REPORT FROM THE CHAIR
For those in our communities who struggle monthly, weekly, daily, and often nightly, too, just to have a safe, decent, and stable place to call home, headlines like these aren’t new “news,” nor can the stories that follow the headlines fully capture the harsh reality of their own lived experiences.
- Housing affordability crisis is nationwide (Mercury News)
- Average Americans can't afford a home in 70 percent of the country (CBS News)
- Rural America faces housing cost hardship (Christian Science Monitor)
- Senior housing: Older Americans face affordability, accessibility challenges (Curbed)
- Middle-Class Misery: Housing Crisis Hitting Cities, Working Americans Harder Than Ever Before (BisNow)
- Homeless in US: A deepening crisis on the streets of America (BBC)
But headlines like this do succeed in signaling the growing scale and severity of the country’s affordability crisis, and they offer at least a glimpse of the pernicious effects the crisis is having on an ever-expanding cross-section of the population, especially in the Federal Home Loan Bank of San Francisco’s three-state western district that includes Arizona, California, and Nevada.
As the lack of affordable rental and homeownership opportunities for very low-, low-, and moderate-income families and individuals makes the national and local news day after day, we can see an important, and potentially hopeful, shift in the public discourse on the subject.
According to a recently published national public opinion poll commissioned by the Opportunity Starts at Home campaign, fully 85% of the American public now believes that ensuring everyone has a safe, decent, affordable place to live should be a top national priority. The response is strong across political divides: 95% of Democrats, 87% of Independents, and 73% of Republicans agree with this priority. Ninety percent of respondents also believe that this country, one of the richest nations in the world, should do more to prevent homelessness.
The news that the poll reveals is that “While people in the United States almost unanimously agree that stable affordable housing is very important or one of the most important things that affect security and well-being, they are increasingly concerned about the rising costs of housing. In fact, 60% say housing affordability is a serious problem in the area where they live, which is up 21 points from 2016. Majorities of people who live in cites (70%), suburbs (59%) and small town and rural areas (53%) say housing affordability is a problem in the area where they live.”
Eighty-nine percent of poll respondents say that when people must spend more than half of their monthly income on housing, it’s “a big problem.” Importantly, personal experience factors heavily into these poll results: 61% say that they themselves have had to make at least one sacrifice—such as working more than one job, stopping retirement savings, skipping payments for utilities, forgoing healthcare, cutting back on buying healthy foods, or limiting learning-enhancing activities for school-age children—because of their high housing costs.
When so many people can see themselves, their family members, their friends, and neighbors represented by such alarming headlines and cold statistics, the public pressure to solve the problem naturally builds. That’s why, for affordable housing practitioners, advocates, and allies, together with a host of other community and economic development stakeholders, evidence of a widespread consensus on the importance of affordable housing comes with an implied promise: that greater awareness and understanding of the crisis may give the search for solutions a vital new urgency.
At the national level, the federal corporate tax cuts that went into effect on January 1, 2018, have led to lower equity pricing in the Low-Income Housing Tax Credit (LIHTC) market. This has caused delays for affordable housing developments that now have to find alternative funds to fill the gap or redesign projects to cut costs. While it’s expected that tax credit pricing will stabilize in 2019, pricing will still be lower than pre-tax cut levels and LIHTC projects will try to fill gaps with other sources of funds, including the Affordable Housing Program (AHP).
Uncertainty still surrounds the issue of Opportunity Zones, which were identified for all states at the end of 2018. Proponents are optimistic that the tax benefits they create will be used with LIHTC equity to fill financing gaps to build more affordable housing. Other industry stakeholders fear that gentrification will speed up in disadvantaged communities designated as Opportunity Zones and displace current residents.
In our region, California stands out as a state where considerable momentum is gathering on the solutions side in the face of a continuing housing emergency. In 2018, bills were passed to increase transit-oriented housing development and streamline the approval process for development of new supportive housing. A proposal to expand the state’s Low Income Housing Tax Credit by $500 million annually is pending, along with a bill designed to allow for taller and denser affordable housing developments on 100% affordable projects by way of an enhanced affordable housing density bonus. The state’s 2018-2019 budget would include nearly half a billion dollars for the Affordable and Sustainable Communities program, which funds development that reduces greenhouse gas emissions.
Newly elected Governor Gavin Newsom appears to be crystal clear on the urgency of the housing crisis facing his state, making a bold debut on the affordable housing policy stage by proposing both sticks and carrots to address it. As the editors of his hometown paper, the San Francisco Chronicle, put it, his “threat to deny transportation funds to cities that don’t produce sufficient housing has upset local officials from Lafayette to Los Angeles. It’s as sure a sign as any that the new governor is onto something.” Carrots come in the form of new incentives for cities that meet short-term housing goals, billions of dollars in added funding for affordable housing and homelessness services, and a reincarnation of local redevelopment agencies, which is a priority for many.
