New ways the White House, FHA aim to support affordable housing

August 27, 2024 5:00 AM

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The housing market has undergone significant fluctuations in recent months, as inventory shortages and mortgage rates rising from COVID-era lows have created a volatile ecosystem.

Leading officials with the White House recently rolled out several initiatives to provide homeowners with new avenues of support. These include $100 million of funding through the Department of Housing and Urban Development's Pathways to Removing Obstacles to Housing program and streamlining the Department of Transportation's DOT loan program.

The first round of grant funding, roughly $85 million, was allocated this year to the first round of PRO Housing recipients.

"Building rental units and homes faster means lower costs for consumers. … Not only will more units get to the market faster, but increasing the speed of construction lowers building costs," said the White House in a press release on Aug. 13.

Other initiatives involve expanding the categories of housing that can be built under HUD's Manufactured Home Construction and Safety Standards, allowing duplexes, triplexes and fourplexes to be constructed within compliance.

The White House isn't alone in this effort, as the Federal Housing Finance Agency published a request for comment in July to crowdsource ideas to improve its affordable housing initiatives. Each Federal Home Loan Bank is required by law to allocate at least 10% of its prior year's income to fund its affordable housing programs.

While former U.S. President Donald Trump has been vocal on other issues like tax cuts and border control during his campaigning, he's been less clear about his stance on housing policies.

Trump rolled back the Obama-era revisions to the Affirmatively Further Fair Housing provision of the Fair Housing Act towards the tail end of his time in office. The act tacked on more stringent reporting and planning requirements to HUD funding.

"I don't think he has a huge identity on housing, aside from that particular action, which suggested that he might be more favorable to local control of planning and zoning and giving local communities more power to approve new housing," Brian Connelly, a business law professor at the University of Michigan who specializes in real estate, land use and zoning, told American Banker's Kyle Campbell.

Inflation, however, has been a key issue the Republican party platform is hoping to tackle.

The document calls for "slashing inflation" to curb future mortgage rate rises as well as "open limited portions of federal lands to allow for new home construction, promote homeownership through tax incentives and support for first-time buyers and cut unnecessary regulations that raise housing costs."

Rates have fallen regardless, as industry experts cite diminishing yields on the 10-year Treasury notes as the cause of this trend.

Below are recent notable impacts to the affordable housing market and how lenders and homeowners alike will be affected in the coming months.

Department of Housing and Urban Development

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FHA updates to 203(k) program bring broad modernization

The Federal Housing Administration has announced long-awaited changes for its 203(k) program to boost consumer engagement among those seeking to purchase an affordable home in need of repairs.

The new modifications to the FHA's 203(k) program span both the standard and limited loan variations. This includes changes like raising the ceiling for allowable total rehabilitation costs a borrower can finance under the limited version from $35,000 to $75,000 and allowing the 203(k) consultant fee to be financed in the total mortgage tally for limited 203(k) borrowers.

Updates to the standard 203(k) include increasing the rehabilitation period to 12 months for repair work to be finalized.

Mortgage and real estate industry advocates have called upon the FHA for such updates in the hopes of expanding access to the program and lowering barriers for its use.

"The changes we are announcing today for the 203(k) program are long overdue and will support greater use of this program where it is needed most — in neighborhoods where homes are affordable but need repair," said Federal Housing Commissioner Julia Gordon in a July 9 press release. "Increased use of 203(k) mortgages will help modernize and revitalize homes, which supports affordable housing supply and strengthens neighborhoods."

Read more:

FHA makes long-awaited changes to 203(k) program

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Affordable housing inventory gets federal legislative boost

Lead officials with the U.S. Department of Housing and Urban Development released a new manufactured home community loan product in June, the latest in a recent wave of efforts supporting manufactured-housing development.

The new loan utilizes funding supplied under the Federal Housing Administration's 223(f) multifamily program to create permanent financing options for the "purchase, refinance and revitalization of manufactured home communities," according to a June 4 press release.

"With this product, HUD aims to support resident-owned communities and other mission-focused owners who are committed to high-quality, affordable manufactured housing that is not at risk of exorbitant land rent increases that jeopardize the stability of their homes and futures," said assistant secretary for housing and FHA commissioner Gordon in the release.

Officials touted the added opportunity as complementary to its $225 million Preservation and Reinvestment Initiative for Community Enhancement, or PRICE, fund rolled out earlier this year to provide communities dependent on manufactured housing with continual support.

Read more:

Manufactured housing, ADU construction get policy boosts

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Mortgage industry advocates team up to boost minority lending knowledge

Experts with the National Association of Minority Mortgage Bankers and Fair Isaac Corp. are working together to spur industry professionals to gain accreditation as a NAMMBA-certified community lender — a title less than 5% currently hold.

The partnership, in addition to NAMMBA's standard CCL training program, will utilize FICO's Score A Better Future educational resources to better inform lenders on how credit works while helping clients plan for future home ownership.

"By fostering a culture of continuous education and ethical practices, we believe that this partnership will not only enhance the capabilities of loan originators but also create lasting positive impacts within the communities they serve," said Julie May, vice president and general manager of scores at FICO, in a July 29 press release.

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FICO partners with minority bankers in lending certification program

Home loan, home to money, Change real estate into cash concept.

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State and local legislators step in to aid middle-income renters

As the costs weighing on middle-income renters continue to grow, changemakers at the state and local levels are working to ease that burden through tailored housing programs, say researchers at Harvard University's Joint Center for Housing Studies.

Findings in the study show that the total for cost-burdened renter households peaked at 22.4 million in 2022, a 2 million-household increase since the pandemic began in 2020. Similar increases in cost burden rates were recorded across all income brackets, but were most rapid among middle-income renters over the last 20 years.

These housing programs have popped up in increasing frequency on a state-by-state basis since the pandemic, with recent campaigns such as Rhode Island's Middle Income Loan Program, California's Statewide Communities Development Authority Workforce Housing Program and others. Such efforts have yet to be successfully deployed at the federal level.

"Middle-income affordability challenges are growing, and policies to address the problem have also become more prevalent. … Given this reality, it is worth considering what these programs are intended to do, what the potential benefits are, whom they serve and the policy tradeoffs that might occur if we prioritize addressing middle-income rental affordability, especially over dedicating more resources to addressing lower-income challenges," researchers said in the study.

Read more:

Middle-income housing programs increase nationwide

Donald Trump And JD Vance Hold Campaign Rally In Michigan

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JD Vance touts immigration as key to solving housing affordability crisis

Prior to being selected as Donald Trump's running mate, Ohio Senator JD Vance was skeptical about Trump's character and many of his political efforts. But the two have managed to find overlaps in their political realms, a core one being immigration and its impact on the housing markets.

"Not having 20 million illegal aliens who need to be housed (often at public expense) will absolutely make housing more affordable for American citizens," Vance said in a June X post.

Vance has been an active member of the U.S. Senate's Banking, Housing and Urban Affairs Committee since joining in February 2023. In an interview with Business Insider last year, Vance called for cuts to the U.S. Department of Housing and Urban Development's budget as a start for wrangling broader inflation and in turn, higher housing costs.

During his time in the Senate, he has introduced bills like the No Community Development Block Grants for Sanctuary Cities Act in March, which if passed would prevent locales housing undocumented immigrants from receiving any funding for affordable housing, infrastructure development or anti-poverty programs.

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Exploring JD Vance's stance on housing affordability