Comment Detail

Comment

General comments:
I am appreciative of the work and effort that people have invested in creating an updated Affordable Housing Program Rule for the Federal Home Loan Bank system. The initial request from the Banks and the development community was to allow more freedom at each of the 11 District Banks to meet specific needs in the individual districts, to make the program more compatible with other funding sources and less burdensome on Affordable Housing development Sponsors by relaxing the “Need for Subsidy” and other items. I believe that the efforts by FHFA staff were aimed at solving these issues and their efforts produced several different ingredients each aimed at solving one of the above. Unfortunately, the combining of the ingredients make a recipe that is awful. My organization, Episcopal Retirement Services Affordable Living is a non-profit ministry based owner, developer and manager of 29 senor affordable communities ERS has used the Federal Home Loan Bank AHP program to complete 6-8 (new applications are being prepared) projects totaling 363 units in the six approved projects out of our portfolio of 1700 units of affordable senior housing.
Here are some specific comments:
1. Even though the comment period has been extended to June 12, 2018, many of the stakeholders have not been involved in the communication concerning the Notice until it was released. This is a very complex rule which took four years to create. More than 60 days should be offered for people to understand and test the proposal before they can make adequate and usable comments. Please extend the comment period further or indicate that the rule as proposed will be further modified with a later comment period.
2. The proposal of an outcomes based system is flawed for multiple reasons:
a. Basing awards on outcomes will create a situation where applications must be re-ranked. This will reduce transparency and trust in the program. Eventually the best development Sponsors will avoid the program if the outcome is so murky. ERS Affordable Living proposes LIHTC projects with FHLB funds before they are approved. In order to confirm that a project will move ahead, ERS must guarantee that should the FHLB AHP award not be received, we will replace that source with our own funds of $500,000 to $1,000,000. We can commit this guarantee because the scoring system is predictable enough to reassure our Board that our AHP application is likely to get funded. Re-ranking will force us to stop using the program if one of our projects must be passed over to meet a certain outcome and then we are required to provide $500,000 to $1,000,000 out of the corporate cash. Other non-profits are likely to take the same approach to the AHP Program if this new rule stands as proposed. Re-ranking is a terrible concept and one which cannot be used in a program that is designed to AID affordable housing development.
b. The outcome based system assumes that the applications provide the majority of funding which is rarely true. Requiring projects to meet arbitrary targets which are specified in law may be totally inappropriate in 10 years but are still a requirement. As a gap financing vehicle, this program cannot affect the design and planning of projects that must meet requirements from Housing Finance Agencies, Participating Jurisdictions in the HOME program and other funding sources with far more investment to offer.
c. Codifying three priorities in a law which will likely stand for 20-30 years as this last one has, makes no sense given that other funders requirements and area housing needs change over time. A prescriptive approach is not the best method.
d. A better method would be to allow each District to state in their Community Housing Plan how they would meet the statutory policy requirements and the Agency (FHFA) has the authority to accept or reject those plans.
e. The requirement that any one project can only be counted to meet one of the three required “priorities” is also a challenge as no Bank can assure what projects will be submitted and situations could arise where every Sponsor focused on meeting one specific priority and no one applied with projects that could fulfill the others priorities. This would mean that the District could not be meet the requirement.
f. The requirement that any District that fails to meet the outcome goals must repay the program from profits will cause the various Districts to become more conservative and guarded in the Implementation Plans and the program will become less flexible than it has been not more flexible.
3. The prescriptive outcomes based proposal will prevent inclusion of mixed income projects which are the encouraged trend of nearly every policy based Housing Finance Agency and local government. Requiring 50% of the units to meet the priority eliminates the capability to utilize the newest law for LIHTC Income Averaging and prevents any 15 year pro-forma from utilizing market rate units due to the overabundance of lower income units. The current 20% requirement is better. If the feeling is that 20% is too little, at worst increase it to 30% but 50% is far too high.
4. The proposed rule was requested to reduce the burden on Sponsors and in effect has made the burden greater by prescribing so many outcomes, notices of non-compliance, increasing the number of units that are required to meet the threshold for targeted populations, etc. Smaller organizations cannot keep staff and the complexity of expecting an organization to make notice to the FHLB of any non-compliance when the organization is likely focused on correcting the non-compliance with another agency is unrealistic. The new proposal will also discourage and possible eliminate urban projects that serve low and moderate income residents at a time when the population is moving to urban areas because of the added services available. Adaptive reuse projects in the urban areas will also be at a disadvantage for similar reasons. I do not believe that the Agency truly intended to create this adverse impact through the new rule.
5. Finally, the current “Need for Subsidy” requirements are so prescriptive that certain other Federally funded programs cannot utilize the program for funding. While Need for subsidy should be a part of the program, the Districts should be asked to create their own guidelines which will, in addition, allow for unusual circumstances. For example, there are Rural Development projects that have very little remaining 515 debt. Refinancing these project requires that the current 515 loan remain in place to keep the rental subsidy. However do so restructures the small amount of existing debt over a new 50 year period and creates a Debt Service Coverage far above the 1.50 allowed by most Districts. However Districts can use other measures (cash flow analysis which will be very low) undue enrichment of the owner, etc.) to verify that the need still exists. The proposal to codify the advisory bulletins will make this process even more challenging and eliminate the ability to serve truly needy projects in rural areas.
Thank you again for the opportunity to comment on the Notice of Proposed Rule. It is my hope and expectation that the Federal Housing finance Agency will rescind this proposed rule and revamp it using the comments received from the public comment period. I look forward to seeing this program make an impact for our society and to utilizing it to aid the seniors whom we serve through Episcopal Retirement Services Affordable Living. If there are any questions on these thoughts, I can be contacted at jkittenbrink@erslife.org .