The Housing Assistance Council is an independent, non-partisan and regularly responds to Congressional committees, Member offices, federal agencies, and policy advocacy coalitions with the research and information needed to make informed policy decisions. Our research work, Rural Data Portal, and Veterans Data Central all provide valuable, educational context to frame the rural policy conversation. If you want to know how a new program or policy could impact America’s small towns and rural places, please don’t hesitate to contact us at policy@ruralhome.org.

HAC’s 2024 Rural Housing Policy Priorities

For over 50 years, the Housing Assistance Council (HAC) has been the voice for the poorest of the poor in the most rural places. Our deeply rooted work in communities across the country informs our research and drives our policy positions. Our independent and non-partisan work with members of Congress, federal agencies, affordable housing and community development organizations, and other stakeholders ensures the most vulnerable rural populations – especially those in high-needs regions like the Mississippi Delta, rural Appalachia, farmworker communities, the Southwest border colonias, and Indian Country – have improved access to safe and affordable housing opportunities.

Rural America is home to about 20 percent of the U.S. population and covers more than 90 percent of the U.S. landmass. Its small towns and rural regions are diverse demographically and economically, and face a wide array of local challenges and opportunities for developing their communities and housing. While each place is unique, HAC has documented several themes. Persistent poverty is a predominantly rural condition. Habitable rural housing is in severely short supply. The adequate housing that does exist is often unaffordable because rural incomes are low and run well below the national median. Rural housing lacks adequate plumbing and kitchen facilities at a rate above the national average. Overcrowding is not uncommon in some rural regions. Decades of stagnant rural house prices have denied owners the wealth and mobility so often associated with buying a home. And racial inequity is endemic as the result of housing policies and banking practices that excluded rural people of color. Complicating these challenges, a lack of reliable rural data obscures rural realities.

In addressing these issues, HAC’s policy priorities include:

  1. Building the capacity of local affordable housing and community development organizations deeply rooted in rural places;
  2. Expanding access to credit and safe, affordable lending in underserved rural communities;
  3. Preserving the critical stock of USDA multifamily homes amid the growing maturing mortgage crisis;
  4. Improving the overall quality, availability and affordability of housing to buy and rent in small towns and rural places; and
  5. Preserving, increasing and tailoring resources for federal affordable housing programs serving rural populations.

We invite you to view our 2024 Policy Priorities and explore the various policy issues facing rural communities. You can also access an Executive Summary of the Policy Priorities.

HAC's Policy Priorities for 2024

 

Policy News town

HAC Comments on Duty To Serve Plan Modifications – December 2023

The Federal Housing Finance Agency (FHFA) put out a call for comments on the Enterprises’ (Fannie Mae and Freddie Mac’s) proposed 2023 Duty to Serve Plan modifications. Both Enterprises proposed cutting a variety of their loan purchase goals in rural areas, citing market conditions as the justification. HAC pushed back on these proposed cuts in our comments. Specifically, HAC made in following points in our comment:

  • HAC is generally agnostic as to which section of Freddie Mac’s Duty to Serve plan USDA Section 515 purchases fall under, but strongly supports their continued inclusion and tangible results. We support mainlining the Section 515 purchases currently included in the rural section of the plan because they focus on rural-targeting of properties.
  • HAC opposes cuts to loan purchase goals in high-needs rural regions and from small, rural financial institutions.
  • HAC opposes cuts to loan purchase goals for manufactured housing communities.
  • HAC supports Fannie Mae’s new proposed objective to better serve the manufactured housing needs of Native communities.
  • HAC support permitting the Enterprises to make equity investments in CDFIs – a decision which relies on approval from the FHFA.
HAC DTS Plan Modification Comments 12.06.23 FINAL
Policy News from the Administration

HAC Comments on OMB Guidance on Grants and Agreements – December 2023

The Office of Management and Budget (OMB) put out a call for comments on their guidance for Grants and Agreements, with a lens toward making grants processes more equitable. HAC submitted comments in support of more proactive geographic equity in the federal grants process. In addition to recognizing capacity building and access to capital as two essential equity issues in rural places, HAC’s comments focused on the recommendations below.

  • Instituting a Rural Impact Analysis for New Regulations
  • Investing in Capacity Building and Rural Intermediaries
  • Eliminating, Reducing or Modifying Cost-sharing and Matching Requirements that Disparately Impact Rural Communities
  • Streamlining and Increasing Uniformity in Applications
  • Including or Increasing Administrative and Predevelopment Costs as Eligible Activities in Rural Places
  • Recognizing the Rural Challenges in Metrics and Data Reporting
HAC Comments on OMB Guidance on Grants and Agreements 12.04.23

The New CRA Rule: A Preliminary Look at Potential Implications for Bank Investment in Rural Community Development

On October 24, 2023, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, and the Federal Deposit Insurance Corporation (FDIC) issued a final rule overhauling the regulations that implement the Community Reinvestment Act (CRA), which encourages federally insured banks to meet the credit needs of the communities in which they do business, especially low- and moderate-income (LMI) communities. This is the most significant joint effort in over three decades to modernize the way regulators evaluate bank performance under the CRA.

