Building an affordable housing strategy that is responsive to community needs and market driven

As we begin a new year, MACDC plans to be working on a wide cross section of housing issues. Our goal is to create an affordable housing system that is better able to meet the diverse needs of our residents and communities. This will require both more money and more flexibility. In a series of articles to be published in early 2016, MACDC is articulating some its thoughts about how we do this. The first article talked about how we can grow the resource pie – the first and most essential step to meeting growing demand for affordable housing. In the second article, we talked about how to lower operating costs so that we can use our limited subsidies more efficiently. In this article, we talk about how to deploy our resources in a more balanced way that enables us to better respond to local market contexts and to community driven priorities.  Our fourth article will address how to create affordable housing that can serve a broader range of income levels.

Article #3: Creating a More Balanced and Community Driven Affordable Housing System

Every community requires a diverse array of housing to meet the needs of its current and future residents.  Neighborhoods must have housing at a variety of price points, as well as rental and homeownership opportunities, housing for seniors, families and young adults, and large and small multi-family buildings, along perhaps with some single family homes and two or three-family homes. And we must build new housing, while maintaining and preserving the homes we already have developed.  These incredible housing pressures are further compounded by the constant shortage of funds required to meet the needs of each neighborhood and town in the Commonwealth.  (See the first article in this series to learn about our efforts to correct that shortage).

At present, well over 90% of our affordable housing dollars are used either to preserve our existing affordable housing or to produce new rental housing through the low income housing tax credit program (LIHTC).  The LIHTC program is fairly flexible – allowing developers to work with local stakeholders to meet local demands, but tax credits have their limitations.  LIHTC projects offer rents designed to serve a narrow income band, generally between 50 and 60 percent of the Area Median Income (AMI). Families that earn slightly more are ineligible and families that earn less can only afford the rents by paying over 30% of their income or by using a rental subsidy.  To be sure, many lower-income households do use rental subsidies, so they can live in tax credit properties, and this further underscores the limitation of the tax credit program’s design.  Moreover, LIHTC projects tend to be 25-50 units in size, or larger, and of course they only offer rental housing opportunities.  In recent years, due to rising construction and operating costs, an increasing percentage of the state’s housing bond resources are now being used to fill financing gaps in LIHTC projects, leaving less and less for other housing priorities.

The LIHTC program will remain at the core of the affordable housing sector for the foreseeable future.  It is a proven tool for producing high quality, well designed affordable rental housing.  In our next article in this series will talk about ways to improve the LIHTC so it can help produce rental housing for a broader range of incomes. In the meantime, MACDC, is advocating for new programs that will complement the tax credit, and enable the affordable housing field to be more responsive to local needs, desires and markets. These programs are very much in line with the Baker Administration’s stated approach of designing state programs in response to local needs and opportunities.

MACDC is advocating for the following:

