REPORT FROM THE CHAIR
2017 was a milestone year for FHLBank San Francisco’s Affordable Housing Program (AHP), as the program reached $1 billion in grants awarded for the construction, rehabilitation, or purchase of housing affordable to very low-, low-, and moderate-income families and individuals. Since 1990, these dollars have created quality rental and homeownership opportunities for nearly 132,000 households in the Bank’s district and throughout the United States.
To celebrate reaching the $1 billion milestone, the Bank created a video that shines a spotlight on member and sponsor users of the AHP – people who go to work every day at a financial institution or nonprofit housing developer to produce those opportunities – along with some of the people who directly benefit from their efforts. Thanks, in part, to the Bank’s AHP, there are now thousands of people whose lives have been changed by having a safe, decent, and affordable place to call home: families, seniors, veterans, young people transitioning out of the foster care system, people with disabilities, individuals struggling with addiction or health issues, and homeless men, women, and children.
Quality affordable housing translates into dramatically improved living conditions for families and individuals. Providing access to affordable rental and homeownership opportunities in all corners of the Bank’s three-state district, and other areas served by Bank members, also makes entire neighborhoods safer, healthier, and more equitable. And when we pull back further to view the impact of the AHP through an even wider lens, we can see that where AHP projects are developed, local economies get a real boost.
In 2017, the Bank commissioned a study to look at the specific economic impacts of AHP grant making. Beyond Housing: Economic Impact of the Federal Home Loan Bank of San Francisco’s Affordable Housing Program 1990-2016 is an economic analysis conducted by Smart Cities Prevail in May 2017 that examined the direct, indirect, and induced economic effects of $884 million in AHP competitive grant funding awarded from 1990 to 2016. In analyzing the dollars deployed to support new construction and rehabilitation projects in 32 states plus the District of Columbia, Smart Cities Prevail found that, on average, the Bank’s grants are leveraged 25-fold: for every $1 million in AHP funding from the Bank, $25.3 million worth of housing is built or rehabilitated.
Viewed from this angle, it’s clear that the AHP is a significant economic engine for the regions served by the Bank’s member financial institutions. Using the IMPLAN input-output model, the Smart Cities Prevail analysis shows that nearly a billion dollars in AHP funding, combined with leveraged funding of $21.5 billion, contributed to the creation of:
- Nearly 120,000 new and rehabilitated housing units in 32 states and Washington, D.C.
- Over 500,000 full-time equivalent jobs
- Over $26.6 billion in labor income
- Over $3.2 billion in additional local and state taxes and fee revenue
- Over $76.5 billion in total economic activity
At a time when both quality jobs and financial resources for community and economic development are in very short supply, the ability of the Bank’s AHP to create new jobs, increase labor income, and boost local economies while improving living conditions for so many people is beyond impressive.
The Bank and the Affordable Housing Advisory Council (Advisory Council) are extremely proud of the AHP’s impact over the last 28 years. Looking forward, the challenges we face in addressing the scale and complexity of the nation’s ongoing affordable housing crisis are both familiar and new.
The market for Low Income Housing Tax Credits (LIHTC) began to suffer in anticipation of the reduction in corporate tax rates that became effective in January 2018. With tax credit equity pricing decreased significantly, in 2017 a handful of the Bank’s AHP-funded projects without investor commitments faced significant delays after being forced to seek additional sources of funding or make design changes to reduce costs. Others faced an unexpected need to contribute equity or deferred developer fees to make projects feasible. We expect that LIHTC projects will continue to have large financing gaps and will look to the AHP to help make up the shortfalls.
Particularly in California and other high-cost markets, inadequate supply of affordable housing units is exacerbated by increased construction and overall development costs. Factors contributing to rising costs across the board include:
- Land values
- Materials and labor, including labor shortages in many areas
- Local development fees and design requirements
- Lengthy permitting and development timelines
- Regulatory requirements
- Community opposition to affordable housing
While investment in lower-resourced neighborhoods is as critical as ever, the growing body of evidence that healthy, safe, more integrated, and economically stable neighborhoods with good schools improve outcomes and economic mobility for lower-income families and children is inspiring a new national conversation about how to reshape policies that direct development in opportunity-rich neighborhoods.
