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					           The Millennial Housing
           Commission's Report --
    A Vision for Our Nations' Housing

           National Association of Housing and
                 Redevelopment Officials
                       June 5, 2002
6/5/2002             An NAHRO AudioShort         1
           Today’s Moderator

• James M. Inglis
  NAHRO Senior Vice President and
  NAHRO, Inc. Chairman
  Executive Director
  Livonia Housing Commission
  Livonia, MI

6/5/2002       An NAHRO AudioShort   2
• Conrad Egan
  Staff Director
  Millennial Housing Commission
  Washington, DC
• Ophelia B. Basgal
 Member, Millennial Housing Commission
 Executive Director
 Housing Authority of Alameda County
 Hayward, CA
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•          Introduction
•          Background
•          Recommendations
           • Public Housing
           • Section 8
           • Other Affordable Housing
•          Questions and Answers
•          Wrap Up

    6/5/2002           An NAHRO AudioShort   4
In today’s AudioShort,
our panelists will
provide you with an a
summary with an
emphasis on public
and assisted housing
as well as a discussion
of the Millennial
Housing Commission’s
Report released on
May 30, 2002.
  6/5/2002        An NAHRO AudioShort   5
           Introduction: Background
• In December 2000, Congress pursuant to
  legislation established the bipartisan
  Millennial Housing Commission.
• The Commission consisted of 22 individuals
  drawn from across the country and from
  across the spectrum of housing ideologies
  and experience.
• The Commission was charged with
  examining, analyzing and exploring three
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           Three Areas of Exploration
• The importance of affordable housing to the
  infrastructure of the US;
• Possible methods for increasing private
  sector involvement;
• Whether existing HUD programs work in
  conjunction with each other and how if
  needed can these programs be improved to
  meet the overall purpose of providing better
  housing opportunities.
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  Millennial Housing Commission
Sought Answers to These Questions:
• Is the nation getting the housing outcomes it
  expects and desires for individuals, families,
  and communities? Are there better ways to
  meet these needs?
• Are existing housing programs living up to
  their potential? Which need reform or
  significant restructuring?
• What are the critical housing needs and are
  new programs needed to address these
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           Gathering the Answers

• The Commission held five public
  hearings, conducted numerous focus
  group meetings, commissioned papers
  and asked for input on policy positions
  and program recommendations from a
  diverse group of individuals and

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 Fundamental Precepts of Agreement
• Housing is linked to access to jobs and
  healthy communities. The failure to
  achieve adequate housing leads to
  significant costs to society.
• A multiple of factors arranging from
  community opposition to high-density
  development to the fast growth of new
  families requiring housing created an
  inadequate supply of affordable housing.
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            The Commission’s Vision

              Produce and preserve more
           sustainable, affordable housing in
              healthy communities to help
           American families progress up the
            ladder of economic opportunity.

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              Basic Principles

• Strengthen Communities
• Devolve decision-making to states and
  local governments, but within a framework
  of federal standards and performance
     – Commission recommends that Congress pay
       special attention to assigning appropriate
       roles and responsibilities to each level of
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           Basic Principles (continued)

• Provide the private sector with effective
  incentives to help produce and preserve
  affordable housing.
• Design programs to sustain the stock of
  affordable housing over the long term.

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           Public Housing

6/5/2002      An NAHRO AudioShort   14
             Public Housing
• One of the major reforms recommended
  by the Commission is to transform the
  public housing program. This should not
  be confused with proposals to convert
  public housing into a tenant-based
  program; but, rather the Commission
  affirms the importance of maintaining a
  permanent inventory of housing for
  people with extremely low incomes.
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           Public Housing (continued)
• Specifically the Commission is
  recommending a gradual transition to
  project-based accounting, with
  subsidies flowing to specific properties
  based on their rents once restored to
  market condition.

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           Public Housing (continued)
• Under this recommendation, public
  housing’s physical inventory and
  population would shift to the project-
  based Section 8 model. This would be
  converting operating and capital funding
  to a long-term Section 8 type contract
  linked to the property instead of the
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           Public Housing (continued)
• Benefits of this Conversion:
     – Reliable funding to cover operating costs
     – Debt service on loans for capital costs
     – Replacement reserves
     – Debt Service Insurance
• Subsidy levels would be based on each
  property’s market rent.

