Treasury Posts Support of HFA Disincentives for Qualified Contracts

Trump Nominates Scott Turner as HUD Secretary

In a significant move relating to affordable housing, former President Donald Trump has nominated Scott Turner as Secretary of the U.S. Department of Housing and Urban Development (HUD). Known for his leadership and commitment to community development, Turner brings a dynamic blend of experiences to the role. Scott Turner is an American politician and former professional football player who has served in various public service roles. He played as a defensive back in the NFL from 1995 to 2003 with the Washington Redskins, San Diego Chargers, and Denver Broncos. After his NFL career, Turner entered politics in Texas. From 2013 to 2019, he served as a Republican in the Texas House of Representatives for District 33. During his time in the state legislature, he focused on economic development and education initiatives. In 2019, Turner was appointed Executive Director of the White House Opportunity and Revitalization Council under President Trump. There, he implemented and oversaw Opportunity Zones across the country, a program designed to spur economic development and job creation in economically distressed communities. Turner has been known for focusing on economic development, particularly in underserved communities, and has frequently spoken about the importance of creating pathways to prosperity through public-private partnerships. As HUD Secretary, Turner s priorities are expected to align with his previous initiatives. These include expanding affordable housing options, strengthening public-private partnerships to revitalize urban areas, and addressing systemic challenges such as homelessness and housing insecurity. His nomination comes at a critical time as the nation grapples with escalating housing costs, supply shortages, and the lingering effects of the COVID-19 pandemic on vulnerable populations. Supporters of Turner s nomination laud his hands-on approach and ability to engage with local leaders, community organizations, and private investors to drive meaningful progress. However, critics have raised concerns about the long-term impacts of Opportunity Zones, particularly regarding potential displacement and gentrification in some areas. Turner s ability to address these concerns while fostering equitable development will likely be a focal point during his confirmation hearings. Senate confirmation of Turner is expected, and no significant objections to the appointment have yet been raised.

Treasury Posts Support of HFA Disincentives for Qualified Contracts

In a December 12, 2024 post, the U.S. Department of Treasury expressed strong support for Housing Finance Agency (HFA) attempts to prevent or limit qualified contract requests for LIHTC projects. According to recent Harvard Joint Center for Housing Studies data, the United States is facing an unprecedented housing affordability crisis. Record numbers of renters spend over 30% of their income on housing and utilities. As housing costs continue to climb in the wake of the pandemic, preserving existing affordable housing stock has become increasingly critical. The Low-Income Housing Tax Credit (LIHTC) program is the federal government's primary tool for expanding the affordable housing supply. Between 2000 and 2019, it supported approximately 25% of new apartment construction. However, a provision known as the Qualified Contract option threatens to prematurely remove thousands of units each year from the affordable housing inventory. Understanding the Qualified Contract Challenge The Qualified Contract provision, introduced in 1989, was designed to encourage private investment in affordable housing by offering property owners an early exit option. After 14 years, owners can request their state housing agency find a buyer willing to pay a statutorily defined price. If no qualified buyer emerges within a year, the property can convert to market-rate housing despite the original 30-year affordability commitment. This mechanism has led to significant losses in affordable housing stock. Current estimates indicate that 6,000-10,000 low-income units are lost annually through Qualified Contracts, with cumulative losses reaching approximately 115,000. The problem has intensified recently as the statutory pricing formula often exceeds market value, making it difficult for agencies to secure buyers willing to maintain affordability restrictions. State-Level Solutions State housing agencies have implemented various strategies to address this challenge: Mandatory Waivers Many states now require LIHTC applicants to waive their Qualified Contract rights as a prerequisite for receiving tax credits. North Dakota and Nevada exemplify this approach, making such waivers mandatory for new applications. The Treasury Department strongly endorses these policies and encourages their application across 4% and 9% LIHTC programs. Incentive-Based Approaches Some states have adopted point-based systems to encourage longer affordability commitments. Georgia's program, for instance, awards developers incremental points based on the duration of their Qualified Contract waiver: one point for a 5-year waiver, two points for 10 years, and three points for a complete waiver. Deterrence Measures States have also implemented policies discouraging Qualified Contract requests from existing LIHTC property owners. These measures include: Disqualifying applicants with a history of Qualified Contract requests (Maine, North Carolina) Assigning negative points to applicants who have previously pursued Qualified Contract exits (Indiana, Kansas, New Hampshire) Awarding bonus points to applicants who have never requested a Qualified Contract (South Carolina) Federal Support and Coordination Federal agencies are aligning their policies to reinforce these state-level efforts: HUD has proposed restricting FHA Multifamily and Risk Share insurance access to owners who waive Qualified Contract rights. The Federal Housing Finance Agency now prohibits Fannie Mae and Freddie Mac from investing in properties that retain Qualified Contract options. The USDA's Rural Housing Service is developing complementary measures. Looking Forward The Treasury Department strongly supports state and federal initiatives to limit the use of Qualified Contracts and preserve affordable housing. These coordinated efforts are a crucial component of the administration's comprehensive strategy to address the housing affordability and supply challenges facing American families. As housing costs strain household budgets nationwide, preserving existing affordable units through Qualified Contract restrictions becomes increasingly vital. State agencies' innovative approaches to this challenge demonstrate the potential for policy solutions that balance private sector participation with long-term affordability goals. This article reflects the Treasury's position on best practices in LIHTC administration as of December 2024. Please consult your state housing agency for the most current guidance and requirements.

