Everyone needs a place to call home, be it a place just for the night or for a lifetime. Whether rented or owned, an apartment or a house, a bed in a homeless shelter or a room in an SRO, urban or rural or suburban, home is a basic human need. Yet the demand for safe, decent, affordable housing consistently outpaces availability and has now reached critical proportions, particularly for extremely low-income households in the 11th District states of Arizona, California, and Nevada. A recent study by the National Low Income Housing Coalition estimates the shortage of units affordable and available to extremely low-income renters in the 11th District to be nearly 1.2 million.
2012 was another difficult year for an affordable housing community still reeling from the collapse of the housing market and the ensuing financial crisis. The doors of California's redevelopment agencies have been shuttered, Arizona and Nevada are still suffering the lingering effects of the recession, and billions of dollars in cuts to other local, state, and federal programs have devastated the landscape for development as we have known it.
The good news is that, in an ever-shrinking pool of available resources, the Federal Home Loan Bank of San Francisco's Affordable Housing Program (AHP), funded by 10% of the Bank's net income, continues to provide a strong and reliable source of gap financing for the development of critically needed affordable housing.
The members of the Bank's Affordable Housing Advisory Council are pleased to present this annual report, which summarizes the Bank's community investment activities in 2012.
Competitive AHP Results
The AHP is the cornerstone of the Bank's community investment activities. AHP grants are awarded through a competitive application process to Bank members working with housing developers or community organizations to create rental or homeownership opportunities for very low- to moderate-income families and individuals.
|(Dollars in millions, except subsidy per unit)||2012
|1990 - 2012|
|Number of Applications||201||20||221||5,343|
|Number of Applications||62||9||71||1,958|
|Number of Units||3,471||71||3,542||102,214|
|Average Subsidy per Unit||$9,629||$18,486||$9,797||$6,753|
These results reflect adjustments, cancellations, and modifications to projects as of December 31, 2012.
With challenges abounding, the number of applications submitted in 2012 was at its lowest level since 1998. Tight credit and a scarcity of funds, particularly for the early stages of development, have made it much harder to get projects off the ground. For the projects that did submit applications and were awarded funds in 2012, the average subsidy was approximately $489,000 per project, down from $592,000 just a year ago. Holding on tightly to their existing commitments, affordable housing developers were value-engineering, deferring fees, and building smarter, more economically, and more adaptively, while using the AHP to leverage additional sources and bring those housing units to their local communities.
Grants awarded in 2012 will support a wide variety of projects, including:
- New construction of rental housing for low-income families, seniors, the formerly homeless, or individuals and households with special needs
- Adaptive reuse of vacant schools, hotels, and medical facilities to create affordable apartments
- Building of Habitat for Humanity homes
- Sustainable developments that will be LEED Certified or GreenPoint Rated
- Permanent supportive housing with services for veterans, including senior veterans, female veterans, and veterans with large families
Collectively, AHP grants awarded in 2012 will create 3,542 affordable housing units in Arizona, California, Colorado, Georgia, Idaho, Illinois, Nevada, New York, Pennsylvania, and Texas.
The Bank continually works with the Advisory Council to implement modifications to its programs in response to changing circumstances and shifting priorities. It is sometimes also necessary to make program changes that will help the Bank make the most effective use of its resources. In 2012 the Bank's Board of Directors determined that consolidating the two competitive funding rounds offered each year into one would support the Bank's ongoing efforts to reduce overall operating expenses.
While the Advisory Council recommended continuing to offer two rounds, it recognizes that this decision is responsive to current conditions and appreciates that the Board approved two changes to the AHP Implementation Plan that will help mitigate the impact of conducting just one annual funding competition: the maximum subsidy a project may request was increased from $1 million to $1.5 million and the maximum total subsidy a Bank member may apply for in a single round was increased from $6.5 million to $10 million.
Also, to keep pace with evolving industry standards, the Bank, in consultation with the Advisory Council:
- modified the AHP benchmarks with respect to a project's development cost by moving to a geographically based per-square-foot cost guideline,
- eliminated the tax credit sales price range as a feasibility/need for subsidy benchmark, and
- added clarifying language to the AHP Implementation Plan with respect to sponsor ownership interest for rental projects, the definition of smart growth for the competitive program, and sweat equity requirements for the Bank's two AHP set-aside programs, WISH and IDEA.
Supporting First-Time Homebuyers: WISH & IDEA
In 2012, the Bank allocated $8 million for its two AHP set-aside homeownership programs, with $6.6 million in Workforce Initiative Subsidy for Homeownership (WISH) Program funds allocated to 28 members and $1.4 million in Individual Development and Empowerment Account (IDEA) Program funds allocated to 10 members, to help low- to moderate-income families and individuals become homeowners in Arizona, California, Nevada, and other states where Bank members do business.