HAC is committed to helping our partners understand the potential impact of this new CRA rule. The rule, however, is nearly 1,500 pages in length, is highly complex, and will take effect over a nearly three-year period. Accordingly, this and forthcoming analyses must be considered preliminary.

The Evaluation Framework

Banks receive CRA ratings of “Outstanding,” “Satisfactory,” “Needs to Improve,” or “Substantial Non-Compliance.” The final rule continues the regulators’ longstanding approach of tailoring the CRA examination tests to bank size and type.[1] The final rule raises the current asset threshold for each of the bank size categories.

  • Large Banks (over $2 billion in assets) are subject to two tests of equal weight.
    • A Retail Lending Test evaluates a bank’s origination and purchase of loans, including home mortgage loans and multifamily loans if it offers them.
    • A Community Development (CD) Test consists of a CD Financing Subtest (40 percent of the total) and a CD Services Subtest (10 percent of the total).
    • A HAC analysis in 2016 found that 2.4 percent of banks headquartered in rural or small-town census tracts that consistently received “Outstanding” or “Satisfactory” ratings were subject to the large bank exam.
  • Intermediate Banks ($600 million-$2 billion in assets) are also subject to equally weighted Retail Lending and CD Tests.
    • The Retail Lending Test evaluates a bank’s origination and purchase of loans, including home mortgage loans and multifamily loans if it offers them.
    • Intermediate Banks may opt in or out of the new rule’s CD Test and CD Financing and CD Services Subtests.
    • Intermediate Banks that opt out are subject to the current CD Test, which has three subtests:
      • CD Lending
      • CD Investment
      • CD Services
    • HAC’s 2016 analysis found that 5.4 percent of banks headquartered in rural or small-town census tracts which consistently received “Outstanding” or “Satisfactory” ratings were subject to the intermediate bank exam (then known as the intermediate small bank exam).
  • Small Banks (less than $600 million in assets) may opt into the new rule’s Retail Lending Test – or may choose to continue to be evaluated under the current small bank test. They are not subject to a CD test.
    • HAC’s 2016 analysis found that 79.4 percent of banks headquartered in rural or small town census tracts that consistently received “Outstanding” or “Satisfactory” ratings were subject to the small bank exam.
  • Limited purpose banks—with just one primary product line such as credit cards (e.g., Amex Bank, Capital One)—are subject only to the CD Financing Subtest.
  • A Strategic Plan option allows banks of all sizes to choose to seek the regulators’ approval of a CRA strategic plan tailored to the bank’s lines of business and specific credit needs identified through a formal input process by the communities the bank serves.

Historically, bank examiners would conduct both quantitative and qualitative assessments of CRA performance under both the Retail Lending and CD Test and its subtests. Banks would be measured against benchmarks for lending and CD investment volume among other metrics relative to their size, business model, and comparable institutions. Quantitative ratings would be supplemented with qualitative assessments including taking account of the bank’s “performance context”—e.g., the economic conditions in the places it served—and determining whether a bank’s lending and CD investments were especially “responsive to a community’s credit and community development needs.” This qualitative element also allowed examiners to consider the terms and flexibility of bank CRA capital offered in particular LMI communities. Rural geographies benefitted especially from a qualitative component to CRA evaluation given their relatively greater capacity-constrained CD ecosystems and limited deal flow and transaction size.[2]

The final rule maintains the combined quantitative and qualitative CRA evaluation framework, but modifies and augments it in several important ways. The remainder of this analysis focuses on the rule’s approach to the new CD Test and Subtests and the potential ramifications for affordable housing and community development in rural America.

Opportunities for Rural Community Development Under the New CD Test

CRA-motivated bank investments, loans, and services have always played a role in rural community development.[3] But it has been challenging under the current CRA framework to increase bank commitments in rural communities, for a number of reasons—some of which are unique to rural areas and some of which are shared with urban and suburban communities.

First, as noted above, the large majority of banks headquartered in rural areas and small towns—and most likely to have branch and ATM networks there—are small banks not subject to a community development test at all. Intermediate-small and large banks were evaluated under the current rule primarily on their CD investments, lending, and services within their Assessment Areas (AAs), selected by the banks themselves and defined as the geographic areas that could reasonably be served by each of a bank’s locations, including its main office, any branches, and deposit-taking ATMs. Relatively few of their AAs encompassed rural geographies. As HAC’s research highlighted, large and intermediate bank support for rural communities faced an obstacle in their uncertainty about whether they would receive CRA credit for work outside their AAs.

The final rule makes major progress on addressing this challenge. While the new CD Test requires large banks and opting-in intermediate banks to meet the CD Financing and Services needs of their facility-based AAs, it also creates a “nationwide AA” to ensure that all CD Financing and Services activities contribute to an institution’s CRA rating.[4]

Second, the final rule highlights several factors that examiners will specifically take into account when conducting the qualitative “impact and responsiveness review” of a bank’s CD Financing and Services. These include whether the investment, loan, or service benefits or serves:

  • one or more Persistent Poverty Counties (PPCs);
  • residents of Native Land Areas; or
  • one or more geographic areas with low levels of community development financing.

