«Mixed Messages on Mixed incoMes Volume 15, Number 2 • 2013 U.S. Department of Housing and Urban Development | Office of Policy Development and ...»
in Mortgagee Letter 94-2. Of the 10 programs, 4 had legacy authority (that is, authority that had been granted 10 to 15 years earlier). The other two communities had received approval within the past 2 years. The remaining 4 were operating, or had been operating, under no identified authority or waiver from HUD. That is, they assumed that FHA had given them permission at some point in the past, but no documentation of that approval was available in their records.
We labeled approval where no documentation was available as phantom legacy approval.
4. Under the current process, local program officials are actively discouraged from seeking approval because of the impediments that exist. Our respondents indicated that the difficulty they face in working with FHA keeps them from even attempting to gain program approval.
This difficulty reinforces the position of the Cornerstone Partnership (NCLTN, 2012). In our conversations, we heard strong assertions that HUD is arbitrary, inconsistent, unhelpful, unresponsive, and not knowledgeable.
5. The consensus of practitioners is that access to FHA financing is desirable, if not crucial, to the viability of these local programs. Almost all the local program staff stated that their programs have been hurt by the withdrawal of conventional lending. Continued uncertainty about the availability of FHA financing and impediments to accessing it have also seriously impaired their ability to implement their programs.
6. An odd geographic disparity exists in the requests for FHA underwriting of LTAH mortgages. The four HUD HOC field offices that manage FHA’s home mortgage financing programs are the first point of contact for practitioners. They are located in Atlanta, Georgia; Philadelphia, Pennsylvania; Denver, Colorado; and Santa Ana, California. These offices do not maintain a centralized database on local applications for LTAH programs, and they do not track activity of such local programs. During the 2 years before our research, the Denver and Santa Ana offices received the most requests—28 and 22 requests, respectively; the Denver HOC approved one-half of the requests received. The Philadelphia and Atlanta offices received “few” and no requests, respectively. No obvious explanation exists for the disparities between the east and west offices (the jurisdictions of the respective offices relate more to the east and west of the Mississippi River than to the east and west coasts), unless they are attributable to the geographic distribution of LTAH activity. In any event, more research is necessary to explain these disparities. Nearly all the requests have come from the states of California and Colorado, which have active and robust state and local inclusionary housing mandates.13 Implications for Policy and Research Currently no clear, expeditious path exists for LTAH programs to follow in obtaining FHA-insured loans. The current process represents a major obstacle to access to FHA mortgages for large numbers of LTAH programs. We see two major arguments for bringing FHA’s rules more in line with the LTAH sector’s needs and one argument against it.
This assertion is according to interviews with local officials from the four respective jurisdictions.
254 Policy Briefs The Federal Housing Administration and Long-Term Affordable Homeownership Programs Arguments for—
1. A large and growing number of communities have embraced the concept of LTAH as an integral part of their commitment to and strategy for implementing affordable housing.
2. In this era of budget stringency and the need for conserving valuable public resources, a key strength of the LTAH approach is that it appears to allow the public subsidy dollars to go farther and achieve multiple socially worthy objectives—namely, successful homeownership, support for social and economic integration, and asset building and upward mobility.
1. FHA currently has a major concern about the long-term health and viability of its home mortgage insurance fund (that is, the Mutual Mortgage Insurance Fund). A recent audit forecasts substantial losses in future years. This projection may bring about a more cautious approach to expanding FHA’s affordability initiatives. In such a risk-averse environment, FHA could conclude that insufficient and inadequate performance data exist to justify extending FHA benefits to this sector.
The documentation of LTAH performance (particularly regarding defaults and foreclosures of FHA-backed shared-equity mortgages) has been extremely limited. As a consequence, until and unless more robust data become available, FHA may conclude that a change in policy is neither prudent nor protective of the FHA mortgage insurance fund.
Although LTAH has gained increased attention and apparent increased relevance at the local level, little is known about the size and scope of this sector, the soundness and cost-effectiveness of the shared-equity approach, or any additional obstacles to its increased use in HUD-promoted affordable housing strategies. The following research proposals address the core issues with FHA policy and LTAH discussed in this brief.
