Programs like Section 8 and PBRA allow low-income families to rent market rate housing, taking advantage of the broad offering of privately owned and operated properties. Programs like HOME, CDBG, FHA Apartment and Rural Housing programs allow developers to address financing shortfalls often associated with affordable housing properties and stimulate meaningful development and preservation activity as a result. Homelessness Assistance Programs provide funding to serve individuals and families across the United States who are affected by homelessness; and Section 811 and 202 programs provide assistance for elderly and persons with disabilities.

In order to address housing affordability challenges for all Americans, significant and sustained increases in funding for these programs is essential. Congress, through recent economic stimulus and recovery packages, has done much to preserve and increase funding for many of these critically important subsidy programs. Sustained increases in funding for these critical programs will enable us to tackle homelessness, greatly reduce protracted Section 8 waiting lists and provide families and individuals with the kind of services and resources that can truly make a difference and hopefully effect meaningful changes in the stability and economic security of low- and middle-income families, especially BIPOC households.

Each of these programs must be freshly examined even as funds are disbursed to identify reforms that will ensure more efficient and effective ways to administer these programs and lead to better outcomes for the families and individuals they seek to serve.

Countless research pieces underscore the lasting impact of a community on a person’s economic and health outcomes and the indisputable benefits of living in areas that have lower poverty rates and access to good schools, reliable and affordable transportation networks and employment opportunities. Research by Raj Chetty, et al., estimated that the household incomes of children of Housing Choice Voucher holders who moved to high-opportunity communities at birth will increase by $214,000. However, too often, BIPOC families who wish to use a voucher to attain better housing in a neighborhood of their choice, whether in the community where they currently reside or in one they deem to be higher-opportunity, face difficulty and programmatic barriers.

There are multiple areas of needed reform, investment or expansion in existing federal programs:

Section 8 Housing Choice Voucher Program

The Section 8 Housing Choice Voucher program has long served as America's primary method for aiding 2.1 million low-income households with rental assistance. This program helps millions of Americans find homes in communities near good schools, jobs and transportation services, but reforms are needed to expand private industry participation. Funded by HUD and administered by local public housing authorities (PHAs), the program provides subsidized rents for qualifying low-income families in private rental housing, including apartments.

The program’s potential success is limited by too many inefficient and duplicative requirements, which discourage private housing providers from accepting vouchers. The program has also been plagued with a flawed and volatile funding system that has undermined private-sector confidence in the program. A U.S. Department of Housing and Urban Development (HUD)-funded study found that 68 percent of rental property owners in the study’s dataset who do not accept Section 8 voucher holders had, in fact, accepted them previously.

The program remains hamstrung despite previous Congressional and Administrative attempts at reform, and federal policymakers must again renew efforts to adopt common-sense reforms that could help control costs, improve the program for both residents and property owners, and increase private housing participation. These reforms must include:

• Establishing a reliable funding system for administrators and property owners.

• Providing financial incentives/participation bonuses to property owners in low-poverty areas.

• Streamlining the property inspection process, especially for those units in buildings financed/inspected under other federal housing programs, such as LIHTC.

• Helping renters with security deposit assistance.

• Funding local PHA investment in on-staff property owner liaisons. According to Poverty & Race Research Action Council (PRRAC), support for property owners like this can often lead to greater participation.

• Simplifying rent and income calculations.

• Extending the contract term for project-based vouchers from 15 to 20 years.

Lawmakers must also reinforce the voluntary nature of the program. Congress explicitly made participation voluntary because of the regulatory burdens inherent in the program. However, state and local governments are enacting laws that make it illegal for a private owner to refuse to rent to a Section 8 voucher holder. Recent examples include “source of income discrimination” provisions passed by a number of cities. While often well intentioned, such mandates are self-defeating because they greatly diminish private-market investment and reduce the supply of affordable housing.

Rental Assistance Demonstration (RAD) Program.

The apartment industry has long supported RAD, which was established in 2011 as an affordable housing preservation strategy for public housing authorities (PHAs). The RAD program has done much to preserve and renovate existing housing affordability stock, but it needs additional funding.

RAD allows PHAs to convert public housing properties at risk of obsolescence or underfunding into project-based vouchers or rental assistance contracts under the Section 8 program by allowing them to leverage private capital to address capital needs. This enables housing authorities to work with private sector developers and managers to preserve their affordable housing stock. The HUD Section 202 and 811 programs are also able to participate in this type of conversion.

RAD is designed to reverse the trend of lost affordable units by accessing private capital to make up for related funding shortfalls. Congress should increase funding for this innovative program to prevent further public housing units from falling into obsolescence and protect the long-term housing stability of those who rely on this housing. Investments in RAD will leverage public-private partnerships to better protect the housing stability of the renters, of all backgrounds and improve outcomes across the board.

