Home matters. Research demonstrates that for both renters and owners, a home is so much more than a structure. A safe, stable place to call home helps children do better in school. An affordable place to live increases the financial security of a young family just starting out, or an individual starting over. Affordable, appropriate homes matter to seniors and to people with special needs. A decent home has a positive effect on both mental and physical health. When people have a place they come home to, neighborhoods are safer. Homes build communities where people look out for one another, where everyone can live, work, and play. And homes that are affordable to very low, low-, and moderate-income households not only matter, but are essential to the strength and vibrancy of our economy and our country.
In 2013 we were relieved to see improvement in the overall economic environment, particularly at the state and local levels. Yet this improvement has barely registered when it comes to the need for affordable housing: according to the National Low-Income Housing Coalition, the critical shortage of affordable housing for lower-income populations nationwide is greatest in the western states that make up the Federal Home Loan Bank of San Francisco’s 11th District—Arizona, California, and Nevada. In California, more than one million low-income households lack access to an affordable place to call home. In Arizona, where approximately one-third of all households are renters, there is a severe mismatch between the number of rentals affordable at various income levels and the number of households with that level of income. And only Nevada, which continues to be near the top of the national list of unemployment rates, exceeds Arizona in the number of lower-income families and individuals enduring a severe housing cost burden. These severely cost-burdened families and individuals have a very difficult time affording basic necessities like food and transportation; opportunities to get ahead are nearly non-existent.
As tax credit programs and many federal, state, and local government funding sources continue to shrink, and as the desperate need for housing affordable to very low, low-, and moderate-income populations continues to grow, the Affordable Housing Advisory Council, along with the wider development community, deeply appreciates the role the Federal Home Loan Bank of San Francisco (Bank) continues to play as a strong and reliable source of gap financing for development. Most critically, the Bank is able to commit Affordable Housing Program (AHP) funds to worthy projects before all other sources of funding are in place, provide AHP set-aside funding for first-time homebuyers through WISH and IDEA, and support innovative economic and community development initiatives through its AHEAD early-stage funding grant program.
The Bank’s Affordable Housing Advisory Council (Council) is pleased to present this annual report, which describes the Bank’s various community investment program activities and results in 2013.
Competitive Affordable Housing Program Results
Because the Bank’s Affordable Housing Program (AHP) dollars become even more valuable in a time when other resources are constrained, it is ever more important to award those funds to projects deemed to be the most ready to realize the goal of providing people in need with an appropriate place to live. In 2013, the Bank received slightly fewer applications than in 2012, a reflection of the fact that there are now fewer affordable housing developers. But with awarded projects receiving an average subsidy of $602,000 per project, up from $492,000 a year ago, we expect the 2013 funds to make a bigger and more immediate difference to the most ready projects. As the following table shows, the trend in both applications and awards is toward rental projects, for which the demand is so great in the 11th District. Of the 8 owner-occupied projects supported in the 2013 competition, all but one are sponsored by Habitat for Humanity affiliates, which are well-known for successful, cost-effective homeownership projects.
|(Dollars in millions, except subsidy per unit)||2013
|1990 - 2013|
|Number of Applications||166||14||180||5,523|
|Number of Applications||86||8||94||2,039|
|Number of Units||5,673||60||5,733||107,251|
|Average Subsidy per Unit||$9,774||$19,167||$9,873||$6,890|
AHP grants awarded in 2013, ranging from $15,000 to $1.5 million each, will support a wide range of well-targeted projects, including:
- New construction of rental housing for low-income families, seniors, the formerly homeless, or individuals and households with special needs
- Permanent supportive housing with services for veterans, young people aging out of the foster care system, or the developmentally disabled
- Sustainable developments that will be LEED Certified or GreenPoint Rated
- Habitat for Humanity homes
Collectively, the $56.6 million in AHP grants awarded through 24 Bank members to 94 projects in 2013 will produce or preserve nearly 6,000 units of housing affordable to lower-income individuals and families in Arizona, California, Florida, Maine, Nevada, Pennsylvania, Texas, and Washington. As these developments are built, they will create jobs and generate new tax revenues. When complete, they will become vital anchors in the neighborhoods where they are built, and lead to substantial improvements in the quality of life there. And when the residents move in, each of the AHP-assisted units will become a home.