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           Public Housing (continued)
• To be eligible, PHA would pledge to
  retain some specified income targets for
  the property.
• Timeframe: Voluntary at first, with a
  period of 7 to 10 years for completion.
• Transitioning: HUD would still have to
  provide oversight on those PHAs who
  choose not to convert some or all of
  their housing stock.
6/5/2002           An NAHRO AudioShort   19
           Public Housing (continued)
              PHA Inventory Viability
• Converting of public housing would
  follow the “Mark to Market” Process:
  conduct a market study and market-
  based physical and financial
  assessment for each property in the
  PHA’s portfolio to determine feasibility
  of conversion approach.
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           Public Housing (continued)
• If the assessment reveals that the
  property is severely distressed but is
  located in a good area and therefore
  warrants investment, then a HOPE VI
  revitalization, mixed-income approach
  would be considered feasible.
• When the property being revitalized is
  completed only then will it move to a
  project-based voucher contract.
6/5/2002           An NAHRO AudioShort     21
           Public Housing (continued)
• If the property is severely distressed
  and is not well located, not viable, it will
  be demolished. A local market
  assessment must be completed to
  determine what housing resources are
  available to any families that must be

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     Inventory Conversion (continued)

• Once the feasibility stage is completed,
  we must ensure that the conversion is
  thoughtful and orderly. Transition steps:
     – Assess the capital, operating, and asset
       and property management needs of each
       property to determine the best debt and
       reserve structure.
           • Prioritize: Convert the properties in the best
             condition and location FIRST.

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     Inventory Conversion (continued)

• Set up each property as an individually
  owned entity with its assets outside the
  Annual Contributions Contract (ACC).
     – Possibility: You could make each property
       or entity a subsidiary nonprofit corporation
       of the public housing authority with
       freestanding assets to facilitate debt
       financing of capital improvements.

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     Inventory Conversion (continued)

• Establish clear and widely accepted
  standards for redesign, unit and site
  amenities, and physical condition so
  that the properties are attractive to a
  wide range of eligible families.
     – Anticipation that this would serve to reduce
       the concentration of the very poorest of

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     Inventory Conversion (continued)

• Upon turnover, permit PHAs to admit a
  percentage of market-rate tenants to
  properties when income-mixing is
     – Use of tenant-based subsidies in areas
       with inadequate supply, or project-based
       subsidies for units in other locations.

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       Inventory Conversion (continued)

• Replace the Annual Contributions Contract
  with a Housing Assistance Payment (HAP)
  contract as each property moves to the
  project-based assistance model.
  – This reduces the regulatory burden of the PHA
    and HUD oversight requirements and
    eventually eliminates the oversight.
  – Properties that elect not to seek project-based
    assistance would move to a housing choice
    voucher-type HAP.
  6/5/2002          An NAHRO AudioShort          27
    Inventory Conversion (continued)

• Use a Section 8 administrator to avoid
  conflict of interest if the PHA is the
  owner/manager, set rent levels, and
  perform housing quality inspections.
     – Many jurisdictions have this in place

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        Inventory Conversion (continued)

• Involve the residents in future planning about the
  conversion. Residents and managers must be
  aware of each other’s desires, opinions and
   – Throughout this process, input and
     participation from public housing residents and
     other important stakeholders should be actively
     sought and considered. Residents should have
     access to training and TA necessary to make
     their involvement informed and productive.

 6/5/2002           An NAHRO AudioShort          29
   Conversion of Severely Distressed
        Properties (continued)
• Utilize the HOPE VI as a preservation
  and production tool providing a
  comprehensive approach to eliminate
  blighted conditions: physical deterioration
  of properties, and social pathology
  characteristic of high-poverty areas--
    higher unemployment rates, longer average
    tenancy, low education levels, high crime rates,
    poor school performance.
6/5/2002            An NAHRO AudioShort          30
   Conversion of Severely Distressed
        Properties (continued)
• First, HOPE VI must be utilized to
  provide relocation, demolition, site
  remediation and construction costs.
  HOPE VI leverages non-public housing
  costs which make up the larger share of
  the development budget.

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 Debt Financing of Capital Needs

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 Debt Financing of Capital Needs
• Capital Improvements would be financed
  through private tax-exempt loans secured by
  a mortgage and backed by FHA mortgage
• No additional guarantees should be
  necessary for the majority of public housing
  properties, whose market rents would fully
  support the debt service to bring the property
  to acceptable quality standards.
6/5/2002          An NAHRO AudioShort          33
     Debt Financing of Capital Needs:
               Scenario #1
    Properties that potentially have sustainable
    rents but do not initially meet quality
• Would have a limited time to rehabilitate or replace
  inadequate units.
• Rents during the planning and rehab period could be
  pegged to what the units would command after
• Additional credit enhancements/other HUD
  guarantees would be necessary in cases where the
  property’s condition will require financing exceeding
  the property’s market value.

6/5/2002             An NAHRO AudioShort              34
     Debt Financing of Capital Needs:
               Scenario #2
    PHA decides not to replace or rehabilitate a
• Rents would be based on market value and
  replacement reserves would continue to accrue.
• Some properties may not need new capital
  investment while other properties do not warrant any
  additional investment and are good candidates for
  demolition -- these units can be replaced with hard
  units or vouchers.

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           Advantages of Debt Financing

• Long-term costs of this capital
  improvement approach would likely be
  lower than the current approach.
• Improvements can occur quickly.
• Debt financing provides another level of
  operational oversight from lenders;
  thereby, substituting standard real estate
  practice for HUD oversite and regulations.
6/5/2002            An NAHRO AudioShort   36
    Debt Financing Not For Everyone:
            Small Properties

• For small properties, the ratio of
  transaction costs to overall debt makes
  this type of financing impractical.
• More suitable approach would be to use
  existing capital grant programs or to
  front-load direct grants.

