How Housing Counseling Creates More Neighborhood Choice for Buyers

by Marietta Rodriguez
NeighborWorks

The US housing system simultaneously is one of the most efficient markets in the world and one of the most complex.

While the efficiency offers consumers many opportunities, the complexity makes it more likely that consumers will make housing and mortgage choices that are not in their best interests. However, our experience at NeighborWorks® shows that housing counseling programs can greatly increase buyers' ability to find and finance homes that are right for them.

With transparent pricing, multiple participants, and regulations that help ensure its stability and strength, the US housing system has many of the attributes of an efficient market. Moreover, as the papers in this panel describe, new technologies are making it even easier to access information about both homes for sale and ways of financing the purchases of those dwellings.

However, many consumers find the home buying process to be daunting. Illustratively, a recent household survey conducted for NeighborWorks® America found 74 percent of Americans (and more than 80 percent of millennials) think that the home buying process is complicated. The survey also found that while the overwhelming share of Americans (including millennials) consider homeownership a key component of the American dream—especially people of color and millennials—thousands of would-be buyers are shut out of the market because of confusion about down payment requirements, lack of information about credit standards, and the burden of student loan debt. Moreover, the complexity of the housing system creates the possibility that consumers who are in the market may make housing and mortgage choices that are not in their best interests, including limiting their home choices without looking at all of the available options and selecting mortgage products that are unsuitable or too expensive.

Part of the problem may be that when seeking information on buying a home, Americans are most likely to consult a real estate agent, search the web, or talk with friends or family who are homeowners. In contrast, only about 40 percent of adults (and half of millennials) are likely to seek counsel from a non-profit organization, such as the many NeighborWorks® member organizations that provide advice on buying a home (and only a fifth said they were very likely to do so).

This is unfortunate because our experience at NeighborWorks® strongly suggests that working with certified housing counselors (at a NeighborWorks® Homeownership Center or other HUD-approved housing counseling agencies) can help consumers make good choices about whether and what to buy, how to finance those purchases, and how to maintain their new homes. Housing counselors do so by working one-on-one with potential homebuyers, helping them develop a budget and to strengthen their credit so they can maximize their chance of getting the lowest possible mortgage rate. Moreover, because they are tightly connected to the communities they serve, housing counselors are aware of  trends practically on a block-by-block basis, knowledge that can help a homebuyer sift through the mountains of data on everything from traffic patterns, crime statistics, and school ratings to which community is closest to the best green space and other amenities.

Housing counselors also can help consumers gain access to a myriad of down payment assistance programs and mortgage products that can make it possible to either spend less than they had planned on mortgage payments or to purchase higher priced homes in more desirable communities. The down payment assistance programs, for example, can not only reduce the time and amount of cash consumers must save on their own to buy a home, they can also reduce the amount they need to borrow, which can lover monthly mortgage payments. Knowing about these programs may be especially important for non-White consumers. According to the 2017 NeighborWorks® America Housing Survey, the average African-American and Hispanic consumer assumed that the minimum down payment generally was a little more than 20 percent, an amount substantially higher than the typical down payment made by first-time homebuyers or the 3.5 percent down payment requirement for an FHA loan.

Moreover, because the role of a housing counselor is to help a homebuyer make the right choice for themselves, a housing counselor is not limited to a small set of mortgage choices the way a mortgage officer at a particular lender would be. For example, the largest mortgage lenders originate very few loan products that are offered by state housing finance agencies (HFAs). These HFA mortgages often have strong, but more flexible underwriting criteria that can help overcome mortgage denial issues that may happen with standard mortgage products and underwriting policies.

Combined, all this assistance can help ensure that homebuyers are more likely to choose affordable homes and mortgages, according to a 2013 study done for NeighborWorks® by Neil Mayer and Associates. The study, which looked at 75,000 homeowners who received housing counseling from NeighborWorks® organizations, found that compared to similar homeowners who did not receive counseling, homeowners who received counseling were one-third less likely to fall seriously behind on their mortgages. Such data, and other findings from the study, confirm that housing counseling allows consumers—particularly low and moderate-income and minority consumers—to access and remain in affordable homes in a wider and more diverse array of neighborhoods and communities.

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Papers from the A Shared Future symposium are available on the JCHS website. 

Rebuilding from 2017's Natural Disasters: When, For What, and How Much?

by Kermit Baker and
Alexander Hermann

The bulk of repairs to homes damaged by this year's record-setting disasters will not be done until 2019 or 2020, according to our analysis of post-disaster spending between 1994 and 2015. The analysis, which looked at the estimated annual cost of natural disasters alongside annual estimates of disaster-related home repairs and improvements, suggests that an increase of $10 billion in total disaster losses any time in the previous three years is associated with about $300 million in additional annual spending on disaster-related home repairs and improvements.

Notes: Dollar values are adjusted for inflation using the CPI-U for all items. Natural disaster costs include only natural disasters that generate over $1 billion in damages after adjusting for inflation.
Sources: JCHS tabulation of US Housing and Urban Development, American Housing Survey, and National Oceanic and Atmospheric Administration data.

The finding is significant because 2017 was an unusually destructive year. While inflation-adjusted, disaster-related damages averaged about $40 billion a year between 1994 and 2015, Hurricanes Harvey, Irma, and Maria together caused about $150 billion in damages, according to estimates from CoreLogic and Moody’s Analytics (Figure 1). Moreover, damages from 2017’s winter storms, droughts, and wildfires will push these numbers even higher. In fact, the total cost of 2017’s disasters could exceed damages from any year in the last two decades, including 2005, the previous record year, when Hurricanes Katrina and Rita (and a host of smaller but significant disasters) combined to cause more than $200 billion in damages (in inflation-adjusted dollars).

As in other years that were marked by particularly destructive storms and other disasters, this year’s damages should lead to a spurt in construction activity. Some of it will be construction of and renovations to infrastructure and commercial buildings. Some will be the construction of new single-family homes and multifamily housing units. And some will be disaster-related repairs and improvements to both owner-occupied and rental housing.

Extensive flooding from Hurricane Harvey in Port Arthur, Texas.