Helping to move that conversation forward, California’s Tax Credit Allocation Committee (TCAC) is signaling a commitment to fair housing principles with a set of policy changes that incentivize development of affordable housing options for families in higher opportunity communities. TCAC’s use of new neighborhood-level “Opportunity Maps” to inform resource allocation is one way to try to remediate long-standing opportunity imbalances by expanding access to better schools and higher paying jobs for low-income residents and communities.
There is also good news for affordable housing in California with the passage of Senate Bill 2, the Homes and Job Act that Governor Jerry Brown signed into law in September 2017. This long-sought piece of legislation creates a permanent and reliable source of funding for affordable housing by imposing a $75 fee on the recording of certain types of real estate documents. Proponents estimated that the fees collected will generate a revenue stream of $250 million each year and create 57,000 jobs over the next five years.
Senate Bill 2 is part of a comprehensive package that approaches California’s housing crisis from multiple angles. Governor Brown also signed Senate Bill 3, which will put a $4 billion bond on the November 2018 ballot, with $3 billion to subsidize the construction of low-income housing and the remaining $1 billion for home loans for veterans, and Senate Bill 35, which will ease local regulations for home building in an effort to spur construction, adding to overall supply. Taken together, the three bills represent a remarkable victory for affordable housing advocates at the state and local level.
In Arizona, affordable housing advocates have been making progress on bringing the State Housing Trust Fund back to its pre-financial crisis strength. In 2017, the Arizona Housing Alliance and the Arizona Coalition to End Homelessness joined forces to form the Arizona Housing Coalition, which is collaborating with LISC and other organizations on an intense campaign to fully restore the State Housing Trust Fund. In Nevada, where the overall number of affordable housing units is only 15 for every 100 households, compared to the national average of 35, the state legislature’s interim affordable housing committee is tasked with preparing up to five bill draft requests by June 2018 to submit for the 2019 session of the legislature.
Successes like these at the state and local level are important, and we must allow them to give us hope for similar progress at the national level at some point in the future, despite the chaotic political landscape. As the Joint Center for Housing Studies of Harvard University put it in its most recent State of the Nation’s Housing report:
"Given the pivotal role of housing in determining the well-being and financial security of every individual and family, attending to the nation’s critical housing challenges should have primacy in the debates over public spending, tax policy, and regulatory regimes. National housing policy must also recognize the diversity of conditions existing both within and across markets."
As priorities are defined, policies crafted, and resources mobilized to develop and implement solutions to the full spectrum of affordable housing needs in our communities, both public and private sector initiative and resources will continue to be in great demand.
The Bank, as a private entity with a public purpose, plays a vital role in affordable housing and economic development, offering programs that have proven effective over time and continue to evolve to meet emerging needs. The Advisory Council is pleased to present this annual report, which describes the Bank’s Community Program results and related activities in 2017.
In 2017, the Bank awarded $73.6 million in grants through 20 Bank members to 89 projects that will construct or rehabilitate 6,280 units of desperately needed housing, creating affordable rental and owner-occupied options for individuals and families in 7 states – Alabama, Arizona, California, Florida, Nevada, Texas, and Wisconsin.
2017 Competitive Affordable Housing Program Results
|(Dollars in millions, except subsidy per unit)||Rental||Ownership||Total||1990-2017|
|Number of Applications||162||7||169||6,195|
|Number of Applications||88||1||89||2,302|
|Number of Units||6,275||5||6,280||125,042|
|Average Subsidy per Unit||$11,711||$32,500||$11,727||$7,520|
In an uncertain financing environment, the AHP continues to be a reliable source of value-adding gap funding for projects that are successful in serving families and individuals facing specific housing challenges. The Bank’s 2017 AHP grants, ranging in size from $110,000 to $2 million, will support a diverse array of projects that target the needs of specific populations. For example:
- 49% of approved projects reserve at least 20% of their units for homeless individuals or households, including homeless veterans.