Each of these factors will tend to reward bank CD Financing and Services in rural areas given their 1) demonstrable overrepresentation among PPCs, and Native Land Areas; and 2) likely overrepresentation among geographic areas with low levels of community development financing given consistent findings of underinvestment from other sources, such as philanthropy.[5]

Additional impact and responsiveness review factors specifically mentioned by the rule include bank financing that:

  • supports a Community Development Financial Institution (CDFI);
  • takes the form of a grant or donation; or
  • invests in a Low Income Housing Tax Credit (LIHTC) or New Markets Tax Credit (NMTC) project.

Given the scarcity of other public and private sector community development resources in rural areas, coupled with often challenged local economies, rural communities especially need the patient, flexible capital provided by CDFIs. Similarly, they have a disproportionate demand for grant funding and equity investments in CD projects and organizations rather than loans. Accordingly, an evaluation framework that specifically recognizes the impact and responsiveness of these approaches has the potential to benefit rural America.

For rural places, these factors may also interact positively with the above-mentioned addition of a “nationwide AA.” For example, a bank that today might hesitate to invest in a LIHTC or NMTC project outside of its facility-based footprint may choose to do so under the final rule, leading to a more geographically equitable distribution of resources over the long term.[6]

Third, CRA-motivated investment in all communities—urban, suburban, rural and small town—suffered under the prior CD Test from a lack of clarity around what loans, investments, or services were eligible for CRA credit. Other than a few long-deemed eligible activities, such as LIHTC or NMTC investments, banks and their community partners were often uncertain about the CRA impact of a new, innovative, or complex CD or affordable housing activity—often the very kinds of financial products and services needed by the most distressed rural communities.

The final rule states that the regulators will jointly “maintain a publicly available, non-exhaustive illustrative list of examples of community development activities that qualify for CRA consideration, including examples of qualifying affordable housing activities. The list will be periodically updated.” Additionally, the rule sets forth a formal process by which a bank can seek advance confirmation that a community development will be considered CRA-eligible.

Conclusion

As previously noted, the new CRA rule is a massive and complex document, representing a major shift in the implementation of this landmark statute. HAC and others will continue to analyze the rule—as well as early feedback from our partners as the transition period begins—and provide periodic updates. In the meantime, we urge our partners to consider approaching current or potential CRA-motivated funders of your work to inquire whether the aspects of the final rule described here might provide incentives for them to begin, increase, or modify favorable their CD financing and services investments in rural communities.

Footnotes

[1] The current CRA examination process is described in Making CRA Work in Rural America: Finding “Outstanding” Financial Institutions, part of HAC’s three-part series of reports “CRA in Rural America” published in 2016.

[2] When in 2019-2020, then-Comptroller of the Currency Joseph Otting put forth a CRA modernization rule shifting CRA evaluation to an entirely metrics-based approach, HAC submitted comments (as did numerous other affordable housing groups) expressing concern about the negative impact removing the qualitative element would have on banks’ incentive to invest in the most distressed rural and urban LMI communities.

[3] Indeed, CRA-motivated investments are a major driver of affordable housing and community development investment in general. For example, CohnReznick estimates that approximately $24.5 billion of capital was committed to housing tax credit investments in 2022 and that the CRA-motivated capital was the source for approximately 82 percent of that amount.

[4] Large national banks play an outsized role in CRA-motivated affordable housing and community. National banks control about 70 percent of the banking systems total assets. Over 99 percent of investments in LIHTC in 2022 from national banks were made by banks with over $10 billion in assets.

[5] The regulators note that currently there is not sufficiently comprehensive local CD financing data to implement this review factor, but expect to be able to do so in the near future, aided in significant part by the more detailed and robust bank CD data reported under the final rule itself.

[6] It should be noted that HAC joined other commenters on the proposed rule expressing concern that collapsing the prior CD Investment and Lending Subtests into a single CD Financing test might incentivize banks to make loans rather than equity investments in LIHTC and NMTC. The final rule’s inclusion of the equity review factor was designed to address this concern. It remains to be seen if banks do in fact maintain their investments in the LIHTC and NMTC markets.

Updated October 2 – What would a federal government shutdown mean for rural housing?

Update, October 2, 2023 – A last-minute agreement on a continuing resolution keeps the government running through November 17. It includes a provision allowing USDA to renew Section 521 Rental Assistance contracts as they expire, even if that requires a higher proportion of annual funding than the prorated amount for the first 48 days of the fiscal year.

The next steps towards funding for the entire fiscal year are not yet clear. The House and Senate have proposed different FY24 funding levels for USDA and HUD, and the House voted on but did not pass its USDA appropriations bill on September 28. Follow HAC’s reporting on appropriations in the HAC News (subscribe here) and on our web pages for USDA and HUD funding.

Update, September 29, 2023 – Congress has not made effective progress towards avoiding a shutdown on October 1. USDA has posted updated shutdown contingency plans, including one for Rural Development. The RD plan seems to be essentially the same as the 2021 version HAC originally summarized here. Since the updated plan indicates that USDA will be able to spend Rental Assistance funds so long as it has them, this post has been updated to remove questions about the lack of an advance appropriation for Rental Assistance.