To estimate how much will be spent on post-disaster home repairs, and when that spending is likely to occur, we combined information on disaster-related damages reported by the National Oceanic and Atmospheric Administration (NOAA) with data on disaster-related home repairs and improvements for the same years found in the U.S. Census Bureau’s American Housing Survey (AHS). The AHS, as a survey of households, only asks owners to report spending on their homes. The comparison suggests that renovation spending continues to increase for about two to three years after the natural disaster occurs, and that an increase of $10 billion in disaster losses any time over the prior three years generates about $300 million in additional disaster-related home improvement spending during the year studied. If this pattern holds, the bulk of the spending from 2017 losses won’t occur until 2019 or 2020. But when it occurs, there is likely to be a substantial increase in spending on home renovations in those years.

While the delay between disaster losses and repair expenditures may seem unusually lengthy, it is consistent with a study funded by the U.S. Department of Housing and Urban Development (HUD) that examined the rebuilding that took place following Hurricanes Katrina and Rita. In a recent Joint Center blog on that study’s implications, our colleague Jonathan Spader (who worked on the initial HUD study) reported that only 70 percent of hurricane-damaged properties in Louisiana and Mississippi had been rebuilt by early 2010, five years after the storms. The study further found that 74 percent of owner-occupied homes had been rebuilt, compared to only 60 percent of the rental properties.

The delays are due to many factors. Insurance companies need to assess the extent of the damage and determine how much is covered. Home improvement contractors, stretched to the limit and suffering from a labor squeeze, must delay certain projects. Owners have to consider local housing and labor market conditions to determine if repairs or improvements make financial sense. Often, federal, state, and local government entities may slow down rebuilding while they decide whether it’s feasible and, if so, whether building codes and insurance guidelines should be more stringent.

Nevertheless, spending will occur and, when it does, it can be substantial. Illustratively, in 2015 (which came after a few relatively mild years for disasters) spending on disaster-related home renovations accounted for almost $11 billion of the $220 billion spent nationally improving owner-occupied homes according to the 2015 AHS. (Lightning and fires accounted for $2.4 billion of this spending, floods for $2.0 billion, and tornados and hurricanes for $1.6 billion. Winter storms, thunderstorms, earthquakes, and drought accounted for the remainder.)

In short, 2017’s hurricanes and other disasters are likely to result in substantial spending on rebuilding, repairs, and improvements to disaster-damaged homes. Moreover, while that spending will ramp up slowly, it is likely to stretch into next decade.

Rebuilding Housing in Harvey’s Aftermath: Two Lessons from Hurricanes Katrina and Rita

by Jonathan Spader
Senior Research Associate

As floodwaters finally subside in Houston, and as Florida residents prepare for Irma, residents, civic leaders, and policymakers can glean two important lessons from the intensive efforts to rebuild homes and communities after Hurricanes Katrina and Rita, two devastating storms that hit the U.S. in back-to-back succession in 2005. 

First, rebuilding residential properties is a lengthy process likely to take several years. Second, the rebuilding process will be especially lengthy for rental properties (as compared to owner-occupied homes), which could greatly affect the 950,000 renters (who account for 41 percent of households) in the greater Houston metropolitan area, as well as additional renters affected by Hurricane Harvey in elsewhere in Texas and in other states. The slower pace of rental rebuilding is due to several factors including both renters’ dependence on property owners to rebuild rental housing units and historical differences in the availability and terms of federal aid for rental property owners as compared to homeowners.

To be sure, the need for emergency assistance and shelter for displaced residents will continue for weeks to come. Nevertheless, Congress is already starting to discuss an aid package. Moreover, the extensive damage (and the need to reauthorize the National Flood Insurance Program before September 30) may spur new efforts to develop policies and programs to support housing recovery in the wake of future natural disasters. As policymakers, civic leaders, and local residents begin to focus on the rebuilding process, they might want to keep the following in mind.

Extensive flooding from Hurricane Harvey in Southeast Texas. Air National Guard photo by Staff Sgt. Daniel J. Martinez

1. Rebuilding residential properties takes time.

An initial lesson from Hurricanes Katrina and Rita is that the rebuilding process takes time, with many properties continuing to show observable damage several years after the storms had passed. In early 2010—almost five years after both hurricanes made landfall—a HUD-commissioned study that I worked on surveyed the exterior conditions of properties damaged by those storms. The survey produced representative estimates of the rebuilding outcomes of properties that experienced “major” or “severe” damage—defined by FEMA as $5,200 or more in storm-related damage—that were located on significantly-affected blocks—defined as a city block on which three or more properties experienced “major” or “severe” damage.

The survey found that 17 percent of hurricane-damaged properties in Louisiana and Mississippi still showed substantial repair needs as of early 2010, almost five years after the storms had hit. Almost half these properties did not meet the U.S. Census Bureau’s definition of a “habitable structure,” a housing unit that is closed to the elements with an intact roof, windows, and doors and does not show any positive evidence (e.g. a sign on the house) stating that the unit was condemned or was going to be demolished. Only 70 percent of hurricane-damaged properties in Louisiana and Mississippi were rebuilt by early 2010, and 13 percent contained cleared lots in which the damaged property had been removed from the parcel (Figure 1).

In the case of Hurricanes Katrina and Rita, the properties that still were damaged included some whose owners had received rebuilding grants through federal programs designed to aid housing recovery. The largest source of assistance following the 2005 hurricanes was the $18.9 billion special Community Development Block Grant (CDBG) appropriations passed by Congress between 2005 and 2008. Some portion of the properties with remaining damage likely also reflect abandonment by owners who moved elsewhere in the wake of the hurricanes. For such properties, funding for demolition, rehabilitation, and land banking may be necessary to transition the properties to a new use, and potentially to support efforts to encourage residents to rebuild in areas with lower flood risks.

Notes: Sample is representative of properties in Louisiana and Mississippi that experienced major or severe hurricane damage and that were located on significantly-affected blocks. Rebuilt structures are residential structures that do not show substantial repair needs as defined in Turnham (2010). Cleared lots contain an empty lot or a foundation with no standing structure. Damaged structures are residential structures that show substantial repair needs—and include all uninhabitable structures. Uninhabitable structures are residential structures that do not meet the Census definition of habitability. 

Source: Spader (2015).

2. Rental properties were rebuilt more slowly than homeowner properties.

A second lesson from the rebuilding process following Hurricanes Katrina and Rita is that rental properties were rebuilt more slowly than owner-occupied homes. This likely was due to several factors. While homeowners directly control the rebuilding progress of their home, renters are dependent on landlords’ rebuilding decisions. Smaller “mom-and-pop” landlords may also be slower to rebuild investment properties if their own home is also damaged. And policymakers have been wary of providing rebuilding assistance to rental property owners who did not purchase sufficient insurance.