- 63% of approved projects reserve at least 20% of their units for special needs households, including seniors, physically/mentally disabled people, and people in recovery from substance abuse.
- 15% of approved projects have at least 20% of units located in rural areas.
A notable trend among the 2017 awarded projects is the adaptive reuse of existing structures to produce quality affordable housing. Projects like these demonstrate the value of creative thinking, as the purpose of a building is reimagined to create new housing solutions that maximize the value of under- or unused structures, making the most of existing resources.
- In San Luis Obispo, CA, an orphanage built in 1931 will be renovated to create 34 new apartments within the original brick structure, preserving its unique character, and another 13 units will be available in three newly constructed buildings that will provide supportive housing adjacent to the old orphanage.
- In Los Angeles, CA, two separate projects will adaptively reuse an existing motel to create 171 units of permanent supportive housing. The development is part of the Los Angeles County Department of Health Services’ Housing for Health program, which serves formerly homeless individuals who are frequent users of county facilities and services.
- Also in Los Angeles, the historic Angelus Funeral Home building will be preserved and renovated to produce affordable housing for low-income families.
- In Tucson, AZ, a historic building that had a long life as a college will be completely renovated, including the installation of an elevator inside a two-story structure that will provide quality affordable housing for low-income seniors.
- In Turlock, CA, a large unused warehouse will provide a foundation for creating emergency shelter and short- and long-term housing for homeless households.
- In Milwaukee, WI, a former hospital will be repurposed to create five floors of permanent supportive housing for low-income families and individuals.
Also noteworthy in 2017 are four innovative “sister” projects. These developments pair affordable housing projects targeted to distinct populations, oftentimes with one campus serving seniors and a second, related campus offering housing to families. These paired projects offer benefits beyond shared development costs and resources when they create opportunities to establish communities that can support one another. One of the 2017 “sister” projects will provide housing for both low-income seniors and the consistently underserved TAY (transition-age youth) population—it’s a kind of “matchmaking” for two distinct populations that has great potential to be mutually beneficial.
The WISH and IDEA first-time homebuyer programs continue to help low- and moderate-income families over what is often the most formidable hurdle facing them: access to money that can cover downpayment and closing costs.
In 2017, the Bank made $12.5 million available for members to deliver grants from the Workforce Initiative Subsidy for Homeownership (WISH) and Individual Development and Empowerment Account (IDEA) programs. A record-setting 47 Bank members reserved $11.3 million in WISH funds and $1.2 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. Seventeen of these members are participating for the first time, thanks to an energetic outreach campaign by the Bank to increase the number of members who participate each year. Ongoing training and support is provided to participants to help members achieve their grant disbursement goals.
Both WISH and IDEA 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 to buy a home through an Individual Development Account or participating in a Family Self-Sufficiency homeownership program. Participants in lease-to-own programs administered by a nonprofit or government entity are also eligible for IDEA grants. The Bank spotlighted one such family in the Spring 2017 issue of its Community Works newsletter. After experiencing a painful foreclosure, the Huertas of Stockton, CA, were able to reclaim their dream of homeownership by participating in Visionary Home Builders’ Bounce Back to Homeownership lease-to-own program and qualifying for a $15,000 matching IDEA grant.
Since the first homebuyer received a grant in 2000, the Bank has funded over $88 million in WISH and IDEA matching grants, helping more than 6,600 households reach their goal of homeownership.
The Advisory 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 Federal Housing Finance Agency (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.
The FHFA published a Notice of Proposed Rulemaking to amend the AHP regulation in March 2018 and is now seeking public comment on the proposed amendments. On April 30, the FHFA issued a correction to the proposed rule and extended the comment period to June 12, 2018. The Advisory Council has carefully studied the proposed changes to the AHP and identified certain issues of concern to users of the program. We are currently preparing a comment letter detailing these concerns that will be submitted by the June 12 deadline.
