Over the past decade, there have been several significant events that transformed the affordable housing industry. Affordable Housing Finance asked its Editorial Advisory Board as well as other industry leaders to choose the biggest news stories of the 2000s, with many of the headlines coming out of the past two years connected to the nation’s economic crisis.
1. The housing bubble peaked in the middle of the decade, housing prices started to fall, and then default rates on subprime and adjustable-rate mortgages began to rise. The subprime foreclosure crisis may have become evident in 2007, but its effects continue to this day. More than 3.2 million households received mortgage delinquency notices just this year, according to RealtyTrac.
The biggest headline was the rise and fall of the American housing market and the role it played in the global economy and the low-income housing tax credit (LIHTC) market, says Jack Gardner, president and CEO of The John Stewart Co.
Doug Bibby, president of the National Multi Housing Council, said his main headline was the run-up in asset values on single-family and multifamily assets, mostly hurting the affordability on the single-family side. “People threw fundamentals out the window,” he said. Now, asset values have come down somewhat on the single-family side, but radically on the multifamily side.
2. Also on top of the list was the decline of the LIHTC equity market. Fannie Mae and Freddie Mac’s departure from the LIHTC market—the government-sponsored enterprises (GSEs) had accounted for more than 40 percent of the market—as well as the decreased activity of some other major investors continue to hinder affordable housing production. Prices continued to fall into the $0.60s range throughout 2009, and many developers were unable to obtain equity investors for their projects.
3. The financial meltdown on Wall Street in 2008 didn’t help matters for the LIHTC industry. The government’s seizure of Fannie Mae, Freddie Mac, and AIG, the bankruptcy of Lehman Brothers, and the disappearance of Washington Mutual, Wachovia, and Merrill Lynch rocked the capital markets. Debt is still harder to obtain, and underwriting is even stricter.
4. President Barack Obama signed the massive $787 billion American Recovery and Reinvestment Act in February 2009, which included funding and program changes aimed at jump-starting the stalled LIHTC market. The government provided $2.25 billion for the Tax Credit Allocation Program, which has furnished much-needed gap financing for LIHTC developments allocated from 2007 to 2009. Another change was the tax credit exchange program, which has allowed developers to exchange their unsold credits for $0.85 per tax credit dollar. Plus, $4 billion was awarded for public housing capital funds.
5. On July 30, 2008, President George Bush signed the Housing and Economic Recovery Act (HERA), which at the time, created some of the most significant changes to the LIHTC program in years. HERA increased the LIHTC credit ceiling for 2008 and 2009 by $0.20, increased the tax-exempt bond ceiling by $11 billion nationally, and provided permanent alternative minimum tax relief for LIHTCs and bonds. It also created a new regulator for Fannie and Freddie called the Federal Housing Finance Agency, modernized some Federal Housing Administration multifamily programs, and created the National Housing Trust Fund.
6. The confirmation of Shaun Donovan, former head of the New York City Department of Housing Preservation and Development, this year as secretary of the Department of Housing and Urban Development (HUD) is a highlight for many in the industry. “[Donovan’s] intellect, vision, and understanding of HUD’s strengths and weaknesses will change the future course of the department in ways that we industry folks only dreamed about,” said Denise Muha, executive director of the National Leased Housing Association.
7. Previous to the LIHTC crash, a bubble existed relative to equity pricing and investor yield, said R. Lee Harris, president and CEO of Cohen-Esrey Real Estate Services, LLC. From 2005 to 2007, the pricing was extraordinarily high, with some projects receiving more than $1 per tax credit dollar, and yields were extraordinarily low
8. Sunia Zaterman, executive director of the Council of Large Public Housing Authorities, said the last decade has seen a sea change in how public and affordable housing is approached, driven by the HOPE VI program. The success has been the result of bipartisanship, innovation, creativity, and new public-private partnerships.
9. The greening of the affordable housing industry also was a major development in the 2000s. State housing finance agencies continued to incorporate sustainable design measures into their qualified allocation plans for LIHTCs throughout the second half of the decade. And most new affordable housing developments of late are energy-efficient with various other green building features, including photovoltaic panels and geothermal heating and cooling systems.
One of the biggest proponents is Enterprise Community Partners, Inc. In 2004, Enterprise created its Green Communities Criteria, the first national green building program for the affordable housing industry. In five years, the Enterprise Green Communities initiative invested $700 million to build and preserve nearly 16,000 green affordable?homes. It continues to lead the green charge into the 2010s with a $4 billion commitment to launch the next generation of its Green Communities initiative and a call to action to make all new and existing affordable housing green by 2020.
10. And before the economic crisis was even a thought for the nation, the last significant news story comes from the end of 2000. The LIHTC and housing bond volume caps were increased and indexed to inflation. In an interview with Affordable Housing Finance in September, John McEvoy, former executive director of the National Council of State Housing Agencies, said this event propelled the tax credit into modern times.