1. Community Scale Housing Program – We are very pleased that the Baker Administration has embraced our recommendation to create a new Community Scale Housing Program that will provide funding for smaller rental projects between 6 and 20 units in size. Such projects are too small to use the LIHTC program, and, therefore, have become very difficult to finance, even though they offer many benefits.  These projects are often a better fit in urban, suburban and rural communities and can be easier and faster to build with fewer transaction costs.   They also can be developed at lower total costs – sometimes as much as $50,000 to $100,000 less per unit than larger, more complex rental projects.  We hope to see a new program launched in the coming months.
2. Acquisition/Rehab Program:  During the foreclosure crisis, the state partnered with the Massachusetts Housing Investment Corporation to use federal Neighborhood Stabilization Program money to provide funds to nonprofit and for-profit developers to acquire foreclosed properties, renovate them and put them back on the market. The program was very successful, but ran out of money when the Federal Stimulus funds were depleted.  Massachusetts still has many vacant or dilapidated properties that could benefit from such a program. We need to re-allocate some of our existing resources (and create new resources) to support such projects, so we can revitalize housing markets in our Gateway Cities and other weaker markets that are still struggling to recover from the foreclosure crisis.  These projects often can be completed at a lower cost than new construction and they have the added benefit of eliminating or rehabilitating blighted properties.
3. Housing Rehab:  For many years, CDCs, cities and others have operated housing rehab programs that provide zero or low interest loans to homeowners, so they can fix up their properties; in 2014, CDCs improved 380 units.  These programs can advance many important policy objectives: housing code compliance, improved energy efficiency, lead paint abatement, blight reduction, and allowing seniors to age in place. Federal cuts to the Community Development Block Grant (CDBG) Program and the HOME Program – and the prioritization of other housing needs – have prevented the increase in funding necessary to address the growing needs of an aging housing stock and an aging population. MACDC believes these programs are vital to our neighborhoods and communities and should be given greater priority.  One immediate focus for MACDC is to reinvigorate the Get the Lead Out Program that provides deferred loan payments to income-eligible homeowners that want to de-lead their homes. The program used to make 200+ loans per year, but in recent years that number has fallen to less than 40 loans per year. We are working with MassHousing and the Department of Housing and Community Development (DHCD) to review program guidelines, assess administrative challenges and ensure funding levels, so that this program can effectively address the ongoing scourge of childhood lead poisoning.
4. Slowing displacement in hot markets: Three of our members are experimenting with programs to buy properties in strong markets as a way to slow displacement and gentrification and to ensure some homes remain affordable to families and working people.  Allston Brighton CDC, Somerville CC and Metro West Community Developers are each developing different models tailored to its local market for acquiring existing housing stock and removing it from the speculative market.  We need to be open to creative ways to buy affordability in existing properties at a wide range of price points. In short, we need to encourage this sort of innovation and support expansion if particular models prove viable. 
5. Homeownership Development – Throughout the recession, DHCD did not fund homeownership development due to the weak homeownership market and the need to prioritize rental housing. In 2014, DHCD re-opened its “homeownership round” for the first time in many years and approved five projects.  DHCD is currently evaluating the progress on those projects before deciding whether and how to move forward.  While rental housing should always be the priority, it is certainly appropriate to spend 5 to 10 percent of our resources on homeownership projects that can help achieve one of two core policy goals.  First, homeownership is key to stabilizing and strengthening housing markets in neighborhoods with low homeownership rates.  In these neighborhoods, homeownership programs can put blighted properties back on the tax rolls and increase economic diversity at a lower per-unit subsidy level than rental housing.  Second, homeownership programs can open up access to otherwise exclusive communities where working people are priced out. The significant racial disparities in mortgage lending recently documented by the Massachusetts Community & Banking Council reinforce the need for new affordable homeownership development.

Housing advocates are generally able to unify around campaigns to increase funding for affordable housing. It is understandably much harder to build unity when it comes to allocating scarce resources across many important priorities.  We cannot avoid these tough questions and conversations.  Choices must be made.  As community developers who pride ourselves on engaging and empowering local residents, we need to make sure those choices reflect what we hear from community leaders about what our neighborhoods need to thrive.  Ultimately, a balanced and community-driven housing agenda requires a diverse set of tools and programs to be successful.

As we begin a new year, MACDC plans to be working on a wide cross section of housing issues. Our goal is to create an affordable housing system that is better able to meet the diverse needs of our residents and communities. This will require both more money and more flexibility. In a series of articles to be published in early 2016, MACDC is articulating some of its thoughts about how we do this. The first article talked about how we can grow the resource pie – the first and most essential step to meeting growing demand for affordable housing. In this article, we talk about how to lower operating costs so that we can use our limited subsidies more efficiently. In subsequent articles, we will talk about how to make our programs more flexible, and how to ensure that we are allocating the limited resources that we have in a way that is more responsive to local market conditions and to the hopes and desires of local communities.

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Confronting the Challenge of Rising Operating Costs in Affordable Housing

One of the great challenges facing our country today is stagnant wages for most working families.  Median incomes today are almost identical to what they were in 2005.  According to the U.S. Census, median household income in Massachusetts in 2014 is just over $69,000 – the same as it was in 2004.  Even in Massachusetts, where the economy is better than many other places, wages are barely keeping up with inflation. Stagnant wages create many problems, but one of the lesser known impacts is how they negatively impact efforts to build and operate affordable housing. 

