A Brief History of Federal

Housing Legislation (and a little bit of State)

Housing NOW! Conference

October 11, 2017 1

The Beginning

National Housing Act of 1934

Federal Housing Administration

created

2

Next

U.S. Housing Act of 1937

Created the US Housing

Authority for building low-rent

public housing by local

housing authorities

3

Next

Agricultural Adjustment Acts

of 1933 and 1938

Created the Farmers Home

Administration to insure loans

made by private lenders in

rural areas

4

Then Came…

Amendment to the National

Housing Act in 1938

Created the Federal National

Mortgage Association

“Fannie Mae”

5

Followed By…

Housing Act of 1949

Created the Urban Redevelopment

Administration and first introduced the term “urban

renewal”.

6

Followed By…

GI Bill - 1944

Created the Veterans

Administration Home Loan

Guaranty Program

7

Followed By…

GI Bill - 1944

Created the Veterans

Administration Home Loan

Guaranty Program

8

And also,

Housing Act of 1949

Created the Rural

Development Section 538

Multifamily Loan Guaranty

Program

9

And

Housing Act of 1949

Created the Rural

Development Section 515

Multifamily Direct Loan

Program

10

And

Housing Act of 1949

Created the Rural Development Section 514

and 516 Farm Worker Housing Grant and Loan

Programs

11

Followed by…

Housing Act of 1949

Created the Rural Development Section 521

Rental Assistance Program for Rural Rental and Farm

Worker Housing

12

And Then

Housing Act of 1954

Modified urban renewal by requiring communities to adopt code enforcement,

relocation, and other measures.

13

And Then Came…

Housing and Urban

Development Act of 1965

Created HUD as a Cabinet Level

Agency

14

And Then…

Housing and Urban Development Act of 1968

Divided FNMA into a private corporation and the

Government National Mortgage Association,

a publicly supported entity

15

Moving Right Along…

Housing and Community

Development Act of 1974

Amended the U.S. Housing Act

of 1937 to create the Section 8

rental assistance program

16

Next came..

Community Reinvestment

Act of 1977

Created law requiring banks to

take steps to make more loans

in low and moderate income

neighborhoods

17

Followed by…

Tax Reform Act of 1986

Created the Low Income Housing

Tax Credit Program

and the

Private Activity Bond Program

18

And after that,

Community Renewal Tax Relief

Act of 2000

Created the New Market Tax

Credit Program for economic

development

19

Then…

Housing and Economic Recovery Act of 2008

Created temporary fixed rate for 9% LIHTC, supplemental LIHTC

funding and National Housing Trust Fund

20

And to really help…

American Recovery and

Reinvestment Act of 2009

More stimulus funds for LIHTC

programs and other economic

development

21

And finally…

Protecting Americans from Tax

Hikes Act of 2015

Amended 1986 Tax Reform Act

to make 9% LIHTC rate

permanent

22

Housing and Economic Recovery Act of 2008

Housing Trust Fund

$174MM in funding announced in May 2016 – DOH

23

And at the Colorado General Assembly

Div. Of Housing - 1970

CHFA – 1974

State LIHTC – 2001-2, 2015-16

HB 1465 – 2017-19!

24

Rodger Hara

Principal

Community Builders Realty Services LLC

rodger.hara@comcast.net

720.323.0253

25

the power of tax credits

Steve Johnson, Director, Community Development

what is chfa?

CHFA’s mission is to strengthen Colorado by investing in affordable housing and community development.