HOTMA Implementation Guide- Key Updates for Multifamily Housing Owners

The U.S. Department of Housing and Urban Development (HUD) has released updated guidance on implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This comprehensive overview highlights essential deadlines and requirements for Multifamily Housing (MFH) owners, as outlined in the updated HOTMA FAQ. Key Implementation Dates July 1, 2025: Mandatory compliance date for HOTMA provisions. May 31, 2024: Deadline for updating Tenant Selection Plan (TSP) and EIV Policies. Early 2025: Expected release of TRACS 203A system. January 1, 2024: Phased-in medical hardship relief application date. The HOTMA final rule requires the phased-in medical hardship relief to be applied only to families who received the medical deduction based on their most recent income review before January 1, 2024. However, MFH Owners may, at their discretion, utilize the general hardship provision as outlined on pages 43-45 of Notice H 2023-10 to assist affected families, including those who receive a medical deduction but are ineligible for phased-in relief and will otherwise see their deduction drop significantly. HUD reserves the right to permit medical hardship relief waivers on a case-by-case basis. Interim Implementation Options MFH owners can begin implementing HOTMA provisions before the mandatory compliance date. During this transition period: Owners may calculate family incomes and tenant rents manually. The current TRACS 202D system can be used with the rent override function. Both pre-HOTMA and HOTMA-compliant TSPs will be reviewed during Management and Occupancy Reviews (MORs). Management and Occupancy Reviews Contract Administrators will handle HOTMA-related issues during MORs as follows: Before July 1, 2025: HOTMA-related tenant file errors will result in observations rather than penalties. TSP compliance with Notice H 2024-04 was mandatory by May 31, 2024; non-compliance will result in findings. Minor HOTMA-related errors unrelated to Notice H 2024-04 will only receive observations until the TRACS 203A release. Model Leases and Forms New HUD-approved model leases will be released before the mandatory compliance date. When implementing new leases: Families must receive copies 60 days before the lease term ends. A clear explanation letter must be provided. Families have 30 days to accept or refuse modifications. Non-response within 30 days may lead to tenancy termination procedures. Financial Considerations Inflationary Adjustments Properties implementing HOTMA must use adjusted values for the calendar year 2025. Pre-HOTMA amounts remain valid until July 1, 2025, for non-implementing properties. Passbook Savings Rate The rate of 0.06% (effective February 1, 2015) may be used by owners who still need to implement HOTMA. Owners making manual adjustments will not be penalized for using the current imputed rate of 0.40%. HOTMA 2025 rate: 0.45% Medical Hardship Provisions Phased-in medical hardship relief applies only to families with medical deductions reviewed before January 1, 2024. General hardship provisions may be utilized for affected families. HUD may permit case-by-case medical hardship relief waivers. Looking Ahead MFH owners should: Subscribe to the MFH mailing list for updates. Monitor for TRACS 203A release. Prepare for full compliance by July 1, 2025. Review and implement necessary policy updates. Stay informed about new form releases and system changes. This guidance represents a significant transition in multifamily housing administration. Property owners and managers should carefully review all requirements and prepare for full implementation while taking advantage of available flexibility during the transition period.

