Industry News

"Viewpoint: The Threat to Rental Housing"
"More Solutions for Workforce Housing"
"Outlook: HFAs' Big Backlog"
"Fixing Foreclosures"
"Obama, Dems Ready to Move on Housing"
"Where Does the LIHTC Industry Go?"
"City Studies Housing Program Designed to Counteract Rash of Foreclosures"
"Making Tax Credits Credible"
"Experts Look at Housing Under Obama Administration"
"Daley Commits $2.1 Billion to Affordable Housing"
"Effort for County Worker Housing Is at Issue"
"Credit Crisis Squeezes Deals"

"Viewpoint: The Threat to Rental Housing"
American Banker (01/21/09) Kennedy, Judith A.

Affordable rental housing has long-held importance in meeting the shelter needs of much of the nation's low- and moderate-income population, but ensuring that there is a plentiful supply of such homes is becoming increasingly difficult during the current credit crunch. With millions more homeowners expected to be displaced by foreclosure in the coming years, it is critical that nonprofit multifamily lenders be able to continue to tap the financing they need to bankroll the construction or preservation of additional low-cost housing. According to National Association of Affordable Housing Lenders President and CEO Judith A. Kennedy, the vast majority of these lenders have never posted a loss on a loan and carry no problem assets. Even so, the illiquidity plaguing the credit markets at the moment is taking its toll on entities such as New York's Community Preservation Corp. and the California Community Reinvestment Corp; and Kennedy insists that Fannie Mae and Freddie Mac still are not stepping in to restore liquidity. Therefore, it is crucial, she says, for the U.S. government to recognize the importance of this small segment of the financial services industry when devising bailout plans for the financial community. Without government intervention, Kennedy warns that multifamily nonprofits will be unable to serve urban and rural communities in need because they will not have the necessary financing to build and preserve affordable rental housing.
Return to Headlines

While the Sec. 42 low-income housing tax credit program has offered the United States over 1.7 million affordable-housing units for people making 60 percent or less of the area median income (AMI), there continues to a significant difference in the housing supply for individuals and families making between 60 percent and 100 percent of the AMI. Although there is no federal program that offers money for affordable housing targeted to individuals earning over 60 percent of the AMI, there are several initiatives that can help deal with this situation. One Midwestern community recently decided to transform a historic high school that was shut down in 2007 into 60 multifamily units. The conversion of the high school into housing costs $150,000 a unit, and a plan was created to include the following elements, one of them being federal and state historic tax credits, which are used at 20 percent and 25 percent of eligible costs, respectively. In addition, a preservation grant from the state historic trust fund of $100,000 will be used to help reduce the renovation expenses. Also, a HUD Sec. 221(d)(4) loan will be acquired with a four-decade amortization period and a loan constant of 7.6 percent. The city and state will work jointly to develop a 40-year tax abatement program for the property, which will save $600 a unit annually in real-estate taxes. The state is providing a grant program to developers that are willing to implement energy-saving windows and energy-efficient heating and cooling systems, and the Midwestern project qualifies for a grant of $1,000 a unit.
Return to Headlines

Housing finance agencies (HFAs) are asking the U.S. government to bring bonds to market so that they will not have to curb lending to low- and moderate-income homebuyers. The National Council of State Housing Agencies (NCSHA) recently noted that 38 state HFAs with $30 billion overall in variable-rate debt outstanding are trying to locate buyers as the bonds are remarketed since traditional buyers have dissipated. The NCSHA and the National Association of Local Housing Finance Agencies (NALHFA) want Fannie Mae and Freddie Mac to come back as leading purchasers of holding bonds and low-income housing tax credits, but noted that the government-sponsored entities require federal direction in order to do so. The NCSHA also wants the Federal Home Loan Banks to give the HFAs liquidity. In addition, the agency is asking the Treasury Department to utilize Troubled Asset Relief Program (TARP) money or other resources to buy long-term, fixed-rate housing bonds at "reasonable rates" that could form the market and attract other investors. The NCSHA is also pressing for Treasury to earmark a minimum of $5 billion in TARP or any recently-established financial-recovery money from the Obama administration for state housing credit, allowing agencies to counter shortfalls they are facing. The NCSHA wants to eradicate the mandate for issuers to create housing purposes when they bring forward unused PAB capacity from one year to the following and wants to lengthen the alternative-minimum tax exemption to housing bonds that are brought forward under a state's private-activity bond limit and to bonds repaying PABs.
Return to Headlines

