September 5, 2023
Marcia Sigal, Acting Director
Community Development Financial Institutions Fund
U.S. Department of Treasury
601 13th Street, NW, Suite 200 South
Washington DC 20005
Re: Capital Magnet Fund Notice and Request for Information
Dear Acting Director Sigal,
We are writing on behalf of the Poverty & Race Research Action Council (PRRAC) in response to the request for information published by the Community Development Financial Institutions Fund (CDFI Fund) concerning the Capital Magnet Fund (CMF).
PRRAC is a civil rights law and policy organization whose mission is to address structural inequality and systems which disadvantage low-income people of color, particularly through advancing fair and affordable housing.
As the only CDFI fund dedicated to affordable housing, the CMF is a significant source of funding for creating and maintaining housing for low-income persons, and is directly bound by the duty to affirmatively further fair housing set forth in the 1968 Fair Housing Act and further defined by HUD in an interim rule in 2021.1 The requirement to affirmatively further fair housing applies to Treasury programs and requires that the CMF act to actively address housing discrimination and segregation, including by
- ensuring programs do not have the effect of creating or perpetuating segregation;
- ensuring that grantees do not discriminate or further segregation;
- assessing the civil rights impacts of funding decisions; and
- affirmatively dismantling patterns of residential segregation and establishing truly open housing markets.2
The CMF must comply with these obligations and incorporate them more directly into the program. The following responses to the request for information offer some methods and practice which would further that obligation and aid the Fair Housing Act’s goal of addressing racial discrimination.
Facilitating CMF Alignment with Other Federal Housing Programs
The CDFI Fund should adopt the approach to allow “CMF Affordable Housing projects…funded under designated federal housing programs” to be “presumed as eligible Affordable Housing Activities…deemed as meeting CMF rules and requirements for Affordable Housing.”
This approach would allow CMF funds to flow more frequently to federally funded Affordable Housing projects, including those that are publicly controlled. Increasing public control of affordable housing is an important social housing goal, which can ensure that housing remains affordable for lower income families in the long-term.3
Ensuring future affordability requires imposing longer (or permanent) affordability requirements. By allowing certain other federal Affordable Housing projects to presumptively meet the Affordability Requirements, CMF would more effectively fund long-term affordability, as many federal Affordable Housing programs require affordability windows longer than the ten years required by CMF.
CMF Commitment Deadline
One of the difficulties in meeting the current two-year commitment deadline is exclusionary zoning. Exclusionary zoning may prevent a low-income housing project from being constructed in areas where such a project will serve to desegregate a community and provide residents access to high-opportunity areas.4
Like the LIHTC programs in some states, the commitment deadline should be satisfied if a Recipient committed the Award to one of the Eligible Activities or has demonstrated that the commitment could not be completed due to exclusionary zoning practices.
Such a change would allow developers of affordable housing funded by CMF to effectively challenge exclusionary zoning, a process which may take years of litigation and court battles.
CMF Program Income (PI) Rules
The long-term affordability period for projects funded with PI should not be shortened. The ten-year affordability period is currently too brief. In the midst of America’s affordable housing crisis, the loss of affordable units after only ten years can be a marked blow; long-term affordability requirements are essential to ensuring that an adequate stock of affordable housing units remains available into the future.
When affordability windows expire, those who reside in them may suddenly face dramatic rent increases they cannot afford, sometimes without warning.5 A lack of available affordable units can leave these residents with nowhere to turn. Though these issues may exist with all affordability windows, the current ten-year window is particularly troublesome in the current crisis, because the short window allows for a much faster churn in units and more frequent displacements.
Other federal housing programs require longer periods of affordability. HOME’s affordability requirements vary according to investment in a unit, but investments of more than $40,000/unit or unit refinancing impose a 15-year affordability window, while new construction of rental housing requires a 20-year affordability window.6 The LIHTC program imposes a 30-year affordability window.7 Some states impose longer windows, such as California’s 55-year affordability period and Vermont’s requirement that LIHTC-funded units remain permanently affordable.