Following Hurricanes Katrina and Rita, both Louisiana and Mississippi used the CDBG special appropriations for disaster recovery to create rebuilding assistance programs for homeowners and small rental property owners. (Texas, which faced less damage from Hurricanes Katrina and Rita, created only a homeowner program.) In both Louisiana and Mississippi, the homeowner programs covered much of the difference between the estimated cost to rebuild and the amount available to the homeowner from insurance and other rebuilding-assistance programs. Conversely, the grant programs for 1-4 unit small rental properties included a more complex set of eligibility requirements that included commitments for the rebuilt units to be rented to qualifying low- and moderate-income tenants. The result was that few rental property owners applied for and received rebuilding assistance, compared to widespread take-up of the homeowner assistance programs. While concerns about the incentive effects associated with bailing out under-insured investors are reasonable, a secondary effect was to reduce the number of rebuilt properties available to renters.

Figure 2 displays the share of hurricane-damaged properties on significantly-affected blocks that received a rebuilding grant through the CDBG-funded homeowner and small rental programs, along with the share of homeowner and small rental properties that were rebuilt by early 2010. The results show that 58 percent of hurricane-damaged homeowner properties in Louisiana and Mississippi received a rebuilding grant, compared to 10 percent of small rental properties. While this rental figure is limited to 1-4 unit small rental properties, a GAO report similarly found that federal assistance through CDBG, the Individual and Households Program, and the Home Disaster Loan Program together reached only 18 percent of all damaged rental units (including units in larger multi-family buildings), compared to 62 percent of damaged homeowner units. The rebuilding outcomes documented in the HUD-commissioned survey also showed sizable gaps, with 74 percent of homeowner properties rebuilt by early 2010 compared to 60 percent of rental properties.

 Source: Spader and Turnham (2014); Spader (2015)

A final question for policymakers is whether to use this opportunity to create a permanent program to support housing recovery following natural disasters. While Congress has relied on the CDBG program for this purpose since the early 1990s, its role is currently defined by the special appropriations legislation drafted following each individual disaster. Making disaster recovery a permanent function of the CDBG program (or creating some other permanent program for housing recovery) would allow HUD to develop permanent regulations and program guidance in anticipation of future disasters. While it is too late for this change to benefit victims of Hurricane Harvey, it might improve preparedness for the next disaster.

Pay for Success: Opportunities and Challenges in Housing and Economic Development

by David Luberoff
Senior Associate
Director

Pay for Success (PFS) initiatives have received widespread attention in the United States over the past several years. These outcomes-based projects – which generally do not pay service providers and government entities until and unless they achieve certain agreed upon outcomes – hold great promise in a variety of fields, including housing and community development, notes Omar Carrillo Tinajero in a new working paper jointly published by NeighborWorks® America and the Joint Center for Housing Studies. In the paper, Carrillo, a 2016 Edward M. Gramlich Fellow, notes that PFS projects may offer important opportunities to break down funding silos, devise innovative new ways to address pressing problems, and compel providers to focus on the results of an intervention. However, he adds, “because their complexity makes them at present difficult to structure and finance, PFS projects are likely to be useful only in limited circumstances, which means the PFS model should therefore be used judiciously and carefully.” Moreover, he notes, “the interest in and discussion about PFS projects has highlighted approaches that could be carried out by the public sector without the structure of PFS arrangements.”

To better understand how this approach could be used to address housing and community development issues, Carrillo examines three projects: 

• The Denver Supportive Housing Social Impact Bond Initiative, which focused on providing supportive housing for individuals who are both frequently in jail and often go to emergency medical services in Denver.
• The Chronic Homelessness PFS Initiative, which aims to provide 500 units of permanent supportive housing for up to 800 of the 1,600 people currently experiencing homelessness in Massachusetts.
• Project Welcome Home, an initiative in Santa Clara County, California focused on providing housing and supportive services for 150-200 chronically homeless individuals in the Silicon Valley over six years.

In the paper, Carrillo reviews the goals of each initiative and describes the metrics that will be used to decide whether and how much providers will be paid.  He also offers detailed descriptions about how each initiative was organized, funded, and evaluated.

The initiatives, he writes, “are promising, especially as they promote an emphasis on outcomes and begin to streamline services from various government sources.” However, he also cautions that “it is not immediately obvious that their benefits outweigh their costs,” particularly the extensive time and resources needed to develop and oversee the initiatives. He adds that it may be possible for the public-sector to adopt many PFS approaches (particularly their focus on outcomes, and the need for better data systems to measure those outcomes) without developing the complex structures and systems needed to establish and oversee an effective PFS.

“Though PFS sounds promising,” he concludes, “putting a project together can entail logistical difficulties and substantial transaction costs. Because of these challenges, the PFS model should be used judiciously. In particular, it could be a promising strategy for situations in which addressing problems requires coordination of a variety of disparate sources of public funding which, for various reasons, are difficult to use in a coordinated fashion.”

However, he adds, “we should not lose sight of the overall problem that PFS programs address: the need to provide services to as many people as possible, in the most effective way possible. It seems difficult to conceive of increased funding for these much-needed resources from the federal government, and state and local governments will continue to find themselves pressed for solutions to deliver evidence-based services. The PFS movement has pushed public-sector entities to focus more heavily on outcomes and, in doing so, to consider more multi-pronged approaches for addressing key issues.”

Growing Demand and Tight Supply are Lifting Home Prices and Rents, Fueling Concerns about Housing Affordability

A decade after the onset of the Great Recession, the national housing market has, by many measures, returned to normal, according to the 2017 State of the Nation’s Housing report, being released today by live webcast from the National League of Cities. Housing demand, home prices, and construction volumes are all on the rise, and the number of distressed homeowners has fallen sharply. However, along with strengthening demand, extremely tight supplies of both for-sale and for-rent homes are pushing up housing costs and adding to ongoing concerns about affordability (map + data tables). At last count in 2015, the report notes, nearly 19 million US households paid more than half of their incomes for housing (map + data tables).

National home prices hit an important milestone in 2016, finally surpassing the pre-recession peak. Drawing on newly available metro-level data, the Harvard researchers found that nominal prices in real prices were up last year in 97 of the nation’s 100 largest metropolitan areas. At the same time, though, the longer-term gains varied widely across the country, with some markets experiencing home price appreciation of more than 50 percent since 2000, while others posted only modest gains or even declines. These differences have added to the already substantial gap between home prices in the nation’s most and least expensive housing markets (map).