Virtually every affordable housing program in the United States restricts rents based on area median incomes, so when incomes stagnate, rents remain stagnant too.  With rental revenues flat, rising operating costs threaten the financial viability of many affordable housing developments – and make it harder to build new projects.  (Note: with rental vouchers, the government fills a portion of this gap with larger operating subsidies, but this simply means that fewer families can receive vouchers within a certain appropriation level).

For example, in the City of Boston operating costs have gone up so much over the past 15 years – relative to rent revenues – that the typical tax credit project in the City of Boston can support only $49,155 in debt compared to $117,825 in 2000.  This means each project needs nearly $70,000 more capital subsidy per unit – and, therefore, we create fewer units overall.   If this trend continues, we could see a day when Low Income Housing Tax Credit projects cannot support any debt whatsoever.

MACDC has been increasingly focused on this issue.  Recently, we hosted a peer learning session with the Massachusetts Housing Partnership to review their extensive data base of operating cost data.  The goal is to better understand which line items are driving costs up and how we might manage them. MACDC is also working with Boston LISC and others through the Mel King Institute for Community Building to offer more extensive support to our members in the area of asset management.  Currently, we are offering a seminar for CDC asset managers to help them more effectively take a “portfolio-wide” approach to managing their housing assets – and lowering operating costs.

In addition to these educational efforts, MACDC is taking specific action to address three key line items in every affordable housing operating budget.

Energy – Over a three-year period from 2012 through 2014, MACDC Members conducted energy retrofits on 3,600 rental units in their portfolios, with more units in the queue. CDCs are also tapping solar energy as a way to stabilize their energy costs for the long term.  MACDC is also working with colleagues such as LISC and New Ecology to advance reform of utility funded energy efficiency programs to make them work more effectively with affordable housing subsidies (and to make more dollars available for our sector).  And we are also working to advance solar energy legislation to lift solar net metering caps and promote more solar energy for lower income communities.

Insurance – MACDC has established a partnership with Chase & Lunt Insurance company to bulk purchase  property and casualty insurance with the goal of stabilizing premiums, while securing solid coverage. In 2016, we hope to grow the program significantly, so we can leverage more buying power in the marketplace and save more money for our members.  Over the long term, we must reverse the industry-wide practice of openly charging affordable housing projects higher premiums than comparable market rate projects.  We need to investigate this practice more deeply and then eliminate unfair (and maybe illegal) discrimination.

Property Taxes – While local assessors are supposed to account for rent restrictions when assessing affordable housing developments, we are hearing from our members and others that there is significant inconsistency with how this is done across the state and many affordable housing owners may be paying more than their fair share.  MACDC is seeking to learn more about this problem and help our members secure fair property assessments. We have recently partnered with the Lawyer’s Clearinghouse to obtain some professional guidance in shaping our strategy.

While we need to do everything we can to manage these operating costs, some increases are inevitable based on normal inflation.  Policy makers need to understand that affordable housing owners will need more subsidy – both capital dollars and operating subsidies – to build and maintain quality housing. 

Ultimately, of course, the best solution is to take concrete actions to begin lifting wages and salaries for working people, not so much because we want them to pay higher rents, but because we think all workers should earn enough to support their families, obtain a stable home and gain economic stability.

A few years ago, a fire caused by a tenant at Urban Edge Housing Corporation displaced over twenty families. Residents had to be evacuated and the organization had to deal with the fallout of the incident. With the complexities of relocating shocked residents, including staff members, Katie Provencher, Deputy Director of Urban Edge and former Director of Community Engagement, realized that they needed to develop robust written policies and procedures as an organization to address traumatic events.

“We realized that each of us were building up a skillset, confronting shooting incidents and fires, so we started putting together policies and procedures.” Said Provencher

Developing a trauma response plan as an organization is not just about each individual incident, but about helping communities heal from a long history of disinvestment and oppression. Unfortunately, violence and trauma occur at higher rates in poorer communities of color. Compounded with the trauma and stress of intergenerational poverty and racism, trauma in low-income communities of color is a significant public health issue linked to poor physical and mental health outcomes. Responding to trauma and facilitating healing in communities is an important way for CDCs and other community leaders to boost community resiliency and improve mental and physical health.

