Pandemic Puts Homeownership in African American Communities at Risk

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In the post-COVID-19 era, African American homeownership in Los Angeles County is predicted to reach an even more concerning level. During the 2007 recession, foreclosure rates among African American homeowners were three times that of non-Hispanic Whites. According to the recent UCLA Center for Neighborhood Knowledge’s Saving Black Homeownership report, the significant homeownership gap between these groups had only started to close between 2010 and 2019, albeit at an extremely slow pace. However, whatever progress made has now been disrupted by COVID-19.

Compared with non-Hispanic Whites, African American households experienced more job losses during this pandemic. As a result, this vulnerable demographic was about twice as likely to have hardship with mortgage payment. Between April and October 2020, about 3,665 new preforeclosure notices were served. Unfortunately, this rate is more than one-and-a-half times greater in African American neighborhoods.

To preempt the crisis, the UCLA study recommends a series of actions, including:

  1. Prompting elected officials to secure a plan before the inevitable post-COVID-19 evictions and foreclosures happen. This should include a Mortgage Relief Fund or assistance program to cover all or partial missed mortgage payments for low- and moderate-income homeowners, with consideration to the most vulnerable homeowners and neighborhoods.
  2. Continuing to monitor developments in real-time and identifying homeowners who fall behind on their payment.
  3. Addressing funding and access to resource inequalities, such as supporting organizations that can reach struggling homeowners, including those who don’t know about or have trouble accessing resources that can reduce foreclosure risk.
  4. Requiring lenders to provide disclosure to mortgage holders about housing counseling and other available resources.
  5. Building on current policies for an inclusive solution for all homeowners in Los Angeles County. Improving existing policies allow local governments to prioritize and give support to the most vulnerable families and neighborhoods.

It is crucial to take action on the current challenges to African American homeowners. Addressing the needs of at-risk homeowners’ calls for policy reforms with the goal of keeping families in the home by helping those who are behind on their mortgage. Time is of the essence, as thousands of vulnerable residents are certain to lose their homes in the near future.

Read the full UCLA report

Century Wins Environmental Finance Municipal Bond of the Year

Century Housing Municipal Bond Awarded Sustainability Bond of the Year

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Century Wins Environmental Finance Municipal Bond of the Year

Century Housing’s 2020 Sustainability Bond, which raised $85 million to directly support quality affordable housing throughout California, today received the Sustainability Bond of the Year Award from Environmental Finance in the US muni bond category. These Awards seek to recognize those bonds that excel, innovate in and contribute to the successful development of the market for environmental bonds.

With its June 2020 bond offering, which was twelve times over-subscribed receiving more than $1 billion in orders, Century Housing became the first Community Development Financial Institution (CDFI) to come to market with a municipal bond CUSIP. Century was also the first CDFI to be rated by two leading public credit rating agencies, Fitch and S&P (rated AA and AA-, respectively). The bond carried a second-party opinion by Sustainalytics attesting to both the environmental and social benefits of the housing created and preserved by this bond. Underwritten and marketed by Wells Fargo Securities as sole manager and offered through the California Municipal Finance Authority, the bond was California tax exempt and federally taxable.

Alan Hoffman, Senior Vice President and CFO of Century Housing, said, ”It is heartening to see the overwhelming investor interest in affordable housing, especially at a time when the COVID pandemic exposes how vulnerable our low-income families, seniors, and veterans really are to the lack of safe, secure, quality housing. We are honored that the Environmental Finance Bond Awards’ judges have recognized Century for its ability to innovate and execute with this bond and hope that the award also reflects our commitment to sustainable, energy-efficient affordable housing in a time of tremendous need.”

Century provides financing for all stages in the development of affordable housing including acquisition, bridge, construction and permanent loans. For more than 25 years, Century’s expertise and quick, reliable execution have allowed affordable housing developers to secure the financing they need, including all-important early stage financing, allowing them to take advantage of programs including Low Income Housing Tax Credits and current COVID-related federal aid like Project Homekey.

More about the award at the Environmental Finance site.

Street View of Century Housing Office in Culver City

Century Housing Announces Bond Offering of up to $100 million to Fund Affordable Housing Development

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Street View of Century Housing Office in Culver City

Century Housing will issue up to $100 million in ESG municipal CUSIP bonds to advance their mission throughout the state of California, becoming the first CDFI to come to market with a municipal bond CUSIP and the first CDFI to be rated by both Fitch and S&P (AA and AA-, respectively).  The third-party opinion by Sustainalytics attests to both the environmental and social benefits that will be created by the housing made possible by these bonds.  The bonds will be underwritten by sole-senior manager Wells Fargo Securities.