Everyone in Colorado will have the opportunity for housing stability and economic prosperity.

homeownership business finance affordable

rental housing

financing multifamily housing

70% debt

30% equity

financing affordable housing

Lower rents results in lower revenue

Lower revenue results in lower cash flow

Lower cash flow results in lower debt

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Denver Metro Two Bedroom 60% AMI Rents Compared to Market Rents for a two person household and average weekly earnings 2007-2016

Denver Metro Two bed, one bath Denver Metro Two bed, two bath

Denver Metro Two bed 60% AMI rent Denver Metro average weekly earnings

affordable to 70% AMI

affordable to 90% AMI

0

50

100

150

200

250

300

350

400

450 Metro Denver Home Price Index (Federal Housing Finance Agency index)

recession

ten years with average annual growth of 9% (Dot Com bubble time period)

slowed growth to average 2% annually, (Dot Com bubble burst Q2 2003)

home prices fall, prior to the Great Recession, at an annual average of 7%

"the lost decade" for home price appreciation

federal stimulus: FTHB tax credit

strong growth, at an annual average of 11.5% means lower affordability

financing affordable housing

financing affordable housing

30% debt

70% gap

low income housing tax credit

the impact of 9% lihtc

Debt 30%

LIHTC 65%

Soft Funds/Equity

5%

low income housing tax credits

the players

Allocation agency

Population based allocation of credits

Developer

For profit, not for profit, housing authority

Investor

Valuing the federal tax liability offset

Treasury

why lihtc works

The developer agrees to long-term affordability

Private sector assumes risk for project success

Competitiveness generates strong projects

Each state customizes its program through a Qualified Allocation Plan

qualified allocation plan

Section 42 requires:

lowest for the longest

priority for projects located in QCT and part of a development plan

only the minimum amount of credit necessary for financial feasibility

but the state can decide…

Unique priorities

Set-asides

Process for awarding credits

Maximum award

Geographic distribution

Demographic distribution

colorado priorities include

Homeless units

Developments that provide supportive services

Counties under 175,000 population

the cost of housing

lihtc volume

696 832 849 864

700 751 692 633

184

923

1582

1331 1272

1642

1243

1902

1062 1299

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2010 2011 2012 2013 2014 2015 2016 2017

un

its

9 percent 4 percent state lihtc and 4 percent

division of housing

Private Activity Bonds (PAB)

Housing Colorado NOW!

October 11, 2017

• NOT CASH

• Tax-exempt bonds issued for privately developed projects.

• IRS allows a limited amount, also know as PAB “Cap”.

• Municipalities (or Authorities) issue the bonds, but have no

obligation to repay investors.

• Investors buy the bonds.

• Underwriters use the investors’ $$, or “bond proceeds,” to make

a loan to the project.

• The project pays back the loan & investors get repaid + interest.

• PABs make rental housing eligible for 4% LIHTC.

What are Private Activity Bonds?

Initial PAB Allocation Process

$100 per person in the state = the “Volume Capacity”

$545,657,400 in 2016; $554,054,500 in 2017

50% of Allocation 50% of Allocation

Statewide Authorities

• Colorado Housing and Finance

Authority (CHFA)

• CO Agriculture Development

Authority (CADA)

Local Governments

• 20,000 Persons or more

• $50 per capita

Statewide Balance

Remaining cap administered by

CO – DOLA/DOH

January 2017 PAB Allocation

Locals 46%

SWB 4%

CHFA 48%

CADA 2% 53 Local Issuers - $257,305,000

CHFA - $267,027,250

CADA - $10,000,000

SWB - $19,722,250

• List of all direct allocations available

at:

https://www.colorado.gov/pacific/dola/

private-activity-bonds

• Receive allocation by January 15th

• Establish priorities & act by September 15th

Bond issuance requires an inducement resolution and closing

by December 23rd; OR

Carry-Forward bond cap for eligible purpose to close within a

3 year period – requires filing with IRS; OR

Relinquish to Statewide Balance; OR

Assign to another issuer for an eligible purpose

If you Receive an Assignment – issue it or carry it forward, or

it will also relinquish on 9/15.