6/5/2002       An NAHRO AudioShort      37
    Debt Financing Not For Everyone:
      Capital Needs Exceed FMRs
    For properties whose capital needs require
    rents substantially above market levels, you
     – Use the HOPE VI program to revitalize the
       properties that are well located but in poor
       condition or otherwise obsolete.
     – Grant PHAs full access to all housing
       development tools including debt financing and tax
       credits, as well as new loan and grant programs.

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• Alternative approaches may add to the
  already tight competition for tax credits.
• Success of endeavor depends on the
  credibility of the PHA and its partners as
  asset and construction managers.
• Congress should consider increasing the
  allocation of the Low Income Tax Credit so it
  can be used to revitalize the public housing
  stock without diminishing its availability for
  other uses.
6/5/2002           An NAHRO AudioShort             39
            Challenges (continued)

• Congress should direct HUD through the
  PHA to work with the private sector and
  different bond-rating agencies to structure
  a guarantee based on the proposed
  Section 8 project-based appropriations.
  Such a guarantee would enable PHAs to
  leverage private-sector investment for
  constructing or rehabilitating units.
 6/5/2002         An NAHRO AudioShort      40
           Simplify the Rating of PHAs


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           Simplify the Rating of PHAs:
                 Current Situation

• HUD uses various systems to assess
  PHAs that focus on process compliance
  rather than outcomes.
• Evaluation systems have become
  pointlessly complex.
• System needs to be simplified.

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   A Simplified Rating System Should

• Related to the quality of housing that
  residents experience and be simple enough
  to enable PHAs or other administrators to
  judge how they are doing.
   – Past public housing assessment systems
     provide insight to design an approach that
     accurately gauges quality of housing and
     its management.
6/5/2002          An NAHRO AudioShort             43
   A Simplified Rating System Should
• Prevent PHAs that do not meet
  minimum standards from converting to
  the proposed project-based program.
     – If such a PHA owns some properties that
       do meet standards, those properties could
       be converted under some form of
       ownership that provides opportunities for
       resident participation and does not give the
       PHA complete control.
6/5/2002            An NAHRO AudioShort           44
   A Simplified Rating System Should
• Require agencies with competency problems
  to accept alternative management.
     – Such as other PHAs acting as administrators,
       state or procured competitively from the public,
       nonprofit, or for-profit sectors.
     – If alternative management measures do not work,
       troubled PHA would have to report to an
       administrative or judicial receiver.

6/5/2002               An NAHRO AudioShort                45
           Rent Model
                                           Test New Rent-
              $$ Threshold

6/5/2002                     An NAHRO AudioShort        46
           Test New Rent Approaches

• Congress should consider funding a research
  demonstration of alternative rent models.
   – Rigorous research is necessary to ensure
     that public housing residents who are
     elderly or disabled are not forced to pay
     too high rents in the name of simplicity.

6/5/2002           An NAHRO AudioShort       47
           Test New Rent Approaches
• The rent structure should incorporate
  incentives for residents to seek economic
     – Establish an income threshold below which
       residents are subject to full verification and pay a
       simplified income-based rent.
     – Families with incomes above the threshold would
       pay a higher fixed rent based on their unit size and
       subject to annual adjustment. Such an approach
       creates real economic incentives.
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           Test New Rent Approaches

• Another approach would be to set rents
  at 30 percent of income for the first year
  and then “step up” the level every year
  thereafter. This creates an incentive to
  work, but gives families a full year to
  access services and achieve some

6/5/2002           An NAHRO AudioShort     49
           Exempt Small PHAs ...

• From
  unnecessary and

6/5/2002         An NAHRO AudioShort   50
     Exempt Small PHAs (continued)
• The Commission recommends that PHAs
  with fewer than 250 units have a simplified
  contract that establishes basic standards for
  physical conditions and operations, but
  strictly limits paperwork and reporting.
  Thereby, freeing the PHA to concentrate on
  physical management.
• PHAs geographically isolated or face high
  staff turnover will need ongoing technical
6/5/2002          An NAHRO AudioShort             51
           Streamlining the Housing
           Choice Voucher Program

6/5/2002           An NAHRO AudioShort   52
• Expand and strengthen the housing choice
  voucher program to improve the access of
  extremely low-income households to the
  private housing stock.
• The Commission believes housing vouchers
  should continue to be the linchpin of a
  national policy providing very low income
  renters access to privately owned housing
6/5/2002         An NAHRO AudioShort          53
        Housing Choice Voucher
       Program Recommendations
• The Commission recommends
  appropriation of additional funds for
  substantial annual increments of
  vouchers to address the housing
  problems of extremely low- and very
  low-income families without access to
  other housing assistance.

6/5/2002       An NAHRO AudioShort        54
        Housing Choice Voucher
       Program Recommendations
• The Commission also supports
  expanded use of vouchers for
  homeownership to help low-income
  families build assets.
• The Commission recommends specific
  refinements that would increase the
  program’s efficiency and effectiveness.