Ron Griffith, President & CEO of Century Housing, said,” Century has financed approximately 45,000 affordable homes providing  a foundation for low-income families, seniors, and veterans to regain their dignity, health, and work prospects in a safe, environmentally sustainable setting. This offering will accelerate our ability to serve our mission and deliver financing exactly where it is needed most.”

“Century’s bonds provide an opportunity for investors to support affordable housing initiatives throughout California, in a manner that is both socially responsible and sustainable, given its Sustainability Bond designation and second-party opinion from Sustainalytics,” said Peter Cannava, Managing Director at Wells Fargo Securities.  “Wells Fargo is proud to share and support Century’s goal of creating safe, decent and affordable housing, and building stronger communities of promise.”

The bonds will be federally taxable and state tax-exempt.  Century expects to provide early stage financing, including acquisition, bridge, and construction loans for developments, most of which will subsequently be financed  with Low Income Housing Tax Credits (LIHTC).

Ron Griffith and Alan Hoffman, Century’s Senior Vice President & Chief Financial Officer, discussed the unique structure of the bond offering with Donna Kimura in a story published in Affordable Housing Finanance (AHF) Magazine.

 

California Developers’ Conference

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The 2018 Annual California Developer’s Conference, co-hosted by Century, brought together affordable housing developers, lenders, and investors to share insights, connections, and hors d’oeuvres at the Beverly Hills Hotel. Panels covered federal, state, and local issues and developer concerns in a post-tax reform world. Chris Thornberg returned as keynote speaker to paint a positive picture of the economy while encouraging developers to support all types of housing development, noting that market-rate housing helps free up rent-controlled housing to low-income residents. You can download Mr. Thornber’s presentation and the presentation from the Federal Update panel, below.

Chris Thornberg’s Keynote Presentation

Federal Update Presentation by Michael Novogradac, Todd Crow, and Fred Copeman

Developers and investors think big at Developers’ Roundtable

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The 15th Annual California Developers’ Roundtable hosted by Downs Pham & Kuei, LLP and Century brought together an overflowing crowd of California’s top affordable housing developers, lenders, and investors at The Peninsula Hotel in Beverly Hills on March 3, 2015.

“The mood was upbeat to say the least. Optimistic energy and conversation filled the room upon hearing the positive market outlook on interest rates, rental housing starts, the increasing need for Affordable Housing, especially in California. An impressive array of speakers and attendees were on hand to reinforce the depth of experience and ability this group has to continue to make a positive impact on Affordable Housing going forward. We are in good hands to meet the changing environment and challenges of this mission,” said Mr. Kelly Sands, President of ICON Builders, who attended the conference.

This year’s panel discussed, among other topics, the local economic forecast and market conditions, the future of debt financing, and developer opportunities. According to Christopher Thornberg, Founding Partner of Beacon Economics and a speaker at the event, “California was among the nation’s stronger economies in 2014 with the labor market turning a corner, but there is also growing inequality of income and wealth, and a lack of housing that has resulted in an exodus of families with incomes of under $100,000 from the state.

Six years ago, the employment outlook and real estate industry were facing tough times. However, as 2015 begins, economic indicators are more favorable. “With the increase in financial resources and new funding through state and federal programs, the outlook for affordable housing looks encouraging,” said Aaron Wooler, SVP of Century, in the debt financing panel.

While developers are waiting for the new AHSC and VHHP funding sources, as well as LIHTC and bond allocations, the event gave everyone an opportunity to discuss larger issues and also share some creative tidbits. Peter Barker, President of Valued Housing, said, “Opportunity arises with innovative thinking. For example, obtaining an independent appraisal commissioned by a developer showed a FMV significantly above purchase price, which helped to generate additional credit in the recapitalization model.”

It was exciting for Century to be a part of this year’s California Developers’ Roundtable, and we hope to see everyone back next year.

 

 

See Aaron at the NH&RA Developers Forum

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Our Senior Vice President, Aaron Wooler, will be speaking on the “Policy & Programs in Context: How Will Affordable Housing Fare in 2013 and Beyond” panel at the National Housing and Rehabilitation Association’s 2013 Spring Developers Forum held Wednesday, May 8th, in Marina del Rey. Learn about the future of affordable housing finance and speak with Aaron about your next project. You can find event and registration information at the event site.

Some Cause for Celebration

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Everyone knows about the “Fiscal Cliff,” which was probably more like a small hillock.  And by now, most folk know that Congress and the President figured out a last minute (actually, it was after the last minute, but who’s counting) compromise to avoid the tax increase components of the problem.  But the popular press has concentrated on the costs and benefits for individuals, families and big businesses.  There were some features in the H.R. 8, the American Taxpayer Relief Act of 2012 (ATRA), that will change some rules for developers of affordable housing as well.

