Barr proposes stricter bank capital requirements

Michael Barr, Vice Chair for Supervision of the Federal Reserve System’s Board of Governors, delivered remarks on his holistic review of large banks’ capital. Barr revealed that he would propose stronger capital requirements for banks. His proposal would subject banks with at least $100 billion in assets to similar requirements of banks with $700 billion in assets.

The announcement was met with opposition from much of the banking industry. "The changes he outlined today fail to adequately consider the negative repercussions from forcing banks of all sizes to hold more capital than is needed to maintain safety and soundness,” said Rob Nichols, President and CEO of the American Bankers Association. “Higher capital requirements come at a cost to the economy, and regulators have other existing regulatory tools to manage risks.”

House Financial Services Chair Patrick McHenry (R-N.C.) also criticized the announcement and argued the plan has not been adequately vetted. "This is deeply concerning as these changes could have disastrous impacts on the cost and availability of credit for all American families and workers,” he said.

Barr offered two key reasons for the change. “First, the proposed rules are less burdensome for banks to implement than the current requirements since they don’t require a bank to develop a suite of internal credit risk and operational risk models to calculate regulatory capital. Second, our recent experience shows that even banks of this size can cause stress that spreads to other institutions and threatens financial stability,” he said.

Citing the recent failure of Silicon Valley Bank, Barr said the changes would improve transparency and account for unrealized losses and gains in available-for-sale securities. Barr noted that the proposal would go through a standard notice-and-comment rulemaking process to allow stakeholders to weigh in.

Acting Comptroller of the Currency Michael Hsu supports the change, stating there is “strong alignment” between the regulatory agencies. 

HOME funds slashed in House proposed HUD FY24 funding bill

The fiscal year 2024 Transportation, Housing and Urban Development markup spending bill was released by the U.S. House of Representatives Committee on Appropriations. While the bill proposes $68.2 billion for the U.S. Department of Housing and Urban Development (HUD), an increase of $6.4 billion from FY23 levels, it slashed key programs with a proven record of success.

The bill reduces funding for several vital housing programs. It decreases the Community Development Block Grant program by $843 million, with total proposed funding at $5.5 billion. Fair Housing funding would be reduced by $1 million for total funding of $85 million. Section 202 and Section 811 housing for older adults and people with disabilities also have cuts of $162 million and $152 million, respectively.

The bill would also completely erase funding for the Family Unification Program, Incremental Vouchers, Choice Neighborhoods Initiative, and Housing Mobility Services. It also includes a $1 billion cut to the HOME Investment Partnerships (HOME) program, proposing $500 million for FY24. The HOME program is one of the most effective and flexible tools for producing affordable housing for states and localities and has produced over 1.34 million housing units.

The bill provides funding increases for tenant-based rental assistance, project-based rental assistance, homelessness assistance, and capital needs for public housing. The Native American Housing Block Grant program would also receive a significant increase of $323 million.

The Senate draft spending bill is expected in the upcoming week. 

LIFT Act of 2023 introduced

Sens. Mark R. Warner (D-Va.), Chris Van Hollen (D-Md.), Rev. Raphael Warnock (D-Ga.), Jon Ossoff (D-Ga.), and Tim Kaine (D-Va.) reintroduced the Low-Income First Time Homebuyers (LIFT) Act. The LIFT Act helps first-time homebuyers, predominately people of color, to build wealth more quickly by offering a 20-year mortgage at around the same monthly cost as a 30-year mortgage. Rep. Emanuel Cleaver (D-Mo.) introduced a companion bill in the House.

“Homeownership is one of the key ways Americans build capital and wealth. Unfortunately, racism and systemic discrimination in our housing laws have put this opportunity out of reach for far too many families of color,” said Warner. “The LIFT Act will help narrow the racial wealth gap by allowing qualified home buyers to build equity – and wealth – at twice the rate of a conventional 30-year mortgage.”

NHC is among the organizations applauding the legislation. Other groups that issued statements supporting the bill’s reintroduction include the Harvard Joint Center for Housing Studies, Moody’s Analytics, Asian Real Estate Association of America, NAHREP, and Virginia Housing Alliance.

“By subsidizing the interest rate on 20-year fixed-rate mortgages, first-generation homebuyers will be able to build equity at twice the rate of a 30-year mortgage,” said NHC President and CEO David Dworkin. “Many multi-generational homebuyers with equity in their current home use this option on their own, but it’s impossible for low- and moderate-income first-generation home buyers to take advantage of it. The LIFT bill evens that playing field and will not only help close the wealth gap, but it will strengthen the economy for all Americans.”

BPC launches Executive Council for Housing Affordability

The Bipartisan Policy Center (BPC) announced a new Executive Council for Housing Affordability. Council members include Airbnb, Amazon, Matrix Rental Solutions, Pretium, USAA, Weyerhaeuser, and Zillow. BPC, part of the Terwilliger Center for Housing Policy, said the Council will help the Terwilliger Center elevate housing affordability as a national priority. BPC believes the Council will highlight housing affordability’s importance to corporate America and U.S. workers. The Council will also try to demonstrate how a lack of affordable homes negatively impacts labor and economic growth, identify best practices for corporate engagement, and build momentum for federal action.

“It’s critical that federal policymakers hear directly from all segments of the private sector, both inside and outside the housing industry, about how high housing costs and the lack of affordable homes are impacting their businesses and their workers as well as broader economic growth and productivity. The Terwilliger Center hopes to provide a platform for these important discussions,” said Dennis Shea, executive director of the Terwilliger Center.

Before announcing the new Council, BPC sent a letter to ranking members of the Senate Committee on Banking, Housing, and Urban Affairs, urging the Committee to prioritize housing legislation. 

NSPIRE takes effect for Public Housing

The National Standards for the Physical Inspection of Real Estate’s (NSPIRE) Final Rule grants HUD authority to inspect public and multifamily housing properties starting July 1. NSPIRE improves HUD’s oversight by strengthening inspection regulations and physical condition standards to ensure safe housing for assisted families and individuals. The new standards go into effect for other rental assistance programs on Oct. 1.

HUD Secretary Marcia Fudge stated, “The purpose of the new standards and inspections are to address the issue of substandard rental properties, promote greater compliance with health and safety standards, and preserve the quality of our country’s neighborhoods and available housing.”