Category Archives: Housing

Lawmakers Question Trump’s Stake in Subsidized Housing Complex

Source: Yamiche Alcindor, New York Times, July 10, 2017
Two congressional Democrats are demanding more information about President Trump’s potential conflicts of interest stemming from his part ownership of the nation’s largest federally subsidized housing complex, which they say could benefit financially from decisions made by the Department of Housing and Urban Development. … Mr. Trump stands to make millions from his 4 percent stake in Starrett City, a sprawling affordable housing complex in Brooklyn, according to a 10-page letter written by Representative Elijah E. Cummings of Maryland, the House Oversight Committee’s top Democrat, and Representative Hakeem Jeffries of New York, whose district includes the complex. … The men added that they also worry that Mr. Trump’s proposed budget would make steep cuts to many housing programs but “would leave the type of federal aid that flows to the owners of Starrett City mostly intact.” … Mr. Cummings and Mr. Jeffries are also concerned about the appointment of Lynne Patton, a longtime Trump family associate, to lead the department’s New York and New Jersey office.

Trump Administration, Senators Put Fannie, Freddie Overhaul Back in Play

Source: Andrew Ackerman, Wall Street Journal, May 11, 2017
The Senate Banking Committee has begun behind-the-scenes work on the issue of how, exactly, to revamp the companies. The senators want to develop a framework to decrease the government’s outsize role backstopping the nation’s $10 trillion mortgage market. On Thursday, the panel will hear testimony from Mel Watt, the director of the Federal Housing Finance Agency, which controls Fannie and Freddie, in the first step of a process that could play out in the coming months.  It remains unclear if policy makers can overcome philosophical differences and hammer out a final deal. Conservative Republicans have called for a private market with no new federal guarantees. Some centrist Republicans and many Democrats have said a federal role is needed to preserve liquid markets for the popular 30-year fixed-rate mortgage that drives home buying. …


Fannie, Freddie shares dive after U.S. appeals court ruling
Source: Nathan Layne and Svea Herbst-Bayliss, Reuters, February 21, 2017

Shares of Fannie Mae and Freddie Mac tumbled more than 30 percent on Tuesday after a U.S. appeals court shut down efforts by hedge funds and other investors to pursue numerous legal claims accusing the U.S. government of seizing their profits following taxpayer bailouts. By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay the U.S. Treasury an amount equal to their quarterly net worth. … Both stocks are still up by about two-thirds since Donald Trump won the U.S. presidential election on Nov. 8. Investors said part of that rally stemmed from comments that month by then-Treasury Secretary-nominee Steve Mnuchin that both companies should be privatized. Mnuchin, however, said in January he was against such a plan. … Both companies have since become profitable under the conservatorship of the Federal Housing Finance Agency. According to court papers, they have returned roughly $68 billion more to the government than they drew down during the financial crisis. … Analysts said the ruling was consistent with others on FHFA’s guardianship of Fannie and Freddie, making it less likely the Supreme Court would take the case. …

The Time Is Ripe: MBA Introduces GSE Reform Proposal
Source: Patrick Barnard, MortgageOrb, February 1, 2017

With government-sponsored enterprise (GSE) reform highly likely under the new administration, the Mortgage Bankers Association (MBA) is wasting no time and yesterday introduced its own proposal for what should happen to Fannie Mae and Freddie Mac. Similar to previous proposals that have been floated about during the past several years by various groups (including the association), the MBA’s plan calls for the GSEs to be “congressionally re-chartered” – in other words, re-privatized – and, importantly, calls for an “explicit guarantee” on the mortgage-backed securities they issue. The MBA’s plan, as outlined in a soon-to-be-released paper, calls for the establishment of a “new, durable foundation for the secondary mortgage market,” the MBA says in a release. … Consistent with the MBA’s previous recommendation, the paper calls for an “end-state that would encourage multiple guarantors” that “would be organized as privately owned utilities with a regulated rate of return.” …

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Deep in debt, flood insurance program expected to boost rates

Source: Dylan Baddour, Houston Chronicle, March 17, 2017

The cost of federal flood insurance will likely rise for thousands of Houston-area homeowners after Congress hits its September deadline to renew and reform the deeply troubled program. The National Flood Insurance Program was created because private insurers couldn’t bear the risk of catastrophic loss, but the program is $24.6 billion in debt and struggling to remain solvent. “The program offers rates that do not fully reflect the risk of flooding.” the U.S. Government Accountability Office concluded in a report last month. … Congress tried to fix the problem in 2012, but the program lapsed for a month amid the effort, stalling home sales in flood-prone areas. The reforms that finally passed caused some rates to soar, so they were swiftly repealed. Now, a five-year extension is set to expire this fall, demanding fresh action. No one can say exactly what measures lawmakers will take, but one thing seems probable: rates will rise, especially in flood-prone places.