But in a state where, according to a USA Today poll, nearly half the voting population feels they can’t afford to live, many factors continue to inhibit production of new housing stock, including:
- Construction and overall development costs
- Local development and land use fees
- Lengthy permitting and development timelines
- Regulatory requirements
- Community opposition to affordable housing
Arizona is now third-worst in the nation for affordable housing, with a shortage of 165,000 units. In Phoenix, once one of the West’s most affordable cities, rising rents have left 46% of area renters spending more than 30% of their incomes on housing. The Arizona Republic tells us that the warning cries are being heard not just from advocates and people in need of affordable housing, they are also coming from companies that need to attract employees, government and localities looking to attract companies by offering livable communities, and developers that want to fill apartments and homes.
Arizona also has a large population of seniors who are less prepared than ever to enter retirement, and who would benefit from affordable housing solutions with additional supports, including food, transportation, social workers, and help navigating the healthcare system. Developers who could provide these services are challenged by the inability to include resident services expenses in an operating budget when applying for AHP funding.
The Arizona State Legislature is considering several proposals that would direct millions of dollars toward affordable housing for families, youth, and people with serious mental illness. Advocates are especially encouraged to see bipartisan support for SB 1471, which could raise as much as $12 million in new funding to house youth, families, and individuals with mental illness, and for SB 1300, which would clarify the property tax exemption for Arizona nonprofit LIHTC developers and owners.
Southern Nevada, which was ground zero in the housing crisis a decade ago, is now, according to the New York Times, “the epicenter of the affordability crunch, with low-income residents squeezed out of once-affordable apartments by working-class refugees fleeing from California’s own rental crisis.”
For extremely low-income households in the state of Nevada, there are only 19 homes per 100 who need them, the lowest number in the country, according to the National Low Income Housing Coalition. For very low-income households, there are 38 affordable homes per 100 renter households, and for 47% of those households paying the rent takes up over half their monthly income.
In the Nevada Legislature, a handful of bills to address the lack of housing throughout the state have been submitted, including five from the body’s Committee to Study Issues Regarding Affordable Housing, an interim committee formed to look at the issue. These include bills that would allow local municipalities to subsidize affordable housing projects without having to borrow and pay back funds from the general fund, would create a $10 million per year LIHTC-style tax credit that advocates say could generate $90-100 million in new affordable housing, and would standardize legal definitions and create three tiers of affordable housing—one tier based on residents having 60% of area median income (AMI), a second tier based on 60-80% of AMI, and a third based on 80%-120% of AMI, which would be so-called workforce housing.
The Federal Home Loan Bank of San Francisco’s Affordable Housing Program (AHP) and other community and economic development tools and resources continue to be part of the solution to the affordable housing crisis we face in Arizona, California, Nevada, and other states where the Bank’s member financial institutions do business. The Bank’s Affordable Housing Advisory Council (Advisory Council) is pleased to present this annual report, which describes how the Bank’s Community Programs and related activities contributed to expanding access to affordable housing and economic opportunities in 2018.
The Bank awarded $65.9 million in grants through 29 Bank members in the 2018 funding competition. The funds will go to 70 projects to construct or rehabilitate 6,067 units of desperately needed housing to create rental and homeownership opportunities for lower-income individuals and families; LGBTQ seniors; homeless veterans; at-risk youth; people with developmental disabilities, mental illness, or long-term chronic illness; and other vulnerable populations in seven states—Arizona, Arkansas, California, Nevada, Oregon, Texas, and Washington.
The 70 AHP grant winners in 2018 included five members that had not previously been awarded AHP grants.
2018 Competitive Affordable Housing Program Results
|(Dollars in millions, except subsidy per unit)||Rental||Ownership||Total||1990-2018|
|Number of Applications||152||8||160||6,335|
|Number of Applications||68||2||70||2,338|
|Number of Units||6,048||19||6,067||130,141|
|Average Subsidy per Unit||$10,813||$27,895||$10,867||$7,659|
Rising construction costs—for land, labor, and materials—continue to plague efforts to fill the gap between the number of available affordable units and the number of people in need of shelter. In the 2018 AHP funding competition, the Bank continued to see development costs per unit and average AHP subsidy per unit requested trend upwards. Multifamily rental projects continued to rely heavily on owner equity and deferred developer fees to fill the financing gap.