Federal Housing Policy Response to America's Housing Crisis- Key Takeaways from the National Housing Task Force Report

The National Housing Crisis Task Force, a bipartisan coalition of practitioners and policymakers, has released a comprehensive federal policy agenda to address America's deepening housing crisis. The report, released in November 2024, and titled "From Crisis to Transformation: A Federal Housing Policy Agenda," outlines 40 specific policy recommendations organized around five key themes. It calls for immediate federal action to address acute and structural housing challenges. The report is intended to serve as a roadmap for the incoming Trump administration s approach to the affordable housing crisis. The Scale of the Crisis According to the report, the housing crisis in America has reached critical levels: Home prices have doubled in the last decade Nearly half of all renters are cost-burdened Homelessness has hit record highs The median house is now 45 years old, with significant maintenance needs Housing construction is down 60%, while population has grown 65% Core Policy Recommendations The Task Force organizes its recommendations into five strategic areas: 1. Lead and Focus the Nation Create a Housing Crisis Council in the White House Develop national housing production goals Implement real-time housing market data tracking Address the property insurance crisis Ensure Fair Housing Act compliance 2. Reduce Barriers to Production and Eliminate Complexity Modernize HUD programs for faster housing production Unlock Department of Transportation and Energy programs for housing Reform housing choice voucher programs Streamline federal land disposition for affordable housing Update building codes and regulations 3. Mobilize Federal Capital for Production & Preservation Authorize new financing mechanisms through Fannie Mae and Freddie Mac Provide low-cost debt for mixed-income housing developments Expand access to financing for housing agencies and CDFIs Create grants for adaptive reuse of buildings Reform and expand the Low-Income Housing Tax Credit The recommendations related to the Low-Income Housing Tax Credit (LIHTC) include: Expand the 9 Percent Credit: Increase the 9 percent LIHTC available nationally to address rising housing costs and build more affordable homes. Exempt Affordable Housing from the State Private Activity Bond Cap: Lift the artificial limit on the number of tax-exempt Private Activity Bonds (PABs) issued in each state to finance affordable housing projects. Increase the "Basis Boost for Difficult Development Areas: Authorize an increase in the Basis Boost for DDAs, Native American housing, Extremely Low-Income housing, and rural areas from 30 percent to 50 percent. Streamline Income Verification: Simplify the income verification requirements for prospective tenants of deed-restricted affordable units to reduce administrative burdens and increase accessibility. The provision also recommends excluding the Basic Allowance for Housing (BAH) for all military members. Strengthen Cost Oversight Provisions: States should be required to consider cost reasonableness as part of their selection criteria when determining which developments will receive LIHTC allocations each year. These recommendations aim to adapt and expand LIHTC to effectively meet the current housing crisis. 4. Innovate with an Industrial Policy Lens Develop a national housing industrial strategy Create a Housing Innovation Unit within HUD Establish national building codes for modular housing Support construction workforce development Research and implement cost-reducing building practices 5. Provide a Housing Safety Net Make housing choice vouchers available to all eligible households Invest in immediate homelessness solutions Create tax credits for rent-burdened households Provide $100 billion for affordable housing rehabilitation Implement new affordability measures Implementation Timeline The Task Force proposes a one-year roadmap with specific actions: Day One Executive Actions: Including creating the Housing Crisis Council and ordering the development of a national housing strategy First 100 Days Legislative Priorities: Including emergency appropriations and authorization legislation Year One Administrative Actions: Including regulatory reforms and program modernization Tax Reform Priorities: Including expanding housing tax credits and creating new incentives The Federal Role The report emphasizes that the federal government is uniquely positioned to address the housing crisis through: Coordinating across multiple agencies and departments Providing substantial capital resources Setting national standards and goals Creating incentives for state and local action Protecting vulnerable populations Looking Forward The Task Force emphasizes that while immediate action is crucial, creating lasting change requires: Permanent commitment to housing as a national priority Partnership with state and local governments Engagement with private and civic sectors Focus on both supply expansion and affordability Investment in innovation and workforce development The report concludes that treating the housing crisis like a true crisis requires immediate federal action and long-term structural reforms. Success will require coordination across all levels of government and sectors of society, with the federal government playing a crucial leadership role in driving transformative change in America's housing ecosystem.