6/5/2002        An NAHRO AudioShort         55
      Improve Utilization and Success

• HUD needs to diagnose the reasons for
  the limited success of the voucher
  program at some PHAs and offer
  targeted technical assistance.
• Voucher units should be reallocated
  from low-utilization PHAs to entities
  serving the same geographic area and
6/5/2002         An NAHRO AudioShort    56
      Improve Utilization and Success
            Rates (continued)
• Where reallocation is not feasible, the
  PHA could be required to contract with
  another entity to administer the unused
• In all cases, households on the original
  PHA waiting list should have priority for
  the unused vouchers.

6/5/2002         An NAHRO AudioShort          57
      Improve Utilization and Success
             Rates (continued)
• The Commission recommends that
  HUD also make two simple
  administrative changes:
     – (1) Expand the resources devoted to rent
       surveys so that published FMRs do not lag
       actual rents.
     – (2) Quickly approve exception payment
       standards when census data demonstrates
       that average rents are at the level of the
       exception sought.
6/5/2002            An NAHRO AudioShort         58
            Increase Landlord Participation
• HUD and PHA should develop consensus
  standards for shortening the inspection and
  lease approval process and for providing better
  service to landlords. Standards should be based
   – Review of PHA performance
   – Feedback from both landlords and voucher
   – Review of all standards that affect landlord
     participation such as lease approval,
     inspections, etc.
 6/5/2002              An NAHRO AudioShort     59
           Increase Landlord Participation
• The Commission also recommends that HUD
  provide technical assistance to PHAs for
  improving landlord participation, disseminate
  best practices information to program
  administrators, experiment with giving PHAs
  greater flexibility in applying the HQS to
  attract owners into the program, and change
  the cap on the family rent contribution for
  newly rented voucher units to 40 percent of
  gross income.
6/5/2002              An NAHRO AudioShort     60
       Link Vouchers       Housing
           Production Programs

6/5/2002        An NAHRO AudioShort   61
       Linking Vouchers to Housing
           Production Programs
• The Commission recommends that HUD
  strengthen and enforce the requirement that
  owners of housing produced under federally
  funded programs accept households with
   – This effort enables extremely low-income
     families to live in rental housing produced
     with other subsidy sources which would
     otherwise be unaffordable.
6/5/2002           An NAHRO AudioShort             62
     Linking Vouchers to Housing
    Production Programs (continued)

• In the interests of promoting mixed-
  income housing, the Commission also
  recommends that owners of
  developments of 50 or more units be
  able to limit the share of voucher
  households to 20 percent or 30 percent,
  subject to local market conditions.
6/5/2002       An NAHRO AudioShort      63
     Linking Vouchers to Housing
    Production Programs (continued)
• Extremely low-income households would
  receive special vouchers for units produced
  under capital subsidy programs such as the
     – Payment standards would equal the operating
       cost rather than base them on FMR.
     – These vouchers could be targeted to places where
       the tenant-based voucher program has had little

6/5/2002              An NAHRO AudioShort            64
     Linking Vouchers to Housing
    Production Programs (continued)

• In addition state and local housing plans
  would be required to take into account
  voucher success rates and barriers to
  voucher use when determining the use
  of HOME and CDBG funds.

6/5/2002        An NAHRO AudioShort       65
     Linking Vouchers to Housing
    Production Programs (continued)
• PHAs should be allowed to designate a
  portion of available housing vouchers for “first
  use” in a particular housing project. This
  would supplement the current system of
  project-based vouchers, but not guarantee
  the owner a specific number of voucher
  holders over time.
     – Allowed in neighborhoods with access to jobs and
       decent schools or as part of a comprehensive
       revitalization project.
6/5/2002              An NAHRO AudioShort             66
        Linking Vouchers to Work
      Opportunity and Self-Sufficiency



6/5/2002            An NAHRO AudioShort                67
        Linking Vouchers to Work
      Opportunity and Self-Sufficiency
          Initiatives (continued)
• The current voucher program does not
  make mobility of tenants a primary goal.
  The voucher program is more effective
  than any other kind of housing
  assistance in improving recipients’
  opportunities, long-term self-sufficiency,
  employment savings, etc.
6/5/2002         An NAHRO AudioShort       68
Linking Vouchers to Work Opportunity
    and Self-Sufficiency Initiatives
• The ability of the voucher program to help
  families become more self-sufficient may
  depend on its ability to assist families in
  moving to neighborhoods with access to good
  jobs and good schools.
   – Moving to Opportunity (MTO)
     demonstration -- mobility counseling is
   – Competes with other program objectives
6/5/2002         An NAHRO AudioShort        69
Linking Vouchers to Work Opportunity
    and Self-Sufficiency Initiatives

• Another way the voucher program can
  help families is to build in opportunities
  for employment and savings.
     – The Family Self-Sufficiency (FSS) program
       shows particular promise for this initiative.