Local Issuers & Statewide Authorities

September 2017 PAB Allocation

Locals 22%

SWB 21% CHFA

56%

El Paso Co - $33,851,100

Denver/DHA - $34,154,800

7 Other Locals - $62,140,050

CHFA - $352,197,950

CADA - $1,525,000

SWB - $70,185,600

• Identify your issuer

• Talk with your local governments – City, County & neighbors

Assignments of “fresh” or current year cap – act by 9/15

Delegations of cap they have carried forward

• Talk with CHFA (especially if they will be the issuer)

• Talk with DOH & Apply to the Statewide Balance

Also, save some cap for the rest of us – only use 55% of TDC

How to Assemble PAB Cap

• DOLA receives allocation by January 15th & relinquished bond

cap on Sept. 15th

• Monthly application cycles:

March thru November, $750 application fee.

Review criteria are similar to DOH’s Grant/Loan review

8 week process, inc. PAB Allocation Committee & award letter

Relinquished bond cap distributed through November round.

• All must close by December 23rd

0.033% issuance fee on Statewide Balance Awards

0.011% issuance fee on bonds issued from direct allocations

Statewide Balance Applications

• Demonstrated local need & support:

Certified copy of an inducement resolution from the local

government/issuer.

Local financial commitment of PAB allocation or other local

financial subsidies.

Market study demonstrating need.

Housing Affordability – going beyond IRS requirements.

Statewide Balance Applications

• Feasibility:

Reasonable costs for development & operation.

Readiness to proceed – site under control, local planning &

zoning approved, credit enhancement secured, tax credits

reserved.

Financially sound – income/expense estimates reasonable,

good underwriting ratios, sources & uses balance.

Development team experience, capacity.

• Typical bond issue size is $6 – $27 million

For rental, TDC of $12MM - $54MM, or 50 - 210 units

Statewide Balance Applications

2015-16 Statewide Balance Awards

Date Allocation Project or Program

Kestrel

VOCC

Villas at Wadsworth Station

5800 Alameda

Ann Watts Community Access Team Manager

& PAB Program Manager

Department of Local Affairs

Division of Housing

(303) 864-7820

ann.watts@state.co.us

https://www.colorado.gov/pacific/dola/division-housing

4% LIHTC

Same concept as the 9% credit but,

Non-competitive

Reduced equity benefit

Doesn’t work for all deals

Need to fill the gap

4% lihtc capital stack

Debt 60%

LIHTC 30%

gap 10%

tale of two credits

59

25% Owner Equity

75% Debt

Conventional

62% LIHTC Equity

30% Debt

8% Other

9% LIHTC

30% LIHTC Equity

60% Debt

10% Other

4% LIHTC

rents

you might be a 4% deal if…

Your project includes acquisition rehab

Your project includes market rate units

Your project is over 100 units

Market rents are significantly higher than LIHTC rents

You gave up competing for 9% credits

You can access soft funds or state credit

addressing the gap

Utilizing state credit

Adding market rate units

State and local funds

Serving higher incomes

Gap Funding &

The Colorado Division of Housing (DOH)

Housing Colorado NOW!

October 11, 2017

• DOH was created by statute in 1970 to improve the access of all

Coloradans to decent, affordable housing.

• Provides state and federal funding to private housing developers,

housing authorities, non-profits, and local governments.

• Provides state and federal funded rental assistance through

housing authorities and non-profit service organizations.

• Served 32,000 households in 2017.

• Fostered the creation of 3,500 new affordable housing

opportunities.

• More than 83% of DOH vouchers serve persons with disabilities.

DOH Overview

• DOH funds are GAP-filling.

• Competitive, monthly applications.

• Contact your Housing Development Specialist BEFORE applying.

• Local $ support, market, cost per unit, & overall feasibility.

• Rentals below 60% AMI. Prefers most below 50% AMI, and at

least 5% of units at or below 30% AMI.

• Grants available only to Non-Profits, Local Governments &

Housing Authorities – loans available to For-Profits.

