The Obama administration has a golden opportunity to make the Department of Housing and Urban Development (HUD) a more efficient agency for the production of affordable housing, no small task given the current state of the department.
Recent legislation making the Federal Housing Administration’s (FHA) multifamily programs work better with tax credits is a great first step, but leadership needs to be in place that will refocus HUD’s priorities, said panelists at “HUD at the Crossroads,” a session at AHF Live.
“It’s so important that we have leadership that can make efficient what has been old and inefficient for many years,” said David Reznick, founder of the Reznick Group, an accounting and business advisory firm focused on housing. “A team needs a great coach.”
But the new administration will take hold of an agency in tatters. The HUD budget has not increased significantly in many years, and much of HUD’s staff has recently retired, depleting the department of financial and intellectual resources. The HUD staff is now down to about 8,000 people—15 years ago, that figure was closer to 15,000, said George Weidenfeller of law firm Goulston & Storrs and a former longtime deputy general counsel at HUD.
The new administration needs to delegate more authority to field offices to streamline the business, while opening lines of communication with the development community by issuing more guidance, said Weidenfeller.
Obama’s background working on housing policy in the Illinois state Senate bodes well for the development community, said Shel Schreiberg, partner at law firm Pepper Hamilton, LLP, and a former HUD veteran. The administration’s working group on housing includes Valerie Jarrett, CEO of affordable housing developer The Habitat Co.; Ingrid Gould Ellen, a professor of public policy and urban planning at NYU; and Eleanor White, former chief of MassHousing.
With such a sympathetic administration, hopes are high that the department can transform itself into more of a problem-solver than an impediment to affordable housing production. “HUD’s mission needs to be redefined as a provider and helper, not a regulator,” said Schreiberg. “The current staff seems more focused on regulations than solutions.”
The Housing and Economic Recovery Act of 2008 included many key provisions for making the FHA’s multifamily programs work better with tax credits. The legislation streamlined requirements and processes that once made working with HUD a nightmare for most developers (for more on these provisions, visit www.housingfinance.com/ahf/articles/2008/nov/1108-finance.htm.
The panelists were hopeful that the new administration could enact those and other changes that would make HUD a viable financing source for tax credit developers. And with the capital markets in flux, developer interest in the FHA is rising. Developers can still get 90 percent loan-to-value, 1.11x debt-service coverage ratio, nonrecourse construction-to-permanent financing through the agency’s flagship Sec. 221(d)(4) program, for instance.
“We’ve seen developers who would never consider doing a HUD loan in the past now saying, ‘What can I do to get a HUD loan?’” said Carolyn McMullen, who runs the Midwest region for FHA lender Prudential Huntoon Paige.
