SEATTLE - The discussion about affordable housing needs to change, according to Kim Herman, executive director of the Washington State Housing Finance Commission (WSHFC).
Instead of talking about budgets and cutbacks, he wants to focus on how investments in affordable housing benefit the overall community. That’s one of the issues he plans to tackle as the new president of the National Council of State Housing Agencies (NCSHA), an organization that represents the nation’s housing finance agencies (HFAs).
Affordable Housing Finance magazine recently caught up with Herman to find out what’s happening at his agency and other HFAs.
Q What are the big issues that housing finance agencies are facing?
A In my speech to the NCSHA annual conference, I quoted several HFA directors that were highlighted in your June 2006 magazine citing issues such as extremely high housing costs, NIMBY attitudes and negative stereotypes of affordable housing, the diversity of problems between urban and rural areas, rapid population growth and the loss of existing subsidized rental units. I would add to these—rapid price increases for building materials, decreasing federal dollars, and increasing development requirements at the local level. I could get more specific about the problems faced by individual states, but almost every problem we are struggling with falls into one of these categories.
Q What do you see as the solutions to these challenges?
A I think one of our first efforts has to be convincing policymakers at all levels that affordable housing is a key ingredient to creating and maintaining livable communities. When middle-income families with jobs can’t afford to buy a home because prices are just too high and low-income families can’t find an affordable place to rent, even when they have a rental voucher, these problems will have a negative impact on the whole community.
There is a direct correlation between the availability of affordable housing and jobs that has been well documented. New housing construction is a primary driver of state and local economies. Businesses lose productivity when their workers have to commute long distances every day, and those commutes add to the congested highways and traffic problems in cities big and small. Communities without affordable housing choices find themselves losing employers, losing workers, and losing a quality of life that comes from an economically diverse environment.
We need to do a better job of making the connection between decent, affordable housing—the kind HFAs are financing everyday—and dynamic, livable communities. Helping policymakers understand these relationships; helping them understand that affordable housing is where new jobs spend the night; helping them understand that children from stable homes do better in school; making these connections is key to getting the resources and support for our affordable housing programs that we need.
Q Are there any new, emerging issues for HFAs?
A Yes, there are some new issues. One issue for many states is the exorbitant cost of housing at all levels. How do you help people under 120 percent of median income buy houses that cost $600,000 to $1.5 million? In Florida, California, Hawaii, New Jersey, Massachusetts, and Washington house prices have gotten so out of hand that our normal programs just can’t do the job. HFAs are looking at new financing programs and new resources to deal with these high housing costs. Another emerging issue is the realization that stable housing tied to services is a necessary ingredient for ending homelessness. You now hear communities talking about [the growing strategy of implementing] “housing first” [policies] before they address the social problems and employment issues that homeless households must deal with to move back into the mainstream of life. While many HFAs have been housing the homeless for years, these changes are putting more demands on HFAs every day.
Two other emerging issues are employer-assisted housing–where do the teachers, clerks and hospital workers live– and, how are we going to house the aging baby-boomers that will be arriving at our doorstep over the next 15 to 20 years? While these issues, like ending homelessness, aren’t new, they are taking on more importance as we struggle with rapidly changing markets and aging populations across the nation.
Q What are your priorities as the new president of NCSHA?
A My first priority is to change the housing discussion at the state and national levels. Rather than talk about budget cuts and cutting back housing programs, we need to be talking about how investments in affordable housing contribute to economic growth, stabilize families, and build sustainable communities. Affordable housing is an investment in our future. To help make this happen, NCSHA just created a communications task force to develop the messages that will convince the public and members of Congress that we have an affordable housing crisis, and we have to act now before it gets worse. That is my No. 1 priority. Beyond that I want to support NCSHA’s education and advocacy programs and make sure NCSHA is ready to support the work of HFAs well into the future.
Q Tax credit prices have declined since the recent highs of about a year ago. What concerns do you have about the equity market? How does the equity market affect the application and allocation process for HFAs?
A I understand that pricing is going down slightly as investors seek higher yields. However, as you pointed out, we are coming down from all-time highs. The fact that we were getting 100 cents on the dollar, or even more in some cases, as recently as a year ago, [meant] we could expect some adjustment in the market. Given where the value of the credit started and even where we were five years ago, we are still fine. HFAs have to continue to allocate our credit resources to solid, viable housing developments. If we do that, I think the market will continue to invest in good projects even if the prices adjust a little.
Q What’s a new program or a recent move that WSHFC made that other HFAs can learn from?
A We’ve made several changes in our single-family programs, including adding a lender-paid mortgage insurance product to compete with 80/20 loan products. In other areas, we’ve made a strong tax credit commitment to the HOPE VI redevelopment projects in our state. Another change in our multifamily and nonprofit bond programs has been to encourage financing for assisted-living and continuing-care retirement communities that will serve our growing elderly population. As the baby boomers age, having sufficient age-appropriate housing will be more important than ever.
Q How is your agency different than it was a year ago?
A First, we are busier. Our homeownership programs have become more popular as conventional rates have increased, and we have more conventional loans in our portfolio than ever before. On the multifamily side, our business has been very strong, which is a little different than what I have been reading about in other areas of the country. We are also seeing a significant increase in elderly projects. Between 30 percent and 40 percent of our multifamily business for the past two years has been elderly housing. Finally, our homeownership programs are back on the profitable side of the ledger after a significant sell-off of our loan portfolio during the refinance boom. Overall, we are doing very well.
Q Where do HFAs go from here?
A I think HFAs are being recognized by many governors, state legislators, and members of Congress as efficient, effective housing finance organizations that can help solve housing problems and contribute to state and local economies at the same time. Every day HFAs are being asked to become more active in the operation and financing of new housing and economic development programs that provide more affordable housing, more jobs, more stable families, and better communities. HFAs are good at managing risks and using financial investments to solve problems. We also recognize that some of the national financial markets need us as much as we need them, and we can negotiate better investments to achieve our goals. Overall, I think HFAs are ready to make larger contributions at the state and local level by using their expertise to make wiser housing and community investments.