… The most likely outcome of flood insurance reform will be increased privatization of the program to relieve FEMA’s burden of risk. In a letter to flood-weary constituents last week, U.S. Rep. Ted Poe, R-Kingwood, wrote that Congressional committees are beginning work on flood insurance renewal, and that “preliminary plans allow private insurers greater and easier access to the marketplace.” … Virtually all reform proposals issued by industry groups call for increasing privatization of flood insurance, but that won’t be cheap. The federal program was created precisely because private insurers couldn’t bear the risk of catastrophic loss. A small number of private insurers have begun offering their own insurance in recent years, mostly for extremely high-value properties. … FEMA acknowledged in a statement that private carriers offer a viable alternative to the federal program. Still, without a renewal of the program this year, the agency noted it would stop selling and renewing policies for millions of properties nationwide. …

Law Firm sues FEMA, seeks agency’s records on Sandy Claims Review program

Source: David Yates, SE Texas Record, March 7, 2017

In late February, the D.C. law firm Weisbrod Matteis & Copley filed a complaint for injunctive relief against FEMA, asserting the federal agency has withheld records related to the agency’s Sandy Claims Review program. WMC represents more than 1,200 Sandy claimants who purchased flood insurance through the National Flood Insurance Program. FEMA administers the NFIP with the aid of private insurance companies participating in the Write Your Own program. According to the lawsuit, Sandy litigants uncovered significant evidence of misconduct by WYO insurers and others working on the agency’s behalf that led to the improper denial or underpayment of many Sandy flood insurance claims. … FEMA’s combination of “delay and deliberate underpayment” has resulted in aggregated payments of more than $500 million to federal contractors, while homeowners received less than $200 million during the same period, according to the suit. … WMC submitted Freedom of Information Act requests on Jan. 6, 2016 and Feb. 9, 2016 to unearth documents “concerning these troubling aspects of the SCR” but FEMA has apparently “failed to respond or even to acknowledge these requests for more than a year,” the suit states. …

The Steady Destruction of America’s Cities

Source: Gillian B. White, The Atlantic, March 9, 2017
How to Kill a City: Gentrification, Inequality, and the Fight for the Neighborhood, a new book by the journalist Peter Moskowitz, brings some much-needed clarity to thinking about a slippery concept. … Moskowitz tells of how gentrification has swept through some of America’s biggest cities, writing case studies of Detroit, San Francisco, New York, and post-Katrina New Orleans. In each city, there are specific problems and circumstances that helped the process along, but it’s striking how similar the choices made by politicians, business leaders, and developers and their effect on poor really are across the country. … While Moskowitz includes the important stories of those who called a neighborhood home long before coffee shops and luxury condos appeared, it’s his outline of the systemic process of displacement that is the most devastating.  He convincingly shows how the choices that a city and its government make in the name of a booming economy assign value to some residents and not others: From choices on where and how to fund affordable housing, to invest in public schools, to support new local businesses, but not old ones, the process that goes by the name “revitalization” is often something more pernicious.

… And despite stable economies, liberal leanings, and high involvement in municipal politics in both New York and San Francisco, policies that could potentially help poorer residents have been much slower to come and less robust than the influx of new private capital that devours neighborhoods and displaces residents. In just about every city Moskowitz examines, he finds that choices by city and state governments limited the creation of affordable housing and changed public-housing policies, giving poorer residents little refuge in increasingly expensive cities. Ultimately, Moskowitz says that a big part of the problem when it comes to the unremitting pace of gentrification is that it is a process that often involves the investments and decisions of the private entities, including developers and big corporations, that decide to set up shop in new neighborhoods. In some ways, that’s great for areas that are floundering, but when city leaders become too reliant on the plans and dollars of the private sector, the people who had been living and working in these neighborhoods all along have no one to look out for them and the lives they’ve built. Private organizations have different interests and responsibilities when it comes to making plans to spruce up a neighborhood. And that can mean that their investments don’t happen an egalitarian manner, or benefit a diverse group of residents.  ….

