Financing affordable housing panel – S&P Housing Summit

The Housing Summit session  “Financing Affordable Housing: Options in Challenging Market Times” addressed both the similarities and differences in affordable public housing, and the ways in which market conditions have impacted the public housing sector. Valerie White, senior director and analytical manager for Public Finance Housing at Standard & Poor’s Ratings Services moderated the panel.  White gave a brief introduction at the beginning of the session which reviewed the difficulties inherent in the housing market, and highlighted the challenges in the market as whole and how they impact the affordable housing industry. She also discussed key market conditions that may place credit pressures on industry ratings over the long term. White then turned the audiences’ attention to Howard Zucker, a partner at Hawkins Delafield & Wood, LLP.

Zucker opened his presentation with a review of the history of government involvement in financial housing, commenting on the progression of Housing Finance Agencies from the turn on the 20th century until the 1980’s.  He briefly introduced the dichotomy between single family mortgage loans and multi-family mortgage loans, and explored the way in which the first state HFA financed each type of loan. At the end of the panel, Zucker had the opportunity to explain his position on the usefulness of state HFAs.  Zucker stated that HFAs are advantageous because they “are mission driven, tax- exempt, and they tailor local operations to fit state needs.” He also stated that HFAs are managed by “sophisticated hands,” have the advantage of “state policies,” and are completely exempt from risk retention rules.” According to Zucker, they are, additionally, an excellent “delivery system for federal housing programs” and most importantly, “target [people with] moderate income.”

Kent Hiteshew, managing director of J.P. Morgan’s Housing Finance Group in the Public Finance Department, reviewed the successes and challenges of state HFAs, and addressed HFAs from a capital markets perspective.  He noted the history of HFAs in the 1960’s through the 1980’s, and noted the particular successes of HFAs in the latter decade. He then addressed the rise of privatized housing finance, which created more “affordable products” and decreased the public popularity of HFAs—although he stated this movement may not have been overall spectacularly advantageous.  Hiteshew then asked “will [HFAs] have a role in federal housing funding policies?”

Mark A. Willis, a resident research fellow at New York University, specifically addressed the housing crisis in terms of low to moderate income individuals and families.  Willis emphasized the problem of debt, stating that “we need to care a lot about how the system is evolving” if we want “people with enough income…to be able to buy a home.”  Willis proposed that we “need to find other products with low risk for low to moderate income [citizens].”

Thomas R. Gleason is the executive director of MassHousing Finance Group.  Gleason opened his presentation by commenting on the precrash state of HFAs, noting that they could increase their footprint at that point because of various advantages they had at the time.  After the market crash, Gleason said, “HFAs had a hard time getting into the market,” they either withdrew and waited, or went forward with non-traditional sources of capital.  Gleason seemed to have a hopeful view of affordable housing finance, because he said that home ownership has been pretty stable, and that HFA collaboration across state lines is important as they attempt to create “brand names in the housing market.”

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