- American Bankers Association Urges CFPB to Take Down Mortgage Calculator
- Enterprise Community Partners: Enterprise’s Comprehensive Overview and Budget Chart of Affordable Housing and Community Development Proposals in the FY 2016 President’s Budget
- National Association of Realtors Pushing for Commercial Use of Drones
- National Low Income Housing Coalition: Housing Wage Calculator
- Urban Institute: FHFA’s Federal Home Loan Bank Members Proposal Overshoots the Mark
Tag Archives: affordable housing
Housing in Smart Cities
I attended an interesting research seminar led by Anthony Townsend yesterday at NYU’s Center for Urban Science and Progress (conveniently located in downtown Brooklyn). Professor Townsend is affiliated to NYU’s Rudin Center for Transportation Policy & Management. He discussed his recent book, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia. Townsend argued that the 21st century will be defined by two global trends – urbanization of the world’s population, and ubiquitous computing. He traced the origins of the “smart cities” movement, its goals and the problems it faces.
As noted on Amazon, the book argues that
cities worldwide are deploying technology to address both the timeless challenges of government and the mounting problems posed by human settlements of previously unimaginable size and complexity. In Chicago, GPS sensors on snow plows feed a real-time “plow tracker” map that everyone can access. In Zaragoza, Spain, a “citizen card” can get you on the free city-wide Wi-Fi network, unlock a bike share, check a book out of the library, and pay for your bus ride home. In New York, a guerrilla group of citizen-scientists installed sensors in local sewers to alert you when stormwater runoff overwhelms the system, dumping waste into local waterways.
While Townsend’s talk did not apply his thesis to urban housing and his book only touches on it, it is certainly worth thinking through how Big Data can help provide more housing and better housing in big cities.
Housing is as “unvirtual,” or perhaps as “real,” a good as a good can be. But businesses such as Airbnb show how the virtual and the real can combine into something quite new. Obviously Airbnb does not solve many housing problems for residents of cities, but it does demonstrate that there is a brave new world ahead. Housing policymakers should try to discern what it is going to look like and how it can be harnessed as a force of civic good.
Who Benefits from the Low Income Housing Tax Credit?
HUD’s Office of Policy Development and Research has released a report, Understanding Whom the LIHTC Program Serves: Tenants in LIHTC Units as of December 31, 2012. By way of background,
The Low-Income Housing Tax Credit (LIHTC) Program provides tax credits to developers of affordable rental housing. The tax credits are provided during the first 10 years of a minimum 30-year compliance period during which rent and income restrictions apply. The LIHTC Program, although established in the U.S. Internal Revenue Code (IRC), is structured such that state-allocating agencies administer most aspects of the program, including income and rent compliance, with the Internal Revenue Service (IRS) providing oversight and guidance. Local administration allows states to address affordable housing needs specific to their populations. (1)
Here are some findings of note:
- Approximately three-fourths of reported households include disability status for at least one household member.
- 36.4 percent of reported LIHTC households had a least one member under 18 years old.
- Nearly 33 percent of reported LIHTC households have an elderly member, and 28.6 percent of reported LIHTC households have a head of household at least 62 years old.
- The overall median annual income of households living in LIHTC units was $17,066, ranging from $8,769 in Kentucky to $22,241 in Florida. By comparison, the median income of HUD-assisted tenants was $10,272 in 2012.
- Approximately 60 percent of reported households nationwide had incomes below $20,000.
- The study found that approximately 39 percent of all LIHTC households paid more than 30 percent of their income for rent, thus making them housing cost burdened. Ten percent of all LIHTC households faced a severe housing cost burden, paying more than 50 percent of their income towards rent.
- In 23 states, HUD was able to collect some data on the use of rental assistance in LIHTC units, which can eliminate cost burden for households who have it. Approximately half of reported households receive some form of rental assistance, with the greatest use in Vermont (64 percent) and least use in Nevada (23 percent).
The Housing and Economic Recovery Act of 2008 requires that this information be collected on an ongoing basis. It should be of great value as policymakers formulate federal housing policy for low-income households going forward.