“While the recovery in home prices reflects a welcome pickup in demand, it is also being driven by very tight supply,” says Chris Herbert, the Center’s managing director. Even after seven straight years of  construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970s. The rebound in single-family construction has been particularly weak. According to Herbert, “Any excess housing that may have been built during the boom years has been absorbed, and a stronger supply response is going to be needed to keep pace with demand—particularly for moderately priced homes.”

Meanwhile, the national homeownership rate appears to be leveling off. Last year’s growth in homeowners was the largest increase since 2006, and early indications are that homebuying activity continued to gain traction in 2017. “Although the homeownership rate did edge down again in 2016, the decline was the smallest in years. We may be finding the bottom,” says Daniel McCue, a senior research associate at the Center.

Affordability is, of course, key. The report finds that, on average, 45 percent of renters in the nation’s metro areas could afford the monthly payments on a median-priced home in their market area. But in several high-cost metros of the Pacific Coast, Florida, and the Northeast, that share is under 25 percent. Among other factors, the future of US homeownership depends on broadening the access to mortgage financing, which remains restricted primarily to those with pristine credit.

Despite a strong rebound in multifamily construction in recent years, the rental vacancy rate hit a 30-year low in 2016. As a result, rent increases continued to outpace inflation in most markets last year. Although rent growth did slow in a few large metros—notably San Francisco and New York—there is little evidence that additions to rental supply are outstripping demand. In contrast, with most new construction at the high end and ongoing losses at the low end (interactive chart), there is a growing mismatch between the rental stock and growing demand from low- and moderate-income households.

Income growth did, however, pick up last year, reducing the number of US households paying more than 30 percent of income for housing—the standard measure of affordability—for the fifth straight year. But coming on the heels of substantial increases during the housing boom and bust, the number of households with housing cost burdens remains much higher today than at the start of last decade. Moreover, almost all of the improvement has been on the owner side. “The problem is most acute for renters. More than 11 million renter households paid more than half their incomes for housing in 2015, leaving little room to pay for life’s other necessities,” says Herbert.

Looking at the decade ahead, the report notes that as the members of the millennial generation move into their late 20s and early 30s, the demand for both rental housing and entry-level homeownership is set to soar. The most racially and ethnically diverse generation in the nation’s history, these young households will propel demand for a broad range of housing in cities, suburbs, and beyond. The baby-boom generation will also continue to play a strong role in housing markets, driving up investment in both existing and new homes to meet their changing needs as they age. “Meeting this growing and diverse demand will require concerted efforts by the public, private, and nonprofit sectors to expand the range of housing options available,” says McCue.

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Live Webcast Today @ Noon ET

Tune into today's live webcast from the National League of Cities in Washington, DC, featuring:

Kriston Capps, Staff Writer, CityLab (panel moderator)
Chris Herbert, Managing Director, Joint Center for Housing Studies
Robert C. Kettler, Chairman & CEO, Kettler
Terri Ludwig, President & CEO, Enterprise Community Partners
Mayor Catherine E. Pugh, City of Baltimore, Maryland

Tweet questions & join the conversation on Twitter with #harvardhousingreport

What Can We Learn from Attempts to Reduce the Cost of Affordable Housing?

by Sam LaTronica
Gramlich Fellow

Midwestern CDCs trying to build affordable homes that do not require development subsidies have identified three potentially promising strategies: building smaller homes, utilizing factory-built homes, and creatively designing houses to get more out of them. In a new working paper that grows out my work as an Edward M. Gramlich Fellow in Community and Economic Development I conclude that while each technique presents opportunities for cost savings, each also comes with its own set of challenges.

The fellowship, which is co-sponsored by the Joint Center for Housing Studies and NeighborWorks^® America, also expanded my horizons because for years, my conception of new “affordable housing” had been limited to the standard multifamily properties developed in larger urban areas. This was the type of affordable housing I had seen since moving to the Boston area, as well as working for an affordable advocacy organization in the San Francisco Bay Area prior to attending the Harvard Graduate School of Design.

As a Gramlich Fellow in the summer of 2015, I was exposed to a new region and new approach to affordable housing. The Midwestern CDCs, which were part of NeighborWorks^® America’s national network, often had in-house general contractors and focused on building and selling affordable single-family homes, in both urban and rural areas. Given the dearth of housing subsidies, particularly subsidies for affordable housing in rural areas, these CDCs were trying to find cost-saving construction techniques that would allow them to build affordable housing without development subsidies.

The Rambler, a single-family home constructed by the Southwest Minnesota Housing Partnership. The home is 1,092 square feet on the main floor with another 1,092 square feet of unfinished basement space that can be converted into living space or more bedrooms at a later date. This home was constructed in 2014 with an asking price of $153,900.

Through reading popular literature on home construction, analyzing building trends, conducting interviews with CDC leaders, and visiting new developments in the Midwest, it became clear that CDCs were interested in pursuing three potential cost saving techniques: building smaller homes, using factory-built homes, and creatively designing houses to get more out of them.

Smaller homes are theoretically cheaper to build because they simply require fewer materials and less construction time. Once occupied, these houses not only can be cheaper to heat or cool but also will cost less to maintain. Smaller footprints also make it possible to build these homes on smaller or irregularly shaped lots, which helps expand the options for CDCs.

However, cost savings are not always realized when buildings are smaller. Once land and other development costs are factored in, it is possible that building smaller homes will be only slightly cheaper than building larger homes on the same lot. Moreover, the marginal cost of constructing a few hundred more square feet might allow the CDC to sell the house for more money while still keeping it affordable. Some CDC leaders also worry that producing affordable homes that are much smaller than new market-rate homes would create obvious distinctions between income levels and stigmatize the people living in the new, smaller homes. Finally, while building smaller can be smart for a number of reasons, most people still want bigger homes as evidenced by the fact that average house sizes have been increasing and have recently surpassed pre-recession levels. This suggests that without a shift in the overall market, smaller homes may not be a particularly appealing option for CDCs trying to build affordable housing.

While factory-built construction techniques are not necessarily new, they are new to many CDCs. Many Midwestern CDCs are currently experimenting with (or exploring the possibility of using) both modular homes and homes made from structural insulated panels (SIPs). Factory-built homes have the benefit of being produced mostly indoors and using assembly line techniques, which can significantly reduce onsite construction time and protect against weather delays, theft, vandalism, etc. Moreover, homes built in factory-controlled settings can be tighter and more energy efficient and make more efficient usage of building materials (which should reduce their cost).