NeighborWorks America is changing gears to offer additional support for the creation of affordable rental housing and to handle the challenge of empty and foreclosed properties. The foreclosure problem has expanded demand for rental housing, states NeighborWorks CEO Kenneth Wade. "It has created an additional demand and burden on the already over-taxed rental stock, particularly at the lower end," he explains. While the quasi-government group was established over 30 years ago to revamp troubled neighborhoods, more recently it has concentrated its resources on instructing housing counselors so they would be able to help homeowners who are trying to make their payments and avoid foreclosure. NeighborWorks and its network of 230 community-based groups want to have an important part in repairing foreclosed properties so they can be rented or sold. "We are stepping up our efforts to deal with the stabilization part of the foreclosure crisis," Wade states. He thinks it is also important to deal with aftermath of foreclosures and revamp those properties so they can be reintroduced for good use. In addition, NeighborWorks wants to expand the number of affordable multifamily housing units.
Return to Headlines

Numerous proposals and bills to bolster the housing market will be considered under President Barack Obama's new administration A recent letter to congressional leaders by Larry Summers--Obama's top economic advisor--says the administration is committed to lowering the foreclosure rate by slashing mortgage payments on distressed loans, allowing bankruptcy judges to modify mortgages, and reforming the Hope for Homeowners program. Summers says the Obama administration hopes to use as much as $100 billion in TARP funds for a "sweeping effort" to curtail foreclosures. Legislation to be considered in the coming weeks could boost the conforming loan limit, expand the first-time home-buyer tax credit and eliminate the repayment requirement and permit seller-funded down payments on FHA loans.
Return to Headlines

The affordable-housing lender industry is struggling to locate investor equity in order to survive the economic crisis that is plaguing the low-income housing tax credit (LIHTC) market. What was formerly an $8-billion industry has dwindled to around $4 billion, meaning the less LIHTC money available, the fewer the affordable-housing units constructed. Numerous experts predict that 2009 will be even tougher as banks consolidate and corporate profits decline. "I strongly think we need to be looking for economic and CRA investors--maybe even tweaks in the CRA to get some of the new bigger banks more organized and directed to affordable rental housing, rather than strictly single-family," says Patrick Sheridan, senior vice president of housing development at Volunteers of America. Meanwhile, Cohen-Esrey Real Estate Services, LLC president R. Lee Harris stresses that there is hope, and explains how his firm is seeking out smaller markets, smaller projects, and deals employing historic tax credits. Ronne Thielen, managing director of Centerline Capital Group and president of the Affordable Housing Tax Credit Coalition, states the coalition has been working on initiatives to make the program more appealing to investors. One plan is to lower the tax-credit program from a decade to five years on a temporary basis, which has the possibility of drawing companies that are willing to invest during a briefer period rather than making a 10-year commitment. The NuRock Cos. President Rob Hoskins states there is a need to look at broadening the LIHTC program to serve households making as much as 80 percent of the area median income (AMI) rather than 60 percent of the AMI. Local Initiatives Support Corp. senior vice president for policy Benson Roberts thinks the LIHTC sector will be okay over the long term, but that getting through the existing turmoil will be hard.
Return to Headlines

In Wausau, Wis., city leaders are hopeful that a new federal program aimed at combating high foreclosure rates will boost the local housing market. Dubbed the Neighborhood Stabilization Program, the HUD initiative has $29 million available for Wisconsin. Already, an estimated $9 million has been set aside for Milwaukee County, leaving $20 million for the state's remaining 71 counties to purchase and redevelop foreclosed homes, demolish blighted properties and build on vacant sites, among other options. Wausau officials are seeking between $1.2 million and $2 million to use on eight local properties, reports Ann Werth, the interim director of the city's Community Development Department. Four of those properties would be renovated, while the other four would be demolished. The location of these properties has not been announced. Werth states, "The program is a wonderful opportunity for our neighborhoods. Anything that can further our housing stock and create affordable housing is good." If successful, the city will sell the four revitalized homes to income-qualifying applicants.
Return to Headlines

The economy remains weak despite Congressional efforts to support the renewable energy sector and ease the housing foreclosure crisis. The Obama administration is tackling the problem of reviving tax credits for affordable housing that are now worthless in the hands of collapsed or cash-strapped financial institutions. Jim Miller, legislative counsel to the Affordable Housing Tax Credit Coalition, noted that the traditional 40 percent of the financing for the low-income housing credit came from Fannie Mae and Freddie Mac. However, the money disappeared once the government seized the housing giants in September 2008. House Financial Services Committee Chair Braney Frank (D-Mass.) and House Ways and Means Committee Chair Charles Rangel (D-N.Y.) lead the effort to expand the tax credit part of the housing bill, which is expected to be a focus of the 2009 Congressional agenda. Furthermore, Rangel's chief tax counsel, John Buckley, said at a Tax Policy Center conference that direct spending is often more stimulating than tax breaks, pointing out "indications that current-law tax benefits are less effective... because there's not sufficient tax liability among the investors to use those credits." In hopes of attracting new investors and easing the burden of predicting the tax liability, the housing coalition is proposing shortening the period from 10 years to five years during which companies can claim the housing tax credit.
Return to Headlines

