REPORT FROM THE CHAIR
The Supreme Court of the United States declared in 1921 that housing, like food and water, is necessary for life. Nevertheless, 95 years later the number of people living on the streets, permanently or temporarily, continues to be a stain on the reputation of a wealthy nation. Millions of extremely low-, low-, and moderate-income families and individuals struggle every day to afford a safe, decent, healthy place to call home in our country. In 2017, there is still not enough of what is necessary.
On a single night in January 2016, HUD’s biennial national point-in-time survey counted more than half a million people living on the streets, in cars, in emergency shelters, or in subsidized transitional housing. Of that number, 286,000 were people in families, 358,422 were individuals, and 25% were children. While the count provides a useful snapshot of the problem, the study also reports that 1.5 million Americans were homeless at some point in 2015.
Poverty, low-wage jobs, sudden or chronic unemployment, domestic violence, aging out of foster care, and mental health and substance abuse issues all contribute to the problem of homelessness. But the single greatest obstacle to solving it, according to the U.S. Conference of Mayors, is the severe lack of affordable housing, across the board. We need to produce a lot more housing, not only to bring the homeless indoors but also to ensure that the full spectrum of people now struggling to find or keep a home that is truly affordable are able to do so.
While the homeless are among the most vulnerable Americans, the number of families and individuals experiencing “shelter poverty,” unable to afford the most basic of necessities after paying their rent, continues to rise. Currently one in four families in the U.S. falls into that category, paying more than 30% of their income in rent. Research from the Harvard Joint Center for Housing Studies and Enterprise Community Partners shows that if nothing is done to increase the supply and availability of affordable housing by 2025, nearly 15 million Americans could be spending half their monthly income on rent.
Nearly 13% of existing affordable rental stock disappeared between 2003 and 2013, while only 2.2 million rental units came online in the same decade, the lowest rate of production since the early 1970s. As supply fails to keep up with demand, every single county in the U.S. has a significant deficit of affordable housing. This scarcity in the rental market makes competition fierce, driving up rents while incomes remain flat or down. In real terms, the median income of renters decreased by 10% since 2001, while rents increased by 5%, making for a 15% explosion in un-affordability.
Another factor in the competition for affordable rentals is the historically low rate of homeownership that followed the 2008 financial crisis. While 70% of renters still aspire to homeownership, saving for a downpayment is out of the question for people living in a constant state of shelter poverty. Moreover, for a shrinking middle-class, tight mortgage loan underwriting standards and ballooning home prices in many areas are keeping them in the market for affordable rentals far longer than in prior decades.
With a new Administration and a new Congress in place, even the status quo for policies and programs that the affordable housing industry and its constituencies currently rely on may be in jeopardy. Immediately after the November 2016 election, for example, what had been a robust and competitive LIHTC market slackened in anticipation of large corporate tax cuts to come, creating financial gaps for affordable housing developments. If the tax cuts happen, experts estimate that the foreseeable loss in annual LIHTC equity could translate into more than 16,000 fewer affordable rental homes created or preserved each year.
Proposed cuts to HUD’s budget and the potential elimination of the Community Development Block Grant program and the Federal Historic Tax Credit program threaten to turn an affordable housing crisis into a catastrophe. The National Low Income Housing Coalition (NLIHC) estimates that 200,000 housing vouchers could initially be lost, along with about 10,000 housing units for seniors and another 6,800 units for people with disabilities. Stalled development and cuts to financial assistance for housing also threaten local economies, through lost jobs and reduced tax revenues. If these draconian cuts – the largest since the Reagan Administration – do happen, NLIHC fears that homelessness could rise to a level not seen since the 1980s.
With the national picture increasingly clouded by uncertainty and worry over resources and priorities, one recent bright spot is the effectiveness of some local activism on the housing front in the Federal Home Loan Bank of San Francisco’s district. Recently, voters approved initiatives that will provide substantial new funding and significant policy solutions for addressing housing affordability, supply, and integration of supportive services in the San Francisco Bay Area, Los Angeles and San Diego counties, and other cities and counties in Arizona, California, and Nevada. The success of these initiatives is a good indication that, at least on the local level, the severity of the housing crisis is well understood. It is encouraging that, especially in high-cost-areas of the Bank’s district, innovative approaches to the problem can win widespread support.