Like building smaller, however, the cost savings that are touted in popular literature are harder to realize in practice. If CDCs, architects, contractors, and subcontractors do not have enough experience working with factory-built housing, then the development process can hit major roadblocks that negate the hypothetical cost savings that would result from a shorter construction period and lower production costs. In fact, some CDCs that experimented with these techniques ended up with homes that cost far more than they would have cost using traditional stick-built techniques.

Finally, creatively designing houses can supplement the previous construction types to get the most out of new homes. This can come in many forms. Designing attached accessory dwelling units will add more units to the housing stock and can supplement the primary tenant’s income.  Co-housing development can utilize scale and reduce the per-owner development costs. Open floor plans can make smaller homes more palatable and unfinished buildouts can reduce costs while allowing families to later customize their home to meet their particular needs.

In the end, there is no silver bullet that can be used to build affordable single-family homes without a development subsidy. However, there are many techniques that, when combined, could produce significant cost savings. CDC leaders interested in pursuing these approaches should remember that the benefits of these techniques, as described in popular literature, do not always materialize in practice. Therefore, CDC leaders should learn from others who have already experimented with them. They should also establish strong relationships with architects and contractors who have experience with these techniques, so that they reduce the likelihood of delays that would drive up costs. Hopefully, by persevering and learning from others, the CDCs can increase the production of affordable homes.

Sam LaTronica, who graduated from the Harvard Graduate School of Design in 2016, was a 2015 recipient of the TheEdward M. Gramlich Fellowship in Community and Economic Development, which is co-sponsored by NeighborWorks®America and the Joint Center for Housing Studies.

How are Community Development Organizations Helping Build Healthy Places?

by Alina Schnake-Mahl
Gramlich Fellow

The great majority of America’s high-performing community development organizations (CDOs) are actively tackling health challenges in their communities. In a new working paper* published by NeighborWorks® America and the Joint Center for Housing Studies, Sarah Norman (NeighborWorks’ Director of Healthy Homes & Communities) and I examine how CDOs engaged in activities at the nexus of health, housing and community development. 

Drawing on a survey of the 242 high-performing CDOs in the NeighborWorks network, we found that 89 percent of the surveyed organizations reported activities and strategies that explicitly promoted health in 2015 – from green and healthy building standards to on-site, coordinated health services. We also found that 83.3 percent of organizations worked with partners to support their efforts.  Increases in these activities, we noted, have been spurred by recent changes in the American health-care system and philanthropic grantmaking that together have provided new opportunities for CDOs to partner with other community entities to address health challenges.

CDOs used a variety of approaches, many of them focused on healthy homes and access to healthy food. For example, Foundation Communities, a nonprofit affordable housing provider based in north Texas since 1990, addresses the health and social needs of residents through health and wellness classes; smoke-free, green and healthy rental homes; community gardens and walking paths; as well as childcare and after school programming that addresses literacy and physical fitness. An evaluation of these programs showed improvements on measures of quality of life and well-being for program participants.

Photo courtesy of Foundation Communities

Similarly, REACH CDC – an affordable housing developer and property management company serving Portland, Oregon – is a member of a Limited Liability Corporation (LLC) that provides enhanced health and social service coordination for 1,400 residents at 11 federally subsidized, independent-living, affordable-housing properties in Portland. Project elements include an on-site Federally Qualified Health Center; culturally specific services for non-English-speaking residents; food distribution for homebound residents and other residents experiencing food insecurity; health navigators; and free mental health consultations. Multiple evaluations documented improvements in quality of life and well-being for residents as well as cost savings for Medicaid. 

Taken as a whole, the study shows that CDOs have undertaken significant efforts to explicitly improve the health of the communities they serve. Additionally, as the health care system increasingly targets the social determinants of health, there are new opportunities for engagement.  For example, housing-based services could help address gaps between formal medical care and community health to help older residents to age in their communities. More broadly, CDOs’ long-standing relationships with local communities provide a strong base to support cross-sector partnerships to tackle health inequities.

Alina Schnake-Mahl is a doctoral student in the Department of Social and Behavioral Sciences, at the Harvard T.H. Chan School of Public Health.  She was a 2016 recipient of the The Edward M. Gramlich Fellowship in Communityand Economic Development, which is co-sponsored by the Joint Center and NeighborWorks®America.

*The full article is under consideration in Cities & Health; the journal is available online. 

Panel Discussions Focus on Housing Policy in the Next Administration

by Shannon Rieger
Research Assistant

From tax reform to fair housing, the incoming Trump administration and new Congress are likely to adopt policies that could greatly affect housing, particularly affordable subsidized housing, noted speakers at a conference held in Boston last week. Organized by The New England Housing Network, a broad coalition of housing and community development organizations from the six New England states, the December 16th event focused on what the new administration and Congress will “do about the unmet need for affordable housing in our country” and what advocates can do to encourage a robust federal affordable housing agenda in 2017.

Speakers, including national experts, state officials, and leading advocates from throughout New England, touched on a variety of issues, including tax reform, the future of Government Sponsored Enterprises (GSEs), infrastructure initiatives, anti-poverty programs, and fair housing policies. Everyone noted that many current programs and initiatives are threatened and that much of the discussion is speculative because there is tremendous uncertainty surrounding the Trump administration’s plans, as well as the likelihood that Congress may not support the new administration’s policies. Nevertheless, panelists discussed several potential strategies for bringing together an effective coalition to advocate for affordable housing at a particularly challenging time.

(Photo courtesy of Asian Community Development Corporation)

In opening remarks, several panelists warned that the incoming Trump administration’s stated focus on increasing defense spending while cutting corporate taxes from 35 to 15 percent will shrink the non-defense discretionary budget. With new capital investment therefore unlikely to materialize, several panelists noted that it will be tempting – and perhaps necessary – to go into “preserve and protect” mode to maintain existing affordable housing programs.  However, discussants went on to emphasize the importance of pushing back against proposed spending cuts instead of focusing on potential losses. The panelists agreed that agencies and advocates must join forces to fight for the common goal of increasing overall non-defense spending, and pointed out that squabbling over the pieces of a shrinking pie would likely only undermine critical potential alliances.

