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Weekly update from the National Housing Conference
News from Washington
Treasury releases new Emergency Rental Assistance guidance

On Monday, the Treasury Department released updated guidance on requirements for the federal Emergency Rental Assistance (ERA) program for grantees at state and local housing agencies. The new guidance allows for significantly expanded access to ERA funds, providing for applicant self-attestation to determine eligibility and clarifying that funds can be used for expenses such as utility payments, housing counseling, and costs related to telework and remote learning in addition to rent payments.

The updated guidance replaces guidance that was released at the tail end of the previous administration, which some advocacy groups viewed as overly burdensome for renters due largely to requiring documentation of tenant income and proof of financial hardship to receive funding. Upon the release of the previous guidance, the National Council of State Housing Agencies (NCSHA) Director of Tax and Housing Advocacy Jennifer Schwartz noted that Treasury required applicants to provide such documentation “despite the seemingly unanimous urging of NCSHA and other organizations representing both grantees and low-income households.”

The previous guidance also did not define “other expenses related to housing” and “housing stability services,” both of which were mentioned as eligible uses for ERA funds under the Consolidated Appropriations Act. This omission led to confusion as to whether tenants could use funds for non-rent expenses and intensified calls for updated guidance to be released.

The new guidance provides relief to some state housing finance agencies and other grantees that had been delaying the implementation of their ERA programs pending guidance they felt was less stringent. States and localities will now be able to move forward with ERA implementation under the new guidance.
Fed Chair delivers Monetary Policy Report to Congress

Federal Reserve (Fed) Chairman Jerome Powell delivered the Fed’s semiannual Monetary Policy Report to the Senate Banking Committee and House Financial Services Committee this week. Powell told both committees that the Fed is not planning on raising interest rates – which currently hover at a record low just above 0% – until the economy reaches maximum employment and the Fed sees sustained inflation rates above its target of 2%.

Powell said that inflation may increase temporarily as COVID-19 numbers improve, but that the economy has a long way to go before inflation becomes a concern. Though he refrained from commenting on stimulus measures currently being negotiated in Congress, Powell also noted that there has not been a strong link between higher deficits and inflation in recent years. In front of the Senate Banking Committee he said, “I really do not expect that we’ll be in a situation where inflation rises to troubling levels.”

Though Powell’s congressional testimony focused on higher-level economic trends, the Fed’s Monetary Policy Report noted the housing sector’s “remarkable” recovery in the second half of last year. The Fed pointed to the uptick in single-family home starts and existing home sales to levels not seen since before the Great Recession, crediting “historically low mortgage rates and the swift adaptation of the real estate sector to the pandemic” for the housing market’s rally. The report also noted that low mortgage rates’ upward pressure on home prices have helped to push household wealth to “record highs,” with gains particularly concentrated in upper-class households.
Mortgage delinquency rate continues to decline

Analytics firm Black Knight released its first look at January 2021 mortgage data, reporting that the national mortgage delinquency rate fell below 6% for the first time since March of last year. The decline in mortgage delinquency in January to 5.85% represents a total of 121,000 fewer delinquent loans than the previous month but Black Knight notes that 3.1 million loans remain delinquent, of which over 2 million have been so for more than 90 days.

Though recent extensions of foreclosure moratoria and forbearance programs have “reduced near-term risk,” the company notes that such measures “may have the effect of extending the length of the recovery period,” since they may result in larger numbers of loans entering forbearance all at once when they are allowed to lapse. This concern is supported by recent research indicating that 83% of homeowners in forbearance have been so since April or May of last year and more than 40% have missed at least six mortgage payments – both indications that their capacity to pay may have been permanently compromised due to job losses or other reductions in income during the COVID-19 recession.

Despite these worrying signs, recent analysis from Urban Institute indicates that forbearance extensions reduce long-term foreclosure risk, especially for homeowners with negative equity. According to Urban Institute, such measures allow “struggling borrowers more time to benefit from improved employment prospects as the economy recovers and to build an equity cushion.”
CFPB to delay, revisit QM rule implementation

The Consumer Financial Protection Bureau (CFPB) announced that it expects to push back the deadline for mandatory compliance with the amended general Qualified Mortgage (QM) final rule, and may alter or revoke the seasoned QM final rule in its entirety. Both rules become effective March 1, and mandatory compliance is set to begin July 1.