Location, Location, Location of NYC Affordable Housing
NYU’s Furman Center has released a white paper, Housing, Neighborhoods, and Opportunity: The Location of New York City’s Subsidized Affordable Housing. The report opens,
Rent burdens for low- and moderate-income renters continue to grow in New York City, inviting calls for more affordable housing. While the primary goal in developing affordable housing should arguably be to provide safe housing at a reasonable cost so that households have more residual income available for food, medicine, transportation, and other essential goods, housing programs also take people to particular neighborhoods. New York City neighborhoods provide widely varying access to services and opportunity. Thus, city policymakers need to pay attention not only to the number or quality of subsidized, affordable units produced, but also to the characteristics of the neighborhoods where those units are built. (1)
In order to provide some data about that, the paper examines where 235,000 units of subsidized rental housing are in New York City. Unsurprisingly, many of the units are in neighborhoods like Upper Manhattan, the South Bronx and Central Brooklyn where land costs were historically low.The paper studies important characteristics of neighborhoods where the subsidized housing stock is located: isolation from the rest of the City; student performance; public amenities like parks; public safety; poverty; and housing cost. It also looks at how these characteristics have changed in the 2000s.
One key finding from the report that will be of interest to those who think about how New York City is changing over time: tens of thousands of properties have opted out of affordability restrictions, particularly in more expensive neighborhoods like Manhattan below 96th Street, and it looks like tens of thousands more will opt out over the next decade.
As the Mayor’s team develops its affordable housing strategy of building and preserving 200,000 units of affordable housing, this report presents some sobering data on the affordable housing challenges that the City faces. My takeaway is that the City should be doing more to encourage housing construction more generally to increase the overall supply, in addition to subsidizing affordable housing directly. Subsidies will never create enough units on their own to house all of the people who call and want to call NYC “home.”
Housing Subsidies For Those Who Need Them
The National Low Income Housing Coalition has posted Aligning Federal Low Income Housing Programs with Housing Need. The Executive Summary goes right to the heart of the matter:
The number of renters in the United States has steadily increased since 2006 and will continue to rise as new households form in the post-recession economy. In 2012, one out of four renter households had incomes at or below 30% of the area median income (AMI) for a total of 10.3 million households categorized as extremely low income (ELI). In the same year there were just 3.2 million units affordable and available to ELI households, creating a shortage of 7.1 million rental units affordable to these households.
Despite this evidence of a substantial need for deeply affordable rental housing, the low income housing resources that are provided by the federal government are only able to reach 23% of the eligible population. (iii)
This study looks at the extent to which the Low Income Housing Tax Credit (LIHTC), the HOME program and the Federal Home Loan Banks’ Affordable Housing Program (AHP) serve ELI households. It finds that in general, “these three programs do not serve ELI households on their own. Their ability to serve ELI households depends on the addition of one or more forms of subsidy, usually housing choice vouchers (HCV).” (iii)
The study identifies common themes from its research on this topic:
- Developers layer multiple funding sources while adapting to rapidly changing political and fiscal environments. Many also rely on non-traditional resources, such as private donations, to fill funding gaps.
- Reducing or eliminating mortgage debt is critical to be able to serve ELI households.
- Cultivating strong local partnerships is a key factor affecting developers’ ability to serve ELI households. Often, local jurisdictions that have prioritized affordable housing are willing to donate land or property at a low cost.
- Cross-subsidization is an important strategy used by many developers committed to inclusive properties that serve ELI households. This strategy incorporates units affordable to ELI households into projects containing other units occupied by households with a broader mix of incomes. The rents paid by higher income households supplement the overall operating expenses of the project, compensating for the lower rents that ELI households can afford.
- While the case studies highlighted some very effective strategies for serving ELI households without the use of vouchers, there is not one model that can be easily replicated. (iii-iv)
None of this is particularly earth shattering, but it is useful to to look into this topic in a systematic way. The Coalition hopes that this report “will contribute to the broader conversation about simplifying the process of financing affordable housing developments, refining existing programs so that they incentivize developers to serve ELI households, and finding ways to fund the ongoing operating costs of units that do serve ELI renters.” (iv)
As an off-the-cuff response, I wonder if the nation’s affordable housing agenda is benefited from such a complex funding environment for housing for extremely low income households. Can it just be funded more comprehensively, acknowledging the reality that it requires deep subsidies from the get-go? What is the opportunity cost of requiring developers to devote so much time to creating such complicated deal structures? In the current political environment, I doubt that affordable housing advocates have the stomach to raise these questions, lest Congress decides to cut back affordable housing subsidies even further. But in the long term, these are questions worth asking.