Identifying and fostering cross-sector alliances and interdependencies emerged as a central theme throughout the forum. The panelists suggested that lifting up housing’s strong ties to health and to economic opportunity, in particular, will be critical in order to keep housing on the agenda. Barbara Fields, Executive Director of Rhode Island Housing, a state entity that works with developers and non-profit groups, illustrated how this might be accomplished by referencing an oft-cited quote from Rakesh Mohan, Deputy Governor of the Federal Reserve Bank of India, who in 2007 said, “Because housing is where jobs go to sleep at night, the quantity, quality, availability and affordability of housing is a key component in national economic competitiveness.”

Similarly, Chris Estes, President and CEO of the National Housing Conference, recalled Megan Sandel’s description of housing as a “vaccine” that can improve health.  Chrystal Kornegay, Undersecretary of the Massachusetts Department of Housing and Community Development, added that we should think of housing as a beginning rather than an end, highlighting housing’s potential to bring together a variety of groups that ordinarily might not collaborate.

Turning to specifics, panelists noted that tax reform could dramatically affect both the Low-Income Housing Tax Credit (LIHTC) and Private Activity Bonds. Panelists referenced a House bill that would eliminate Private Activity Bonds but keep LIHTC, while a Senate bill introduced in May 2016 would expand the LIHTC program by 50 percent. They also discussed House Speaker Paul Ryan’s June 2016 tax plan which, by greatly increasing the standard deduction, would substantially reduce use of the mortgage interest deduction. Although it is far from certain that this proposal will become law, panelists suggested that if reforms do happen, housing advocates should insist that any revenue generated by the changes be re-invested in housing on measures such as a renters’ tax credit and not used for other purposes.

Discussants also noted that Treasury Secretary designate Steven Mnuchin and key members of Congress appear to significantly disagree on GSE reform. Mnuchin has said he is interested in seeing that Fannie Mae and Freddie Mac are taken out of “government ownership,” restructured, and privatized.  However, Congress has not demonstrated support for a “recap and release” of the GSEs. These disagreements may impede any efforts to reform GSEs, noted several panelists.

The conflicting perspectives about both issues within the Republican Party will make it hard to substantially change the tax code or restructure the GSEs, said Benson “Buzz” Roberts, President and CEO of the National Association of Affordable Housing Lenders. He also noted that “inertia is the most powerful third party in the United States”, and may slow down or even block substantial changes in tax policy or GSE reform in the next several years.

Several panelists pointed out that President-Elect Donald Trump’s plan to substantially increase spending on infrastructure explicitly includes roads, bridges, tunnels, airports, railroads, ports and waterways, and pipelines. However, they added, it is unclear whether or not housing will (or could) be part of this spending package.  Including housing in those programs, panelists noted, might be an effective way to fund housing in coming years. In thinking about how to effectively communicate the role of housing as an economic engine, Fields suggested that investments in the skilled labor needed to build housing (along with the other forms of infrastructure explicitly mentioned in the Trump administration’s plan) may help to mitigate existing labor shortages and grow the economy.

Turning to anti-poverty, mobility, and fair housing policies under the incoming Trump administration, the discussants agreed that the AFFH (Affordably Furthering Fair Housing) initiative will certainly be under threat from a Republican-majority Congress and from incoming HUD Secretary Ben Carson, who last year wrote an op-ed denouncing the rule. The future of anti-poverty policies is less certain. Speaker Ryan’s “welfare reform 2.0” plans are the most concrete indication of how the Trump Administration might approach “anti-poverty” policy. Ultimately, panelists concluded that while there is little concrete information about how the Trump administration will proceed in this arena, the strong focus of the Trump campaign on economic opportunity and mobility for all Americans may present some opportunities. For example, by highlighting housing’s role in advancing mobility, housing advocates could align a housing agenda with other Trump administration priorities.

Taken together, the upshot of the discussions was that while many existing programs and initiatives could be under threat, the future of housing policy in a Trump administration is very uncertain.  Opportunities may arise from uncertainty, though, such as the potential to insist that housing be included as a part of infrastructure investment. The panelists added that recognizing such opportunities, and starting today to proactively build strong, cross-sector coalitions able to take advantage of potential openings, will be critical to advancing an affordable housing agenda in coming years. 

Housing Inadequacy Remains a Problem for the Lowest-Income Renters

Irene Lew
Research Analyst

In the early 1970s, in response to growing concerns about the housing conditions of poor families, the US Department of Housing and Urban Development (HUD) developed a measure of housing adequacy for its American Housing Survey (AHS) that continues to be used by the agency today. This adequacy measure was originally designed to evaluate the extent to which the national housing stock met the standard of “a decent home and a suitable living environment” established by the Housing Act of 1949. While the condition of the housing stock has improved over the past several decades, the rental stock is still three times more likely than the owner-occupied stock to be considered inadequate. And problems persist among the most affordable rentals.

While fairly complex, the AHS adequacy measure factors in various housing problems related to plumbing, heating, electrical wiring, and maintenance. Using this AHS measure, the majority of the nation’s rental housing stock is in physically adequate condition. As of 2013, just 3 percent of occupied rental units were categorized as severely inadequate and 6 percent were moderately inadequate. In fact, the adequacy of the rental stock has improved over the past decade, with the share of rentals categorized as physically inadequate declining from about 11 percent in 2003 to 9 percent in 2013. 

Notes: Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies. 

Source: JCHS tabulations of HUD, American Housing Surveys.

Stricter building codes have certainly helped to encourage higher quality, particularly the construction of units with complete plumbing and heating systems. As a result, severe physical deficiencies have been rare among the rental stock, especially among newer rentals. Just 1 percent of rentals built 2003 and later was classified as severely inadequate, compared to 4 percent of those built prior to 1960.

It is noteworthy, however, that the AHS adequacy measure does not account for certain health-related quality issues such as the presence of mold or structural issues such as holes in the roof or foundation, so housing quality problems may in fact occur at higher rates than the survey reports. And although physical deficiencies have become less common among the nation’s rental housing stock, housing problems disproportionately appear in units occupied by the lowest-income renters. In 2013, 11 percent of units occupied by extremely low-income renters (those with incomes less than or equal to 30 percent of area medians) were physically inadequate, compared to just 7 percent of those with incomes above 80 percent of area medians.

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income. Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies.

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

The lowest-income households also accounted for the largest share of renters reporting overcrowded conditions and physical housing problems such as toilet breakdowns, exposed electrical wiring, heating equipment breakdowns lasting six hours or more and the presence of rats in the unit. 