The federal government, or parts of it, close when funding (appropriations) lapses. None of the fiscal year 2024 appropriations bills have been enacted yet, and ongoing differences between factions on Capitol Hill make temporary funding unlikely. A shutdown could begin on October 1, 2023, when fiscal year 2023 ends. If a continuing resolution (CR), or a series of them, keeps the government operating beyond October 1, a shutdown could occur whenever the final CR ends. Federal agencies have prepared shutdown plans.

A brief federal government shutdown probably would not impact most people who receive housing assistance but, at some point after the first few days, the housing effects would begin to be noticeable. In fiscal year 2019, a record 35-day shutdown from December 22, 2018 to January 25, 2019 led some owners of USDA-financed rental properties, unaware that the agency had enough Section 521 Rental Assistance (RA) funding to last through January, to threaten to evict tenants who could not pay full rent on their own. Fortunately, Congress reached a funding agreement before any RA renewals were missed that February.

As HAC considers what a shutdown will mean, some important questions remain open and are included in the analysis below. HAC and other national rural housing organizations have reached out to USDA RD’s multifamily and political leadership with these questions and will update this information when we receive a response.

KEY TAKEAWAYS

  • A brief federal government shutdown probably would not impact most people who receive housing assistance but, at some point after the first few days, the housing effects would begin to be noticeable.
  • Section 521 Rental Assistance contracts would continue to be renewed during a shutdown “if funding is available,” according to USDA Rural Development’s shutdown plan, dated September 2023.
  • If the agency has used up all its RA funds, “additional servicing options” could be provided to rental properties. When the government closed in December 2018 and January 2019, for example, USDA considered permitting owners to use project reserves to cover costs, but the shutdown ended before a final decision was made.
  • No new rural housing loans, grants, or loan guarantees would be committed during a shutdown.
  • HUD’s monthly subsidy programs – including public housing operating subsidies, housing choice vouchers, and multifamily assistance contracts – would operate only while funding remained available, according to HUD’s August 2023 contingency plan. If they ran out of money during a shutdown, they would cease to operate.

WHAT SHUTS DOWN

USDA Rural Development

Rural Development’s contingency plan, dated September 2023, indicates that State Directors, their staff, and some employees in the Washington, DC national office and the Customer Servicing Center in St. Louis would continue working during a shutdown.

Rental Assistance

RD’s plan says that Section 521 Rental Assistance would continue “if funding is available.”

The amount needed for RA can vary considerably from month to month. The RA payments each month are for the RA contracts that expired during that month, and each payment obligates a full year of RA funding. For example, the RA contracts that expired during August 2023 and were renewed in late August or early September will not be impacted again until they expire in August 2024. How much RA funding does USDA have on hand? How long will that amount last?

The contingency plan provides that, if the agency has used up all its RA funds, “additional servicing options” could be provided to rental properties. In 2019, for example, USDA was considering permitting owners to use project reserves to cover costs. The shutdown ended before the agency completely ran out of RA money, so they did not have to decide whether to allow the use of reserves. Has USDA RD planned for such a possibility this year?

Has RD developed plans for communicating with property owners/managers and with tenants if a shutdown occurs and while it continues?

Loans, grants, and servicing

According to USDA’s contingency plan, no new loans or grants would be committed during a shutdown. No new loan guarantees would be issued under any of the housing programs or the community facilities program. For Section 502 guaranteed loans only, lenders and borrowers could choose to proceed with closing if USDA had already issued a valid conditional commitment. The lender would be assuming the risk until the shutdown ended and a guarantee was issued.

RD activities that are considered necessary to preserve the government’s property would continue during a shutdown, and loans and escrow accounts are considered to be government property. Therefore RD would keep processing nightly updates for each RD financial system, making insurance and tax payments from borrowers’ escrow accounts, and “reconciling and submitting for initial processing” collection activity including amortized payments and payoff activity. Some foreclosure sales would go forward. Servicing of existing guaranteed loans would continue, including processing loss claims.

HUD

HUD’s plan is dated August 30, 2023. It explains that, since 2019, appropriations language has allowed HUD’s salaries and expenses funding to be carried over into the next fiscal year, with wording similar to that used for the Rental Assistance advance appropriations. Thus, if FY24 begins without an appropriation, HUD may have some FY23 funds remaining for staff to continue working at full force, at least temporarily. The department’s senior leadership would decide how much of that funding to use and for what functions.

Programs operating with HUD funding that was obligated before a shutdown would continue to operate. Much of the Federal Housing Administration’s and Ginnie Mae’s work would continue during a shutdown. Monthly subsidy programs, however – including public housing operating subsidies, housing choice vouchers, and multifamily assistance contracts – would operate only while funding remained available. If they ran out of money during a shutdown, they would cease to operate.

Treasury

The Treasury Department’s plan, dated December 2022, states that the CDFI Fund’s programs would not operate during a shutdown, without providing any further details.

WHO KEEPS WORKING

Generally, during a shutdown, federal staff in the affected agencies do not work unless their functions are considered essential. Furloughed employees are also not allowed to do their jobs voluntarily while the government is closed. In the past, Congress and the President have usually agreed to pay furloughed employees retroactively after a shutdown ends, but they are not required to do so.