Rare Win for Affordable Housing Over Gentrification

Source: Habitat Magazine, March 1, 2017

In a vote watched closely by opponents of the gentrification now sweeping Brooklyn, shareholders at the 326-unit St. James Towers co-op in Clinton Hill have voted to remain in the affordable Mitchell-Lama program instead of going to market-rate sales. The vote was a victory for Mayor Bill de Blasio, who has vowed to add and protect thousands of affordable housing units in a city that is becoming less affordable by the day. The vote was also a blow against the wave of gentrification that is particularly visible in Brooklyn, Manhattan and parts of Queens. … There are compelling arguments on both sides of the issue. Opponents of privatization, like Cumbo, view it as a threat to a vital, and beleaguered, piece of the city’s housing stock. Proponents of privatization counter that after serving the required time in the Mitchell-Lama program, with its tax breaks and limited resale prices, shareholders are entitled to reap the rewards of the city’s currently hyper-inflated real estate prices. Last week’s vote at St. James Towers was the second in the three-step process of privatization, each of which requires approval by a two-thirds super-majority of shareholders. In the first vote, held in 2014, a sufficient number of shareholders voted to authorize a privatization feasibility study. Last week’s vote was on whether or not to authorize the money to prepare an offering plan. A third vote, which will not be held, would have determined whether the co-op stayed in the Mitchell-Lama program or went to market-rate sales.

Sacramento mayor lands private dollars toward housing plan for homeless people

Source: Anita Chabria, The Sacramento Bee, February 21, 2017

Bolstering his attempt to use federal affordable housing vouchers to shelter Sacramento’s homeless, Mayor Darrell Steinberg announced a partnership with Sutter Health at Tuesday night’s Sacramento City Council meeting that could provide $20 million in funding to strengthen his proposal – and possibly double that if the city lands federal dollars. Steinberg said Monday night that Sutter Health has promised up to $5 million over three years and has committed to help fundraising for an additional $5 million from private entities for homeless services in Sacramento – if the city and county move forward with the mayor’s plan to prioritize federal housing vouchers for homeless people. … The Sutter funds are part of an ongoing local initiative started in 2015 that pledged up to $20 million in matching funds to help local governments deal with homelessness. Sutter has already given grants to Placer and Yolo counties and the cities of Davis and Roseville. Last September, Sutter gave the city of Sacramento $433,000 to increase services at its Salvation Army shelter. …

Life Is Hell for Tenants of Giant D.C. Slumlord Sanford Capital-And Taxpayers are Subsidizing the Company

Source: Alexa Mills and Andrew Giambrone, Washington CityPaper, February 2, 2017

… Mold, vermin, broken refrigerators and toilets, children and elderly living without heat and air conditioning, units open to vagrants no matter how many times tenants complain—these are standard conditions at buildings owned by Sanford Capital, the company that owns G Street Apartments and at least 16 other D.C. properties, amounting to hundreds of units across the city. Sanford Capital has been buying apartment complexes that are home to the city’s working poor for more than a decade. In extensive reporting on the company’s practices, City Paper found that Sanford employs a systematic strategy for allowing buildings to become so squalid that residents are forced to leave. The company also files for evictions in bulk. In some cases, Sanford has rushed to replace the modest rents of the working poor with those of very low-income people who hold government-issued vouchers set at similar or higher rates—the District footing the bulk of the rent bill and ensuring a guaranteed stream of revenue for the company.