Nonetheless, the Bank’s AHP continues to fund high-quality projects aimed at meeting specific and compelling needs. Many of the 2018-awarded projects aim even higher, and have the potential to be transformational, including:
- In San Francisco, California, two AHP grants will support the ongoing effort, via HUD’s Rental Assistance Demonstration (RAD) Program, to substantially rehabilitate and renew the original promise of its aging public housing portfolio. The Ping Yuen apartments, located in the transit-, services-, and culture-rich Chinatown neighborhood, now under private nonprofit ownership, are undergoing the first comprehensive renovations since they were built in the early 1950s.
- In Los Angeles, California, a severely distressed public housing project that was built in the 1950s will be transformed into 12 two- and three-story garden-style buildings with a total of 115 units for low-income families. This project is part of a larger master plan designed to improve the neighborhood, promote safety, and encourage a sense of community.
- In Davis, California, a 90-unit affordable infill project targeted to extremely low- and very low-income disabled, homeless, and workforce households will provide supportive housing with community gardens and an orchard on the property.
- In San Diego, California, the majority of apartments in a brand new 407-unit permanently supportive development will serve formerly homeless families, who will be supported by project-based rental subsidies.
- In Phoenix, Arizona, a newly-built 24-unit congregate living community on the edge of the Phoenix Mountain Preserve will offer holistic wellness programing, sweat lodges, and walking trails.
- In Los Angeles, California, a new 4-story, 72-unit complex targeted to seniors, including formerly homeless seniors, will include a community YMCA.
- In Ventura, California, a new 48-unit affordable housing complex built for very low- and low-income farmworkers is designed with cost-saving conservation in mind, featuring solar energy production and a greywater system to meet 100% of the development’s irrigation needs.
- In National City, California, senior residents of a 150-unit rehabilitation project will have a dedicated Nutrition Center where they can socialize with one another and enjoy a free healthy meal, five days a week.
Over the past five years, members of the Bank’s Advisory Council have been very active in efforts to amend the AHP Regulation, seeking to achieve the best possible outcome on several different fronts.
Soon after the Federal Housing Finance Agency (FHFA) published a Notice of Proposed Rulemaking to amend the AHP regulation in March 2018, the Advisory Council formed a subcommittee to thoroughly evaluate the amended regulation. Advisory Councils across the FHLBank System engaged with one another and with the FHFA, meeting often in person or via conference calls throughout the process. The Advisory Council’s diligent efforts culminated in the submission of a strong comment letter that highlighted our main concerns with the proposed amendments.
The FHFA published the Final Rule on November 28, 2018, with an effective date of December 28, 2018. The Bank and the Advisory Council were pleased that the FHFA recognized our most pressing concerns about the amendments and produced a new regulation that, in general, will allow the Bank to administer the program more efficiently.
While some aspects of the AHP were not specifically addressed in the Final Rule, e.g., need for subsidy and social service expenses, the Advisory Council and the Bank are looking forward to continuing to work with the FHFA to bring more clarity to addressing those issues.
The deadline for implementation of the Final Rule is January 1, 2021, except for certain provisions related to owner-occupied retention changes that must be implemented by January 1, 2020.
In preparation for the 2019 AHP funding competition, the Bank, with the Advisory Council’s support, also revised the definition of “project” in the Bank’s AHP Implementation Plan to clarify that certain types of developments, including those considered to be part of a "hybrid" project by a state tax credit agency, were eligible for AHP subsidy as long as they were financed and operated independently and were identified by a separate legal description. The revised AHP "project" definition aligns with other major funders in the affordable housing industry and will allow the Bank to support these types of projects.
In a country with an ever-widening wealth gap, homeownership continues to be one of the most powerful tools we can use to narrow it. The Bank’s two first-time homebuyer programs are part of this solution, too. In 2018, members reserved $8.9 million in funds from the Workforce Initiative Subsidy for Homeownership (WISH) Program and $600,000 from the Individual Development and Empowerment Account (IDEA) Program to give a boost to lower-income families and individuals saving to buy a home.
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, while 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.
In 2018, disbursement of funds for the grants was up 15% from the prior year. Members serving Arizona communities, where homes have traditionally been more affordable, helped the greatest number of homebuyers. In California, the Fresno area also saw an increase in WISH and IDEA grant activity. The Bank’s Community Works newsletter recently profiled the Gonzalez family of nearby Clovis, whose dream of owning a home came true thanks to a partnership between that city and the local Habitat for Humanity affiliate and a $15,000 WISH grant delivered through member Tri Counties Bank. Out of 44 participating members in 2018, six were new participants.
