extension would provide Congressional leaders with extra time to reach an agreement on a funding bill for FY23. While both the House and Senate released their draft funding bills earlier this year, the likely success of a final bill package will largely depend on the outcome of the November elections. Congress is expected to vote on the temporary funding bill next week.
Senate Committee Holds Second Hearing on Rural Housing Service Programs
This week, the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development held a hearing that addressed how USDA’s Rural Housing Service can better serve rural residents. Witnesses testifying before the subcommittee included Elizabeth Glidden, Deputy Executive Director of the Minnesota Housing Partnership Marcia Erickson, CEO of GROW South Dakota Tonya Plummer, Director of Native American Housing Programs at Enterprise Community Partners David Battany, Executive Vice President for Capital Markets at Guild Mortgage Company, on behalf of the Mortgage Bankers of America.
During the hearing, witness testimony focused on the need to decouple rental assistance from section 515 mortgages as properties with these mortgages age and their mortgages mature, many rural low-income families are at risk of unaffordable rent increases. For many rural communities, the shortage of affordable housing is an enormous impediment to attracting new business, new residents, and new talent. “A longtime concern has been mortgage maturation, as many 515 properties do not have a preservation or replacement strategy. The peak of mortgage maturation for Section 515 properties in the Midwest states is 2030, about 10 years before the peak occurs in other areas of the United States,” Ms. Glidden testified. Since its inception in 1963, the Section 515 program has financed nearly 28,000 rental properties containing over 533,000 affordable apartment units, but fewer than 12,900 properties and approximately 370,000 occupied units remain in the program today. No new construction has been undertaken in a decade, and without action, RHS and the rural families they serve will continue to lose thousands of affordable Section 515 units each year to mortgage maturations.
Addressing the mortgage maturation crisis, Senator Tina Smith (D-MN), Chairwoman of the Subcommittee, announced the introduction of the Strategy and Investment in Rural Housing Preservation Act, along with Senator Jeanne Shaheen (D-NH). This legislation, if passed into law, would allow tenants to remain in affordable rural housing even after a USDA mortgage on the property has matured. Specifically, the bill will provide the RHS tools to maintain rental assistance for residents in prepaid or maturing properties who are at risk of losing their homes by restructuring existing Section 515 loans and extending incentives for property owners to stay in the program. In the event a loan restructuring is not possible, the bill further protects residents by allowing rental assistance to be decoupled from the underlying loan but remain in place at the property. It also gives the resident an option to transfer their rental assistance to another eligible property. Finally, the bill requires USDA to establish a plan for preserving affordable rental housing in rural areas in consultation with an advisory committee composed of a variety of interested stakeholders, including tenants. A similar bill has also been introduced in the House of Representatives. Several witnesses also underscored the need to pair decoupling with increased funding for Rural Housing Service programs such as the multifamily preservation and revitalization program, and that implementation conditions must be included with any program change.
The witnesses also highlighted the need for further, systematic investments in funding for RHS. Using South Dakota as an example, Ms. Plummer described how the rural housing staff in the state is functioning at 25 percent of what they were five years ago. “We can advance this objective by addressing three areas: better workflow, better technology, and if these two areas are achieved, better loan products,” said Ms. Plummer. Describing how the goal of RHS lending can better serve consumers and industry participants alike, Ms. Bettany, testified that the current loan payment and application process for both lenders and applicants is cumbersome and outdated and that response times from the RHS to approve a loan can take up to 10 days, well beyond the industry standard.
Witnesses also proposed ways to streamline regulatory requirements for programs and to increase flexibility for the smallest communities, as cumbersome processes have deterred nonprofits from utilizing programs. Other suggestions included the need to integrate RHS with better technology– in some cases, RHS is using software that is nearly 25 years old. The outdated technology can delay applications from prospective renters and buyers and scare away prospective landlords that are interested in utilizing RHS programs for their properties.
This was the second hearing Senator Smith chaired aimed at improving rural housing programs. In May, the subcommittee focused on aspects of the USDA’s Rural Housing Service programs that are functioning well and which areas should be changed or reformed. NAHMA members provided Senator Smith with suggestions on ways to improve rural housing programs following the May hearing and will continue to monitor these developments closely.
To view the full hearing, click here. To read the full bill text of the Strategy and Investment Act, click here.
Treasury Notice Issued for Unobligated Emergency Rental Assistance Funds
The Treasury Department issued a recent notice regarding unobligated emergency rental assistance (ERA1) funds provided through the Consolidated Appropriations Act of 2021. The notice addresses upcoming ERA1 deadlines and outlines options available to grantees that anticipate having unobligated ERA1 funds at the end of the program’s period of performance. It also identifies certain options available to states, local governments, territories, and other grantees participating in the ERA1 program that anticipate holding unobligated ERA1 funds at the end of the program’s period of performance.
To view the ERA1 Notice from Treasury, click here.