CARL M. EIFLER Managing Director, The First Boston Corporation, New York, NY 2* PAUL S. GROGAN President, Local Initiatives Support Corporation, New York, NY F. BARTON HARVEY, III Deputy Chairman, The Enterprise Foundation, Columbia, MD BRIAN HAYS Immediate Past Chairman, Public Securities Association, Brookside, NJ JOHN T. JOYCE President, International Union of Bricklayers and Allied Craftsmen, Washington, DC GEORGE KNIGHT Executive Director, The Neighborhood Reinvestment Corporation, Washington, DC KAREN KOLLIAS Vice President, American Security Bank, Washington, DC MICHAEL D. LAPPIN President and CEO, The Community Preservation Corporation, New York, NY KENNETH G. LORE Partner, Brownstein Zeidman and Lore, Washington, DC MOISES LOZA Executive Director, Housing Assistance Council, Inc., Washington, DC STEVEN A. MINTER Executive Director, The Cleveland Foundation, Cleveland, OH DONALD A. MULLANE Executive Vice President, Bank of America, Los Angeles, CA JOHN E. PEARSON Immediate Past Chairman and CEO, Northwestern National Life, Minneapolis, MN DR. MARK J. RIEDY President and CEO, National Council of Savings Institutions, Washington, DC March, 1992 RICHARD S. SCHWEIKER President, American Council of Life Insurance, Washington, DC I. DONALD TERNER President, BRIDGE Housing Corporation, San Francisco, CA BERNARD L. TETREAULT Executive Director, Montgomery County Housing Opportunities Commission, Kensington, MD RONNIE O. THARRINGTON Assistant Administrator for Housing, Farmers Home Administration, Washington, DC MARY TINGERTHAL Vice President, GMAC Residential Funding Corporation, Minneapolis, MN THOMAS J. WATT Senior Vice President, Multifamily Housing, Freddie Mac, McLean, VA FREDERICK L. WEBBER President & CEO, U.S. League of Savings Institutions, Washington, DC WALTER D. WEBDALE Director, Fairfax County Department of Housing and Community Development, Fairfax, VA JOHN C. WEICHER Assistant Secretary for Policy Development and Research, U.S. Department of Housing and Urban Development, Washington, DC March, 1992 Testimony Presented to the Subcommittee on Housing and Urban Affairs Senate Committee on Banking, Housing, and Urban by James L. Logue III, Executive Director of the Michigan State Housing Development Authority on behalf of the National Council of State Housing Agencies Testimony Presented to the Subcommittee on Housing and Urban Affairs Senate Committee on Banking, Housing, and Urban Affairs of the Michigan State Housing Development Authority Mr. Chairman, and Members of the Subcommittee, thank you for this opportunity to testify on the multifamily mortgage insurance programs of the Federal Housing Administration (FHA). I am James Logue, Executive Director of the Michigan State Housing Development Authority (MSHDA) and former Deputy Assistant Secretary for Multifamily Housing Programs at the U.S. Department of Housing and Urban Development. I am testifying today on behalf of the National Council of State Housing Agencies (NCSHA), which is a national, nonprofit organization created in 1970 to assist its members in advancing the interests of low and moderate income people through the financing, development, and preservation of affordable housing. NCSHA is the only representative of state or local government exclusively devoted to the full range of affordable housing issues. NCSHA's members are state housing agencies (HFAs) with statewide authority. They operate in every state, the District of Columbia, Puerto Rico, and the Virgin Islands. Our member agencies have made the dream of homeownership real for over 1.4 million Americans through the Mortgage Revenue Bond (MRB) program, which they administer in all but one state. They have also helped finance over 420,000 units of low income rental housing through the Low Income Housing Tax Credit (Tax Credit) program. In 30 states, our members administer HOME. In additional states, we contribute to HOME administration through project evaluation and underwriting. Collectively, we operate more than 600 affordable housing programs, which range from homeownership to homeless initiatives. We want to thank you, Mr. Chairman, and the other Members of the Subcommittee who have cosponsored legislation in this Congress to make MRBS and the Tax Credit a permanent part of our Federal housing effort. We also want to commend the President for proposing MRB and Tax Credit extensions in his FY 1993 budget. This is the first time in history that an administration's program has advocated rather than opposed the MRB program. Mr. Chairman, HFAS play an important role in providing credit enhancement for multifamily housing new construction and rehabilitation. In 1990, HFA new construction and rehabilitation bond-financed programs produced over 228 multifamily projects over 11,000 units in all. Of these units, approximately 21 percent were unrestricted or market rate units. The vast majority percent carried rent restrictions. - 79 MSHDA has been offering mortgage financing for multifamily developments for more than 22 years. MSHDA has taken advantage of virtually every form of housing assistance offered by Congress and HUD, including Section 236 interest reduction funding, Section 8 subsidies, rent supplements, housing development grants, Section 8 moderate rehabilitation funds, and since 1986, the Tax Credit. the end of 1991, MSHDA had financed more than 44,116 units in 305 separate developments. Of these, only 1,230 units in eight projects are FHA-insured; two projects totalling 195 units were coinsured by HUD. Effectively, MSHDA has self-insured 97 percent of its portfolio. By Time and time again, HFAs see evidence of the shortage of multifamily credit enhancements and financing in the marketplace: States which require financing to be in place before they will allocate Tax Credits to a project are experiencing lower usage of Tax Credits. For example, the State of Texas requires projects to have secured either a conditional or firm commitment before they can receive an allocation of Tax Credits. Partially as a result of an inability to secure financing, almost $15 million in projects out of that state's $32 million total authority which were slated to receive Tax Credits earlier in 1991 dropped out of the pipeline. Another state, Colorado, which requires either a conditional or firm commitment before it will give a project an allocation used only about 50 percent of its total authority in 1991. · in In 1991, 25 of the 54 allocating agencies had Tax Credits The demand for HFA financing has also risen since HUD discontinued the Co-Insurance Program. In 17 states, the number of multifamily units projected to be constructed from bond issuances rose from 24 (1,872 units) in 1990 to 59 (4,293 units) in 1991. |