Since the first homebuyer received a grant in 2000, the Bank has funded nearly $100 million in WISH and IDEA matching grants, helping more than 7,400 households reach their goal of homeownership.
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 2018, members took advantage of these lower cost funds to boost local economies, create new affordable housing, and facilitate homeownership for lower-income households, using:
- $227 million in Advances for Community Enterprise (ACE) Program funds to support community lending and economic development activities, including small business loans. The funding is expected to create or retain over 2,032 jobs.
- $929 million in Community Investment Program (CIP) advances. The 22 CIP advances will be used by nine 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.
In addition, the Bank issued 14 CIP Standby Letters of Credit on behalf of two members to credit enhance financing for multifamily rental projects, one located in the North Bay Area and the rest in various Southern California communities. More than half the projects will create new affordable housing for seniors.
With its non-mandated AHEAD economic development grant program, the Bank facilitates and strengthens relationships between member financial institutions and nonprofits working to spur community development and create new economic opportunities for people living in low- and moderate-income communities across the district.
The eligibility criteria for AHEAD is deliberately broad, allowing members to support a great variety of innovative initiatives. Nonprofits with specific areas of expertise bring participating members an array of impressive ideas for how to create jobs, promote entrepreneurship, and help build wealth in their communities.
Several of the 2018 grants will support initiatives designed to do these three things in creatively sustainable ways, such as by establishing social enterprises that will generate significant revenue to support job training and workforce development programs.
Applications for AHEAD grants demonstrate the strong commitment Bank members have to advancing innovative economic development initiatives and fostering community stability and self-sufficiency. In 2018, the Bank’s Board of Directors allocated $1.5 million for the AHEAD Program and received 192 grant applications from 48 unique members. Thirty-one of those members sponsored winning applications for their nonprofit partners, with nine members sponsoring successful applications for the first time. The grant amounts range from $10,000 to $50,000.
Selected 2018 AHEAD grants:
- $50,000 via City National Bank to nonprofit EARN to expand its successful SaverLife incentivized savings program to low-income working families in Nevada.
- $30,000 via First Republic Bank to Hack the Hood, which is training at-risk youth in Oakland to design and build professional websites for local small businesses at no charge.
- $30,000 via Bank of Marin to Petaluma People Services to create an employment program in the North Bay for low-income women who are aged 50 and over.
- $35,000 via Mohave State Bank to Red Feather Development to help members of the Navajo Nation and the Hopi Tribe in Arizona identify and remediate health and safety risks in their homes.
- $40,000 via Northern California Community Loan Fund to the Sierra Business Council to help provide technical assistance and alternative capital to microbusinesses in the rural Sierra Nevada region of Northern California.
- $35,000 via Farmers & Merchants Bank of Central California to Society for disABILITIES to create a durable medical equipment repair training program in conjunction with a free medical equipment closet that serves people with physical disabilities in Modesto.
- $20,000 via Rabobank to Women’s Economic Ventures to help small businesses in Ventura and Santa Barbara counties that were damaged or adversely affected by devastating wildfires and mudslides.
In response to the wildfires that devastated the northern Bay Area in the fall of 2017, the Bank took several steps designed to provide immediate relief to affected communities and support the rebuilding efforts to come, including direct donations, matching donations for members, and raising the per-member limits for CIP and ACE discounted advances used to fund recovery and rebuilding efforts in affected areas.
These measures remained in place as the Woolsey Fire in Los Angeles and Ventura County and the Camp Fire in Butte Country—the largest and most deadly fire in California history—brought further devastation to the state of California in 2018.
Between October 20, 2017, and December 31, 2018, 30 members contributed or pledged a total of $573,000 to organizations serving fire victims and affected communities, and the Bank has donated or pledged $177,500 in matching funds to the same organizations. The Bank also made direct donations totaling $50,000 in response to the California wildfires and floods.
At the end of 2018, the Bank increased the total amount available for disaster relief matching donations from $150,000 to $250,000, increased the maximum match per member financial institution from $5,000 to $10,000, and expanded the program to include all three states in the Bank’s district—Arizona, California, and Nevada. These changes are meant to meaningfully support member efforts to respond to the urgent unexpected needs of their communities.
Going forward, the Bank will match up to $10,000 per member for donations made to local organizations providing services and support to disaster victims. The match is available to both newly participating members and members that have previously accessed the program, on a first-come, first-served basis.
