About OCCH

President's Message


Hal Keller, President

A HARD SIX MONTHS FOR THE PARTY OF AFFORDABLE HOUSING

As always, I will start by clearly stating that I share my views as a member of the Party of Affordable Housing that has friends in both political parties. Successful affordable housing policy in the country has always advanced through bi-partisan cooperation.

Now that is out of the way, it has been a very, very hard eight months since the election for the Party of Affordable Housing. But the worst of our fears have not been realized to date. Consider the following:

First, Tax Policy. Immediately after the election, the prospect of lower corporate tax rates from anticipated tax reform shook the LIHTC equity markets. This resulted in a significant reduction in the capital investors pay for tax credits. Deals stalled, investors withdrew from the market.

But, now things seem to have opened up a bit and stalled deals are moving ahead and pricing slowly increasing. The “new normal”, however, still has lower equity prices than pre-election pricing. Kudos to the Ohio Housing Finance Agency in keeping with its proactive tradition of working with stakeholders to address market dysfunctions by producing alternatives to get more credits to deals and filling a portion of funding gaps.

The future of tax reform is unknown at this time, but we can take comfort in the broad support for the tax credit program in both the House and Senate, as evidenced by the introduction of The Cantwell-Hatch bill in the Senate that includes a funding increase for the program, and the Tiberi-Neal bill in the House that would modernize the program. Much of this support is the product of the advocacy and engagement of the affordable housing community.

And with the failure of health care reform and the revenues it would have generated for use in tax reform, plus the demise of the “border adjustment tax” (as evidence in a recent joint statement on tax reform between the heads of the tax writing committees in the House, Senate and the Treasury Secretary), it is unlikely that rates in any tax reform would result in rates below 25%, rather than the 15% or 20% numbers the White House and House had targeted.¬† It is important to note that even at a 25% rate, there is a significant reduction in equity that would go to deals. Ideas on how to offset this for the tax credit program are being explored.

Second, Spending. The Administration’s FY 2018 HUD budget, the worst housing budget in decades, would eviscerate the CDBG and HOME programs, eliminate the CHOICE Neighborhood Initiative program and institute serious cuts to public housing, along with other very, very bad things.

But, the White House’s budget was so draconian that appropriators in Congress are not using it as a starting point as they draft their own spending bills. It is unclear how the FY 2018 appropriations process will go this year: The FY 2017 omnibus spending bill was not as bad as feared for housing programs. To be clear, even modest cuts to HUD and RD programs follow years of budget cuts that have damaged this country’s ability to deal with an ever worsening housing crisis.

Third: Regulations. Specifically the Community Reinvestment Act (CRA). This one may not be on your radar yet. Recently the Treasury Department issued a regulatory reform report that listed CRA as one of the areas to be reviewed. I, for one, was surprised. With all this talk of financial regulatory reform, I can assure you that banks do not have CRA on their wish list for the top 10 banking regulations they would like to see be repealed or revised. Financial institutions have learned to live with CRA and many have integrated community investment into their corporate culture.

But, there is no reason to suspect anything sinister from a review of CRA, and we all know the law could benefit from a review of the regulations to increase clarity and consistency among the three regulatory agencies. We, however, need to be very, very careful. There are still individuals in Congress and elsewhere that believe CRA created the financial crisis by pushing banks into making bad loans. That myth has been repeatedly debunked. But those folks will certainly make their view known.

Why is this so important? Tax Credits, HOME, Section 8 and public housing are all public subsidies. We need the private sector with infinitely more resources and the organizational infrastructure at banks through their Community Development Corporations to make public-private partnerships work. This system works: let’s do no harm.

Fourth, the Ohio Housing Trust Fund. As part of the Ohio biennial budget process there was a real opportunity to increase the Ohio Housing Trust Fund. A change in the recordation fee formula would have raised funding to an estimated $70 million from the current funding level of approximately $45 million.  Unfortunately the increase did not survive the conference committee. Very disappointing given the hard work done by a coalition of many, Including COHHIO, the Ohio CDC Association, Enterprise Foundation, NeighborWorks Ohio and many others like OCCH and our partners.

But, this coalition found new allies in and out of state government and will be back in the future

In conclusion, it has been a difficult time for the Party of Affordable Housing. If anything, it underscores the importance of continued vigilance and advocacy on federal and state housing policy issues.

OCCH stands ready to work with our partners on advocacy, investment, lending and philanthropy toward our collective mission to preserve and expand affordable housing opportunities for those in need.



Hal Keller
President


hkeller@occh.org