Changes to the AHP Implementation Plan
In 2013, the Bank’s Board of Directors approved the following changes to the Bank’s AHP Implementation Plan:
Units Reserved for Homeless Households
The requirements for sponsors to validate commitments made in their AHP applications to reserve units for homeless households have been expanded. For units reserved for homeless households with incomes over 30% of the area median and rent set at the maximum limit, the Bank will require additional information from the sponsor to: (1) explain how the project will be able to absorb, over the 15-year retention period, the potential cash flow deficit caused by the units reserved for homeless households, and (2) provide documentation from a homeless services provider that there are a sufficient number of homeless households within the target market area that are able to pay the scheduled rent for the reserved units.
AHP Scoring for Community Stability
Promoting community stability is a key goal of the AHP. To provide participants with greater clarity in the application process and create more transparency in scoring and compliance monitoring, the Bank updated the Community Stability scoring category section of the AHP Implementation Plan. The resulting revisions, informed by a survey of the requirements of the tax credit agencies in the 11th District, the scoring methods of other FHLBanks, and suggestions and feedback from the Council, provide greater specificity about elements that may qualify for points and more detail about the documentation required.
Definition of First-Time Homebuyer
The Bank now uses only the definition of first-time homebuyer promulgated by HUD for both the competitive AHP and the WISH and IDEA homeownership programs. This definition is the one most commonly used by program participants.
WISH & IDEA for Sustainable Homeownership
The Bank’s Workforce Initiative Subsidy for Homeownership (WISH) and Individual Development and Empowerment Account (IDEA) first-time homebuyer programs offer eligible low- and moderate-income households 3-to-1 matching grants of up to $15,000 for the purchase of a home. The grants are made available through participating Bank members to households earning up to 80% of area median income. Because downpayment and closing costs are often the most significant barriers to homeownership, both WISH and IDEA funds can be used for those expenses. Both programs require participants to complete a homebuyer counseling program administered by a qualified and certified organization, which is a well-known factor in determining successful long-term homeownership.
In 2013, the Bank set aside $10 million from its annual AHP contribution to fund matching grants for first-time homebuyers: $7.8 million in WISH funds were allocated to 27 members and $2.2 million in IDEA funds were allocated to 11 members to help lower-income individuals and families purchase a home in Arizona, California, Nevada, and other states where Bank members do business. Seven California-based members are participating for the first time, opening the door to new homeownership opportunities in Fresno, Imperial, and Santa Cruz counties.
In the immediate aftermath of the 2008 financial crisis, reduced housing prices and low interest rates combined to offer lower-income buyers unprecedented opportunities to become homeowners. Market dynamics began to change in late 2012, with many of those potential homebuyers effectively sidelined by cash-paying investors, who were sweeping up foreclosure inventory at bargain prices at the same time that the general availability of mortgage credit had tightened significantly. Nationwide, investors accounted for one in five single-family home purchases in 2013, and this investor purchasing activity was especially strong in Arizona and Nevada. The unsurprising result of this investor activity has been to increase prices and reduce the supply of affordable homes in these two states, which have been devastated by foreclosures and unemployment and where the need for affordable homes is overwhelming. Until the investor wave subsides, lower-income homebuyers will be at a disadvantage, and members may find fewer opportunities to disburse WISH and IDEA funds to eligible homebuyers.
On a very positive note, the rate of default on homes that are purchased with subsidies from the WISH and IDEA programs continues to be negligible. A study of 2012 grant recipients found that, out of 750 home purchases, only four, or less than one half of one percent, had ended in foreclosure. This is in keeping with the results of the Bank’s first foreclosure study, undertaken in 2008, which found that of 3,343 homes purchased between 2003 and 2008 with AHP, WISH, or IDEA subsidies from the Bank by homeowners who had not refinanced the original loan, only 1.23% of the homes had been foreclosed on or were in foreclosure. We believe that this is attributable to the inherent features of the two programs, including the care taken in selecting homebuyers, the affordability criteria established for the purchase, and the effectiveness of required pre- and post-homeownership counseling.
Credit for Communities
The Bank’s Community Investment Cash Advance (CICA) programs continue to provide Bank members with 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. Member participation in CICA programs continues to expand, as the Bank encourages members to take advantage of these programs to foster economic development and facilitate development of affordable housing that will boost local economies.
Continuing an upward trend, in 2013, 8 members used Advances for Community Enterprise (ACE) totaling $385 million to support efforts to create or retain more than 1,500 jobs around the country. Eligible uses for ACE credit include financing commercial, industrial, and manufacturing activities; supporting social service, community, and public works projects; and funding public or private infrastructure projects such as roads or utilities.
Five members used Community Investment Program (CIP) advances totaling $315 million to support single-family home loans made to households with incomes at or below 115% of area median income.