6/5/2002             An NAHRO AudioShort           70
                         Vouchers to

6/5/2002   An NAHRO AudioShort         71
Linking Vouchers to Non-Housing
• HUD should allow other agencies to
     compete for special allocations of
     vouchers for certain populations, but
     require the PHA to perform key
     operations such as housing inspections,
     rent-setting, and payments to landlords.
• The functions of this initiative would be
     monitored as part of the PHA overall
     voucher program. AudioShort
6/5/2002            An NAHRO                72
Linking Vouchers to Non-Housing
• Housing vouchers can also work effectively
  with other types of assistance programs for
  special-needs populations.
   – States expand community-based housing
     options, vouchers will be looked at as the
     way to provide permanent housing for
     persons with disabilities.
   – This will require establishing stronger
     partnerships between PHAs and other
     providers of supportive services.
6/5/2002          An NAHRO AudioShort             73
       Flexible Use of the Section 8
           Project-Based Units

• In addition to expanding the tenant-
  based housing choice voucher program,
  the Commission proposes certain
  improvements to the project-based
  Section 8 program.

6/5/2002         An NAHRO AudioShort   74
Linking Vouchers to Non-Housing
       Programs (continued)
• Currently treatment of project-based
  Section 8 units are inflexible -- subsidies
  can not be transferred from deteriorated
     – Though Mark-to-Market can assist
       properties in good condition, economically
       it is better to demolish and replace some
       obsolete or poorly located properties.

6/5/2002            An NAHRO AudioShort             75
Linking Vouchers to Non-Housing
       Programs (continued)

• Better use of funds to transfer project-
  based section 8 and other subsidies to
  other locations as part of mixed-income
  housing development. Companion use
  and affordability restrictions would also
  be transferred.

6/5/2002        An NAHRO AudioShort       76
  Linking Vouchers to Non-Housing
         Programs (continued)
• Benefits
  – The transfer of subsidies and resources would
    help preserve existing affordable housing.
  – Provide new preservation options for property
    owners who are considering to opt out of their
  – Enable other properties assisted by shallow
    subsidy programs (LIHTC and HOME) to serve
    some very low-income renters.
  6/5/2002         An NAHRO AudioShort         77
Linking Vouchers to Non-Housing
       Programs (continued)
• HUD currently has the authority to transfer
  project-based Section 8 contracts to other
  developments; however, statutory issues
  apparently exist in
   – existing contracts to new replacement
     housing construction projects, and
   – in transferring companion use restrictions
     in other buildings under the Mark-to-Market
6/5/2002          An NAHRO AudioShort          78
Linking Vouchers to Non-Housing
       Programs (continued)
• Commission recommends:
     – that the administrators of these project-
       based contracts be permitted and
       encouraged to allow the transfer of
       assisted units to aid in the preservation of
       affordable units in high-quality properties
       and to improve income diversity.
     – Congress remove any statutory obstacles
       to using transferred project-based Section
       8 subsidies for replacement housing.
6/5/2002             An NAHRO AudioShort              79
      Commission Recommendations:
            Other New Tools

6/5/2002       An NAHRO AudioShort   80
              Flexible Tax Credit

• Allocate a flexible new tax credit to
  stimulate production of affordable
  properties suitable for homeownership.
     – A new homeownership tax credit to be
       allocated to the state housing finance
       agencies to help lift low-income and
       minority homeownership rates.

6/5/2002            An NAHRO AudioShort         81
              Exit Tax Relief

• The Commission’s proposed
  preservation tax incentive is intended to
  reduce the number of project-based
  units lost from the affordable housing
  stock by giving current owners an
  incentive to transfer ownership to new
  owners who commit to the long-term
  preservation of affordability.
6/5/2002        An NAHRO AudioShort       82
           Exit Tax Relief (continued)

• The Commission cites the risk of rent
  escalation within the conventionally
  financed inventory as a compelling
  reason both to preserve as many
  privately held units as possible and to
  recognize the preservation of affordable
  housing as a critical public policy goal.

6/5/2002            An NAHRO AudioShort   83
             Exit Tax Relief (continued)
• It is critical that the nation adopt a preservation
  philosophy to guide its housing policy going
   – A new underwriting standard for long-term
   – Efficient use of federal resources and a
      recognition of the broader benefits of
   – Recognition of an entity’s unique nature and
      needs in expanding affordable units through
  6/5/2002            An NAHRO AudioShort               84
           Exit Tax Relief (continued)

• Because of the immediacy of the
  problem, any proposed tools or
  approaches that can quickly and
  efficiently preserve housing should
  receive priority from the federal
     – The proposed preservation tax incentive(PTI)
       be adopted and enacted quickly.
6/5/2002            An NAHRO AudioShort         85
           Exit Tax Relief (continued)

• The Commission recommends that
  states be given the authority to allocate
  exit tax relief, via a preservation tax
  incentive to stimulate the transfer of
  properties to preservation entities.