Background

With 1,400 units of housing, things can and do happen at Urban Edge, a CDC serving the neighborhoods of Roxbury and Jamaica Plain in Boston. Fires, shootings and accidents have all occurred during the organization’s 40 year history. Thankfully, Urban Edge is mindful of the need for strong support to survivors of trauma. Even though Urban Edge outsourced property management several years ago, they chose to keep resident services within the organization, so that they could maintain a strong connection with their community.

Urban Edge’s policies and procedures around addressing trauma include three parts: addressing residents’ needs, addressing the self-care needs of staff (who will have their own emotional reaction to such incidents), and leveraging external resources to respond to the emerging needs of the community. 

Implementing A Response Plan and Working with Partners

A few years ago, the shocking death of one of Urban Edge’s youth shook the community.

“Within the first few hours of the incident, we went door to door to see how affected they [residents] were,” said Robert Torres, Director of Community Engagement. “We looked for physical signs of distress, sometimes people were crying and sometimes the event was a trigger for something else in their life.”

Torres and his team referred affected residents to Courtney Gray, the Director of Trauma Services at the Boston Public Health Commission (BPHC). Courtney’s team of trained trauma counselors helped the residents cope with the physical and emotional stress they felt following the incident. 

Working with BPHC is now standard practice for Urban Edge.  Given that each incident is different, Urban Edge also works with community members to address their specific needs. When a young adult was caught in the cross-fire of a shooting incident and died, the staff helped his family apply for funeral assistance and made an appointment with the Louis D. Brown Peace Institute, which provides support to the survivors of homicide victims.

Preventing and Responding to Incidents

Ideally, violence and accidents would not happen.  That is why Urban Edge engages in significant efforts to reduce violence, strengthen community ties, ensure solid property management, and otherwise promote prevention. In a large community, there will come a time when CDCs and other community leaders need to respond to a tragic event, whether it is violence, fire or even a natural disaster. Given that incidents will occur, the robust and detailed policies that the organization has developed along with their network of outside partners enables Urban Edge to be ready to respond appropriately and professionally when the time comes.

By combining both prevention and a robust response plan, Urban Edge is using a trauma informed approach to help communities heal – emotionally, physically and socially.

Katie and Robert are teaching a workshop on Responding to Trauma: Facilitating Healing in Community on February 10th to help organizations develop their own policies and practices around traumatic incidents. SIGN UP TODAY.

Yesterday, Governor Baker unveiled his $39.6 billion FY 2017 budget proposal and this morning he filed an economic development bill, “An Act to Provide Opportunities for All,” seeking legislative authorization for nearly $1 billion in capital investments over the next five years.  There is a great deal of information to digest in these two proposals, and we will spend the next several days examining key items of interests to MACDC members.  For now, here is brief overview of various line items we will be tracking throughout the legislative process.

House 2 – FY 2017 Budget Recommendation from Baker / Polito Administration

• Small Business Technical Assistance (SBTA) program:  proposed level funding ($2 million)
• Urban Agenda Grant program:  proposed level funding ($3 million – combined economic development and housing grants)
• Massachusetts Rental Voucher Program (MRVP):  proposed funding cut $8 million, to $82.9 million
• Foreclosure Prevention Counseling:  proposed level funding ($2.35 million)
• Alternative Housing Voucher Program (AHVP):  proposed level funding ($4.6 million)
• Residential Assistance for Families in Transition (RAFT):  proposed level funding ($12.5 million)
• Housing Preservation & Stabilization Trust Fund (HPSTF):  no proposed funding (- $11.5 million)
• Community Preservation Act (CPA):  proposed level funding ($10 million – transferred from the state’s end-of-year budget surplus)

“An Act to Provide Opportunities for All” – Economic Development proposal seeking legislative authorization to fund over five years:

• $500 million for MassWorks
• $50 million for the Transformative Development Fund to enhance redevelopment projects in Gateway Cities
• $75 million for the Brownfields Redevelopment Fund
• $25 million for a new site assembly and pre-development fund, to support commercial and industrial development in regions outside of Boston
• $25 million for the Smart Growth Trust Fund, combined with proposed changes and expansions to Chapter 40R, to meet Commonwealth’s need for smart growth housing development at higher density and development of “starter homes”.
• Revision to the Housing Development Incentive Program (HDIP); allow new construction (in addition to rehabilitation) and raise reimbursement from 10% - 25%.