In the 11th District, where the economic recovery has been good for those who were already doing well, but not good for those already struggling, the Affordable Housing Advisory Council deeply appreciates the steady support and significant financial resources the Bank provides for affordable housing and community development. Through its Affordable Housing Program and other Community Programs, the Bank plays an important role in developing and delivering affordable housing and economic opportunity solutions for underserved populations and communities.
In 2016, the amount of funding for the competitive Affordable Housing Program was $76 million, a substantial increase over $44.7 million in 2015. Another $12 million was allocated to the WISH and IDEA homeownership programs. The amount of funding for the Bank’s non-mandated AHEAD Program, which focuses largely on economic development initiatives, increased from $1 million to $1.5 million.
The Bank’s Affordable Housing Advisory Council (Council) is pleased to present this annual report, which describes the Bank’s Community Program results and related activities in 2016.
In 2016, the Bank awarded $76 million in grants through 19 Bank members to 85 projects that will construct or rehabilitate 6,318 units of desperately needed housing, creating affordable rental and owner-occupied options for individuals and families across 11 states – Arizona, California, Colorado, Florida, Montana, Nevada, New York, North Carolina, Texas, Washington, and Wisconsin – and in the District of Columbia.
2016 Competitive Affordable Housing Program Results
|(Dollars in millions, except subsidy per unit)||Rental||Ownership||Total||1990-2016|
|Number of Applications||165||8||173||6,026|
|Number of Applications||84||1||85||2,213|
|Number of Units||6,316||2||6,318||119,768|
|Average Subsidy per Unit||$12,035||$17,500||$12,037||$7,320|
While AHP grants are generally only a small portion of the total development budget, program users benefit from the powerful leverage and uncommon flexibility this gap financing can provide. Ranging in size from $35,000 to $2 million each, the Bank awarded 2016 AHP grants to a diverse array of projects that target the needs of specific areas and populations. For example:
- Permanent supportive housing for veterans and their families and for homeless veterans 55 or older
- Senior-friendly housing targeted to the LGBT community and seniors living with HIV/AIDS
- Transitional and permanent supportive housing for chronically or at-risk homeless individuals and families and emancipated youth
- Rental housing for very low-income individuals with developmental disabilities, mental illness, or long-term chronic illness
This year’s grants also demonstrate that the AHP can work effectively with other sources of funding, including California’s Mental Health Services Act, Veteran’s Housing and Homelessness Prevention Program, and Affordable Housing and Sustainable Communities Program, and HUD’s Rental Assistance Demonstration (RAD) Program, that prioritize efforts to serve vulnerable populations and to promote community health, stability, and sustainability.
Even with the mortgage crisis behind us, the slowdown in lending has drastically reduced the number of first-time homebuyers. Yet people of all income levels continue to aspire to homeownership in huge numbers. For low- to moderate-income families and individuals, the journey to homeownership takes an extraordinary amount of hard work, thrift, and determination under all economic conditions. To get to their destination, many who are reaching for the stability and security this symbol of the American dream offers desperately need the kind of downpayment assistance that the WISH and IDEA programs provide.
In 2016, the Bank made $12 million available for members to deliver grants from the Workforce Initiative Subsidy for Homeownership (WISH) and Individual Development and Empowerment Account (IDEA) programs. Thirty-five Bank members reserved $9.4 million in WISH funds and $2.6 million in IDEA funds to help low- to moderate-income families and individuals buy a home in Arizona, California, Nevada, and other states where members do business. We are pleased to note that 15 Bank members participated for the first time, and the Bank is committed to growing the number of members participating each year.
Both programs offer eligible homebuyers 3-to-1 matching grants of up to $15,000 for the purchase of a home. WISH is targeted to families and individuals who are ready to make the transition from renting to owning. IDEA is directed at homebuyers who have been saving for the purchase of their first home through an Individual Development Account or participating in their local housing authority’s Family Self-Sufficiency homeownership program or a lease-to-own program administered by a nonprofit or government entity.
Homebuyers receiving WISH and IDEA matching grants are also required to prepare for successful homeownership by completing a comprehensive homebuyer counseling program. Together with favorable mortgage rates and terms, WISH and IDEA homebuyers are well positioned for the long haul, and rates of foreclosure for these homebuyers are exceedingly low compared to delinquency rates on FHA-insured loans.