The Urban Land Association recently brought together several of the country's top housing experts for a roundtable discussion, moderated by John K. McIlwain, senior resident fellow of the ULI and the J. Ronald Terwilliger chair for housing, on the new Obama administration and the possible changes that could occur regarding housing over the coming several years. Harvard University's Joint Center for Housing Studies Nicolas P. Retsinas noted that the U.S. Department of Housing and Urban Development (HUD) will be at the forefront of the housing sector, working to devise solutions to the housing crisis. "It will be clear that housing will be a large part of the economic recovery package, and as this new administration moves forward, they will place emphasis on the issues sustainability and metropolitan growth," he said. Therefore, he added, it is of vital importance that HUD be present at any meeting on the future of the housing-finance sector. Meanwhile, Consumer Federation of America director of housing policy Barry Zigas stressed the outlook is poor for the for-sale home market, FHA, and government-sponsored entities. "Successful resolutions require quick legislative changes to rebalance and align the interests of services, investors and borrowers," he explained. Some of his plans for change include permitting judicial alterations through bankruptcy proceedings to help homeowners retain their houses and encourage loan modifications, and overhauling the tax consequences of loan changes for homeowners or investors. In addition, Zigas suggested making REMIC tax status dependent on changing PSAs to take away hurdles to loan modifications; and indemnifying servicers acting in good faith according to a specific set of standards around loan modifications and asset sales.
Return to Headlines

Saying that affordable housing is "more important than ever" in a financial downturn, Chicago Mayor Daley committed $2.1 billion on Jan. 28 to establish 50,022 units of rental and for-sale housing by 2013. The money that any deal depends on will be provided by federal and state funding, low-income tax credits, bonds, loans, and tax-increment financing subsidies. In 1993, Daley introduced Chicago's initial five-year plan for affordable housing. The previous last five-year plan utilized almost $1.9 billion to construct 24,000 multi-family units and protect or upgrade 19,000 units for homeowners. In addition, the City Council required a 10 percent affordable-housing set-aside on projects that entailed city land, planned developments, and zoning alterations that raise density. The new plan increases the figures to $2.1 billion and 50,022 units during a period when a poor economy has made the city's affordable-housing problem much worse. "It's too bad because everything was moving very quickly -- market-rate housing, affordable housing," Daley said. "But, when a recession comes in, it slows everything down," which is when government has to re-invest, he stated.
Return to Headlines

Fairfax County, Va.'s plan to construct a 270-unit apartment complex on its government-center property was originally lauded as a way to offer low-rent housing to firefighters, teachers, and additional county employees who cannot afford any other housing. Opponents of the plan, though, contend that the project is not fulfilling its vows because Fairfax is banned from providing the units just to county workers. The Board of Supervisors found out in December that the developer of the residential project got a $2-million tax credit on the stipulation that the majority of the units be made more widely accessible. This means that anybody earning less than the region's median income of $99,000 for a four-member family can live there, in spite of where he or she works. The disagreement highlights the challenges of offering affordable housing in one of the nation's wealthiest communities, where the average home sold for around $550,000 in the early part of 2008. Fairfax County has around 48 units earmarked for workforce housing, set up through partnerships with the fire and police departments, the sheriff's office, and Inova Health System. The upcoming project, called the Residences at the Government Center, is meant to add over 200 units to that number.
Return to Headlines

Affordable-housing developers have tried for years to recapitalize and protect thousands of properties initially funded under the different generations of the federal Sec. 202 program. Since the capital markets problem began in 2008, such deals have become nearly impossible to finance utilizing the available tools of tax credits and tax-exempt bonds. In addition, developers trying to make Sec. 202 agreements work with competitive 9 percent low-income housing tax credit (LIHTC) prices are having problems. Numerous Sec. 202 projects are already low on cash, with long-deferred capital mandates. With the money to recapitalize these communities tough to locate, thousands of apartments could become unlivable, according to Volunteers of America senior vice president for housing development Patrick Sheridan. Senior housing experts are lobbying finance groups to reserve a bigger percentage of 9 percent LIHTCs to recapitalize Sec. 202 properties, particularly since several states are likely to have 9 percent LIHTCs returned by affordable family projects developers who are not able to use them. "I think the state agencies are being way too passive," states Bill Kelly, president of the nonprofit housing coalition Stewards of Affordable Housing for the Future. He believes that with some preliminary planning by officials, Sec. 202 projects could utilize returned LIHTCs, which otherwise may have to be returned to the national pool.
Return to Headlines

Abstract News © Copyright 2009 INFORMATION, INC.