President Joe Biden unveiled a sweeping 13-page action plan that aims to create and preserve hundreds of thousands of affordable housing units in the next three years and help close the country’s critical housing supply shortfall within five years. Key provisions include making reforms to Low Income Housing Tax Credit and the HOME Investment Partnership Programs and offering more financing options for smaller multifamily properties as well as manufactured and modular housing.
The plan features a combination of legislative, regulatory and administrative steps that were applauded by industry experts for giving communities and developers tools to expand affordable housing and encourage construction and rehabilitation of housing of all types and price points. Calling it a thoughtful proposal that acknowledges the challenges in resolving the nation’s housing shortage, a joint statement from the National Apartment Association and the National Multifamily Housing Council pointed to four aspects of the plan that they were particularly encouraged by:
- Rewarding jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, for the first time at scale.
- Deploying new financing mechanisms to build and preserve more housing where financing gaps currently exist.
- Expanding and improving existing forms of financial financing, including for affordable multifamily development and preservation.
- Working with the private sector to address supply chain challenges and improve building techniques.
“I love that they have packaged this together and it’s a comprehensive approach to trying to move the needle on addressing housing affordability,” Cindy Chetti, senior vice president, government affairs at NMHC, told Multi-Housing News. “I think there are new financing mechanisms in here that might be things that would help move the needle. I definitely think the zoning and land-use policies are important and that they talk about using federal dollars to leverage removing barriers at the state and local level.”
Both Chetti and Nicole Upano, AVP, housing & regulatory affairs at NAA, said there are many provisions in the plan that both industry groups have long supported.
“We want to see what the final language looks like, but contextually we like what’s being proposed in President Biden’s plan. There certainly are a lot of steps in the right direction here that we’re happy to see complementing our existing, ongoing federal advocacy efforts to move forward short- and long-term sustainable solutions to address the nation’s affordable housing challenges,” Upano told Multi-Housing News. “These are all additional tools in the toolbox to help us get there.”
Upano pointed to one of the immediate steps the administration said it was taking to finalize the LIHTC ‘income averaging’ proposed rule. Income averaging will allow developers to meet the same affordability goals by taking the average of the income for some households in the property rather than requiring all to meet the same threshold. The administration said this change will enable creation of more financially-stable, mixed-income developments and make LIHTC-supported housing more feasible in sparsely populated rural areas and facilitate production of additional units for extremely low-income residents.
“We were definitely pleased to see further expansions and flexibilities in existing established programs that have had so much success like LIHTC and HOME to support new construction and help state and local governments to work through those funding mechanisms toward their housing goals,” Upano said.
The statement from the White House points out that actions like improvements to LIHTC and HOME programs build on proposals that were approved in the House-passed reconciliation bill but have not been approved by the Senate. Some of those proposals included financing more than 800,000 affordable rental units by increasing tax credit allocations and providing additional capacity for private activity bonds and pairing LIHTC with other programs like HOME, the Housing Trust Fund and Project Based Rental Assistance.
More Transit-Oriented Development
Diane Yentel, president & CEO of the National Low Income Housing Coalition, said in a statement NLIHC joins President Biden in continuing to call on Congress to enact the budget reconciliation bill that has been stalled for months. But she noted in her statement the Housing Supply Action Plan does include important measures to increase the supply of housing, including using transportation funding from the Bipartisan Infrastructure Law to encourage state and local governments to boost transit-oriented development.
“The administration’s commitment to using federal transportation funds to reduce restrictive local zoning laws, which can inhibit or prohibit the construction of apartments and are often deeply rooted in racial exclusion, is especially promising,” Yentel stated.
Upano agreed that it was important to reward states and localities that are reducing the sometimes insurmountable regulatory barriers to build new rental housing.
“We think this is the right approach and it definitely aligns with our ongoing advocacy to get the YIMBY act passed,” she said, referring to the Yes in My Backyard Act, which would require Community Development Block Grant recipients to report on how they are removing discriminatory land use policies and implementing more inclusive and affordable policies.
Bob Broeksmit, president & CEO of the Mortgage Bankers Association, also commended the Biden administration for announcing steps to alleviate the acute shortage of single-family and multifamily housing for prospective homebuyers and renters.
“Eliminating the regulatory barriers to new construction, including manufactured housing, in underserved markets; expanding affordable financing for multifamily development and rehab projects; and a commitment to more private and public sector partnerships will help address the housing supply and affordability challenges that continue to burden families,” he said in a prepared statement.
While noting that the administration was focusing on ways to improve financing of multifamily projects, Broeksmit called on the Housing and Urban Development department to “focus on the issues that continue to lead to significant lending pipeline delays in its MAP program, which is a primary financing option for producing more affordable housing.”
One financing change HUD is implementing as part of the new plan is making it easier to financing new units of manufactured homes by increasing the usability of FHA’s Title 1 loan program for manufactured housing, supporting greater securitization of Title 1 loans through Ginnie Mae’s platform, updating the HUD Code to allow manufacturers to modernize and expand their product lines and helping them respond to supply chain issues.
Freddie Mac has announced it will be competing a feasibility assessment looking at lending for those purchasing manufactured homes, who now rely on personal property financing rather than conventional mortgages. This type of financing generally costs more for the homebuyer. Both Freddie Mac and Fannie Mae have revised purchase targets for manufactured housing loans, which should increase delivery of the units.