Since 2000, the Bank has funded over $80 million in WISH and IDEA matching grants, helping more than 6,100 households reach their goal.
The Bank works with the Council throughout the year to make needed changes to the AHP Implementation Plan in response to altered circumstances and shifting priorities. In 2016, the Bank made two key changes designed to respond to the ongoing homelessness crisis and the especially acute lack of affordable housing in its three-state district:
Housing for Homeless Households
The Bank revised its definition of "homeless" to better align with other funding sources and to make the Bank’s definition of “homeless” more expansive and inclusive of the many different circumstances that can cause people to fall into homelessness. Key elements of this revision are:
- Adding four categories of homeless households that were not previously included in the Bank’s definition
- Removing language that prohibited formerly incarcerated individuals from qualifying as homeless
- Clarifying which types of households are considered at risk of homelessness
- Providing additional clarification on documentation requirements for compliance monitoring
The Bank’s 11th District is made up of Arizona, California, and Nevada, where the need for affordable housing is acute and where construction costs, especially in California, are significantly higher than the national average. Historically, the Bank’s policy has been to assist its members in meeting affordable housing needs in all the markets they serve, and AHP scoring has not distinguished between projects located in-district and those located elsewhere. In 2015 and 2016, the Bank awarded $23 million in AHP grants to 20 out-of-district projects.
To address the unique needs of the Bank’s district while still allowing members to continue to support affordable housing in other markets, the Bank has created a modest scoring advantage for projects located within the 11th District. With the new In-District Project scoring category, projects may earn up to 3-points when located within the Bank’s District. This scoring preference is similar to that of six other FHLBanks.
The Council continues to be enormously invested in the effort to modernize the AHP regulation, in concert with the Bank, the other Federal Home Loan Banks, and their affordable housing advisory councils. Our goal, shared by the FHFA, is to ensure that the AHP is positioned for the future by being nimble enough to meet emerging needs and responsive to different regional realities. While the slow pace of the process has been a source of disappointment, we are appreciative of the opportunities we have had, particularly at the past two Annual Leadership meetings, to engage in a constructive dialogue with the FHFA on the priorities and principles we would like to see reflected in any revisions to the regulation.
We were also delighted to have an opportunity to put a local human face on what AHP dollars do by hosting Director Watt and his special advisor, Megan Moore, for a tour of the Kelly Cullen Community. This AHP-assisted project provides supportive housing to 174 homeless individuals in San Francisco’s Tenderloin District. Council Members Don Falk of the Tenderloin Neighborhood Development Corporation and Doug Shoemaker of Mercy Housing California led the tour, which also included Mara Blitzer of the Mayor’s Office of Housing. This site visit offered an opportunity to discuss both the value and the burdens of using AHP funding under the current regulation for projects like the Kelly Cullen Community, which received a $1.5 million AHP grant.
The Bank’s Community Investment Cash Advance (CICA) programs offer Bank members a lower-cost source of funds they can lend for affordable housing, neighborhood revitalization, and economic development activities that benefit low- to moderate-income communities.
In 2016, members took advantage of these lower cost funds to boost local economies, create new affordable housing, and facilitate homeownership for lower-income households, using:
- $313 million in Advances for Community Enterprise (ACE) Program funds to support community lending and economic development activities, including small business loans. The funding is expected to create or retain over 1,535 jobs.
- $530 million in Community Investment Program (CIP) advances. The 15 CIP advances will be used by six different members to fund mortgages for low- and moderate-income households, to finance first-time homebuyer programs, to create and maintain affordable housing, or to support other eligible lending activities related to housing for low- and moderate-income families.
The Bank issued one ACE Standby Letter of Credit to provide credit enhancement in connection with the issuance of bonds to consolidate Ampla Health, Inc.’s portfolio of community health center mortgages. Ampla is a nonprofit network of community-based Federally Qualified Health Centers in six counties in Northern California. The health centers provide medical, pediatric, dental, and other services to low- and moderate-income rural and migrant families in Butte, Colusa, Glenn, Sutter, Tehama, and Yuba counties. The mortgage consolidation will save the organization over $928,000 on all the properties it owns.