As we begin a new year, MACDC plans to be working on a wide cross section of housing issues. Our goal is to create an affordable housing system that is better able to meet the diverse needs of our residents and communities. This will require both more money and more flexibility. In a series of articles to be published over the next few weeks, MACDC will articulate some of its thoughts about how we do this. The first article talks about how we can grow the resource pie – the first and most essential step to meeting increasing demand for affordable housing. In subsequent articles, we will talk about how to reduce costs, how to make our programs more flexible, and how to ensure that we are allocating the limited resources that we have in a way that is more responsive to local market conditions and to the hopes and desires of local communities.

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Growing the Housing Resource Pie

Toward the end of a lovely video tribute to Jeanne DuBois, the former Executive Director of Dorchester Bay EDC, she is shown repeating many of her favorite sayings, including this one: “There is never enough money and there is always enough money”.

Jeanne, of course, is correct. In a society as rich as ours, there is always enough money to get something done if it is deemed important enough and if the sponsors are creative, persistent and patient in assembling the necessary resources.  CDCs, like Dorchester Bay, have become masters at this, cobbling together funding from 10 or more sources, working for years to put the deal together, and then pinching pennies to make the numbers add up.  Every year, we see more and more examples of this capacity to create exciting, impactful projects.

So why don’t we do it more often?  Well, because Jeanne is also right that there is never enough money … to do all the projects that are needed.

This is why MACDC is currently working with countless allies at the state and local level to grow the resource pie and ensure that resources are used as efficiently as possible. These efforts include the following:

• Continue to grow the MRVP program steadily in the coming years because it is one of the few programs that targets our most vulnerable families and provides a long-term solution to family homelessness. With support from Governor Baker and the State Legislature, housing advocates just won a major increase in funding for the Mass. Rental Voucher Program from $65 million to $90.9 million, a 40% increase, but more funding is needed to meet the incredible needs within our communities.
• Increase the Commonwealth’s Low Income Housing Tax Credit. MACDC recently testified in support of legislation filed by Rep. Kevin Honan that would do this by $15 million over four years to help preserve some of the 5,000 “13A projects,” whose affordability restrictions are set to expire in the next few years. MACDC is also working with Preservation of Affordable Housing (POAH) to stretch those tax credit dollars even further by adding a new Donation Tax Credit (DTC) modelled after programs in Illinois and Missouri. The DTC that will allow us to leverage significant federal tax savings by structuring transactions as donations to nonprofit organizations rather than sales.
• Increase the Commonwealth’s so-called “Volume Cap” that is allocated to Multi Family Rental Housing because this allows developers to take advantage of tax exempt bond financing and the 4% federal tax credits that can help subsidize both preservation and some production projects. In the past, these 4% credits have not been a constrained resource, but going forward there will likely be insufficient credits to meet all the demand. The affordable housing field could lose millions of dollars of subsidized tax credit equity unless we can restore some of this “volume cap” to rental housing.
• Secure new funding for the Brownfields Redevelopment Fund. This Fund has run out of money and it is a vital tool for putting contaminated land to use for housing and job creation. MACDC is seeking at least $15 million in new funding to ensure that this program remains viable.
• Allocate a reasonable proportion of the state’s capital budget to affordable housing. Last year, the Governor allocated $94.7 million to privately-owned affordable housing (in addition to $90 million for public housing), but this is not enough. We will continue to push to see this number increased next year.
• Fund the Housing Preservation and Stabilization Trust Fund, a relatively new program created in 2013 that provides housing for extremely low-income households and those who need supportive services. CDCs and other nonprofits are particularly focused on serving these populations and this year we secured $11.5 million for the program – overcoming a veto from Governor Baker who sought to reduce the line item to $10 million. We need to ensure that this program is consistently funded each year.
• Grow the City of Boston’s Housing Resources from $31 million to $51 million per year per Mayor Marty Walsh’s housing plan. We won a major victory toward this goal when Mayor Walsh increased the City’s Inclusionary Development Program’s fees. MACDC is also advocating for an increase in the City’s linkage fees. Finally, and most importantly, MACDC is working with a broad coalition of community groups to explore whether to pursue the Community Preservation Act in Boston in 2016 – a program that could generate nearly $20 million per year in new funding for community housing, historic preservation, open space preservation, and outdoor recreation.

