The Senate Banking, Housing, and Urban Affairs Committee easily approved two measuresyesterday that could help increase the nationwide supply of affordable housing and havean impact on housing bond issuance.
Members of that panel approved on a voice vote the proposed American Dream DownpaymentAct, sponsored by Sen. Wayne Allard, R-Colo., which would create a program to providefederal down-payment and closing assistance of about $5,000 for each eligible low-incomefamily purchasing a home for the first time. The Bush administration supports theproposal.
The proposed program would operate as part of the U.S. Department of Housing and UrbanDevelopment's HOME Investment Partnerships Program, which attempts to expand the supplyof affordable housing for low and very low-income families by providing grants to statesand local governments. States and localities are allowed to use their HOME grants tofund housing programs that meet local needs and priorities, and they are also permittedto use the funds to help renters, new home buyers, or existing home owners.
Bond financing is sometimes involved in affordable housing projects that use HOME money,and analysts have said funds provided under the proposed program could spur bondissuance.
Despite lawmakers' enthusiasm for the proposal, some affordable-housing advocacy groupshave criticized it, arguing that it diverts vital funds from the HOME program.
"Every HOME dollar Congress invests in this program is a dollar it could have providedstate and local HOME administrators to address affordable housing needs they judge mostpressing in their communities," one advocate said on Oct. 1, the same day the Houseapproved a similar version of the bill sponsored by Rep. Katherine Harris, R-Fla.
Lawmakers appropriated $75 million for the down-payment initiative in fiscal 2003, whichended Sept. 30. President Bush has requested $200 million in funding for the program inhis proposed fiscal 2004 budget, and intends to request another $200 million in fundingfor the program in fiscal 2005.
The other housing bond-related measure the committee approved yesterday was a proposalintroduced by Sen. Jon Corzine, D-N.J., that would allow HUD to raise Federal HousingAdministration mortgage limits for multifamily buildings in high-cost areas.
Although Corzine had previously intended to offer his proposal as an amendment toAllard's bill during the meeting yesterday, following negotiations committee chairmanRichard Shelby, R-Alabama, incorporated Corzine's proposal in a so-called manager'samendment to Allard's legislation that the panel adopted. Earlier this month, theDemocratic senator introduced a separate bill - the proposed FHA Multifamily Loan LimitAdjustment Act - that is designed to accomplish the same goal, if enacted.
Following the vote, Corzine claimed victory. "This amendment will provide the increaseswe need to make the FHA multifamily programs succeed in all our communities,particularly in those high-cost areas that so desperately need additional affordablerental housing," he said. "We cannot allow access to affordable housing for our workingcitizens to continue to lag and add thousands of families to the 14 million people whocurrently face severe housing needs."
Corzine also said that the FHA's mortgage- insurance programs have been "extremelysuccessful in producing new and rehabilitated housing with little or no cost to thefederal government."
Those who support raising the loan limits in high-cost areas argue it is important to doso because there are markets where construction costs are so high that the current loanlimits are insufficient. Those skyrocketing building costs make it difficult orimpossible to use the FHA program in those expensive housing markets. Corzine arguedthis specific point in the Senate Oct. 3 when he introduced his bill. Statisticsgenerated by HUD demonstrate that "in 2002 and 2003, no multifamily loans have been FHA-insured in New York City, Philadelphia, Los Angeles, Seattle, Massachusetts, or NewJersey," he said.
Similar legislation sponsored by Rep. Gary G. Miller, R-Calif., that would pump up FHAmultifamily mortgage limits easily passed the House last week. FHA multifamily insuranceprograms are designed to stimulate the construction, rehabilitation, and preservation ofproperties by insuring lenders against loss in financing first mortgages.
Increasing loan limits in high-cost regions would make FHA mortgage insurance availableas a credit enhancement in those areas, according to a bond counsel. Such a move couldmake possible some housing development deals involving bond financing that otherwisewould not be feasible, he said. Although multifamily financing is already widelyavailable, upper limits on loan amounts sometimes leave the FHA unable to insure loansto developers large enough to make some projects financially feasible.