The action would have the effect of delaying the expiration of the “GSE patch,” which exempts loans sold to Fannie Mae and Freddie Mac from QM requirements and is scheduled to sunset when compliance with the general QM final rule becomes mandatory. According to NHC President and CEO David Dworkin, its elimination would “have significant unintended consequences of reducing mortgage lending – and ultimately the homeownership rate – even further.”

The announcement comes a few weeks after Acting CFPB Director Dave Uejio signaled that CFPB could reconsider rules implemented under the previous administration that have not yet taken effect if they are “not in line with our consumer protection mission and mandate.”

“An extension of the compliance deadline would allow lenders more time in which they could make QM loans based on a debt-to-income ratio or whether the loans are eligible for sale to Fannie Mae or Freddie Mac, and not just a pricing cut off,” Uejio said in a blog post on the potential changes.
House passes COVID-19 stimulus package

Early Saturday, the House of Representatives passed a version of President Joe Biden’s $1.9 trillion stimulus package aimed at helping the economy recover from COVID-19. The package now heads to the Senate, where it will be considered under the rules of budget reconciliation.

The bill passed by the House includes $30 billion in emergency rental assistance, adding to the $25 billion in rental assistance that was included in the stimulus bill signed by former President Trump in December. The bill also provides $10 billion for mortgage assistance, and $5 billion for COVID-19 prevention among homeless populations. Assistance targeted at homeowners was originally omitted from the package proposed by the White House, but was included in the House bill after a push by a coalition of housing and civil rights stakeholders, including NHC.

In addition to measures protecting renters and homeowners, the bill includes money for direct stimulus payments and vaccine distribution, an extension of unemployment insurance through Aug. 29, and the establishment of a fully refundable child tax credit. The bill also includes a gradual minimum wage hike to $15 an hour, but a ruling by the Senate Parliamentarian that the minimum wage cannot be increased via budget reconciliation means that a portion of the bill is likely dead on arrival in the Senate.
HUD issues grants to PHAs and local housing programs

The Department of Housing and Urban Development (HUD) awards billions in grants to states, localities and public housing agencies (PHAs) through various programs this week. HUD awarded $3.4 billion to states and localities through the Community Development Block Grant program, $2.7 billion to PHAs through the Capital Fund program and $1.3 billion to states and localities through the HOME Investment Partnerships program. HUD also awarded smaller amounts through the Housing Opportunities for Persons with AIDS, Emergency Solutions Grants, Recovery Housing and Family Self-Sufficiency programs.

In a press release announcing one tranche of grants, which totaled over $8 billion, HUD Principal Deputy Assistant Secretary for Community Planning and Development James Arthur Jemison said, “This funding comes at a critical time for our country, when these bedrock programs have never been more important.”
Chart of the week
Chart of the week: Housing crisis is widespread, but especially acute in California

A new report from the National Association of REALTORS® on state and local strategies to increase housing affordability measured home affordability by state, finding that the median home would be unaffordable for significant portions of households in most states. The report notes that the housing crisis is especially acute in California: in the Los Angeles, San Francisco and San José metropolitan areas, less than one fourth of homes were affordable to the median household.
What we're reading
The University of California, Berkeley’s Terner Center for Housing Innovation published a brief detailing their recommendations for federal housing investment and regulatory oversight to “make good on the 1949 Housing Act’s promise of ‘safe and affordable housing for all.’” The brief emphasizes the importance of regional planning in housing policy, recommending among other things that the federal government “create flexible supply-side subsidies that operate at a multi-jurisdictional scale.”

A new report from the Manhattan Institute argues for the use of “hyperlocal zoning” – zoning policy made by a “street vote” of residents of a single city street or block – to spur housing production in areas with high amounts of unmet demand. According to the report, “The key is to use the strong economic incentives for infill growth to solve political problems by enabling bargaining at highly local levels. Votes by street or by block would give residents a way to negotiate to share the benefits of new development and ensure that it will suit them."

Though there has been much focus on increased demand for larger homes with more space during the pandemic, an analysis from the Harvard Joint Center for Housing Studies Housing Perspectives blog finds that “demand for smaller homes, which tend to be more modestly priced, remains strong.” The analysis notes that this demand has not gone unnoticed by home builders, many of whom have “increased their production of units targeting entry-level buyers,” which tend to be smaller and less expensive.
The week ahead
Monday, March 1

Tuesday, March 2

Wednesday, March 3

Thursday, March 4

Friday, March 5
The National Housing Conference has been defending the American Home since 1931. We believe everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.
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