To be sure, this is an extensive set of goals, but the needs within our communities are significant. Many families pay 30% or more of their income for housing.  Massachusetts currently spends less than 2 percent of its combined operating and capital budget on housing. This simply is not getting the job done. And given the growing evidence that quality, affordable housing leads to significantly better health and education outcomes, investing in housing is money well spent.

Over the past 11 years, CDCs across the Commonwealth have provided critical training and educational services to future homebuyers.  Pre-purchase education for prospective homebuyers is a vital resource that helps people not only prepare to purchase a home, but also helps qualify them for the One Mortgage, formally Soft Second Loan, program.

Check out the table below to see the number of individuals who not only graduated from a pre-purchase homebuyer course offered by a CDC, but also used the One Mortgage or Soft Second program to buy their home. (Source: MHP)

Last week, Governor Baker and Housing and Economic Development Secretary Jay Ash unveiled the first round of Urban Agenda Grant winners at a series of meetings in Boston and Framingham. The inaugural awards from this new program – a total of $3 million awarded to fund 16 separate economic development, planning and housing initiatives from New Bedford to North Adams – will entrust municipal officials and community organizations to forge collaborative partnerships and craft unique, specific solutions to meet locally-identified needs that satisfy a range of economic development and housing opportunities.

MACDC is proud to have several member organizations lead and partner in 7 of the 16 program initiatives that received more than half ($ 1.6 million) of the grant funds in this first round. All told, the grant program made awards in three categories of community development: economic development implementation, economic development planning, and housing development. State agency officials received 54 applications, requesting a total of $12.7 million in funding, from communities across the Commonealth. With this level of interest, a successful program launch can build greater support to fund successful community-driven projects through Urban Agenda grants in the years to come.

Complete list of grant award winners and project briefs

Nonprofits on a budget sometimes struggle about how and when to hire an attorney.  Getting legal help can be intimidating and expensive so being strategic about bringing a lawyer on board makes good sense.  Here are some tips to consider before making the call.

When do you need a lawyer?

 “An ounce of prevention is worth a pound of cure.”  Community development corporations sometimes believe that lawyers are only needed for closings and lawsuits.  However, there are many situations when some good legal advice at the outset of a difficult situation can save the agency time and money in the long run.  If a nonprofit is entering into a significant contract or has a tricky employment decision to make, up front legal review can save a lot of headaches later on.  On the other hand, there are many situations where the nonprofit can take on tasks that were formerly left to the lawyers—these include incorporating an entity with the secretary of state and annual corporate filings.  The bottom line is this:  if the stakes are high, or the issues are murky or unusual, think about reaching out for some support.  A lawyer may be able to offer helpful advice at the right time.

The right person for the work.

It is critically important that the lawyer you hire has the relevant experience to assist your organization.  This is especially true for public housing authorities and other public and quasi-public entities regulated by HUD or DHCD. Hiring a lawyer who is not familiar with procurement rules or open meeting law can be a recipe for trouble. Finding a lawyer with relevant experience can be handled through networking with other agencies and advocacy organizations. CHAPA also has a consultant page that identifies lawyers with relevant experience.  http://www.chapa.org/consultant_browse

Talking about fees.