6/5/2002           An NAHRO AudioShort        86
 Production of New Affordable Housing

• Provide capital subsidies for the production
  of units for occupancy by extremely low-
  income households.
  – Commission recommends that Congress
    address the housing needs of extremely low-
    income households through a 100 % capital
    subsidy for construction, rehabilitation, or
    acquisition of units earmarked for extremely
    low-income households.
 6/5/2002          An NAHRO AudioShort         87
Attract Private Capital to the Production
  of Mixed-income, Multifamily Rental
• Commission recommends that the limits
  be taken off states’ ability to issue tax-
  exempt debt for specific multifamily
  properties, with the condition that eligible
  properties must restrict rents on at least
  20 % of the units to levels affordable to
  families with incomes below 80 % of AMI.
 6/5/2002         An NAHRO AudioShort        88
           Facilitate Strategic Community

• Commission recommends creation of a
  new, more potent community
  development tool that builds on the
  lessons of successful projects while
  unifying funding and regulations.

6/5/2002             An NAHRO AudioShort    89
           Facilitate Strategic Community
• This proposal would allow state governors to
  reserve up to 15% of their federal block grant
  funds (including TANF, CDBG, HOME,
  Workforce Investment Act (WIA) funds, Social
  Services Block Grants, Child Care Block
  Grants and transportation funding) to support
  comprehensive redevelopment projects
  sponsored by local governments.

6/5/2002            An NAHRO AudioShort        90
      Other Major Reforms to Existing

6/5/2002         An NAHRO AudioShort    91
           Federal Housing Administration

• Restructure FHA as a wholly owned
  government corporation within HUD
     – FHA and Ginnie Mae be combined into a
       single entity.

6/5/2002             An NAHRO AudioShort       92
           Federal Housing Administration

• Provide for more flexible multifamily
     – Combine all mutlifamily programs in the
       General Insurance and Special Risk
       Insurance Fund into a single program
     – Permit FHA to vary the terms or other
       aspects of its mutlifamily insurance
6/5/2002             An NAHRO AudioShort         93
           Federal Housing Administration

 – Grant FHA broad authority to pursue pool
   insurance and offer adjustable-rate insurance
 – Index multifamily mortgage limits to a
   construction cost index and give FHA greater
   flexibility to increase limits in high-cost areas.
 – Allow FHA to insure construction-only loans.
 – Build on the success of the 221(d)(4) rental
   production program
6/5/2002            An NAHRO AudioShort            94
     Federal Housing Administration

• Provide for more flexible single-family
     – Expressly authorize FHA to initiate single-
       family risk-sharing demonstration programs
     – Authorize FHA to set its own standard for
       selecting business partners.
     – Expressly authorize FHA to introduce new

6/5/2002            An NAHRO AudioShort         95
            Federal Housing Administration

• Urge FHA to use sophisticated private-
  sector techniques to prevent mortgage
  defaults and, when defaults are
  unavoidable, reduce their cost.
• Expand FHA’s home improvement lending
• Expand FHA’s small investor lending
 6/5/2002             An NAHRO AudioShort    96
            End Chronic Homelessness

• The Commission strongly endorses a program to
  end chronic homelessness within 10 years
  through provision of additional supportive
   – The tools are already in place.
   – The Commission recommends that this set-
     aside be made permanent as a way to ensure
     the addition of 15,000 incremental units of
     permanent supportive housing each year.
 6/5/2002          An NAHRO AudioShort        97
End Chronic Homelessness (continued)

• A related recommendation is to transfer
  renewal funding for expiring rent and
  operating subsidies to permanent
  supportive housing to HUD’s Housing
  Certificate Fund.

6/5/2002        An NAHRO AudioShort     98
            End Chronic Homelessness
A successful end homelessness policy must:
   – Provide sufficient public and private funding for
     a full continuum of interventions targeted to
     various homeless sub-populations.
   – Infuse this continuum of interventions with the
     high expectation, incentives and supports
     needed to encourage homeless households to
     participate in treatment programs, work
     productively and engage in constructive
 6/5/2002           An NAHRO AudioShort           99
   Link Housing Assistance with Work
• The Commission recommends that
  federal housing assistance programs
  encourage and facilitate expanded
  economic opportunity, recognizing that
  working-age families living in assisted
  housing, like other able-bodied people,
  have an obligation to contribute to
  society as well as accept its help.
6/5/2002        An NAHRO AudioShort         100
   Link Housing Assistance with Work
        Requirements (continued)

• The Commission recommends over
  time the housing assistance system
  require residents who are not elderly or
  disabled work as a condition of
  receiving aid.

6/5/2002        An NAHRO AudioShort      101
           Streamlining of Existing

6/5/2002           An NAHRO AudioShort   102
   HOME and the Low Income Housing
        Tax Credit Programs

• Both LIHTC and HOME have helped to
  build the capacity of state and local
  jurisdictions to engage in housing
• The LIHTC and HOME programs represent
  a true and strong paradigm shift away from
  some of the less effective federal policies
  and programs of the past.
 6/5/2002        An NAHRO AudioShort      103
     Recommendations to Improve the
      Low Income Housing Tax credit
• Allow sponsors of tax credit properties
  in low-income rural areas to set rent
  caps based on statewide median
• Remove impediments to the use of tax
  credits for preservation.