FHA Apartment Programs

FHA Apartment programs are an important source of capital supporting apartment construction and redevelopment.

FHA Apartment is best known for offering a source of construction debt to developers in addition to those offered by bank and other private construction capital sources. It also serves borrowers with long-term investment goals as the only capital provider to offer 35-40-year loan terms. FHA lending is essential to borrowers in secondary markets, borrowers with smaller balance sheets, new development entities, affordable housing developers and non-profit firms, all of which are often overlooked or underserved by private capital providers. It is important that FHA continues to be a credible and reliable source of construction and mortgage debt. FHA not only insures mortgages, but it also builds capacity in the market, providing developers with an effective source of construction and long-term mortgage capital. Federal policymakers should increase funding FHA’s Apartment Programs.

Community Reinvestment Act (CRA)

The Community Reinvestment Act was established in 1977 and provides guidelines for depositories activities in serving low- and moderate-income neighborhoods through providing loans, investment, deposits and other banking services. CRA has the potential to have a meaningful impact in improving housing equity and opportunity. But to achieve this goal, the regulatory framework needs modernization. Today’s banking system does not look anything like it did in 1977 or intermittent years where CRA was changed. Banking regulators have proposed a framework to modernize the approach to CRA. This important step to maintain CRAs focus on serving lower- and middle-income communities must:

• Include greater incentives for banks to provide loans for apartment apartments that include middle-income housing.

• Update the methodology for determining assessment areas (AA) which today neither reflects the current nor the future state of banking.

• Update the guidelines regarding depository investment in the Low-Income Housing Tax Credit (LIHTC) program, in which banks invest heavily to meet CRA requirements.

Lastly, as policymakers look to reform the CRA, the three main banking regulators, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation should work in concert to finalize a new framework that is harmonized among the regulators, a reality that does not exist today given the separate approaches each has undertaken to date.

Land accounts for approximately 10 to 25 percent of an apartment project’s cost, and even more in high-cost areas. Developers also often struggle to find developable land in urban areas. Yet the federal government as well as many localities own underused or abandoned land or buildings that could be used for affordable housing.

Making good use of these lands and buildings requires strong public-private partnerships. The private sector contributes the investment dollars and expertise, and the government provides the land and helps facilitate a streamlined approval process. In the end, such partnerships produce affordable apartments while also boosting economic development. Policies like these have the potential to improve affordability, mobility and equity while improving the overall economic viability of entire communities.

Private, public and non-profit rental housing providers rely on the eviction process as their only legal remedy to recover possession of a unit to maintain the safety, peaceful enjoyment and successful operation of their communities. While most eviction complaints are premised on non-payment of rent, other causes include lease violations and criminal activity. This process is an essential property management tool and is needed to ensure the continued operational and financial health of a property.

Innovative policies can help residents avoid displacement from their current housing or find a housing solution that is right for them. Policies that provide and appropriately fund programs to assist residents facing financial hardships, like the Emergency Rental Assistance Program (ERAP), can protect renters and housing providers from unnecessary disruption and loss. ERAP could be more effective if resources were provided directly to housing providers to ensure they are used for their intended purpose. Property owners can also mitigate evictions by working with affected residents on payment solutions and flexible lease terms, and helping residents secure public and private rental assistance funds.

Given the complex nature of housing policies at the state and local level, federal policymakers should refrain from applying a one-size-fits-all approach; and instead look for ways to increase the supply of affordable housing and provide those families and individuals in need with the assistance that ensures they remain in stable housing. The appropriate federal role in evictions is leveraging federal dollars to help at-risk residents avoid eviction in the first place and boosting efforts to produce affordable housing options.

Recent administrations have actively expanded and/or altered various fair housing rules and policies. However, the resulting regulations and guidance have created uncertainty for housing providers and, in some instances, offer interpretations that differ from prevailing legal outcomes. Notably, HUD should align their disparate impact standards with the Supreme Court’s decision in Texas Department of Housing Communities Affairs v. The Inclusive Communities Project, Inc. The housing industry has long-raised concerns that the broad use of disparate impact theory could create liability for conducting ordinary and necessary business practices. While the opinion upheld the use of disparate impact liability under the FHA, the Court offered new analysis and limitations on the use of the theory that should be fully incorporated in HUD’s rules and guidance.

As HUD and federal policy makers continue to look at the Disparate Impact Rule, HUD must ensure their interpretation of disparate impact liability is compatible with the Supreme Court’s rulings on the matter. Policymakers should also ensure that guidance exists to help housing providers execute necessary business practices without running afoul of fair housing requirements.