Manufactured Housing Affordability Rules
The cost of renting lot space should be considered as it relates to affordability of manufactured housing. Manufactured housing serves as an important source of housing for rural and low-income communities, because of the lower cost of manufactured housing.8 As discussed below in the context of alternative home ownership models, allowing Homeownership on land which is leased or owned by a cooperative increases the affordability of housing. Allowing lot rental price to be considered will further increase the affordability of these homes and promote Homeownership.
CMF Affordable Homeownership Purchase Price Limitation Rules
The CDFI fund should use a more inclusive index, such as used in HUD’s Small Area FMR program.9 By using sub-regional data to determine median purchase price within zip codes, eligible homeowners would have a greater choice of communities to live in and would not be restricted to low-opportunity areas, where median purchase prices are lower.
The purpose of this request for information is, in part, to “ensure that the CMF program requirements adequately address activities and current business practices in the affordable housing industry” and to “better promote and incorporate policy priorities…in conjunction with affordable housing and affordable homeownership.”
These purposes can be best fulfilled by aligning the CMF program with the policy priorities of the social housing movement. Social housing is housing which is deeply and permanently affordable and which actively respects the dignity of those who live in it.10 Examples of social housing include “community land trusts and related tenant cooperative models” and well as “more traditional public sector and non-profit ownership and management of housing by public housing authorities, non-profit housing developers, churches, state housing agencies, and community development corporations.”11 Overall, we believe that the CDFI fund should be more inclusive toward alternative home ownership programs, such as limited equity co-ops, tenant owned co-ops, and the like. Such programs make the purchase of a home more affordable by sharing costs. Preferencing CMF funding for such programs would foster Homeownership activities.
Thank you for the opportunity to comment. We would also be happy to provide additional information on any of the points set out here.
Audrey Lynn Martin, Housing Policy Counsel
Sam Reece, Law & Policy Intern
Poverty & Race Research Action Council
1 See Restoring Affirmatively Furthering Fair Housing Definitions and Certifications, 86 Fed. Reg. 110, 30779-30793 (June 10, 2021) (to be codified at 24 C.F.R. §§ 5, 91, 92, 570, 574, 576, 903. A proposed final AFFH definition from HUD is pending. See Affirmatively Furthering Fair Housing, 88 Fed. Reb. 27, 8516-8590 (Feb. 9, 2023).
See e.g., NAACP, Boston Chapter v. Sec’y of Housing and Urban Dev., 817 F.2d 148 (1st Cir. 1987).
3 See Alliance for Housing Justice, Supporting the Movement for Social Housing, 32:1 Poverty and Race 7 (2023).
4 For an overview of housing mobility and the importance of access to high-opportunity areas, see Poverty and Race Research Action Council, Housing Mobility Programs in the U.S. December 2022, PRRAC.org, https://www.prrac.org/pdf/prracHousingMobilitySurvey2022.pdf (last accessed August 3, 2023).
5 See Brandon Duong, What Can Be Done When LIHTC Affordability Restrictions Expire?, Shelterforce, Shelterforce.org, https://shelterforce.org/2022/04/07/what-can-be-done-when-lihtc-affordability-restrictions-expire/ (last accessed August 3, 2023).
6 See U.S. Department of Housing and Urban Development, Building HOME Ch. 2 at 2-16 HUD.gov, https://www.hud.gov/sites/documents/19787_CH02.PDF (last accessed July 27, 2023).
7 HUD User Office of Policy Development and Research, What Happens to LIHTC Properties After Affordability Requirements Expire?, huduser.gov, https://www.huduser.gov/portal/pdredge/pdr_edge_research_081712.html (last accessed July 27, 2023).
8 See NeighborWorks America, Manufactured Housing: Blueprint for Affordability and Community Impact at 7-8, neighborworks.org, https://www.neighborworks.org/getattachment/4bbeca87-4aa5-4f9f-a59a-4c8145b23fa4/attachment.aspx (last accessed July 27, 2023).
9 See 24 C.F.R. 888, 982-983, 985.
10 See Alliance for Housing Justice, supra Note 4.
11 See Phil Tegeler, What can HUD do to expand public and community ownership of rental housing?, Poverty and Race Research Council, PRRAC.org, April 2021, http://www.prrac.org/pdf/hud-social-housing-2021.pdf (last accessed July 19, 2023).