1. Survey of LTAH programs. This project would be the first comprehensive survey of state, local, and community long-term affordable homeownership programs across the country.
2. Survey of lender policies and practices regarding LTAH programs. The lack of mortgage financing opportunities is restricting the growth of LTAH. The effectiveness of any changes in FHA policy would depend on the home mortgage industry’s response to and perspective on such changes. This project would survey the extent of lenders’ involvement in such programs and explore the obstacles and potential incentives of such involvement.
3. Demonstration to promote LTAH best practices. Significant diversity in LTAH programs ranges from purely governmental to public-private partnership to community and nonprofit initiatives.
Because of the disparate and decentralized nature of these efforts, they have not been the subject of focus of federal programs or oversight. A demonstration would identify at least 5 to 10 communitywide, regionwide, or statewide initiatives to produce an understanding of best practices in the field. Such a demonstration would include the promotion of (1) greater integration of local efforts, (2) sharing knowledge and expertise, (3) implementing improved management practices (including stewardship and administrative practices), (4) improving alignment with and access to federal resources, and (5) strategies to expand access to sustainable mortgage financing.
Cityscape 255Stromberg and Stromberg
Acknowledgments The authors thank Elizabeth Cocke, director of the U.S. Department of Housing and Urban Development (HUD), Office of Policy Development and Research, Housing Technology Division, for providing the support to carry out such research in a bureaucratic environment, and they thank Mark Shroder, managing editor of Cityscape, for his sharp virtual pencil in making this brief more comprehensible. Emily Thaden, Rick Jacobus, and John Emmeus Davis were generous with their time and expertise in providing information and knowledge about shared-equity homeownership and in commenting on the research concept and drafts of this policy brief. Most importantly, they thank the many people with whom they spoke at the various programs around the country and the HUD staff at the Home Ownership Center offices who spoke with them. The research would not have been possible without their participation.
Authors Edwin Stromberg was program manager (now retired) at the U.S. Department of Housing and Urban Development, Office of Policy Development and Research.
Brian Stromberg is a doctoral candidate at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
References Davis, John. 2012. Personal communication (telephone). Recognized expert in community land trusts and cofounder of Burlington Associates.
Davis, John Emmeus. 2010a. “More Than Money: What Is Shared in Shared Equity Homeownership?” Journal of Affordable Housing & Community Development Law 19 (3&4): 259–277.
———. 2010b. The Community Land Trust Reader. Cambridge, MA: Lincoln Institute of Land Policy.
———. 2006. Shared Equity Homeownership: The Changing Landscape of Resale-Restricted, OwnerOccupied Housing. Montclair, NJ: National Housing Institute.
Institute for Community Economics. 2012. Personal communication (telephone and e-mail) with former staff.
Jacobus, Rick. 2011. Cumulative Number of Owners Served Under Shared Equity Homeownership.
Washington, DC: Center for Housing Policy. Also available at http://www.nhc.org/media/files/ Shared_Equity_Cumulative_numbers.pdf.
Jacobus, Rick, and Jeff Lubell. 2007. Preservation of Affordable Homeownership: A Continuum of Strategies. Washington, DC: Center for Housing Policy.
Jacobus, Rick, and Ryan Sheriff. 2009. Balancing Durable Affordability and Wealth Creation: Responding to Concerns About Shared Equity Homeownership. Washington, DC: Center for Housing Policy.
256 Policy Briefs The Federal Housing Administration and Long-Term Affordable Homeownership Programs National Community Land Trusts Network (NCLTN). 2012. Updating FHA’s Policy Regarding Affordable Housing Restrictions and Community Land Trusts. In collaboration with NCB Capital Impact. Available at http://www.cltnetwork.org/userfiles/FHA%Summary%2011%2007%20 2011%20final.pdf (accessed May 1, 2013).