Any lawyer you hire should be willing to discuss fees openly and you should not feel uncomfortable asking about how much the services may cost.  There are some situations where it may be difficult or impossible for the lawyer to provide a reliable estimate of how much the services required will cost. Complex litigation with a self-represented individual falls into this category. However, there are other engagements where it is reasonable to ask the attorney to provide at least a range of the expected cost.  If you are retaining a lawyer for a closing, ask if the lawyer will provide a “not to exceed” price for the services. A lawyer’s tasks are similar from one closing to another and lenders typically pay their attorneys on a fixed fee basis.  Therefore, you may want to ask whether the attorney would be willing to give you a fixed price for the transaction. Doing so provides both your organization and the lawyer some certainty. Other situations that lend themselves to a fixed fee may include contract review and preparation of simple contracts and releases.

Title insurance (for extra credit!)

Massachusetts is a “negotiated rate” state for title insurance policies over a certain amount. If your attorney is issuing a title insurance policy on a housing project under development and the acquisition price or loan amount is greater than $2 million, you should ask him or her to negotiate with the title insurance company the rate you will pay for your policy premium. For owner coverage (as contrasted with coverage for the lender), the savings can be significant.  While a standard rate may be $3.65/$1000 of coverage for smaller policies, some title insurance companies are willing to reduce the premium on a large policy for a nonprofit to as little as $1.25. On a $5 million policy with coverage for your agency as the owner, that is a savings of $12,000.

Your relationship with your attorney is a key ingredient to the success of your organization. Call when you need to and seek out an experienced lawyer who will work with you to keep your legal expenses in check while advancing the mission of your organization.

Felicity Hardee is an attorney who helps nonprofits and affordable housing developers with their community development needs. She assists clients with closings involving multiple financing sources, including Low Income Housing Tax Credits, and provides compliance assistance, litigation services and general legal advice to CDCs throughout Massachusetts. Find her at www.fhardee.com, on LinkedIn and on Twitter at @felicity_hardee.

The foreclosure crisis has receded from the headlines.  But any notion that foreclosure is not a serious problem anymore would be news to nonprofit foreclosure prevention counselors on the front lines.

At a gathering on September 28, convened by MACDC and CHAPA, counselors from 13 nonprofit organizations immersed in foreclosure prevention spoke about the issues they encounter, the changing nature of the foreclosure crisis, and challenges going forward.  They spoke about lenders being aggressive in setting auction dates yet unresponsive to borrower requests for loan modifications. They noted that the funding that has sustained foreclosure prevention counseling is drying up.  They fear the impact on their neighborhoods of lenders initiating foreclosure while neglecting to maintain those properties once the foreclosure process has been initiated.

The data on foreclosures underscore the persistent nature of the problem.  A September article by The Warren Group, publishers of Banker & Tradesman, noted that foreclosure petitions in the Bay State rose in July, increasing 49 percent compared with July 2014.  This marked the 17th consecutive month of increases in petition filings. In the first seven months of the year, there were 6,360 petitions filed in Massachusetts, a 60 percent increase from last year's mark through July. Petitions are the first step in the foreclosure process, when banks petition the state courts for the right to foreclose.

Too often, loan servicers are taking steps that tend to exacerbate problems rather than remedy them.  Some are not complying with required standards when borrowers apply for loan modifications.  Many are reluctant to negotiate forgiveness of past due amounts, or to consider principal reductions, when borrowers encounter hardships.  Some are ignoring borrower authorizations of foreclosure counselors to negotiate on their behalf.

Counseling agencies are struggling to serve their clients with diminishing resources to fund their work.  Many continue to rely on annual grants from the MA Division of Banks through a program, authorized by legislation from 2007 that permits the Division to collect fees from licensed mortgage originators, retain up to $5 million of these fees, and use up to $2 million of the retained revenue to make grants for foreclosure prevention counseling and homebuyer education.  Earlier this year, through the State budget, the Legislature authorized the Division to retain $2.35 million from these fees, and the Division in 2015 made $1.3 million available in grants. The Request for Proposals for 2016 grants has recently been issued by the Division.

MACDC advocated for this program because we knew that a long-term, stable source of dedicated revenue would be necessary to address the foreclosure crisis.  Eight years later, with the number of foreclosures stubbornly high, the wisdom of the Legislature’s decision is evident. According to a 2015 report issued by the Division of Banks, in calendar year 2014, the 21 agencies who received awards served almost 5,300 clients.  Unfortunately, other funds that have historically supported this work have been reduced or eliminated, including funds from the Community Based Home Corps Program (funded by the MA Attorney General’s Office from prior legal settlements), HUD Counseling grants, and NeighborWorks America’s National Foreclosure Mitigation Counseling (NFMC) Program.