Thirteen members used lower-cost CIP Standby Letters of Credit totaling $191 million to support the development of affordable housing projects. One member used an ACE Letter of Credit in the amount of $7.3 million to provide credit enhancement for a retail construction project that will create 25 permanent jobs in a disadvantaged area.
In 2013, the majority of CIP and ACE activity took place in California, an indication of the state’s more robust recovery. Noteworthy examples of CIP and ACE credit program use include:
- One credit union member used $176 million in CIP advances to provide first mortgages to more than 300 credit union members earning up to 115% of area median income. These homebuyers are primarily located in high-cost California, but are also located in Florida, Idaho, Montana, Nevada, New Mexico, Texas, Virginia, and Washington.
- One community bank member used a $5 million ACE advance to finance SBA lending in its local area, including loans for capital and acquisition of fixed assets, business lines of credit, and debt refinancing.
- Another member used a $1.5 million CIP Standby Letter of Credit to provide credit enhancement for a 46-unit multifamily apartment project in a rural area.
AHEAD Grants Move Projects Forward
The AHEAD Program enables Bank members to give a critical, early boost to local programs and projects that target critical community development needs and:
- create or preserve jobs,
- facilitate improvements to public or private infrastructure, or
- deliver social services, training or educational programs, or other services and programs that benefit low- and moderate-income communities.
AHEAD funds can be used to finance a variety of start-up costs, such as research, studies, and project plans; consulting or other professional services; or organizational and capacity-building activities. Demand for this early funding continues to grow: this year the Bank reviewed 131 applications, requesting nearly $6 million, before selecting 33 AHEAD grant winners.
The AHEAD grants awarded to 21 Bank members in 2013 will fund a wide range of innovative and exciting community and economic development projects designed to:
- Create or expand job training and employment readiness programs specifically targeting at-risk youth, returning veterans, newly released prisoners, and others
- Provide financial planning, business mentoring, and microlending services to low-income entrepreneurs
- Help bridge the digital divide by making broadband connectivity available to affordable housing residents
- Create opportunities for at-risk youth to improve academic performance and develop leadership skills in non-traditional ways
- Support housing for seasonal workers
The AHEAD Program continues to strengthen relationships between Bank members and nonprofit groups that have special expertise in economic and community development. For example:
- Mendo Lake Credit Union was awarded a $25,000 AHEAD grant to help Resources for Native Development (RFND) become a certified community development financial institution (CDFI), which will enable RFND to increase capital for lending to tribes for business development, consumer, and home loans.
- National Bank of Arizona is partnering with LISC Phoenix to support economic development projects that address health issues as part of comprehensive community revitalization. A $25,000 AHEAD grant will help LISC Phoenix launch its “Healthy Activities Along the Rail” initiative.
- Western Alliance Bank is supporting the efforts of FISH Emergency Referral Services to ease the food hardship that is prevalent among families of low-paid service industry workers. A $30,000 AHEAD grant will pay costs, including the purchase of equipment and supplies, of creating a new no-cost dining room for the Rancheros area of Douglas County, Nevada.
Community Outreach and Engagement, Training, and Technical Assistance
In 2013, the Bank participated in over 80 public and community events and affordable housing and economic development conferences, seminars, roundtables, and forums, including:
National Association of Affordable Housing Lenders Summit, Washington, D.C.
The summit brought together financial institutions and housing and community development lenders, including a number of Bank members and community partners, to discuss current issues and visit Congressional leaders on Capitol Hill. Comptroller of the Currency Thomas Curry opened the summit with remarks on the Consumer Financial Protection Bureau and the Public Welfare Investment Authority. Federal Housing Administration Commissioner and former Council member Carol Galante was the keynote speaker. Bank staff spoke on a panel with CDFI representatives about experiences and lessons learned since the FHLBanks were allowed to open membership to non-depository CDFIs. Allen Hoffman, chief financial officer of Bank member Century Housing, a California CDFI, was also on the panel.
Bipartisan Policy Center Housing Commission Forum, Los Angeles, CA
The Bank participated in a forum held at the University of Southern California’s School of Public Policy to explore pressing issues in housing today: demographic trends affecting housing markets, efforts to link housing and healthcare to serve the most vulnerable populations, access to credit for prospective homebuyers, and efforts to create incentives for the adoption of energy efficiency measures in housing.
CCEDA’s XXIV Annual Teaching & Learning Conference, San Francisco, CA
Bank staff presented information on the Bank’s AHEAD grant program at this annual event, where representatives from financial institutions, local governments, and community organizations discussed funding for community development in California. The conference was an opportunity for organizations to connect with potential financial partners and learn about funding resources. It was hosted by Ralph Lippman, executive director of the California Community Economic Development Association (CCEDA) and vice chair of the Council.