Reiss on Drop in FHA Premium
Law360 quoted me in FHA Premium Cut Sets Up Fight Over Future Of Housing (behind a paywall). It reads in part,
President Barack Obama’s plan to lower premiums on Federal Housing Administration insurance has rekindled a battle with Republicans over the rehabilitation of the recently bailed out government mortgage insurer and the government’s role in the U.S. housing market more broadly.
Obama on Thursday officially laid out a plan that would see the FHA charge borrowers half a percentage point less on mortgage insurance premiums beginning this month in a move to boost affordability for the low- and middle-income borrowers who traditionally rely on FHA-backed mortgages.
The announcement came as the FHA continues to recover from a post-financial crisis shortfall that saw the long-standing program receive a $1.7 billion bailout from the U.S. Department of the Treasury in 2013, the first time the FHA has needed federal support.
Obama’s move on mortgage insurance premiums could make the road to a secure FHA take that much longer, and, coupled with earlier policy changes by the Federal Housing Finance Agency on mortgages backed by Fannie Mae and Freddie Mac, set up a renewed fight with Republicans over government support for the housing market.
“What’s at stake is not just housing prices and mortgage rates,” Brooklyn Law School professor David Reiss said. “What’s implicit of all of this is: What’s the appropriate role of the government in the housing market?”
The president’s plan would see the FHA charge borrowers 0.85 percent annual premiums on their mortgage insurance, down from the 1.35 percent they currently pay. First-time homebuyers will see a $900 drop in their mortgage payments each year under the new policy, according to a fact sheet released Wednesday by the White House.
“It’ll help make owning a home more affordable for millions” around the country, Obama said in a speech in Phoenix on Thursday.
Housing analysts said that the move could help boost the housing market at the margins but would not entice a large number of first-time buyers to get into the housing market.
The lower mortgage insurance premium will prove to be “marginally beneficial for the average borrower, in our opinion, and consequently, we do not believe this news … is a catalyst for higher housing demand and higher earnings estimates,” Sterne Agee analyst Jay McCanless said in a note Thursday.
But what the rate cut does is put in clear relief Obama’s plan to boost the housing market and provide a strong government role in that key economic sector, even if it means potentially putting added pressure on the agencies that provide government assistance to the housing market. Those agencies include the FHA as well as the Federal Housing Finance Agency and the two failed mortgage giants over which it has authority, Fannie Mae and Freddie Mac.
“The tension is between financial responsibility and public policy about housing,” Reiss said.
In the FHA’s case, lowering the mortgage insurance premium is likely to increase the amount of time that the agency will need to get to a 2 percent capital level that is mandated by Congress.
An independent audit of the FHA’s finances released late last year found that the agency’s Mutual Mortgage Insurance Fund stood at a positive $4.8 billion as of the end of September after being as much as $16.3 billion in the hole in 2012.
Still, while the gain on the fund has been real, its capital ratio stood at only 0.41 percent in that period, far lower than the mandated 2 percent.
* * *
Obama had backed congressional efforts to eliminate Fannie Mae and Freddie Mac and boost private capital in the mortgage market, but they failed amid disagreements between the Senate and House Republicans. The issue is now largely dormant.
That has left a vacuum for Obama to fill, Reiss said.
“Because Congress refused to act, Republicans are going to be stuck with a more activist government because they refused to come to the table and put together a proposal that can pass,” he said.
Reiss on Housing Unaffordability
TheStreet.com quoted me in Homeownership Unaffordable For Most Americans in Major Cities. It reads in part,
Homeownership remains unaffordable for most Americans who are living in major cities.
A median-income household can only afford a median-priced home in 10 of the 25 largest U.S. metropolitan areas, which is actually an improvement from 2013, according to a report by Interest.com, the Chicago-based consumer financial information website.
The most affordable metro areas area Atlanta, Minneapolis and St. Louis while San Francisco is the least affordable since the median income in the city is 46% less than what is required to buy a median-priced home in the area. Median-income households in San Diego, New York and Los Angeles don’t fare much better.
* * *
Many potential homeowners should evaluate what kind of mortgage they really need, said David Reiss, a law professor at Brooklyn Law School. Since most homeowners only stay in their house for an average of seven years, getting a traditional 30-year mortgage may not be the solution and an adjustable rate mortgage which resets after a period of years could be more affordable.
“This advice holds particularly true for families that are thinking about having more kids, since they may move sooner than they think if they come to realize that they want more space,” he said.
