The House Financial Services Committee has approved legislation (H.R. 2985) to create a national affordable housing fund, bringing advocates one step closer to their goal of a dedicated funding source for housing aid.
The funding is still contingent on the passage of government-sponsored enterprise (GSE) reform and Federal Housing Administration (FHA) modernization legislation, which would channel money from Fannie Mae- Freddie Mac portfolio holdings and FHA premium revenue into the trust fund. Those sources are expected to provide $800 million to $1 billion annually for affordable housing.
“The growing shortage of affordable housing is one of the most serious social and economic problems facing our country,” said Financial Services Committee Chairman Barney Frank (D-Mass.) after the committee approved the bill, 45-23. “Given our severely constrained fiscal realities, we are today doing the best we can to address this—creating a lowincome housing trust fund that will be paid for in ways that do not draw from federal tax revenues.”
In marking up the bill, the committee rejected two amendments that would have effectively gutted the trust fund by tying its funding to the regular appropriations process. One would have required the GSE-FHA funding to be offset with reduced federal spending in other areas, while the other would have shifted the program to Title II of the Cranston- Gonzalez Act, to be funded through annual appropriations.
The goal of the trust fund is to build, rehabilitate, and preserve 1.5 million housing units over 10 years. Sixty percent of the trust fund money would be provided as grants to participating local jurisdictions and 40 percent to states, Indian tribes, and “insular areas,” which are U.S. territories plus three former U.S. dependencies. A proportionate amount of the state funding would have to go to rural areas.
The funds would be allocated according to affordable housing needs through a formula to be developed by the Department of Housing and Urban Development (HUD) that would take into account population, percentage of families living in substandard housing, percentage of families paying more than 50 percent of income for housing, percentage of persons in poverty, housing construction costs, vacancy rates, age of the housing stock, and efforts to increase the supply of affordable rental housing.
All funds would have to be used for families with incomes below 80 percent of state or local median, but the income ceiling would be reduced to 60 percent of median in any year where the available funding is less than $2 billion. At least 75 percent of the funds would have to go to families at below 30 percent of the area median income (AMI) or the national poverty level, whichever is higher, and at least 30 percent would have to go to families below the income limit for Supplemental Security Income benefits.
In addition, to promote mixedincome housing, at least 10 percent of the trust fund money would have to go to families with incomes higher than 50 percent of the AMI.
Trust fund money could be used for housing construction, rehabilitation, acquisition, preservation, and operating assistance. Funds could be used for affordable rental housing and for downpayment and closing cost assistance for first-time homebuyers.
Grantees would have to provide a match of 12.5 percent of the trust fund allocation if the matching funds come from state, local, or private resources and 25 percent if the match is from federal sources. Up to 33 percent of the match could be provided through commitments to provide services for residents.
HUD could reduce or waive the match requirement for recipients in fiscal distress, for disaster areas, or for local jurisdictions that provided a zoning variance or other waiver of regulatory barriers to support affordable housing.
FEMA transfers housing assistance responsibility
HUD is taking over responsibility for housing assistance to families displaced by hurricanes Katrina and Rita under an agreement with the Federal Emergency Management Agency (FEMA).
The disaster housing assistance program (DHAP) will be administered by local public housing agencies (PHAs) under guidance provided by HUD in Notice PIH 2007-26.
The program will provide aid to displaced families who are receiving or are eligible to receive FEMA rental assistance. Participating families must receive ongoing case management services. PHAs will enter into agreements
with FEMA to administer the program beginning Nov. 1, although they have already begun pre-transitional case management for families to be assisted. FEMA, rather than the PHAs, will determine if families are eligible for the program.
Families can receive DHAP aid in their units if the owner is willing to participate in the program. If not, the family must move to get assistance. Families may also move voluntarily and receive assistance in the same PHA’s jurisdiction or in another jurisdiction where a PHA is administering the program.
The monthly rent subsidy for participating families will be based on the higher of the Sec. 8 fair market rent (FMR) or the voucher payment standard established by the PHA. Also, if a family was receiving FEMA rental assistance immediately before the transition to DHAP, the rental subsidy won’t be less than the FEMA aid. In no case, however, can the rent subsidy exceed the rent to the owner under the lease.
Family income will be disregarded in calculating the DHAP subsidy. A family may lease a unit where the rent exceeds the subsidy amount, but the family will be responsible for the additional cost. Tenants are also responsible for any utility costs that aren’t included in the rent.
The DHAP will terminate on March 1, 2009, and the subsidy will be phased down over the preceding year. Beginning March 1, 2008, the subsidy will be reduced by $50 and by an additional $50 each month until the subsidy is eliminated or the program terminates, whichever comes first. Families joining the program after March 1, 2008, will be responsible for the incremental tenant contribution in effect when they start. For example, a family leasing a DHAP unit April 1, 2008, would have to pay $100 plus any other amount not covered by the program.
A family could request a hardship exemption from the incremental rent subsidy reduction if the applicable tenant payment under the transitional requirement would exceed 30 percent of gross monthly income. Any amount paid by the family because the unit rent exceeds the FMR/payment standard limit would be disregarded.
HUD establishes green initiative under Mark-to-Market program
HUD has established a national pilot program to encourage Sec. 8 owners participating in the Mark-to-Market (M2M) program to use green building principles for energy efficiency, recycled materials, and indoor air quality, including the techniques employed in the department’s Healthy Homes Initiative.
Participation in the program will be voluntary.
Under the M2M restructuring program for FHA-financed Sec. 8 projects with above-market rents, HUD generally finances 80 percent of most rehabilitation items and 97 percent of certain “significant additions” to the property. Under the green initiative, HUD will designate substantially greener materials, appliances, and systems as significant additions.
This designation will reduce the owner’s required contribution to the rehabilitation costs from 20 percent to as little as 3 percent. If the property management company has a Leadership in Energy and Environmental Design accredited professional, the department may also increase the incentive performance fee to support ongoing property maintenance.
HUD won’t specify the green elements to be adopted for any property, relying instead on the owner and the M2M participating administrative entity to determine the costs and benefits of specific alternatives.
However, the department is establishing threshold principles, including the owner’s commitment to maintain the green property beyond the 20-year schedule of repairs and replacement. The property would have to be maintained for at least as long as the extended term of the use agreement (generally 30 years, although sometimes as long as 50 years).
The owner would also have to prepare a green operating and maintenance plan that includes resident involvement and outreach, integrated pest management, baseline green requirements for ongoing operations, and monitoring of energy use, water consumption, and environmental conditions.
Barry G. Jacobs is editor of Housing and Development Reporter, the nation’s premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments,” and an always up-todate compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law.