6/5/2002        An NAHRO AudioShort         104
      Recommendations to Improve the
       Low Income Housing Tax credit
            Programs (continued)

• Remove the prohibition against
  combining LIHTC with assistance under
  the moderate rehabilitation program.
• Clarify what project costs can be
  included in eligible costs.

6/5/2002        An NAHRO AudioShort   105
     Recommendations to Improve the
      HOME Investment Partnerships
• Given the widely recognized success of
  the HOME program, enact a substantial
  increase in HOME funding for both
  states and local jurisdictions.
• Allow the use of HOME funds to
  capitalize a long-term project reserve
6/5/2002       An NAHRO AudioShort     106
      Recommendations to Improve the
       HOME Investment Partnerships
• Permit Participating Jurisdictions to use
  HOME funds to refinance certain low-income
  housing mortgages.
• When rental housing is financed with both
  HOME and CDBG funds, HOME rules should
• Improve lead hazard evaluation and control
  by incorporating lead safety into general
  housing rehabilitation activities.
6/5/2002         An NAHRO AudioShort       107
       Recommendations to Eliminate
      Barriers to Combining LIHTC and
        HOME and Other Programs
• Make both new construction and
  substantial rehabilitation expenditures
  eligible for the 9% tax credit.
• Allow a “Basis boost” for tax credit
  developments in high-poverty, high-cost
  areas, even when they also receive
  HOME assistance.
6/5/2002         An NAHRO AudioShort    108
   Recommendations to Eliminate
  Barriers to Combining LIHTC and
HOME and Other Programs (continued)

• Delegate subsidy-layering reviews for
  tax credit properties to state allocating
• Allow states to use Temporary
  Assistance to Needy Families (TANF)
  funds for onetime grants to existing tax
  credit properties.
6/5/2002         An NAHRO AudioShort          109
   Expand State’s Ability to Use the
   Mortgage Revenue Bond Program

• The Commission recommends repeal of
  the Mortgage Revenue Bond program’s
  10-year rule, thereby, increasing the
  resources available to states for

6/5/2002       An NAHRO AudioShort     110
           Revise Federal Budget Laws

• The Commission recommends that
  Congress make a serious effort to
  address the issues raised by the HAP
  condition to preserve the existing stock
  of government-assisted affordable

6/5/2002            An NAHRO AudioShort   111
    Supporting Recommendations

6/5/2002     An NAHRO AudioShort   112
           Increase Funding for Housing
             Assistance in Rural Areas
• The Commission recommends that
  Congress and the Administration should
  increase appropriations for low-income
  housing in rural America.
• Congress should provide adequate
  funding for core RHA housing
  programs, including 515 rental housing,
  Section 521 rental assistance and
  housing assistance for farm workers.
6/5/2002             An NAHRO AudioShort   113
        Increase Funding for Native
       American and Native Hawaiian

• The Commission recommends that
  Congress increase funding for the
  Native American Housing Assistance
  and Self-Determination Act (NAHASDA)
  block grant.

6/5/2002         An NAHRO AudioShort   114
 Establish Individual Homeownership
        Development Accounts

• The Commission recommends that the
  401 (k) and IRA statutes be amended to
  allow financial institutions to monitor
  IHDA deposits for Community
  Reinvestment Act credit.

6/5/2002       An NAHRO AudioShort     115
  Allow Housing Finance Agencies to
           Earn Arbitrage
• The Commission recommends that
  Congress repeal or liberalize federal
  restrictions on housing agencies’ ability to
  earn arbitrage on mortgage bond
  proceeds. This measure would increase
  the amount of federal assistance available
  to support low-income housing without
  additional annual appropriations.
6/5/2002        An NAHRO AudioShort       116
   Exempt Housing Bond Purchasers
   From the Alternative Minimum Tax

• The Commission recommends that
  housing bond purchasers be exempt
  from the Alternative Minimum Tax.

6/5/2002      An NAHRO AudioShort     117
      Undertake A Study of the Davis-
         Bacon Act Requirements
• Evidence presented to the Commission
  suggests that wage levels set under this
  Davis-Bacon are higher than actual wages
  paid. Hence, the Commission recommends
  that Congress undertake a study of the Davis-
  Bacon requirements and make improvements
  in such areas as the accuracy of the wage
  data, the applicability threshold and the
  reporting requirements.
6/5/2002          An NAHRO AudioShort        118
            Address Regulatory Barriers
• Address the regulatory barriers that either add
  cost of or effectively discourage housing
   – Federal agencies to include a housing impact
     analysis as part of the rule-making process
   – Establish a demonstration program to provide
     planning grants to localities committed to
     combining land-use regulations into a
     comprehensive “balanced growth code” that
     has “workforce housing affordability” as a key
 6/5/2002            An NAHRO AudioShort         119
         Streamline State Planning
       Requirements for CD Programs
• The Commission recommends that
  Congress encourage states to develop
  plans that establish basic principles
  such as the importance of sustainability,
  define housing needs and target areas,
  list priorities, outline a menu of
  resources, and request project
  proposals that offer solutions.
6/5/2002         An NAHRO AudioShort     120
Expand Financing Options For Small
      Multifamily Properties
• Create an FHA small multifamily pool
  insurance program.
• Streamline FHA’s existing small
  multifamily whole load insurance.
• Encourage the government-sponsored
  enterprises and leaders to make loans
  for small multifamily properties.