In addition, four members used nine CIP Standby Letters of Credit to credit enhance tax-exempt financing for multifamily rental projects.
The Bank’s Board of Directors determines funding for the AHEAD Program annually. In recognition of the value of the program to Bank members and the critical need for this kind of flexible funding in the nonprofit community, in 2016 the Board increased the allocation for AHEAD from $1 million to $1.5 million. The Council welcomes the additional funding to help support and nurture a greater number of projects and programs aimed at meeting big challenges, with 51 initiatives receiving grants in 2016, compared to 35 in 2015.
The AHEAD Program was created to enable members to give a meaningful boost to programs and projects that:
- create or preserve jobs,
- support a nonprofit’s organizational and capacity-building activities, or
- deliver social services, training and education, and other needed services and programs.
With grant amounts ranging from $20,000 to $50,000, the AHEAD Program is designed to be flexible, and grant funds can be used to cover a variety of costs that are often difficult for a nonprofit to finance. Encouraging Bank members and nonprofits to become partners in addressing high-priority needs of their communities is an important goal of this program. These partnerships generate meaningful results when members deliver AHEAD funding to nonprofits that have a deep understanding of very specific problems facing the communities and populations they serve, along with the experience and expertise to imagine and implement real solutions.
In 2016, with economic issues at the forefront of challenges facing many communities, nearly 60% of the funded projects directly involve job training or support for entrepreneurs and microenterprises. Both directly and indirectly, the Bank estimates that the entirety of the 2016 funding will create or retain approximately 3,300 jobs.
In 2016, 28 Bank members submitted successful applications, with 3 members participating for the first time. The Bank reviewed 197 applications requesting $8.9 million before selecting a total of 51 AHEAD winners.
- Northern California Community Loan Fund is supporting Restaurant Opportunities Centers of the Bay Area, as it offers a workforce development program in Oakland, CA, that helps low-wage restaurant workers develop skills to move up to higher paying restaurant jobs, such as front-of-the-house or server positions.
- Charles Schwab Bank is supporting The Opportunity Alliance Nevada in its development of a regional cooperative financial education program in Northern Nevada that will be integrated into the existing social service offerings of at least 23 local nonprofit organizations.
- Farmers & Merchants Bank of Central California is supporting The Women’s Center, a nonprofit that runs two emergency shelters for domestic violence victims and their families in California’s Central Valley, which plans to expand its service offerings to include a financial literacy component to help clients become financially independent and self-sufficient.
- Mechanics Bank is supporting Meristem, Inc., which serves young adults with autism or other behavioral differences in the Sacramento area, with a project that will help clients develop entrepreneurial skills through product creation, marketing, sales, and delivery.
- MUFG Union Bank is supporting Esperanza Community Housing Corporation as it implements a jobs program that trains Los Angeles residents to become health promoters, leading to higher wage employment opportunities in the healthcare industry.
- Pacific Western Bank is supporting Oak View Renewal Partnership as it provides microenterprise and entrepreneurship training to the underserved Oak View community in Huntington Beach.
- Sunwest Bank is supporting The White Mountain Apache Housing Authority in its efforts to create a public transportation system on a Native American reservation in rural East Central Arizona, where access to public services is limited.
The Bank works hard to ensure that members and their community partners are able to make the most of using each of its Community Programs. In 2016, Community Investment staff provided one-on-one technical assistance to individual members and community organizations and conducted:
- Six webinars on the competitive application process
- Eight AHP compliance webinars
- Four WISH and IDEA in-person workshops—one in Arizona, one in Nevada, and two in California—plus four webinars
- Two AHEAD webinars on the application, disbursement, and monitoring processes
Also in 2016, the Bank actively pursued opportunities to offer tailored consulting services to members looking to reach deeper into the low- to moderate-income communities in their service areas. With two community bank members, discussion focused on how to increase CRA activity in their assessment areas through greater use of the Bank’s Community Programs and how to forge partnerships with local nonprofits. Consulting with the mortgage department of an Arizona credit union, Bank team members helped the member strategize on ways to expand its use of WISH funds and to gear up for future participation in the IDEA Program. This offering of enterprise-to-enterprise consulting services is intended to add value to Bank membership by sharing the Bank’s community investment expertise and helping members build their network of potential community development partners.