• For more info:

https://www.colorado.gov/pacific/dola/grant-loan-programs

DOH Application Process Summary

• HOME Investment Partnership Program (HOME)

• Community Development Block Grant (CDBG) &

CDBG-Disaster Recovery (CDBG-DR)

• Housing Development Grant (HDG)

• Housing Development Loan Fund (HDLF)

• Colorado Housing Investment Fund (CHIF)

• Neighborhood Stabilization Program (NSP)

• National Housing Trust Fund (HTF)

• New! Homeless Solutions Program (HSP)

DOH Available Grants & Loans

• Federal $ given to states & local governments

• State CDBG available only if local government does not get its

own allocation (non-entitlement areas)

• CDBG – Local government is Applicant, & may either grant or

loan the funds to the project

• HOME requires Long-term monitoring

• HUD Environmental Clearance, Davis-Bacon, Section 3,

Affirmative Marketing & other cross-cutting federal regulations

HOME & CDBG

• Federal $ given to state – $320 million

DOH received approximately 1/3 of the funds

• 19 Presidentially declared flood & fire-impacted counties

• 80% of funds must go to Boulder, Larimer, & Weld Counties

• All funds must be spent by Sept 2019

• Coordinated application review with CHFA for rental housing to

make most of CDBG-DR and State Tax Credit

• Household Assistance Programs still underway in several

counties restoring private access and repairing/replacing homes

• For general information: http://dola.colorado.gov/cdbg-dr/

CDBG - Disaster Recovery (CDBG-DR)

• State General Fund $

• HDG is for grants or loans, & especially for:

o Homebuyer and low-income rentals

o Permanent Supportive Housing

o Rural – statewide

• HDLF is only for loans.

Housing Development Grant (HDG) &

Housing Development Loan Fund (HDLF)

• State Attorney General’s mortgage settlement custodial funds

• Revolving Loan Pool

• Up to 30% can convert to long-term debt (up to 17 years) – 70%

of the loan must be repaid within 7 years

• Up to 100% of the loan can convert to the 17-year term if the

project serves a designated percentage of special needs

households

• Limited availability - contact your Housing Development

Specialist

Colorado Housing Investment Fund (CHIF)

• Federal $ given to state & some local governments

• Funds may continue to be recycled semi-indefinitely within the

State until exhausted.

• Blends regulations of CDBG/HOME

• Multi-family rental projects with minimum of funds serving 50%

AMI or below, remainder may go up to 120% AMI. DOH’s goal is

to have at least 75% of units at or below 50% AMI.

• Properties must be:

(1) in a HUD identified eligible census area;

(2) abandoned, foreclosed or vacant by HUD definition; and

(3) zoned residential.

Neighborhood Stabilization Program (NSP)

• Federal $ allocated to states.

• Funds are available as grants or loans.

• Priorities are permanent supportive housing and mixed-income

developments with 30% AMI rents that would not be financially

feasible but for HTF funding.

• Supportive housing eligibility requires a minimum set-aside of

25% of the units for individuals with special needs.

• Applications are accepted on a monthly basis.

National Housing Trust Fund (HTF)

• A continuing allocation of State funds

• Funds can be used for new construction, acquisition,

rehabilitation, and DOH vouchers

• Targeted populations are:

Homeless

Veterans

Individuals exiting mental institutions into homelessness

Individuals exiting correctional facilities into homelessness

• Funds are designed to support permanent supportive housing,

rapid rehousing, and limited supportive services.

Homeless Solutions Program (HSP)

• Talk with your DOH Housing Development Specialist BEFORE you

start writing your application

o Describe your project & get advanced warning of potential minefields

o Get your questions answered on how to fill out the application

• Be thorough with your application – if you’re tempted to write

in “N/A,” ask first!

• Make sure your pro-forma works. Take DOH’s “Hammering Out

the Deal” course to learn what we’re looking for & how to use

our pro-forma.

• Be available to answer questions.

How to Succeed in your DOH Grant Application

Wayne McClary Housing Development Specialist

Department of Local Affairs

Division of Housing

(303) 864-7819

wayne.mcclary@state.co.us

https://www.colorado.gov/pacific/dola/division-housing