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 2017, members took advantage of this discounted funding to boost local economies, create new affordable housing, and facilitate homeownership for lower-income households, using:
- $519.8 million in Community Investment Program (CIP) advances. The eight 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.
- $44.5 million in Advances for Community Enterprise (ACE) Program funds to support community lending and economic development activities, including small business loans. The ACE funding provided to seven members is expected to create or retain over 696 jobs.
In addition, six members used 12 CIP Standby Letters of Credit to credit enhance tax-exempt financing for multifamily rental projects.
The AHEAD Program was created in 2004 to enable members to give a crucial boost to programs and projects that create or preserve jobs, support a nonprofit’s organizational and capacity-building activities, deliver social services, or provide training and educational programs.
The program was deliberately designed with broad eligibility criteria, so that members could support a diverse array of innovative nonprofit initiatives that address specific local economic or community development priorities. Since then, AHEAD has supported a wide range of activities, from incubation of food service businesses to creating a new public transportation system on Native American lands, and from developing smart phone apps for financial literacy and savings programs for the underbanked to training parents to become Head Start teachers.
In 2017, prompted by a request from the Advisory Council to consider whether it would be beneficial to narrow the focus of the AHEAD program, to potentially increase the success rate of projects applying for an AHEAD grant, the Bank undertook a survey of members who use the Bank’s Community Programs and nonprofits that have received AHEAD grants over the years.
Survey questions were designed to elicit insights on what program criteria, grant size, and outcome measurements respondents felt best aligned with their priorities for economic development funding. The rate of response for the survey was about 12%, which is in line with a typical average 10-15% response rate for external surveys.
The survey results demonstrated that the AHEAD Program as currently structured is an effective tool for members and nonprofits to use in meeting pressing community needs. As a result, no changes have been made and the Bank will continue to build on the program’s strengths.
Encouraging Bank members and nonprofits to become partners in addressing high-priority needs of their communities is a key objective of the AHEAD Program. The Bank is consistently impressed with how well-connected members are to very localized economic development strategies and initiatives. Because of the networks and nonprofit connections of the participating members, AHEAD grants support precisely targeted efforts to expand proven development models or get new inventions and interventions off the ground.
Reflecting the extent to which economic issues continue to dominate the community development landscape, about 50% of the funded projects in 2017 directly involve job training or support for entrepreneurs and microenterprises.
In 2017, 32 Bank members submitted successful applications, with 9 members participating for the first time.
The Bank reviewed 193 eligible applications requesting nearly $8.6 million before selecting a total of 51 AHEAD winners
These AHEAD projects demonstrate a high degree of ingenuity and creativity in their approach to addressing critical community needs. For example:
- MUFG Union Bank is supporting the growth of Homeboy Industries’ electronic waste recycling job training program, which offers vocational opportunity to clients in Los Angeles who are predominantly former gang members or formerly incarcerated.
- Charles Schwab Bank is supporting Northern Nevada HOPES to add financial coaching and education to their comprehensive set of healthcare services for underserved populations in Reno and Washoe County, including the LGBTQ community, homeless individuals, and people with mental illnesses.
- East West Bank is supporting Local Initiatives Support Corporation (LISC) of Los Angeles as it works with institutions such as hospitals, universities, and transit agencies to increase procurement opportunities for minority- and women-owned businesses located in a designated Promise Zone in South Los Angeles.
- Western Alliance Bank is supporting Native American Connections in its implementation of a commercial kitchen training program at a former elementary school that the organization repurposed to create an Indian Visitors Center in Phoenix.
- Community First Credit Union is supporting North Coast Opportunities, as it offers, in partnership with a local community college, early childhood development classes and certifications for parents to become teaching assistants at Head Start programs in rural Lake and Mendocino counties.
- First Republic Bank is supporting Renaissance Entrepreneurship Center’s plan to deliver an entrepreneurship and empowerment training program for women living in public housing in Bayview Hunter’s Point, one of the most marginalized communities in San Francisco.