Existing credit scoring models, like FICO Classic, which drive approvals, interest rates and other terms of apartment leases, car loans, insurance products, home mortgages and other financial products often do not accurately reflect the creditworthiness of renters. While more credit reporting agencies and central data aggregators are collecting alternative data such as rental payments, medical payments, utility payments and other payment records, more needs to be done by policymakers and regulators to increase adoption.

The impact of using static and limited financial data to determine someone’s creditworthiness and overall financial stability disproportionately impacts BIPOC communities. According to the Urban Institute, “as of October 2020, 31.5 percent of Hispanic/Latine consumers and 45.1 percent of Black consumers had subprime credit scores, but only 18.3 percent of white borrowers did. Using alternative data could provide an on-ramp that could allow many of these consumers to improve their credit prospects. evThese data could enable credit scoring for more than 50 million currently unscoreable consumers and raise credit scores for those with thin files.”

Apartment living now attracts a wide variety of Americans and will continue to do so, making it all the more important that credit reports and scoring models are modernized and adopted so as not to prevent our nations renters from being put at a financial disadvantage. The federal government should promote voluntary policies that give people flexibility to build wealth without owning real estate and through incentivized savings. Federal regulators, with the support of Congress, should continue to push for greater adoption of alternative credit scoring models that better enable renters to build a financial and credit profile that more accurately portrays their fiscal stability.

In advocating for policy changes to increase the use of rental payment data, policymakers should understand the full legal and risk landscape surrounding rental reporting that property owners face. NMHC’s 2022 White Paper - "Renter Payment Reporting: Considerations for Rental Housing Operators,” is a great resource to help policymakers explore the issue.

Flood Insurance

Floods are the most common natural disaster in the United States. The National Flood Insurance Program (NFIP) ensures that affordable flood insurance is available at all times, in all market conditions for every at-risk rental property. These include more than just high-rise apartment properties in urban centers and extend across every state to include rental homes of all sizes and types. Federal policymakers must work to ensure that all rental properties continue to have access to affordable, quality flood insurance through the NFIP to not only lessen taxpayer risk in the wake of a flooding event but to also help manage the increasing costs of operating housing that is affordable.

Congress must also look for ways to ensure that the NFIP remains attainable and affordable to all rental property owners. As Congress and other federal policymakers look to reauthorize and reform the NFIP, they should:

• Provide for a long-term reauthorization of the program to create market certainty that allows the apartment industry to meet soaring rental housing demand.

• Expand the NFIP to include Business Interruption coverage for rental properties.

• Allow for NFIP blanket coverage for owners who own several rental housing properties or garden style communities.

• Provide Replacement Cost Value (RCV) instead of Actual Cost Value (ACV) to damaged apartment properties.

• Ensure that all rental properties continue to have access to affordable, quality flood insurance through the NFIP and federal mitigation and resiliency resources should be a top priority for Congress and federal policymakers in their efforts to improve housing and racial equity.

Flood Mitigation

FEMA (Federal Emergency Management Agency) currently administers several mitigation grant programs to reduce damage, claims, and overall risk in the event of a natural disaster such as flooding. While apartment communities are not explicitly excluded from eligibility for existing FEMA funds, the grant programs are overwhelmingly focused on primary, single-family homes. FEMA has only recently focused attention on the importance of mitigation efforts for properties that cannot benefit from traditional mitigation techniques like building elevation.

Unfortunately, many of the recommendations for alternative methods of mitigation that FEMA has made to property owners are impractical for apartment communities and the majority would not afford any flood insurance premium reduction despite the large cost of implementation. This leaves mitigation out of reach for most small, affordable property owners in flood prone areas.

As Congress and federal policymakers look at improving our nation’s flood resiliency as part of NFIP reform and in other areas, they should:

• Require FEMA to undertake further actuarial work and issue alternative mitigation guidance specific to apartment property owners that is both realistic, cost effective and would result in premium reductions under the NFIP.

• Expressly authorize small businesses and apartment firms to be eligible for existing mitigation programs or consider establishing an apartment and commercial property specific mitigation grant program to address the unique challenges faced by these property owners.

Examples of actions that the federal government should incentivize at the local level include:

• Deferring taxes and other fees for certain apartment development.

• Making available underutilized land.

• Streamlining the development and approval processes with fast-tracking programs.

• Adopting by-right zoning for apartment development.

• Reducing parking and other land requirements.

• Establishing density bonuses.

• Enacting separate rehabilitation codes.

• Creating an efficient public engagement process and reducing the influence of NIMBYism.

• Using property tax abatements.

• Restricting the use of counter-productive housing policies like rent control and mandatory inclusionary zoning that deter housing investment by the private sector.