6/5/2002       An NAHRO AudioShort        121
Expand Financing Options For Small
  Multifamily Properties (continued)

• Fund national data collection on
  multifamily lending and promote
  standardization of lending practices.
     – Commission recommends a national data
       collection effort to analyze the risks of
       multifamily lending.

6/5/2002            An NAHRO AudioShort            122
           Foster a Secondary Market for
           Development and Construction
• To develop a secondary market for
  development and construction loans,
  the Commission recommends that
     – Encourage the Federal Home Loan Bank
       System to launch a pilot program
       establishing a “private” secondary market
       for construction loans.
6/5/2002             An NAHRO AudioShort           123
   Foster a Secondary Market for
Development and Construction Lending
– Urge the Treasury Department to publish detailed
  guidance on the use of Financial Asset
  Securitization Investment Trusts
– Permit FHA to issue construction-only insurance.
– Grant government-sponsored enterprises express
  authority to purchase construction-only loans.
– Require banking regulators to collect, report on
  and publish sufficient detail on the activity and
  performance of real estate loans.
 6/5/2002          An NAHRO AudioShort         124
      Launch A Demonstration For
    Comprehensive Community-Based
• The Commission recommends
  combining the interest and resources of
  large private foundations with the
  funding from the federal government.
     – Funding decisions would be made by
       representatives of private foundations and
       public agencies.
     – Localities apply to the board for funding.
6/5/2002            An NAHRO AudioShort         125
  Improve Customer Education About
       Home Mortgage Lending

• The Commission recommends that
  Congress enact regulatory changes to
  educate and protect consumers in
  mortgage transactions, as well as
  assure loans are made at fair and
  reasonable credit costs.

6/5/2002       An NAHRO AudioShort       126
  Improve Access of Manufactured
 Home Buyers and Owners to Capital
• The Commission recommends that:
     – Congress (a) affirm that Fannie Mae and
       Freddie Mac can purchase manufactured
       home loans classified as personal property
       (b) encourage support of a secondary
       market in such loans if they are determined
       to be sound, and (c) establish performance
       goals for manufactured home loan
6/5/2002            An NAHRO AudioShort         127
  Improve Access of Manufactured
 Home Buyers and Owners to Capital
        Markets (continued)
• FHA’s Title I and II programs be
  promoted and loan limits be increased.
• Ginnie Mae approve more lenders as
  issuers/servicers, or instruct current
  issuers to make and service loans for
  manufactured homes.

6/5/2002       An NAHRO AudioShort         128
             Affirm the Importance of the
            Community Reinvestment Act
• Affirms the importance and benefit of CRA to the
  goals of expanding homeownership and
  producing and preserving affordable housing.
• Acknowledges the need for periodic
  reassessment of the rules governing CRA
  compliance, assignment and use of grades.
• Acknowledges the need for periodic
  reassessment of CRA’s coverage of mortgage
  lending activity.
 6/5/2002             An NAHRO AudioShort      129
    Affirm the Importance of the
 Government-Sponsored Enterprises

• In light of the demonstrated value of the
  GSEs, as well as their potential to help
  their partners expand homeownership
  opportunities among immigrants,
  minorities, and low-income households.
  The Commission:

6/5/2002        An NAHRO AudioShort       130
      Affirm the Importance of the
   Government-Sponsored Enterprises
• Affirms the ongoing importance of the
• Supports the current regulatory system for
  Fannie Mae and Freddie Mac
• Recommends that Congress and HUD
  support, full, safe and sound GSE activity in
  subprime, manufactured housing, home
  improvement, small multifamily, and
  development and construction lending.
  6/5/2002        An NAHRO AudioShort       131
           Roundtable Discussion
              • Questions will be taken from
                the audience.
              • Press 1 on your handset to
                enter into the question
              • Questions will be answered
                in the order in which they are
6/5/2002           An NAHRO AudioShort      132
• NAHRO’s Network Central for further
  discussion and information sharing on this
  and other topics at:

• NAHRO’s DirectNews for up to date news on
  HUD NOFA’s, regulations, PIH notices,
  guidebooks, studies and reports at:

  6/5/2002        An NAHRO AudioShort       133
             Wrap-Up (continued)
• Programs and Policies – NAHRO’s
  Section 8 programs and policies web page
  for a veritable cornucopia of information on
  all things Section 8 at:

  6/5/2002        An NAHRO AudioShort        134
                  • Thank you for
                    participating in the
                    NAHRO AudioShort
                  • Remember to fax or
                    email your evaluation
                    forms to NAHRO.
                  • NAHRO’s Summer
                    Conference will be in
                    New York City, on July
6/5/2002    An NAHRO AudioShort          135

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