Weekly update from the National Housing Conference |
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In this issue,
May 14, 2023
Issue 92-17
· FHFA rescinds DTI-based fees, will issue RFI
· Affordable Housing Credit Improvement Act reintroduced in Congress
· Join NHC’s 2023 Racial Equity Work Group
· Strategy and Investment in Rural Housing Preservation Act reintroduced
· Senate Banking Committee advances key nominees
· Final inspection regulations for HUD-assisted and insured housing released
· HUD announces $837 million in funding for energy improvements
· HUD expands access to affordable housing with $22 million in homeownership grants
· Mortgage Bankers Association seeks associate director
Chart of the week: Homebuying trends in metro Boston contribute to new areas of racial segregation
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House Price Battle Royale: Low Inventory vs Affordability
I’ve been wrestling with the impact on house prices of the rapid increase in mortgage rates and monthly payments over the last year. My reaction was the current situation was somewhat similar to the 1978 to 1982 period and we would see prices decline in real terms (adjusted for inflation). See from March 2022: Housing: Don’t Compare the Current Housing Boom to the Bubble and Bust.
In that article, I wrote on prices: “[W]e should expect something similar to what happened in the late ‘70s – a decline in real house prices seems likely … Currently we just have to watch and wait. However, we can be fairly confident that we won’t see cascading nominal price declines like during the housing bust – since there will be few distressed sales.”
In the 1980 period, nominal prices only declined slightly on a month-to-month basis a few times according to the Case-Shiller National house price index. However, real prices – adjusted for inflation – declined 10.7% from the peak. The inflation-adjusted peak was in October 1979, and real prices didn’t exceed that peak until May 1986 (See from October 2022: House Prices: 7 Years in Purgatory).
As I noted in “7 Years in Purgatory”: “Earlier this year, I argued the most likely path for house prices was for nominal prices to “stall”, and for real prices (inflation-adjusted) to decline over several years. The arguments for a stall included historically low inventory levels, mostly solid lending over the last decade, and that house prices tend to be sticky downwards. … However, we are already seeing nominal house price declines on a national basis.”
And the historically low level of inventory is a key reason house prices haven’t declined more to date. As of February, the Case-Shiller National Index was off 2.8% in nominal terms (seasonally adjusted), and off 4.6% in real terms.
Here is a look at the house price battle between low inventory and affordability.
The following graph is based on data from Altos Research showing active single-family home inventory over the last 9 years through May 5th. Inventory collapsed in 2020 due to a combination of factors: supply was restricted since many homeowners didn’t want strangers in their homes, and demand picked up significantly as mortgage rates fell sharply at the beginning of the pandemic. Also, investor buying increased significantly, and demographics were favorable for home buying.
Inventory fell further in 2021 and then picked up in the 2nd half of 2022 as mortgage rates increased. With record low levels of inventory in late 20202, 2021 and early 2022, house prices soared with the Case-Shiller index up over 19% in 2021 alone. more...
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News from Washington | By Brittany Webb
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FHFA rescinds DTI-based fees, will issue RFI
The Federal Housing Finance Agency (FHFA) announced it rescinded the debt-to-income (DTI) ratio-based fees for borrowers with a DTI at or above 40%. FHFA also said it would issue a Request for Input (RFI) on loan pricing. The agency had previously delayed implementation of these fees, also called loan-level price adjustments (LLPAs), from May 1 to Aug. 1 after significant pushback from the mortgage industry.
“I appreciate the feedback FHFA has received from the mortgage industry and other market participants about the challenges of implementing the DTI ratio-based fee,” said FHFA Director Sandra Thompson. “To continue this valuable dialogue, FHFA will provide additional transparency on the process for setting the Enterprises’ single-family guarantee fees and will request public input on this issue.”
David Dworkin, NHC’s President and CEO, issued a statement commending FHFA’s decision. “This will help first-time home buyers whose total debt comes close to that 40% level. Borrowers who have proven adept at managing their obligations do not pose additional risk due to a few points on a DTI ratio. In fact, many will save money by becoming homeowners in areas where rents are high," Dworkin told American Banker.
In a statement to HousingWire, Dworkin said, “Guarantee fees on loans purchased by Fannie Mae and Freddie Mac are the appropriate mechanism for investors to pay for guarantees on the timely payment of principal and interest on mortgage-backed securities, ensuring a liquid and efficient market. To create a fair playing field for first-time homebuyers across all income levels, Fannie Mae and Freddie Mac should charge the same fee for everyone, as was the practice between 1938 and 2008, and as FHA loans do today.”
"The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience. We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation," said Bob Broeksmit, President and CEO of the Mortgage Bankers Association.
Details on the RFI are forthcoming, but some expect the RFI to address recent controversies surrounding the LLPA pricing matrix.