Presidential appointees (i.e., agency officials who were confirmed by the Senate) are not furloughed. They are not paid, however, unless funds for their salaries are appropriated after the shutdown ends. “Schedule C” employees, also known as political appointees (these jobs do not require Senate confirmation), are subject to the same rules as civil service employees to determine whether their roles are essential during a shutdown.

WHAT A SHUTDOWN MEANS FOR GOVERNMENT CONTRACTS

An Office of Management and Budget document explains that during a shutdown a federal contractor can proceed with work that is not impacted by the lapse in funding. For example, if an agency has already obligated funds representing the entire price under a contract or task order before the funding lapse began, the contractor can conduct the work. At the agency, however, routine operational and administrative activities relating to contract or grant administration cannot continue.

WHAT HAPPENED IN FY19

Fiscal year 2019 began on October 1, 2018 with parts of the federal government, including USDA and HUD, open under continuing resolutions. After a final CR expired, they did close down on December 22. The government reopened on January 25, 2019, under another CR that expired on February 15. A final consolidated appropriations act was signed into law by President Trump on February 15.

USDA Rural Development

The first HAC News issue after the shutdown began, published on January 15, 2019, reported that limited functions were continuing at USDA’s national office in Washington, DC and the Customer Service Center in St. Louis. Loan closings were not taking place and applications were not being processed.

Rental Assistance

USDA RD was able to renew Section 521 Rental Assistance contracts that expired in December and January. If the shutdown had continued, however, the agency would not have had enough money to renew the approximately 700 RA contracts that expired in February and 1,000 in March.

By January 25, 2019, when a deal was reached for a three-week CR, the HAC News reported that USDA was considering short-term measures, such as allowing owners to use project reserves to cover costs, but had not yet finalized any plans or notified property owners/managers. The need for providing information directly from USDA had become clear when managers of USDA-financed properties in Arkansas, Louisiana, Missouri, and Mississippi sent notices to tenants telling them their RA was ending in January and they would be responsible for paying their full rent, then backpedaled when informed by USDA the RA would be paid.

After the shutdown ended, the February 11, 2019 HAC News quoted a notice USDA sent to owners and managers of USDA-financed properties with Section 521 Rental Assistance: “We are pleased to inform you that Rental Assistance for Section 514/515 properties has been obligated through April. … We understand that the most recent lapse in appropriations created anxiety and uncertainty regarding the status of your contract obligations. We are hopeful that this communique and the fact that all contracts are obligated through April will provide you reassurance and operational predictability in your management of these critical low-income resources throughout rural America. Thank you for your partnership in delivering the Rural Housing Service affordable housing mission.”

A January 2019 memo from the National Housing Law Project explained the rights of federally assisted tenants during the government shutdown. NHLP is preparing an updated memo for a possible October 2023 shutdown.

Homeownership Programs

On February 1, 2019, after the shutdown ended, USDA’s single-family programs office announced it would issue new Certificates of Eligibility to all Section 502 direct applicants who had valid COEs on December 21 before the government shut down. The agency did not have enough money to obligate additional Section 502 direct loans until it received funding beyond February 15, however.

Section 504 repair loans and grants were available on February 1. USDA planned to prioritize applicants with immediate health and safety hazards.

Other Impacts

There were additional housing-related impacts from the FY19 shutdown, and only a few are summarized below.

Some HUD Project-Based Rental Assistance contracts expired early in the shutdown, as reported in the January 15, 2019 HAC News. About 21,500 households with average incomes under $13,000 per year were impacted by the expiration of 650 PBRA contracts that ended in December. More were expiring in January and February and HUD would need to determine whether it had funds available to renew them. Property owners could use their reserves, if available, to cover shortfalls. Public housing capital funding was unavailable, and operating funds would not be able to carry public housing authorities beyond February.

The shutdown’s effect in Indian Country was “substantial and unique,” the Center for Indian Country Development at the Minneapolis Federal Reserve reported, although calculating a dollar amount was not possible. Because of the unique relationship between the U.S. and Tribes, Tribal services are often closely tied to federal funding. Government employment is disproportionately high in Indian Country, Tribal staff such as those who plow reservation roads were furloughed, and Tribal education funds were in danger.

Disaster spending, particularly funding for Puerto Rico’s recovery from Hurricane Maria in 2017, was also delayed by the 2019 shutdown. Congress had appropriated $20 billion in CDBG-DR funds for Puerto Rico, but only $1.5 billion of that money was approved before the shutdown, and HUD did not disburse it during the shutdown. HUD approval of disaster spending plans or amendments from California, Florida, Georgia, Missouri and the U.S. Virgin Islands was also put on hold.

 

HAC in the News

Groups Urge HUD and USDA to Finalize Efficiency Requirements for U.S.-Backed Homes

ACEEE, HAC, and Sierra Club logos

A federal proposal to ensure new homes supported by U.S.-backed mortgages and federal housing programs meet updated energy efficiency criteria garnered widespread support from stakeholders today. Groups advocating for affordable housingenergy efficiency, and climate mitigation united in urging the administration to finalize the action promptly.