- Six webinars on the competitive application process
- Eight AHP compliance webinars
- Three WISH and IDEA in-person workshops—in Arizona, Nevada, and California—plus three webinars
- Two AHEAD webinars on the application, disbursement, and monitoring processes
To further the Bank’s mission and achieve its Community Lending Plan goals, the Bank actively establishes and nurtures relationships with policymakers and public officials, government agencies, affordable housing advocates and experts, and a variety of community and economic development organizations.
In 2018, the Bank sponsored, co-sponsored, or participated in nearly a hundred public and industry events and affordable housing and community development conferences, forums, roundtables, and meetings, including:
Minority Depository Institution (MDI) Roundtable, Los Angeles, CA
At an MDI roundtable hosted by the Federal Deposit Insurance Corporation (FDIC), the Bank presented information about the Bank’s housing and economic development grant and credit programs to the group of MDI executives, which included 13 current Bank members. Other topics discussed during the roundtable included risk management, consumer compliance, bank resolutions and receiverships, and local economic issues.
NAAC Annual Economic Development Conference, Los Angeles, CA
The Bank was part of a diverse group of financial institutions, nonprofit organizations, state and federal government agencies, and local businesses participating in this annual conference, hosted by National Asian American Coalition and co-sponsored for the first-time by the National Diversity Coalition. During a panel discussion on the challenges and opportunities of small business lending to diverse groups, the SBA highlighted a record amount of SBA loans to Asian-American small businesses in FY18 and growth in the microlending sector. USDA highlighted many different loan guarantee programs, including one that benefited AHEAD grant winner El Pajaro CDC, a commercial kitchen incubator in Watsonville, CA.
Building Resilient & Inclusive Communities, Santa Rosa, CA
The Bank participated in a forum hosted by the Federal Reserve Bank of San Francisco, City of Santa Rosa, and Sonoma County that was convened to discuss solutions for rebuilding after the North Bay wildfires. Area financial institutions, local government agencies, and philanthropic and nonprofit organizations working in the region discussed how local government is streamlining planning and approval processes to help with faster rebuilds, a proposal to create a structured fund to help with land acquisition for future affordable housing development, and how local financial institutions can collaborate with local nonprofits for CRA and rebuilding purposes.
Community Development Forum—Building Disability & Financial Partnerships, Sacramento, CA
The Bank, in partnership with the FDIC and the California Foundation for Independent Living Centers (CFILC), hosted a forum to bring attention to the needs of people with disabilities and the role that financial institutions can play in supporting them. The Bank moderated a forum that showcased efforts of Bank members and their community partners to work with the disability community. Santa Rosa human services agency Becoming Independent, which won an AHEAD grant sponsored by Exchange Bank, was highlighted.
Chicanos Por La Causa (CPLC) Maryvale Health & Housing Convening, Phoenix, AZ
The Bank participated in an event hosted by CPLC that brought together professionals from the affordable housing and health care industries to discuss collaborations and partnerships. The day-long event included a visit to CPLC’s Maryvale Community Service Center, which provides behavioral health, domestic violence, HIV, and substance abuse services in one of the highest crime areas in the Phoenix metro region. CPLC Executive Director David Adame is a member of the Bank’s Advisory Council.
On behalf of the Advisory Council and my 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 persistent and productive efforts to find and deliver meaningful solutions to our ongoing affordable housing crisis.
It has been an honor and a pleasure to serve as Chair of this Advisory Council for the past two years. The time spent with Bank team members working to modernize the AHP program reflected their continued commitment and dedication to the production of affordable housing. It has been inspiring to hear from other Advisory Council members as well as program participants how AHP, WISH, and IDEA change lives in our communities. I have used this inspiration within my organization to bring forth new programs and forge forward with renewed vigor. Thank you for allowing me this honor.
I look forward to continuing to serve as a member of this diverse and talented group, which this year welcomed three new members. Holly Benson, Chief Operating Officer of Abode Communities; Dr. Hilary Lopez, Senior Associate at Praxis Consulting Group; and Takao Suzuki, Director of Community Economic Development at Little Tokyo Service Center CDC, each bring a wealth of experience and expertise to our table.
With tremendous gratitude for their service and the many significant contributions each have made to the work of this Advisory Council, we say farewell to Jasmine Borrego, President of TELACU Residential Management; Dean Matsubayashi, Executive Director of Little Tokyo Service Center CDC; and Elizabeth Moore, Managing Partner, Elizabeth Moore & Associates.
Finally, I am pleased to report that in 2019 the Bank will provide over $51 million in funding for the competitive AHP and $9.3 million for the WISH and IDEA programs. These programs provide essential resources as we struggle to ensure that everyone can have a safe, decent, stable place to call home.