WISH and IDEA grants match $3 for every $1 contributed by the homebuyer, up to a maximum grant of $15,000, and are made available through participating Bank members to households earning up to 80% of area median income. The funds can be used for downpayment and closing costs, which can be significant barriers to homeownership. Both programs require participants to complete a homebuyer counseling program administered by a qualified and certified organization.
WISH grants are targeted to working families and individuals who are ready to make the transition from renting to owning. The program can complement or supplement a variety of local, state, and federal homeownership programs. The IDEA program, which has been at the forefront of asset-building initiatives since its inception, is directed at homebuyers who have been saving for the purchase of their first home through an Individual Development Account or participating in their local housing authority's Family Self-Sufficiency homeownership program or a lease-to-own program administered by a nonprofit or government entity.
Funded annually at the discretion of the Bank's Board of Directors, the Access to Housing and Economic Assistance for Development (AHEAD) Program makes grant funds available for projects and initiatives that create or preserve jobs, facilitate improvements to public or private infrastructure, or deliver social services, training or educational programs, or provide other services and programs that benefit low- and moderate-income communities. Since its inception in 2004, AHEAD has awarded over $5 million in grants to support nearly 200 projects.
The program has been very successful in helping members form partnerships with community development organizations. Because the majority of the grant funding awarded by the Bank each year flows through the AHP to support the creation of affordable housing for renters and homebuyers, beginning in 2013, the AHEAD Program will make grant funds available only for economic and community development projects and for housing-related initiatives that are not eligible for the AHP.
AHEAD funds can be used to finance a variety of project predevelopment costs, ranging from studies and project plans to consulting fees or marketing, organizational, and capacity-building activities. Demand for this early-stage funding continues to grow: in 2012, the Bank reviewed 184 applications requesting more than $8 million in AHEAD funding, a 47% increase over 2011, before selecting 30 AHEAD grant winners.
The AHEAD Program is designed to strengthen relationships between Bank members and nonprofit groups that have special expertise in economic and community development. For example, in 2012:
- National Bank of Arizona was awarded $30,000 to support Homeward Bound in offering a financial education program that helps families achieve economic independence. Participants learn about managing limited resources, preparing a monthly budget, identifying and repairing credit issues, establishing good credit, preparing and filing income taxes, establishing and maintaining checking and savings accounts, and preparing to rent market-rate housing or become homeowners. The AHEAD grant will help fund part of a case manager's salary.
- Farmers and Merchants Bank of Central California partnered with Modesto's Center for Human Services to support The Harvesting Futures program, which is designed to help at-risk youth learn skills, gain knowledge, and develop the tools and confidence needed to start their own ventures or be effective employees. This goal is accomplished through participation in community service activities, entrepreneurship education, and a "learning lab" experience in the program's social enterprise. A $30,000 AHEAD grant will be used to refine the entrepreneurship training program and develop a formal business plan for the social enterprise.
- Clearinghouse CDFI received a $50,000 AHEAD grant to help the Solutions Foundation open and operate a self-sufficient thrift store in Las Vegas that can empower its program participants early in their recovery process. The store will rely on community donations of clothes, furniture, electronics, appliances, and other miscellaneous goods, which will be sold to the public. The income generated will be used to rent the retail space and pay employees the minimum wage. The grant will help pay costs of creating the initial infrastructure and operating expenses for the store's first three months.
In total, the AHEAD grants awarded in 2012 will help 18 Bank members support important initiatives that address a wide variety of needs and populations, including:
- Creating or expanding job training programs and employment readiness services specifically targeting at-risk youth, homeless mothers, returning veterans, released prisoners, and others
- Promoting equitable transit-oriented development to reduce the combined costs of housing and transportation for lower-income communities in Los Angeles County
- Developing creativity and imagination among incarcerated youth and young people on probation
- Establishing a leadership institute for members of business cooperatives
- Providing technical assistance and support to establish or grow healthy-food enterprises
- Expanding capacity for targeted microlending and other financial services programs
As the economic environment slowly improves, the Bank's Community Investment Cash Advance (CICA) programs are helping Bank members facilitate business development and expansion in the communities they serve. These CICA advances, or loans, provide members with lower-cost funds to lend for affordable housing, neighborhood revitalization, and economic development activities that benefit low- to moderate-income communities.
Twenty-six Advances for Community Enterprise (ACE) totaling $340 million were made to seven members in 2012, an amount nearly five times greater than the ACE advances Bank members borrowed just a year before. Based on the ACE applications submitted by members, the Bank estimates that these advances, which are used primarily to support loans to small businesses and SBA-insured lending, will help create or retain approximately 1,585 jobs around the country.