The groups were joined by more than 6,000 individuals across the country who supported the proposal in public comments gathered by Sierra Club and submitted to regulators today.

The U.S. Department of Housing and Urban Development (HUD) and Department of Agriculture (USDA) proposed updating their efficiency requirements in May by issuing a preliminary determination. If the action is finalized, future residents of the homes at issue compared to homes under the current criteria will save an estimated $14,500 for single-family homes and $6,000 per multifamily unit overall, net of costs, over the lifetime of the homes thanks to lower energy bills, HUD and USDA calculated. It would avert 2 million metric tons of carbon dioxide emissions for each year of new homes, the agencies said.

Jonathan Harwitz, director of public policy at the Housing Assistance Council, said: “Keeping housing affordable includes making utility costs affordable. We encourage HUD and USDA to move forward with this determination, and also to find ways to help cover upfront costs and to educate those who finance and build affordable housing.”

Lowell Ungar, federal policy director at the American Council for an Energy-Efficient Economy, said: “The longer we build brand-new inefficient homes, the more needless energy costs and climate pollution we’ll see for decades ahead. Just by meeting their legal mandate, the agencies will help ensure tens of thousands of new homes have lower energy bills and less risk of spiking costs. The analysis is clear; now they need to act promptly to get the job done.”

Jessica Tritsch, building electrification campaign director at the Sierra Club, said: “Too often renters and folks in low-income housing are left behind from programs that offer energy efficient housing and lower utility bills. This move by HUD will help ensure better access to climate-friendly appliances and healthier, more affordable homes. Adopting these new energy efficiency building codes is long overdue. We are committed to holding HUD, and other federal and state agencies, accountable to help low-income homeowners and renters access clean, safe, energy efficient housing.”

Background:

In bipartisan laws in 1992 and 2007, Congress directed HUD and USDA to periodically strengthen efficiency criteria for new homes purchased with federally backed loans such as Federal Housing Administration (FHA) and USDA mortgages, along with new homes with funding from other HUD programs, like the HOME Investment Partnerships grants for affordable housing. These homes—about 200,000 new ones each year—are primarily for low- and moderate-income homeowners and renters.

These criteria follow a model building energy code known as the International Energy Conservation Code (IECC) for single family houses and smaller multifamily buildings, and ASHRAE Standard 90.1 for high-rise multifamily buildings. The law requires HUD and USDA to update the criteria when the codes are updated every three years as long as the agencies determine that doing so would not negatively affect the availability or affordability of covered housing. But the regulators have not updated the criteria since 2015.

The agencies finally issued a preliminary determination for public comment in May for the 2021 IECC and Standard 90.1-2019 (the current requirements are the 2009 IECC and 90.1-2007). A provision in the omnibus spending bill enacted at the end of 2022 also requires the Department of Veterans Affairs to update its loan requirements based on the HUD-USDA criteria.

Houses and multifamily buildings meeting these criteria generally have more insulation in the walls and roofs, better air sealing and windows, and more energy-efficient systems, including better-sealed ducts. The homes waste less heat and allow more efficient heating and cooling with smaller HVAC systems.

Today is the final day for stakeholders to comment on the preliminary determination. When the agencies issue a final determination, they will implement the updated efficiency criteria in each covered program over a few months.

Media contacts:

ACEEE – Ben Somberg, 202-658-8129, bsomberg@aceee.org

HAC – Dan Stern, 202-516-6882, dan@ruralhome.org

Sierra Club – Shannon Van Hoesen, 202-604-2464, shannon.vanhoesen@sierraclub.org

The American Council for an Energy-Efficient Economy (ACEEE), a nonprofit research organization, develops policies to reduce energy waste and combat climate change. Its independent analysis advances investments, programs, and behaviors that use energy more effectively and help build an equitable clean energy future.

The Housing Assistance Council (HAC) is a national nonprofit that supports affordable housing efforts throughout rural America. Since 1971, HAC has provided below-market financing for affordable housing and community development, technical assistance and training, research and information, and policy formulation to enable solutions for rural communities.

The Sierra Club is America’s largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person’s right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action.

Policy News from the Administration

HAC’s Comments on Rental Assistance Decoupling – August 2023

The Fiscal Year 2023 President’s Budget included a request to decouple USDA Section 521 Rental Assistance from Section 515 Multifamily Loans to facilitate the rehabilitation and preservation of the multifamily portfolio. To explore the potential impacts, Congress directed USDA to conduct a series of stakeholder meetings and provide a report on how decoupling would be implemented. HAC submitted comments in support of decoupling, with a focus on the topics below.

  • Making Long Term Affordability Parameters the Top Priority
  • Considering A Pilot Concept When Implementing Decoupling
  • Clarifying the Annual Rent Increase Process for Decoupled RA Units
  • Establishing A Plan for Units Without Rental Assistance in Decoupled Properties
  • Maintaining Support for the Entire Suite of Preservation Programs, Even If Decoupling Becomes an Option
  • Establishing A Plan for Prepayments, Since the Bulk of Units Are Lost to Prepayments
  • Improving Data Transparency At RHS

Read HAC’s full comments.