California Housing Consortium’s First Annual Homeownership Forum, San Francisco, CA
Financial institutions, government housing agencies, and nonprofit developers discussed scalable solutions for reducing the inventory of distressed properties, how to bring stability back to the market, and how to help distressed homeowners. The Bank presented WISH and IDEA program information in both English and Cantonese at the forum. As a result of the event, the Bank was asked to be part of a homeownership taskforce to help create solutions in a post-Neighborhood Stabilization Program environment.
Affordable Housing Advisory Council Leadership Conference, Washington, D.C.
Council Vice Chair Ralph Lippman, Community Investment Officer James Yacenda, and I attended this event convened by the Federal Housing Finance Agency to exchange ideas and discuss issues common across the Federal Home Loan Bank System. As the AHP celebrates its 25th year in 2014, discussion of how the AHP regulations work in these changing and challenging times was of great value.
The Bank was also pleased to sponsor the Habitat for Humanity 2013 Jimmy and Rosalynn Carter Annual Work Project held in Oakland, California, and to participate in numerous grand openings and groundbreakings for AHP-funded projects.
To help members and their partners understand and use the Bank’s community programs, in 2013 the Bank conducted:
- Six AHP webinars on the competitive application process
- Eight AHP compliance webinars
- Seven WISH and IDEA workshops: one in Arizona, one in Nevada, two in California, and three webinars
- One AHEAD workshop geared specifically to underrepresented Nevada members and nonprofits
The all-webinar approach to presenting AHP workshops eliminates the need for members and sponsors to travel, resulting in greater participation. Webinars are also recorded and available on the Bank’s website, further increasing member and sponsor access to information about the Bank’s programs.
The Bank launched a re-designed and more dynamic public website in 2013, aimed at increasing engagement with community partners, member program participants, and other audiences. Featuring richer content, design, and functionality, the public website facilitates the application and disbursement process for the AHP, WISH, IDEA, and AHEAD programs and allows users to search for project and program data. It also promotes Bank events, such as workshops and webinars; affordable housing industry events, including groundbreakings and grand openings; and community development events.
In 2013, the Bank also launched a new quarterly e-newsletter, Community Works, to highlight how the Bank's products and programs help members and their partners make a difference in their communities. Each issue features an in-depth story about the people and projects that have benefited from the Bank’s community programs. The newsletter also includes videos, recent news, and announcements about upcoming events of interest to Bank audiences.
On behalf of the members of the Council, I would like to thank the Bank’s members and the Bank’s Board of Directors, management, and staff for consistently rising to the challenges that providers of affordable housing have been facing in Arizona, California, Nevada, and across the country. The Council would like to acknowledge the many contributions departing Council members Manuel Bernal, Jose Bernardo, and Robin Hughes have made to our work during their terms of service, and wish them well in the future. We also congratulate and welcome our new members: Laura Archuleta, president of Jamboree Housing Corporation; Dora Leong Gallo, chief executive officer of A Community of Friends; and Carol Ornelas, chief executive officer of Visionary Homebuilders of California. All three are leaders in our industry, and we look forward to benefiting from their knowledge and specific areas of expertise. As outgoing chair of the Council, my best wishes go to incoming Chair Ralph Lippman, executive director of California Community Economic Development Association, who will lead the Council for the next two years, and to Vice Chair Dean Matsubayashi, executive director of Little Tokyo Service Center Community Development Corporation.
It has been a great honor and privilege to serve as chair of the Council for the last two years. This role has given me a deeper appreciation of the Bank’s commitment to seeking innovative and creative solutions to the ongoing challenges of scarce resources and expanding needs. Not least among these challenges is the constant need to direct resources in a way that appropriately balances, through the Bank’s outreach and AHP scoring, a broad need for low-income housing with the need to serve special-needs populations. It is a pleasure to work together to champion the cause of ensuring that everyone has an affordable place to call home, and the role of chair has allowed me to see first-hand that this Bank is at the forefront of finding innovative and creative ways of accomplishing that mission.
I am very pleased to report that, as a result of the Bank’s 2013 earnings, expected deobligations, and the return of previously awarded funds, the Bank’s total AHP contribution in 2014 will exceed $58 million, with $49 million used to fund the AHP and $9 million set aside for WISH and IDEA. The Council looks forward to seeing these funds used to create opportunities for lower-income families and individuals to have a safe, decent, affordable place to call home – because home matters, in so many different ways.
Affordable Housing Advisory Council