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Affordable Housing Credit Improvement Act reintroduced in Congress
The Affordable Housing Credit Improvement Act (AHCIA), a bipartisan bill that would expand and strengthen the Low-Income Housing Tax Credit (LIHTC) program, was reintroduced into Congress last week. The bill contains 30 various consensus proposals to increase affordable housing production and preservation, better serve hard-to-reach areas, remove barriers to preservation, and streamline the program to promote efficiency. Estimates of AHCIA’s impact show the bill could finance over 2 million additional affordable homes—that would be a vital contribution to affordable housing inventory at a time when some estimates say the affordable housing shortage is 3 to 7 million units. NHC strongly supports AHCIA and has been a vocal advocate for its passing.
Sens. Maria Cantwell (D-Wash.), Todd Young (R-Ind.), Ron Wyden (D-Ore.), and Marsha Blackburn (R-Tenn.) cosponsored the Senate version of the AHCIA. And Reps. Darin LaHood (R-Ill.), Suzan DelBene (D-Wash.), Brad Wenstrup (R-Ohio), Don Beyer (D-Va.), Claudia Tenney (R-N.Y.), and Jimmy Panetta (D-Calif.) cosponsored the House version. Nearly half of Congress cosponsored AHCIA during the 117th Congress.
The 2023 version of AHCIA is very similar to its previous iteration. However, the new legislation includes some technical modifications, updates, and new language addressing data sharing and transparency. Key provisions of the bill include restoring the 12.5% credit allocation that expired at the end of 2021, lowering the “50 percent test” threshold to 25% so states can finance more affordable housing within the existing bond cap, and basis boosts for rural areas, Native American lands, and extremely low-income households.
“Too many families are paying too much just to keep a roof over their heads. Securing more affordable housing is key to our economic growth and individual families’ success,” said Cantwell. “This legislation would increase the federal resources allocated to each state, cut the red tape that hinders financing for workforce housing, better serve people most in need, and ultimately add more than 64,000 affordable units to Washington’s housing stock over the next decade.”
“In Indiana and across the nation, affordable housing is needed now more than ever. The Affordable Housing Credit Improvement Act will leverage private sector investment to increase the stock of affordable housing for families in both urban and rural communities. Our bipartisan bill tackles the housing affordability crisis head on to help Hoosier families and strengthen our communities,” said Young.
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Join NHC’s 2023 Racial Equity Work Group
NHC is establishing a 2023 Racial Equity Work Group. This group will gather professionals across organizations to concentrate efforts to improve racial equity and justice for Black Americans and Americans of AAPI, Latino, and Native American national origins in housing. NHC hosts a kickoff meeting on Monday, May 15, 2023, from 4-5 pm ET. Hyepin Im, President and Founder of Faith and Community Empowerment, Sara Rodriguez, CEO/Owner at Titan Title and former President at NAHREP, and Elisabeth Coats, Director of the Homeownership Alliance at the National Community Stabilization Trust will lead the group's efforts. To join the kickoff meeting and receive future communications, click here or contact Erika Ramirez, Senior Policy Associate, at erika.ramirez@nhc.org.
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Strategy and Investment in Rural Housing Preservation Act reintroduced
Sens. Jeanne Shaheen (D-N.H.) and Tina Smith (D-Minn.) reintroduced the Strategy and Investment in Rural Housing Preservation Act (SIRHP) last week. The bill would help low-income tenants in rural areas access safe and affordable housing.
Specifically, SIRHP would provide the USDA’s Rural Housing Service (RHS) tools to maintain rental assistance for residents in properties with prepaid or maturing mortgages who are at risk of losing their homes by restructuring existing Section 515 loans and extending incentives for property owners to stay in the program. If a loan restructuring is not possible, the bill would further protect residents by allowing the decoupling of rental assistance from the underlying loan while remaining in place at the property or by allowing the resident to transfer their rental assistance to another eligible property. Finally, the bill would require USDA to establish a plan for preserving affordable rental housing in rural areas in consultation with an advisory committee composed of various stakeholders, including tenants.
“As Americans recover from the economic hardships of COVID-19, addressing the affordable housing crisis is pivotal,” said Shaheen. “The Strategy and Investment in Rural Housing Preservation Act would help address these obstacles by providing resources and assistance to renters in rural communities who would otherwise face housing instability.”
“As Chair of the Subcommittee on Housing, Transportation, and Community Development, I have worked with stakeholders to expand access to affordable housing, but we also need to make sure that people who already have a place they call home can keep it that way. And that’s what this bill does,” said Smith.
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Senate Banking Committee advances key nominees
The Senate Banking Committee advanced the nominations of four key individuals out of Committee: Dr. Jared Bernstein, nominated to be chairman of the Council of Economic Advisers; Dr. Ron Borzekowski, nominated to be the Director of Financial Research at Treasury; Solomon Jeffrey Greene, nominated to be HUD’s Assistant Secretary for Policy Development and Research; David Uejio, nominated to be HUD’s Assistant Secretary for Fair Housing and Equal Opportunity.