HAC Decoupling Comments 2023
Policy News from the Administration

Senate Funding Bill Supports Most HUD Programs

On July 21, the Senate Appropriations Committee unanimously approved a bill to fund HUD for fiscal year 2024. Like the House bill, the Senate’s version maintains aid for tenants. It holds many other programs at their FY23 funding levels, rejecting the House’s proposed cuts to HOME, Section 202 elderly housing, Section 811 housing for people with disabilities, and the Self-Help Homeownership Opportunity Program (SHOP). It includes no funding, however, for the new Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program for preservation of manufactured housing.

— HAC’s analysis of FY24 appropriations for USDA housing programs is available here. —

 

HUD Program (dollars in millions) FY22 Final Approp. FY23 Final Approp. FY24 Admin. Budget FY24 House Bill, H.R. 4820 FY24 Senate Bill, S. 2437
CDBG $3,300* $3,300* $3,300 $3,300 $3,300
HOME 1,500 1,500 1,800 500 1,500
PRICE Manuf. Hsg. Preserv.

225 0 20 0
Self-Help Homeownshp. (SHOP) 12.5 13.5 10 10 13.5
Veterans Home Rehab 4 1 4 1 0
Rural Cap’y Bldg 5 6 5 7 6
Tenant-Based Rental Asstnce. 27,370 27,600 32,703 31,132 31,738
    VASH setaside 50 50 0 ** 30
    Tribal VASH 5 7.5 5 5 7.5
     Replacemts. for 521 RA 20***
Project-Based Rental Asstnce. 13,940 13,938 15,904 15,820 15,790
Public Hsg. Capital Fund 3,388 3,200 3,225 3,235 3,200
Public Hsg. Operating Fund 5,064 5,109 5,133 5,128 5,530
Choice Neighbrhd. Initiative 350 350 185 0 150
Native Amer. Hsg. 1,002 1,020 1,053 1,344 1,082
Homeless Assistance Grants 3,213 3,633 3,749 3,729 3,908
Hsg. Opps. for Persons w/ AIDS 450 499 505 505 505
202 Hsg. for Elderly 1,033 1,075 1,023 913 1,075
811 Hsg. for Disabled 352 360 356 208 360
Fair Housing 85 86 90 85 86
Healthy Homes & Lead Haz. Cntl. 415 410 410 345 350
Housing Counseling 57.5 57.5 66 57.5 57.5

* This table does not show amounts for Community Projects/Congressionally Directed Spending (popularly known as “earmarks”), which were included in the CDBG account beginning in FY22.

** The bill does not specify an amount for HUD-VASH vouchers but the National Low Income Housing Coalition reports that the broader Tenant-Based Rental Assistance funding in the bill will cover those renewals.

*** This $20 million request is explained in HAC’s summary of the USDA rural housing budget proposal.

 

House FY24 Funding Bill Supports Tenants, Cuts HOME

The House Transportation-HUD Appropriations Subcommittee approved an FY24 spending bill on July 12 that would maintain funding for tenant vouchers, public housing, and Native American housing programs but would cut programs including HOME, Section 202 elderly housing, Section 811 housing for people with disabilities, and the Self-Help Homeownership Opportunity Program (SHOP).

HOME would be most drastically impacted, with its funding cut by two-thirds, from $1.5 billion in FY23 to $500 million in FY24. SHOP would fall back to the $10 million funding level it had for several years before being increased to $13.5 million in FY23. The Choice Neighborhoods Program would be eliminated and the new Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program for preservation of manufactured housing would be cut from $225 million in FY23 to $20 million in FY24.

The bill would rescind $564 million appropriated in past years for the Lead Hazard Control and Healthy Homes programs but not yet spent.

The bill also proposes to block HUD’s February 9, 2023, Affirmatively Furthering Fair Housing (AFFH) proposed regulations and HUD’s ability to require specific changes to existing zoning laws under its June 10, 2021 AFFH interim final rule.

The Senate has not yet released its FY24 Transportation-HUD appropriations bill, but its version is likely to be substantially different from the House’s proposal.

HUD Budget Proposes to Shrink Small Programs, Expand Support for Others

March 13, 2023 — The administration’s budget for fiscal year 2024 requests funding increases in many HUD programs and calls for legislation expanding support to far more tenants and homebuyers. At the same time, however, the budget would cut some of HUD’s smallest programs, including two that are particularly important for rural residents: the Self-Help Homeownership Opportunity Program (SHOP) and the Rural Capacity Building (RCB) program. Details are provided in the table below.

HAC presented a webinar on “Rural Housing in the Fiscal Year 2024 White House Budget” on Wednesday, March 15. Watch the recording and view the slides here.

Two Steps Back for Rural Places and Native Americans

SHOP and RCB both saw small increases from FY22 to FY23, but the administration’s budget would roll those back for FY24. SHOP grew from $12.5 million in FY22 to $13.5 million in FY23 and would get only $10 million under the budget request. RCB received $6 million for the current year, but the budget would reduce it to its FY23 level of $5 million.

The administration requests no funding for manufactured housing grants through the Preservation and Reinvestment Initiative for Community Enhancement (PRICE), which was created in the FY23 omnibus appropriations bill.