To further the Bank’s mission and achieve its Community Lending Plan goals, it is essential that the Bank be proactive in establishing and nurturing relationships with policymakers and public officials, government agencies, affordable housing advocates, and a variety of community and economic development organizations.
In 2016, the Bank sponsored, co-sponsored, or participated in nearly a hundred public and industry events and affordable housing and community development conferences, forums, roundtables, and meetings, including:
- Affordable Homebuying in Arizona: Fact or Fiction? – Phoenix, AZ
Co-hosted by the Arizona Housing Alliance, the Hispanic Association of Real Estate Professionals, and the Federal Reserve Bank of San Francisco, this conference explored affordable homeownership resources for the Arizona market. Bank team members participated in a panel discussion on federal and state programs that increase access to affordable mortgage credit and presented information on the WISH and IDEA programs.
- AHP Modernization Meeting – Los Angeles, CA
Bank team members attended a meeting hosted by the Southern California Association of Non-Profit Housing to discuss the AHP modernization initiative. The Bank is collaborating with other FHLBanks and affordable housing industry stakeholders to develop consensus positions on desired changes and a common strategy for advocacy efforts.
- Homelessness, Housing, and the Way Forward for San Francisco – San Francisco, CA
Bank team members attended a panel discussion hosted by SPUR, a local think tank focused on urban planning issues. The panel included homeless housing providers, local policy experts, and journalists, who discussed the current state of homelessness in San Francisco and ways to move forward on solutions for providing permanent housing for the city's homeless residents.
- Innovative Approaches to Solving the Housing Crisis – San Francisco, CA
Hosted by the Federal Reserve Bank of San Francisco, this event explored how some experimental and smaller-scale efforts might bring all types of housing to market sooner. Discussion focused on innovative solutions, such as pre-fabricated construction, small sites acquisition, shared housing, accessory dwelling units, and reclaiming underused properties.
- Las Vegas Access to Affordable Mortgage Credit – Las Vegas, NV
Bank team members attended this forum hosted by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Bank of San Francisco. The forum looked at current housing conditions in the Las Vegas market and included panels on existing government resources for homeownership and on mortgage lenders and financial counseling organizations with existing programs for low- and moderate-income communities.
- On the Edge: America’s Middle Neighborhoods – San Francisco, CA
The Federal Reserve Bank of San Francisco hosted this event focused on neighborhoods that are not deeply distressed, but are not thriving economically, either. The event provided historical background on these “middle neighborhoods” and explored how local policy and program changes can help address the challenges they face today, preventing further decline and generating long-term social and economic benefits.
- Orange County Banker CRA Roundtable – Irvine, CA
One of a series of regional CRA roundtables hosted by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, this event provided an opportunity to discuss the latest trends in CRA examinations and affordable mortgage products. Participants also received an update on a financial stability initiative led by Orange County United Way.
- Regulated, Responsible Homeownership Summit – Daly City, CA
This summit, hosted by the National Diversity Coalition and National Asian American Coalition, focused on the challenges that face low- and moderate-income people, especially people of color, when they are trying to obtain credit to buy a home. Attended by California financial institutions, faith-based organizations, and advocacy groups, participants explored potential policy and regulatory solutions for increasing access to credit.
On behalf of the Council, I would like to thank the Bank’s Board of Directors, Bank Team Members, member financial institutions, and their community partners for their constant engagement in the struggle to find solutions to the full spectrum of affordable housing and economic opportunity challenges facing our communities.
It has been an honor to serve as chair of the Council for the last two years, and a privilege to be part of this dedicated group since 2008. My congratulations and best wishes go to the new chair, Laura Archuleta of Jamboree Housing; new vice chair, Diana Yazzie Devine of Native American Connections; and new Council Member Iosefa Alofaituli of Opportunity Fund. This Council brings a breadth and depth of experience and expertise that are exceptionally well-suited to ensuring that the Bank’s affordable housing and economic development programs continue to deliver the vital resources our communities need.
Looking ahead, I am pleased to report that in 2017 the Bank will provide over $73 million in funding for the competitive AHP and $12.5 million for the WISH and IDEA programs. These funds will be used to help provide the essential elements of what is necessary for individuals, families, and communities to live, and to thrive.
Affordable Housing Advisory Council