In response to the wildfires that devastated the North Bay area in the Fall of 2017, the Bank took a number of steps designed to provide immediate relief and support the rebuilding efforts to come. In the immediate aftermath of the disaster, the Bank donated $25,000 to the American Red Cross to aid victims.
Next, the Bank allocated $100,000 to a voluntary program that would match donations by members to local relief organizations. In response to the Southern California wildfires, the initial $100,000 allocation was increased to $150,000 and the Bank also made a $25,000 donation to the United Way to assist those fire victims.
With a maximum matching grant of $5,000 per member, at yearend the Bank’s matching funds had added $83,500 to $303,500 in donations from 17 members. Including the $25,000 donations to the American Red Cross and the United Way, a diverse group of vital local charities received a total of $437,500 in funding for disaster relief and rebuilding.
In addition, the Bank raised limits on per-member CIP and ACE discounted advances to support relief and rebuilding efforts in the District. The raised limits will remain in place as the long road to recovery continues.
The Bank also contributed to emergency relief donations made by the entire FHLBank System in the wake of 2017’s especially destructive hurricane season.
The Bank offers both new and experienced users training that enables them to make the most of its Community Programs. In 2017, Community Investment staff provided one-on-one technical assistance to individual members and community organizations and conducted:
- Six webinars on the AHP competitive application and disbursement processes
- Eight AHP rental and ownership compliance webinars
- Four WISH and IDEA in-person workshops—one in Arizona, one in Nevada, and two in California—plus three webinars
- Two AHEAD webinars on the application, disbursement, and monitoring processes
The Bank continues to be proactive in developing and nurturing relationships with policymakers and public officials, government agencies, affordable housing advocates, and a variety of community and economic development organizations.
In 2017, the Bank hosted, sponsored, co-sponsored, or participated in a wide variety of public and industry events and affordable housing and community development conferences, forums, roundtables, and meetings, including:
- Community Development Resource Symposium, Reno, NV
The Bank hosted a symposium in Northern Nevada focused on resources for community development. Over 50 attendees from the public and private sectors had an opportunity to learn about the competitive AHP, the WISH and IDEA homebuyer programs, AHEAD grants for economic development, and CICA discounted advances and letters of credit. The event was held at Northern Nevada HOPES, a federally qualified health center that won a 2017 AHEAD award through member Charles Schwab Bank.
- North Bay Wildfires: Recovery and Rebuilding – Santa Rosa, CA
The Bank participated in a tour and roundtable discussion of recovery from the devastating wildfires in the North Bay. Organized by the Federal Reserve Bank of San Francisco, the City of Santa Rosa, and the County of Sonoma, the group toured areas in Santa Rosa that were heavily damaged in the fires, mainly areas with large numbers of residential properties destroyed. The roundtable brought together professionals from government and financial institutions to discuss innovative strategies for rebuilding both homes and businesses after the disaster. FHLBank San Francisco members Bank of the West, Beneficial State Bank, Mechanics Bank, and Northern California Community Loan Fund also participated.
- Health, Wealth, & Housing Conference – Los Angeles, CA
The Bank participated in a conference hosted by LA LISC, the Federal Reserve Bank of San Francisco, the UCLA Women's Health Center, and the LA County Department of Public Health focused on the intersection of health and housing. This was an opportunity to explore cross-collaborations across different industries, such as partnerships between local universities, public health systems, financial institutions, affordable housing developers, and philanthropic organizations. AHAC member and LA LISC Executive Director Tunua Thrash-Ntuk was a speaker and moderator for the conference.
- Southern California Banker CRA Roundtable – Los Angeles, CA
The Bank participated in a regional banker CRA roundtable hosted by the FDIC, Federal Reserve Bank of San Francisco, and OCC. Discussion topics included investing in community development partnerships and qualifying community investments for CRA credit. The Bank provided updates on the AHP modernization initiative and the Bank’s Quality Jobs Fund.