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income Overcrowded conditions refer to units where there are more than two people per bedroom. Holes in the floor are those that are about four inches across.  

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

Matthew Desmond’s most recent book, Evicted, vividly captures these statistics, drawing attention to the grim housing conditions of families in low-rent units in inner-city Milwaukee who must live with the constant presence of roaches and other vermin, clogged sinks and bathtubs, holes in their windows, and broken front doors.

Rentals occupied by extremely low-income households in central cities have the highest physical inadequacy rates, especially those located in small multifamily buildings with 2-4 units. Indeed, 16 percent of these units were categorized as inadequate, compared to 12 percent of those in buildings with 50 or more units. As I pointed out in a previous post, small multifamilies are a critical source of low-cost housing because they tend to charge lower rents than those in much larger structures, but much of this stock is rather old and at higher risk of loss from the affordable stock due to deterioration.

As this recent NPR piece suggests, the narrow margins for mom-and-pop landlords operating in low-income neighborhoods do not provide sufficient incentive for landlords to make improvements or repairs in a timely manner. Indeed, according to the American Housing Survey, 13 percent of extremely low-income renters reported in 2013 that the owner of their unit usually did not start major repairs or maintenance quickly enough, compared to less than half that share (6 percent) among higher-income renters with incomes above 80 percent of area medians.

The prevalence of housing deficiencies among units occupied by the lowest-income renters highlights the importance of bolstering building code enforcement efforts at the state and local levels. However, municipalities are often faced with tight budgets that lead to dwindling code enforcement teams. Indeed, according to one estimate in 2013, Cleveland and Detroit, among others, have cut their code enforcement workforce by about half since the middle of the last decade. Cities like Baltimore, Portland, and the San Francisco Bay Area are also facing shortages of building inspectors that make it difficult to deal with building code violations. While increased code enforcement can identify landlords who are failing to maintain their properties, this could also lead to unstable housing situations for current tenants. Renters may withhold rent or call local building inspectors as a tactic to push landlords to make necessary repairs, but this could lead to eviction threats or the initiation of a formal eviction process due to nonpayment of rent.

At the federal level, budgetary constraints have also impacted efforts to address the physical deficiencies among the aging public housing stock, which was largely built before 1970. Federal appropriations for the public housing capital fund fell by 34 percent over the past decade and HUD is faced with an estimated backlog of $26 billion in capital maintenance and repairs (as of 2010). HUD’s housing choice voucher and project-based rental assistance programs, which subsidize rentals for low-income households in the private market, require landlords to pass annual or biennial inspections for housing quality. However, the public housing stock is not subject to regular inspections and has largely been prohibited from using private capital to finance capital needs and repairs. As a result, compared to other types of assisted rentals, physical housing problems are more common among the public housing stock. In 2013, over half (53 percent) of public housing units had more than two heating equipment breakdowns lasting at least six hours and 13 percent of units had water leaks due to equipment failures within the previous 12 months.

Living in unsafe, physically inadequate housing can lead to adverse health and developmental outcomes for low-income families. Indeed, recent research confirms that children exposed to defects such as leaking roofs, broken windows, rodents, and nonfunctioning heaters or stoves were more likely to experience emotional and behavioral problems. Among five housing characteristics studied—quality, stability, affordability, ownership, and receipt of housing assistance—poor physical quality of housing was the most consistent and strongest predictor of emotional and behavioral problems in low-income children and adolescents. Poor housing conditions such as mold, chronic dampness, water leaks, and heating, plumbing, and electrical deficiencies, are also associated with health risks like respiratory illness and asthma. These findings underscore the urgent need for cities to prioritize code enforcement and work collaboratively with nonprofit tenants’ rights groups to deal with landlords who are not responsive to requests for necessary repairs.

HUD Funding in the Presidential Budget Prioritizes Economic Mobility and Rental Assistance

Irene Lew
Research Analyst

Several weeks ago, President Obama released his final budget proposal to Congress. In it, the President requests $48.9 billion in gross discretionary funding for HUD—a $1.6 billion increase over the amount that Congress appropriated in FY 2016. With the exception of the Community Development Block Grant (CDBG) and the public housing capital fund, HUD’s FY 2017 budget maintains or requests increases for key programs over the levels that lawmakers approved in FY 2016 (Figure 1).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications; White House Office of Management and Budget FY 2017 President’s Budget 

Funding for Rental Housing Assistance

More than three-quarters (78 percent) of the funding request would support 4.5 million low-income households through HUD’s three largest rental housing assistance programs: housing choice vouchers, project-based rental assistance, and public housing (through its capital and operating funds) (Figure 2).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications.

After several years of uncertainty in the wake of sequestration in 2013, the request of $20.8 billion for the housing choice voucher program would fully fund all voucher renewals in calendar year 2016. The request includes a 26-percent boost in administrative fees to cover public housing agencies’ (PHAs) costs to administer the voucher program under a new formula based on the recommendations of a HUD-commissioned study released last year that highlighted the underfunding of PHAs.

Meanwhile, the budget would provide a full 12 months of funding for all contracts under the project-based rental assistance program, including public housing units and privately-owned units that were converted to long-term project-based Section 8 contracts under the Rental Assistance Demonstration (RAD) program. For the second straight year, HUD is seeking $50 million to expand the RAD program and remove the 185,000 unit cap on the number of public housing conversions under the first phase of RAD. Since it received Congressional authorization in 2012, RAD has been a key part of HUD’s strategy to access private capital to rehabilitate and preserve the aging public housing inventory, which has experienced a net loss of 139,000 units since 2000. Until RAD’s authorization, HUD’s public housing program was largely prohibited from accessing non-federal funding sources for making critical repairs to the stock. As of December 2015, HUD estimates that PHAs and their partners have raised over $1.7 billion through RAD to convert more than 26,000 public housing units.

With an increased emphasis on public housing RAD conversions, the request for the public housing program in FY 2016 was a marginal increase—less than 1 percent—over the FY 2016 enacted level. The budget proposes a 2 percent reduction for the public housing capital fund, which is troubling given that the public housing stock has an estimated capital needs backlog of about $26 billion, and that adequacy issues among public housing units are much more common than among other types of federally assisted and unassisted units. While RAD will help address adequacy issues in the public housing inventory, there is no guarantee that RAD funding will continue, and the ongoing disinvestment in the public housing capital repairs fund may offset gains made under RAD.