Sazama, Gerald. 1996. A Brief History of Affordable Housing Cooperatives in the United States.
Working Paper 1996-09. Storrs-Mansfield, CT: University of Connecticut, Department of Economics. Also available at http://digitalcommons.uconn.edu/econ_wpapers/199609/.
Schwartz, Heather L., Liisa Ecola, Kristin J. Leuschner, and Aaron Kofner. 2012. Is Inclusionary Zoning Inclusionary? A Guide for Practitioners. Santa Monica, CA: RAND Corporation.
Temkin, Kenneth, Brett Theodos, and David Price. 2010. Balancing Affordability and Opportunity:
An Evaluation of Affordable Homeownership Programs With Long-Term Affordability Controls. Washington, DC: Urban Institute.
Thaden, Emily. 2011. Stable Homeownership in a Turbulent Economy. Cambridge, MA: Lincoln Institute of Land Policy.
U.S. Department of Housing and Urban Development (HUD). 1999. Homeownership Options Under the HOME Program: A Model for Publicly Held Properties and Land Trusts. HOME Model Series, Chapter 3. Washington, DC: U.S. Department of Housing and Urban Development.
———. 1993. Community Land Trusts and the HOME Program. CPD Notice 94-42. Washington, DC: U.S. Department of Housing and Urban Development.
Additional Reading Haughey, Rick, and Ryan Sherriff. 2010. Challenges and Policy Options for Creating and Preserving Affordable Housing Near Transit and Other Location-Efficient Areas. Washington, DC: Center for Housing Policy.
National Housing Conference. 2010. Options for Better Supporting Long-Term Affordability in the HOME Program. Letter to Office of Community Planning and Development.
258 Policy Briefs Data Shop Data Shop, a department of Cityscape, presents short articles or notes on the uses of data in housing and urban research. Through this department, the Office of Policy Development and Research introduces readers to new and overlooked data sources and to improved techniques in using well-known data. The emphasis is on sources and methods that analysts can use in their own work. Researchers often run into knotty data problems involving data interpretation or manipulation that must be solved before a project can proceed, but they seldom get to focus in detail on the solutions to such problems. If you have an idea for an applied, data-centric note of no more than 3,000 words, please send a one-paragraph
to firstname.lastname@example.org for consideration.
New Data on Local Vacant Property Registration Ordinances Yun Sang Lee Patrick Terranova Dan Immergluck Georgia Institute of Technology Abstract This article describes the Vacant Property Registration Ordinance Database, a new database of local vacant property registration ordinances (VPROs) in the United States.
Beginning with an industry list, 550 ordinances were acquired, read, and coded on more than 30 characteristics. VPROs grew dramatically in 2008 and 2009, during the climax of the national foreclosure crisis, and the number of ordinances continued to grow after 2009, albeit at a somewhat slower pace. The database provides details on the coverage, requirements, and penalties specified in VPROs across the country.
Introduction Because of the growth in vacant properties that stemmed from the foreclosure crisis, the United States has seen a major increase since the mid-2000s in the number of local governments enacting vacant property registration ordinances (VPROs). VPROs require property owners to register vacant
and foreclosed properties with local government. VPROs often require owners of the registered properties to pay a periodic registration fee (which may increase as a property remains vacant for an extended period) and to maintain and secure properties in specified ways. They may also oblige property owners to carry a minimum amount of insurance or, in some cases, to provide a minimum bond or deposit. If requirements are not met, most VPROs specify fines and, in some cases, potential criminal penalties. As of May 2012, there were more than 550 local VPROs in the United States, increases from fewer than 20 VPROs in 2000 and fewer than 100 at the end of 2007.
The proximate objectives of VPROs typically include providing better data on the extent and nature of vacant and foreclosed properties, having detailed and reliable contact information for property owners and managers, and reducing the harms and costs such properties pose to neighborhoods and local governments. Ultimately, proponents of VPROs may hope to discourage irresponsible investment by internalizing some of the social costs of vacant properties and holding owners accountable for not maintaining properties in a responsible manner.