- Banking & Financial Stability for People with Disabilities – San Francisco, CA
The Bank attended a forum hosted by the FDIC and the World Institute of Disability, where the primary topic was the CalABLE program, which provides dedicated savings accounts for persons with disabilities. CalABLE allows participants to save without tax consequences or harm to existing benefits. The forum also explored ways to increase access to banking services for people with disabilities.
- National American Indian Housing Council (NAIHC) Annual Convention & Trade Show – Nashville, TN
- The Bank participated in this annual convention and tradeshow sponsored by NAIHC, one of the country’s leading affordable housing organizations focused on Native American populations. The Bank’s Community Investment Officer, Jim Yacenda, spoke at the welcoming reception on behalf of the Federal Home Loan Bank System and the Council of Federal Home Loan Banks, both sponsors of the event.
- Arizona Healthy Communities Conference, Tempe, AZ
- The Bank attended the 4th annual Arizona Healthy Communities Conference, hosted by the Arizona Housing Alliance, which brings together professionals from affordable housing, the health and medical sectors, financial institutions, and social service providers to discuss the intersection of health and housing. This year’s conference topics included how demographic shifts affect Arizona communities, a study about health equity, connecting communities to housing and health opportunities, and how fair housing can help communities achieve better health outcomes.
- Investment Without Displacement: Preserving and Upgrading Affordable Housing in the Bay Area, Oakland, CA
- The Bank participated in a workshop hosted by the Federal Reserve Bank of San Francisco, the Great Communities Collaborative, and UC Berkeley’s Displacement Project. The event focused on how to preserve and improve existing affordable housing stock and included panel discussions on displacement issues and tactics that could be used by nonprofits, government funders, and building inspectors to prevent displacement.
- Nevada Help for Homeownership Event, Las Vegas, NV
- The Bank presented information about the WISH and IDEA downpayment assistance programs at an event hosted by the Nevada Affordable Housing Assistance Corporation, the administrator for the Hardest Hit Fund (HHF) in Nevada. The HHF is a US Treasury-funded initiative to help the 18 states that were hardest hit by foreclosures after the 2007-08 financial crisis.
On behalf of the Advisory Council and Vice Chair Diana Yazzie Devine of Native American Connections, I would like to thank the Bank’s Board of Directors, Bank Team Members, member financial institutions, and their community partners for their enthusiastic support of the work we do together to make a difference in people’s lives and strengthen our communities.
I am honored to lead this Advisory Council at such a volatile time for our industry: the group at this table brings a remarkable depth of passion and breadth of experience to ensuring the Bank’s affordable housing and economic development programs continue to deliver the vital resources our communities so desperately need.
In this context, it’s important to acknowledge the enormous influence that former FHLBank San Francisco Community Investment Officer Jim Yacenda, who retired in February 2018, has had on the Advisory Council’s composition and direction since its very beginning. Our unique effectiveness owes much to Jim’s ability to consistently recruit and inspire dedicated and diverse Advisory Council members.
Equal parts energetic champion for the cause of ensuring that everyone, especially the most vulnerable among us, has an affordable place to call home and pragmatic evangelist for the proposition that bringing private capital into the community investment marketplace has real rewards for business, there can be no doubt that Jim’s storied career has left an indelible mark on the affordable housing landscape.
While Jim will be missed, we are delighted to welcome Marietta Núñez to the role of Community Investment Officer. Marietta brings a unique blend of deep knowledge and great creativity to our mutual endeavors, and we look forward to her guidance and leadership.
It is my pleasure to also welcome new Advisory Council members Anne Wilson of Community Housing Works and David Paull of Nevada HAND, who each bring a wealth of experience and a unique perspective to the table. It is with great gratitude for their many years of valuable service to the Advisory Council that we bid farewell to departing members John Carlisi and Cloyd Phillips, whose presence will be truly missed.
Finally, I am pleased to report that in 2018 the Bank will provide over $67 million in funding for the competitive AHP and $9.5 million for the WISH and IDEA programs. These funds will transform people’s lives, make neighborhoods stronger and safer, generate jobs and revenue streams, and create a wealth of new opportunities for individual and collective success.
Affordable Housing Advisory Council