Meanwhile, the President’s budget also requests funding increases for key multifamily rental housing assistance programs administered by the US Department of Agriculture (USDA) that serve roughly 403,000 low-income households annually in rural communities, including $33 million for the Section 515 Rural Rental Housing Loans program, up 18 percent from $28 million enacted in FY 2016, and $1.4 billion for the Section 521 Rural Rental Assistance program, a modest increase (1 percent) from the FY 2016 enacted level.

Commitment to Ending Homelessness

Funding for homelessness prevention remains a priority in the President’s budget, which includes an 18 percent increase in discretionary funding over the FY 2016 enacted level for Homeless Assistance Grants. The increase will fund $25 million in new projects for homeless youth in coordination with the Department of Health and Human Services (HHS), an additional 25,500 new units of permanent supportive housing targeted at the chronically homeless, and 8,000 new rapid rehousing units for homeless families. Overall, in contrast to many other HUD programs whose funding levels have declined sharply over the past decade in real terms, funding for homeless assistance grants is now 43 percent higher in FY 2016 than in FY 2006 (Figure 3).

Note: Percent change is based on dollar values that have been adjusted for inflation using the CPI-U for All Items.
Source: White House Office of Management and Budget; US Department of Housing and Urban Development FY 2017 Congressional Justifications.

Building on the findings in HUD’s recent Family Options report highlighting the effectiveness of vouchers in improving the housing stability of homeless families, the budget is seeking $88 million in discretionary funding for 10,000 new vouchers for this population. In addition to this request, the budget has also proposed $11 billion in mandatory funding for an ambitious new 10-year initiative to end homelessness among families with children. This initiative, which would be exempt from the annual Congressional appropriations process, aims to assist 555,000 families over the coming decade through a significant expansion of housing choice vouchers and rapid rehousing assistance. As I noted in a blog post last year, the reduction in family homelessness has been much smaller than among veterans and chronically homeless individuals. In fact, as of the 2015 Point-in-Time count, which estimates both the sheltered and unsheltered homeless populations on a single night every January, the number of homeless persons in families in shelter is actually 4 percent higher than in 2007.

Emphasis on Economic Mobility and Fostering Inclusive Communities

With increasing evidence that neighborhood quality matters for child development and economic prospects, including a 2015 analysis of HUD’s Moving to Opportunity demonstration program, the President’s budget has requested a $75-million funding increase for Choice Neighborhoods, and has proposed a new three-year $15 million Housing Choice Voucher Mobility Counseling Demonstration program to help HUD-assisted families move and stay in higher-opportunity neighborhoods. In a similar vein, the budget has proposed the Upward Mobility Project, a new place-based initiative that will allow states and localities to blend funding across four existing block grant programs—HHS Social Services Block Grant and Community Services Block Grant, as well as HUD's HOME and CDBG programs—to implement evidence-based policies focused on poverty reduction and neighborhood revitalization. The budget maintains HOME funding at the FY 2016 enacted level of $950 million, which is an encouraging sign for many advocates who had rallied against FY 2016 Congressional proposals calling for severe cutbacks to the program, an important source of gap financing for tax credit projects and other local affordable housing initiatives. The budget also includes a request of $300 million in mandatory funding for a Local Housing Policy Grants program to help localities and regional coalitions fund policies and programs that minimize barriers to housing development and expand housing supply and affordability.

Reflecting the impact of the Supreme Court’s decision regarding low income housing tax credit (LIHTC) allocations in Texas Department of Housing and Community Affairs vs. Inclusive Communities Project and HUD’s Affirmatively Furthering Fair Housing ruling last summer, the President’s FY 2017 budget has also proposed that Qualified Allocation Plans (QAPs) for state housing finance agencies be required to include Affirmatively Furthering Fair Housing (AFFH) as an explicit preference for awarding tax credits. Additionally, part of the $69 million increase requested for the public housing operating fund in FY 2017 would go toward supporting increased PHA administrative expenses associated with implementation of the new AFFH regulations.

Serving the Lowest-Income Households

According to HUD’s 2015 Worst Case Housing Needs report, just 39 affordable units are available for every 100 extremely low-income renter households (those with income no higher than 30 percent of AMI). To incentivize developers seeking tax credits to provide deeper affordability for the lowest-income households—those who often cannot afford to live in LIHTC units without additional rental assistance—the President’s budget has once again proposed an income-averaging rule for LIHTC eligibility in which the average income for a minimum 40 percent of the units in a project does not exceed 60 percent of AMI.

The National Housing Trust Fund would also help address the shortfall in units that are affordable to the lowest-income households. Originally authorized in 2008 under the Housing and Economic Recovery Act, the Housing Trust Fund is a mandatory program funded by GSE contributions that will allocate funding to states and state-designated entities for the development, rehabilitation, and preservation of housing targeted at extremely low-income households. HUD predicts that it will collect $170 million in fee assessments from Fannie Mae and Freddie Mac for the fund in 2016, and an additional $136 million from the GSEs in 2017.

Preserving the Affordable Rental Stock

Despite an expansion of the voucher program, the budget included a $20 million reduction in tenant protection vouchers, which provide critical protection to residents at risk of displacement because they live in HUD-assisted units with expiring or terminating contracts. HUD notes that it will need to provide partial funding to approximately 33,500 vouchers in FY 2017 because the proposed amount of $117 million is insufficient to fund them for a full 12 months. Although HUD plans to request the full amount necessary for these voucher renewals in 2018, there is no guarantee that HUD will receive the funding it needs, putting families living in HUD-assisted units with expiring affordability contracts at risk for rent increases, eviction, or homelessness.

In addition to a requested expansion of the RAD program in order to preserve affordable stock, the President’s budget has also proposed that Section 202 Project Rental Assistance Contracts (PRACs), providing affordable rental housing to adults aged 62 and over, should also be eligible for conversion. While not part of the FY 2017 discretionary funding request, the budget has also recommended adding the preservation of federally assisted affordable housing to the other 10 criteria that state housing finance agencies are required to include in their QAPs for awarding LIHTC allocations.

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What happens from here? As the Center on Budget and Policy Priorities (CBPP) notes in a recent memo, the House and Senate will likely begin working on their own budget resolutions earlier than usual this year because an agreement is already in place on overall Congressional funding limits for fiscal year 2017. However, final decisions on FY 2017 appropriations will likely occur after the November elections.