Greene currently leads HUD’s Office of Policy Development and Research, which informs policy development and implementation to improve life in American communities by conducting, supporting, and sharing research, surveys, demonstrations, program evaluations, and best practices. Uejio serves as Acting Associate Director for Supervision, Enforcement, and Fair Lending at the Consumer Financial Protection Bureau. The nominations now move to the full Senate for a vote.
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Final inspection regulations for HUD-assisted and insured housing released
HUD published the Final Rule for the National Standards for the Physical Inspection of Real Estate (NSPIRE), which changes inspection regulations for the agency’s Public Housing and Multifamily Housing programs. These changes include new self-inspection requirements and reports, clarification of the timeline for correcting health or safety deficiencies, new “affirmative standards” for all units participating in HUD’s rental assistance program, and allowing tenants to make recommendations regarding units to be inspected, among other changes. HUD also committed to reviewing the standards at least every three years.
“Stronger standards, better inspections, and greater insights about living conditions will result in healthier and safer homes for residents. That’s a win for everyone,” said HUD Secretary Marcia Fudge.
The rule becomes effective for public housing inspections on July 1. For Housing Choice Voucher, Project-based Vouchers, and Multifamily Inspections, the rule becomes effective on Oct. 1.
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HUD announces $837 million in funding for energy improvements
New funding through HUD’s Green and Resilient Retrofit Program (GRRP) will improve energy and water efficiency and climate resilience to HUD-assisted multifamily properties serving low-income communities. The Inflation Reduction Act allocated $837.5 million in grant and loan subsidy funding to HUD and $4 billion in loan commitment authority specifically for this program.
“The launch of the Green and Resilient Retrofit Program today will ensure low-income individuals and families have better access to healthy, energy efficient, and resilient homes,” said HUD Secretary Marcia Fudge.
An additional $42.5 million will launch a new HUD initiative this summer “to collect and assess energy and water usage data from HUD-assisted multifamily housing properties to save energy and water, cut costs and reduce emissions.” HUD’s announcement is part of a larger set of actions the White House announced to lower energy costs.
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HUD expands access to affordable housing with $22 million in homeownership grants
HUD announced $12 million in grants to support non-profit, self-help housing organizations to help lower the cost of homeownership and open housing opportunities for low-income families and individuals through the Self-Help Homeownership Opportunity Program (SHOP).
“The SHOP program provides a unique pathway for first-time homeowners and underserved groups to buy a home. At HUD, we care about rural America and these capacity-building grants are further evidence of our commitment,” said HUD Secretary Marcia Fudge.
Additionally, HUD awarded $10 million in Rural Capacity Building grants to support rural housing development organizations, Community Development Corporations, Community Housing Development Organizations, rural local governments, and Indian tribes. These groups can use the grants to implement community development and affordable housing activities to support low- and moderate-income families and individuals in rural areas. “Through these grants, HUD and our partners will build and repair homes, and create housing solutions that match the unique needs of rural neighborhoods,” HUD Deputy Secretary Adrianne Todman said.
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Mortgage Bankers Association seeks associate director
The MBA is recruiting an Associate Director for its Affordable Housing Initiatives team. The position will manage a portfolio of issues related to affordable homeownership and have high visibility with MBA members and external stakeholders, including staffing MBA’s Affordable Homeownership Advisory Council. Interested applicants can find more information on applying here.
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Homebuying trends in metro Boston contribute to new areas of racial segregation
The Harvard Joint Center for Housing Studies published a blog examining how homebuying trends in metro Boston contribute to new racial segregation areas in the city. The post explores how today’s high housing prices are pricing Black families out of Boston, with many families moving to newly segregating, post-industrial towns on the metropolitan’s edge. For example, Brockton, a city of 100,000, started undergoing profound racial change in 1980 to become New England’s first Black-majority city.
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An article in The Washington Post highlights a TikTok account that exposes how much people pay for rent, telling the stories of everyday renters in various cities. The piece notes rent costs are rapidly rising across the United States. It quotes NHC President and CEO David Dworkin, who said, “One of the reasons these videos went so viral is because younger people seeing these videos are the ones experiencing this most severely, they’re personally experiencing the problem of, ‘I can’t believe this is all I get for this rent.’”
FHA Commissioner Julia Gordon delivered keynote remarks at the National Association of REALTORS® Regulatory Issues Forum, where she spoke of regulatory policy concerns within the real estate industry. Gordon highlighted inventory shortages and a high interest-rate environment as severely constraining low- and moderate-income households from purchasing homes. She noted recent administrative actions, like lowering the FHA mortgage insurance premium and proposing a downpayment assistance program, as opportunities to address these issues.
The podcast HousingWire Daily featured an interview with Katrina Jones, Vice President of Racial Equity Strategy and Impact at Fannie Mae. The episode discusses Fannie Mae’s 2023 Equitable Housing Finance plans and current affordability challenges, including the impacts on first-time homebuyers, rent reporting, special purpose credit programs, and equity in appraisals.
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The week ahead
Monday, May 15
Tuesday, May 16
Wednesday, May 17
Friday, May 19
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The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest. |
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