The pool of funding that covers most of HUD’s Native American housing efforts would be increased from $1.02 billion in FY23 to $1.053 billion. But the much smaller Section 184 loan guarantee program, which has $5.5 million in FY23, would be cut to less than one-fifth of that, $905,700. At the same time, the budget asks Congress to expand Section 184, making it available to all Tribal members regardless of where they purchase a home.

Support for Renters

The budget proposes to create new, substantial assistance for tenants through mandatory spending proposals. These efforts, which would not be funded through the annual appropriations process, would need to be approved separately by Congress. That is extremely unlikely to happen in the current political climate.

Proposed mandatory spending would include:

  • $9 billion to provide vouchers for all youth aging out of foster care annually;
  • $13 billion for the estimated 450,000 extremely low-income veteran families
  • $7.5 billion for new Project-Based Rental Assistance contracts for extremely low-income households;
  • $7.5 billion to modernize public housing; and
  • $3 billion for competitive grants to states and localities for eviction reduction efforts such as emergency rental assistance and access to legal counsel.

The budget also proposes to extend assistance to tenants through some existing programs:

  • $565 million for new incremental vouchers for 50,000 additional households, specifically including those who are experiencing or at risk of homelessness or fleeing or attempting to flee domestic violence or similar violence; and
  • $300 million for capital investments in public housing.

The budget proposals for the Treasury Department would expand the Low Income Housing Tax Credit, as well as the New Markets Tax Credit.

Homeowner Aid and Removing Barriers

The administration’s budget calls for $10 billion in mandatory funding for a new First-Generation Down Payment Assistance program to help address racial and ethnic homeownership and wealth gaps. Homeowner assistance would also be supported by $100 million to states and territories through the existing HOME program. HOME’s funding would increase from $1.5 billion in FY23 to $1.8 billion in FY24.

The Community Development Block Grant program would again receive $3.3 billion, including $85 million to continue the “Yes In My Back Yard” or YIMBY program created in FY23 for removing regulatory barriers to housing production and preservation.

 

HUD Program(dollars in millions) FY22 Final Approp. FY23 Final Approp. FY24 Admin. Budget
CDBG $3,300* $3,300* $3,300
HOME 1,500 1,500 1,800
Self-Help Homeownshp. (SHOP) 12.5 13.5 10
Veterans Home Rehab 4 1 4
Tenant-Based Rental Asstnce. 27,370 27,600 32,703
    VASH setaside 50 50 0
    Tribal VASH 5 7.5 5
    Replacemts. for 521 RA 20**
Project-Based Rental Asstnce. 13,940 13,938 15,904
Public Hsg. Capital Fund 3,388 3,200 3,225
Public Hsg. Operating Fund 5,064 5,109 5,133
Choice Neighbrhd. Initiative 350 350 185
Native Amer. Hsg. 1,002 1,020 1,053
Homeless Assistance Grants 3,213 3,633 3,749
Hsg. Opps. for Persons w/ AIDS 450 499 505
202 Hsg. for Elderly 1,033 1,075 1,023
811 Hsg. for Disabled 352 360 356
Fair Housing 85 86 90
Healthy Homes & Lead Haz. Cntl. 415 410 410
Housing Counseling 57.5 57.5 66
Rural Capacity Bldg 5 6 5

* Substantial increases in CDBG funding for FY22 and FY23 was driven nearly entirely by the return, after a 10-year absence, of $1.5 billion for the Economic Development Initiative for the purpose of funding Community Projects/Congressionally Directed Spending (popularly known as “earmarks”). In FY23, just under $3 billion is added for earmarks. These figures are not included in the table.

** This $20 million request is explained in HAC’s summary of the USDA rural housing budget proposal.

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HAC’s Comments on Duty to Serve – July 2023

The FHFA requested comments on Fannie Mae and Freddie Mac’s Duty to Serve plans as part of their annual Duty to Serve Listening Sessions. Jonathan Harwitz, HAC’s Director of Public Policy, provided oral comments, accompanied by longer written comments, on behalf of HAC. If implemented robustly, Duty to Serve has the potential to improve the lives of people living in the most underserved communities. HAC’s comments focused on:

  • Maintaining USDA Section 515 preservation as a core goal of the rural Duty to Serve Plans;
  • Permitting targeted equity investments in CDFIs;
  • Using, and further refining, the new Colonias Census Tract definition; and
  • Meeting rural LIHTC equity investment goals.

Read HAC’s full comments.

HAC DTS Rural Listening Session Comments
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HAC’s network supports improvements to USDA’s Rural Housing Service in letter to Congress

With the help of our network of organizations working across the country in rural areas, more than 100 organizations signed on to support bipartisan, cross-Committee collaboration to consider improvements to USDA’s Rural Housing Service (RHS) programs as part of the larger Farm Bill. Historically, the RHS programs have not been included in the Rural Development Title of the Farm Bill because they fall within the jurisdiction of the Banking Committee. But in recent months there has been increased cross-Committee momentum to include some bipartisan RHS modernizations in the Farm Bill, and we want to encourage that momentum to keep building. Check out the letter below to learn more. Thanks to all the organizations who signed on in support!

HAC Rural Housing Farm Bill Sign-on 2023 FINAL