An article by journalist Loren Berlin, published in the November 10 issue of Shelterforce Weekly, addressed the dearth of funding nationwide for foreclosure prevention counseling. She notes, “Across the United States, hundreds of housing counseling agencies are struggling to regroup as elected officials declare the foreclosure crisis resolved and public funds to support mortgage default counseling services evaporate. The NFMC received $180 million in Congressional appropriations in 2007; it got roughly $50 million this year. Similarly, the U.S. Department of Housing and Urban Development’s budget for housing counseling services, which funds a variety of counseling services, including foreclosure prevention,  was just $47 million this year, down from $87.5 million in 2010. Additionally, many states have reduced or ended their support for default counseling, and the majority of funds from the 2012 national mortgage settlement have been depleted. This loss of government support is compounded by a similar decrease in funds from national foundations and large financial institutions.”

In Massachusetts, MACDC is working with CHAPA to identify and advocate for resources to fill this growing void. At the same time, we need to continue to support the work of the nonprofit counseling agencies involved in homebuyer education and financial literacy, so we don’t see a repeat cycle of foreclosures in the future.

Research has demonstrated the link between pre-purchase homebuyer education and more sustainable homeownership.  An analysis commissioned by the Federal Reserve Bank of Philadelphia in 2014 affirmed the benefits of pre-purchase counseling: in addition to improving homebuyers’ financial creditworthiness as they prepared to qualify for a home mortgage, individuals who received one-on-one counseling achieved better outcomes after purchase in terms of credit score, total debt, and payment delinquency than those who did not receive such counseling.

A working paper commissioned by national mortgage lender Freddie Mac in 2013 concluded that pre-purchase homeownership counseling reduced 90-day delinquency rates by 29% for first-time homebuyers taking out fixed-rate loans in owner-occupied one-unit properties under Freddie Mac’s affordable lending programs.

MACDC believes the path forward is clear.  The Massachusetts state legislature can take a major step forward by providing funding for foreclosure prevention counseling and for first-time homebuyer education to replace what has been lost; one way would be authorize the MA Division of Banks to retain a higher amount of revenue from licensing fees so the Division can increase its awards.  With this one step, we can help homeowners stay in their homes, protect neighborhoods from the negative impacts of foreclosure, and help today’s homebuyers to become tomorrow’s successful homeowners.

In 2015, the Massachusetts Housing Investment Corporation (MHIC) reached a new high in supporting community- and neighborhood-based organizations by donating over $400,000 to 31 CDCs, Boston LISC and MACDC with two-year contributions.  This level of support was only made possible by MHIC’s commitment to use the Community Investment Tax Credit (CITC).  MHIC, as a nonprofit investment and lending organization that focuses on the critical shortage of affordable housing across the Commonwealth, has financially supported CDCs since its founding in 1990.  Now, through the CITC program, MHIC is also able to help CDCs grow their operations through this valuable financial tool.

“The Community Investment Tax Credit enables MHIC to provide further support to our partners on the ground in communities of greatest need across Massachusetts,” commented Joe Flatley, MHIC’s President and CEO.  “We’re thrilled to be a leading investor in CDCs through the CITC program in 2015.  It’s an additional resource for us to use that ensures CDCs continue to provide critical services in the neighborhoods and towns in which they work.  We strongly encourage more businesses, individuals, and foundations to use the CITC program to power their donations to CDCs.”

“MHIC’s support of our field has been phenomenal from the start.  It doesn’t surprise me that Joe and the team at MHIC would use the CITC program to further support what CDCs are doing. This is an organization that knows how to invest wisely and help revitalize our most distressed communities.  And that’s what the CITC program is all about,” concluded Joe Kriesberg, MACDC’s President.

The CITC program continues again in 2016 with an additional $6 million of credits to be allocated by the Commonwealth’s Department of Housing and Community Development.  To learn more about the program, go to https://macdc.org/how-it-works.