Low-Income Housing Tax Credits (LIHTCs):  Back when the LIHTC was created, the tax credit rates for the two forms of LIHTC (i.e., the “9%” and “4%” credits) were actually nine and four percent.  However, those rates were allowed to float over time and have gone up and down depending upon capital market forces.  Novogradac & Company and other firms have reported those LIHTC percentages, which have exceeded 9% in some years (infrequently) and been as low as 7.5% in some recent years.  As part of the Housing and Economic Recovery Act of 2008 (HERA), Congress fixed the credit percentage for 9% LIHTCs at nine percent, and that provision had been extended, but was due to expire at the end of 2012, which would have returned the floor rate for 9% LIHTCs to the floating level, and probably have dropped it as much as one-sixth.

 

Unfortunately, they did not also fix the rate for 4% LIHTCs, and that has continued to decline, until it is now below 3.25%.

 

ATRA, which addressed the tax side of the “Fiscal Cliff,” extended the floor percentage for 9% LIHTCs until the end of 2013.  It also redefined the applicability of the higher rate by applying it to allocations made by state housing finance agencies before January 1, 2014, rather than linking it to the “placed in service date,” as it had in the past.  That effectively extends the extended floor rate into 2014 for previously allocated LIHTCs and 2015 for LIHTCs allocated in 2013.  This change does not apply to commitments of future year LIHTCs during 2013.  And, once again, the 4% LIHTCs were not included in this extension.

New Markets Tax Credits (NMTCs):  Although NMTCs are not directly useful for housing developments, they have frequently been used to subsidize the nonresidential portions of mixed use developments, especially transit oriented development.  ATRA retroactively extended the NMTC program for 2012 and 2013, provided for annual allocations of $3.5 billion, and extended the time for reallocated unused funds until 2018.

Military Housing Allowance:  ATRA extended a provision that allows military families to exclude their basic housing allowance from their income for purposes of calculating whether the household qualifies as a low-income tenant until December 31, 2013.  This will permit military families who qualified as low-income under this provision to stay in their current homes, and others to qualify for housing assistance.

Mortgage Forgiveness Debt Relief Act:  Sometimes just called the Mortgage Debt Relief Act, adopted in 2007, provided a significant tax benefit for homebuyers who received some form of debt forgiveness as part of resolving their home mortgage problems.  Normally, if a taxpayer receives a debt reduction, the cancellation of debt is treated as income for tax purposes.  During the mortgage crisis of the past half dozen years, many thousands of homebuyers negotiated mortgage principal reductions, or agreed to “short sales,” in order to escape unsupportable mortgage debt.  The Mortgage Debt Relief Act allowed taxpayers to exclude the cancellation of debt from their incomes for tax purposes.  This Act was scheduled to sunset at the end of 2012, but ATRA extended it for another year.  Loss of this tool would have adversely affected the 2012 National Mortgage Settlement agreement entered into between most states and the five largest mortgage servicers.

Mortgage Insurance Premium Tax Exemption:  ATRA also reinstated the deductibility of private home mortgage insurance premiums in certain cases.  Originally created in 2007 as part of the Tax Relief and Health Care Act of 2006 for one year and later extended, this deduction expired at the end of 2011, but has now been reinstated for tax years 2012 and 2013.  While the full deduction is only available to those with taxable incomes of $100,000 or less, taxpayers with incomes of less than $110,000 qualify for a proportion of the total.

Unemployment Insurance Benefits (UIB):  While not strictly a housing program, the Federal Emergency UIB program has become a lifeline for many hundreds of thousands of Americans who lost their jobs and have exhausted their state UIB eligibility of 26 weeks.  Historically, Federal UIB payments were provided to the states for up to 99 weeks of eligibility in times of recession.  Earlier changes in 2012, adopted by Congress and signed by the President, modified the extension period, limiting it to 73 weeks in states with the highest unemployment rates (including California) and reducing the extension period to 40 weeks in states with lower rates of unemployment.  In California, this extension spared about 400,000 unemployed workers from losing their benefits at the end of 2012. However, ATRA does not extend additional UIB for those who have already exhausted their eligibility, and the funding may be cut as part of the sequestration process that was deferred for two months (see below).

The extension will allow the unemployed to keep paying rent, and feeding their families for a little while longer.

“Fiscal Cliff” Part II:  What ATRA did not do was address the spending side of the Federal Budget, Debt and Deficit issues facing the President and Congress.  It did push off the sequestration issue for two months to allow the new Members of 113th Congress, in both the House of Representatives and the Senate, to be sworn in, find their offices, elect their leadership and settle into their new committee assignments.

However, Fiscal Cliff, Part 2, the battle over expenditures and raising the debt limit has already been joined between those who would cut deeply into social service programs and entitlements, and those who want to preserve the safety net for those hardest hit by the recession and slow recovery.  Stay tuned for more debate and conflict in the halls of power.