… According to D.C. Department of Consumer and Regulatory Affairs (DCRA), Sanford has amassed nearly $150,000 worth of fines since 2009 across 26 addresses.
Many residents in Sanford’s properties receive housing vouchers or other forms of rent assistance that are bankrolled by taxpayers. … D.C. Attorney General Karl Racine filed a lawsuit against Sanford Capital in October, seeking a court-appointed receiver to oversee a rehabilitation plan for Terrace Manor, a Sanford property in Southeast. Racine is also asking the company to abate housing code violations and for restitution of rents tenants paid while Sanford was illegally neglecting apartments. … In other words, the city is simultaneously enriching and suing Sanford. … Estimating conservatively that vouchers average $1,000—some are more, some are less, and they depend on family income, among other factors—Sanford is being paid about $340,000 a month, or $3.7 million a year, by District and federal programs. … Advocates say Sanford accepts formerly homeless and low-income voucher tenants because the company is guaranteed to make money from them, at least for the duration of the benefits those tenants receive. The District’s rapid rehousing program, for example, helps people move into more stable environments than shelters, but the subsidy is time-limited so some landlords are reluctant to welcome participants. …

Paying for success

Source: Jason Axelrod, American City and County, February 6, 2017

Several local and state governments are pioneering a new investment model to finance projects in their areas that uses success as a payment benchmark. Social impact bonds (SIBs) — also known as pay-for-success models — involve public-private partnerships (P3s) in which private entities invest in public projects that are overseen by governments, organized by nonprofit intermediaries, executed by service providers and are ultimately evaluated by independent entities. Such projects generally tackle social issues like homelessness or family welfare, and they aim to reduce government dollars spent on existing measures. Unlike a municipal bond, an SIB has no fixed rate of return for investors. An SIB’s ROI yield depends entirely on the project’s success, based on outcomes defined in the SIB contract. At pre-defined points in the project’s execution, a study of the program’s effectiveness will be carried out, and the government will accordingly pay funders pre-defined amounts based on how certain benchmarks are met. …

… The Denver Social Impact Bond program provides up to five years of supportive housing and Assertive Community Treatment for 250 homeless repeat offenders who cost taxpayers over $7 million per year in legal and health care-related expenses, city documents show. … In 2013, the Connecticut Department of Children and Families (DCF) sought and obtained technical assistance from the Harvard Kennedy Government Improvement Lab in constructing and executing an SIB project to address its greatest unmet service need at the time— parent and caregiver substance use, according to DCF Chief of Staff Elizabeth Duryea. … In 2015, Cuyahoga County, Ohio, became the first U.S. county to institute an SIB-funded program with a similar mission to Connecticut’s SIB-funded project. The county’s Partnering for Family Success Program seeks to reduce the amount of days children spend in foster care, which was one of the more expensive items in the county’s budget. …

GAO to scrutinize financial solvency of DoD’s privatized housing programs

Source: Jared Serbu, Federal News Radio, October 24, 2016

The U.S. military’s program to privatize the living quarters on its bases — contentious and controversial at its inception 1996 — is now universally regarded as a great idea. Of on-base homes, 94 percent meet the Defense Department’s housing standards, compared to 22 percent when the government was in charge. But Congress and the Government Accountability Office are asking new questions about the long-term viability of the Military Privatized Housing Initiative (MHPI), particularly with regard to how it’s financed: Developers and investors were promised a steady income stream from each home they built, tied directly to military members’ basic allowances for housing (BAH) which are calculated to match leasing and utility rates in a given community. But Congress has since gone along with a DoD proposal which cuts those allowances by 5 percent, and occupancy rates are falling as the military shrinks in size. … Lepore said GAO will soon begin work on a new audit of each military service’s privatized housing projects, based on language the Senate suggested in its version of the 2017 Defense authorization bill. Although that bill has not yet passed, it tasks GAO to assess the financial solvency of each project because, in the Senate’s words, the BAH reductions “were implemented without an appropriate level of consideration on the impact such changes would have on the military housing privatization initiative.” … Until then, the Army is encouraging housing providers to offset any of their financial losses by cutting back on non-critical services — mowing lawns less frequently, for example — but Hammack said none of the Army’s housing providers have yet come forward with a case that the cuts are putting them in dire financial straits. Underutilized base housing is another concern. All of the military services are smaller than they were at the start of MHPI; the Army in particular is in the midst of a drawdown that will bring it to its lowest active duty level since midway through the last century. … The audit, which looked at several installations that had reached the bottom of the waterfall — Fort Detrick, Maryland; Naval Station Mayport, Florida and Barksdale Air Force Base, Louisiana — found installation officials had failed to conduct appropriate security checks: Of 128 tenants the IG sampled, only eight had been run through all of the proper databases and several were given installation passes for longer than their lease terms. …