The Bank funded 34 Community Investment Program (CIP) advances to five members in 2012, supporting $376 million in single-family loans made to households with incomes at or below 115% of area median income. In addition, the Bank issued 11 CIP standby letters of credit totaling $132 million on behalf of three members to credit-enhance tax-exempt financing for multifamily rental projects.
The always challenging environment for affordable housing and community development makes ongoing outreach, training, and education even more critical. Collaborating with and engaging policymakers and public officials, government agencies, affordable housing advocates, and numerous community and economic development organizations, as well as Bank members and their community partners, is critical to furthering the Bank's mission and meeting its Community Lending Plan goals.
To help members and their partners understand and use the Bank's community programs, in 2012 the Bank conducted:
- Eleven AHP workshops on the competitive application process: two in Arizona, five in California, and four webinars
- Twenty AHP compliance webinars
- Thirteen WISH and IDEA workshops: two in Arizona, one in Nevada, three in California, six webinars, and one teleconference.
- One AHEAD workshop in California
The Bank participated in nearly 100 public and industry events and affordable housing and community development conferences, forums, and meetings, including:
- American Bankers Association Habitat for Humanity Build Day, San Diego, CA
Bank staff joined ABA conference attendees, Bank members, and staff from the Council of Federal Home Loan Banks for a day of construction in conjunction with ABA's annual convention.
- Bridging the Gap with AHP Grant Funds at NeighborWorks Training Institute, Los Angeles, CA
Bank staff created and presented this well-attended workshop as part of the larger NeighborWorks training event.
- Resources and Technical Assistance for Community Development Forum, Las Vegas, Nevada
Bank staff presented information on the Bank's community programs at an event featuring representatives from financial institutions, Nevada nonprofits, HUD, and the Federal Reserve Bank of San Francisco. Several members of the Advisory Council also participated.
- Los Angeles Business Council's 2012 Mayoral Housing, Transportation & Jobs Summit, Los Angeles, CA
Bank Community Investment Officer Jim Yacenda spoke on the opening plenary panel, along with real estate practitioners, government agency representatives, and academic experts, at a summit attended by more than four hundred civic, business, and community leaders. Governor Jerry Brown shared views on the challenges facing the State; Lt. Governor Gavin Newsom gave the keynote address; and Mayor Antonio Villaraigosa brought the event to a close. Bank staff will use the results of the report on housing and transportation corridors produced for the summit by UCLA in reviewing some AHP scoring considerations.
- Foreclosure Prevention and First-Time Homebuyer Workshop, Sherman Oaks, CA
The Bank hosted an event to assist both distressed homeowners and first-time homebuyers, with special guest Congressman Brad Sherman, D-CA, and representatives from member institutions JPMorgan Chase, Wells Fargo Financial National Bank, and Bank of America California.
- Affordable Housing Advisory Council Leadership Conference, Washington, D.C.
Advisory Council Vice Chair Ralph Lippman, Jim Yacenda, and I attended this Federal Home Loan Bank System event convened by the Federal Housing Finance Agency to exchange ideas and discuss common issues.
In 2012, the Bank also redesigned its public website to increase engagement with stakeholders and facilitate participation in its community programs. The new website was launched in January 2013, along with a new quarterly newsletter, Community Works, that shines a spotlight on how the Bank's products and programs help members and their partners make a difference in their communities.
On behalf of the Advisory Council, I would like to thank the Bank's members, Board of Directors, management, and staff, who contributed so much to the achievements presented in this report. I would like to offer the Advisory Council's deepest appreciation to our outgoing member Jack Gardner, whose enthusiastic support, guidance, and, yes, his ever-present wit will be truly missed. Please join me in congratulating our reappointed members, and welcoming our newest Advisory Council member, Don Falk, Executive Director of Tenderloin Neighborhood Development Corporation.
As both an affordable housing advocate and current Chair of the Advisory Council, I believe that the Federal Home Loan Bank of San Francisco is uniquely poised to help address the challenges presented by the changing dynamics of housing in our district states and their local communities and profoundly affect newly developing philosophies about best practices to ensure low- to moderate-income individuals and families are able to obtain decent affordable housing.
I am delighted to report that, as a result of the Bank's 2012 earnings and expected deobligations and return of program funds, the Bank's total AHP contribution for 2013 will be nearly $67 million. Of that, $10 million is being set aside for the WISH and IDEA programs, and nearly $57 million will be available for the single AHP funding competition in 2013. The Advisory Council looks forward to these funds being made available to a broad and diverse array of projects—projects that will reach people in need and offer them a safe, affordable place to call home.
Affordable Housing Advisory Council