Chris Neary, Cinnaire’s Vice President for Policy, Research and Advocacy, provides an update on the Build Back Better Plan, the Community Reinvestment Act, and the busy agenda at the FHFA in the latest issue of Policy Pulse.
With Build Back Better Stalled in the Senate, What’s Next?
When Democrats won narrow control of the Senate a year ago this month, they started quickly working to enact their aggressive campaign promises. Two major items on the agenda – the $1.9 trillion American Rescue Plan Act and the $1 trillion bipartisan infrastructure bill – have now been signed into law. While these are landmark measures by any standard, the Biden Administration and Congressional Democrats have been saddled by another piece of unfinished business: The Build Back Better Plan.
After passing the House of Representatives, the Build Back Better Act stalled out in December, when Senator Joe Manchin (D-WV), the crucial 50th vote needed in the Senate, announced he could not vote for the legislation. Democrats remain optimistic that they can eventually reach an agreement with Senator Manchin to pass legislation that resemble Build Back Better, even if it is changed significantly to meet his demands and divided into multiple bills.
What does all this mean for the game-changing investments in affordable housing and community development envisioned in the Build Back Better Act? In the short term, we will be keeping an eye on any potential rekindling of Build Back Better negotiations. If there is a path forward, the bill will be changed with pressure to cut. We will need to be prepared to fight for affordable housing and community development provisions once again.
If a large scale Build Back Better bill does not come together, it’s unlikely we will see investments on the scale envisioned by that legislation. However, there may be other legislative opportunities this year with Democrats eager to show progress on pressing issues – including affordable housing – ahead of the midterm elections in November. Congress will also need to extend funding for the government, which expires on February 18th. President Biden will want to see some more legislative action before his State of the Union address on March 1st.
With the legislative agenda on hold, pressure will also mount on federal agencies and regulators to take action. We anticipate a busy year at federal agencies, including a potential Community Reinvestment Act regulatory update. Read below for some developments on that front.
As a final note, while it’s easy to focus on what’s not being done, it is worth taking stock of the unprecedented level of support affordable housing has received this year. In a recent newsletter, the Housing Partnership Network’s policy team noted that there were historic investments in affordable housing made in 2021. “Congress spent tens of billions of federal dollars for housing and community development and created 15 new programs to address the housing emergency that was made worse by the pandemic,” they wrote. HPN also prepared a helpful Chart of Federal Funding for Housing and Community Development, which gives an overview of the programs that were enacted in the last year.
Community Reinvestment Act
During the Trump Administration, the Office of the Comptroller of the Currency (OCC) undertook a controversial re-write of CRA regulations without the two other federal banking regulators, the Federal Reserve and the Federal Depository Insurance Corporation (FDIC). This led to strong opposition from the affordable housing and community development industries, as well as concern by a variety of stakeholders that inconsistent rules would be counterproductive.
Under new leadership during the Biden Administration, the OCC decided to rescind the controversial rule and finalized that process in December. The OCC, Federal Reserve, and the FDIC have indicated their desire to work together on a new joint rule making this year. This process may be easier due to recent turmoil at the FDIC that resulted in the Trump-appointed FDIC chief resigning. The next step will be another rule making process, which may have a smoother path with new leadership.
Busy Agenda at FHFA, Nominee Named by Biden
President Biden has nominated Acting Director Sandra Thompson to a full term to lead the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. The Senate Banking Committee held a hearing on her nomination on January 13th, where she pledged to receive the racial homeownership gap.
FHFA has recently taken several noteworthy actions:
Published a final rule establishing updated affordable housing goals for Fannie Mae and Freddie Mac, including higher benchmarks for single-family and multifamily housing goals and subgoals focusing on low-income neighborhoods and minority communities.
Sent Duty to Serve goals back to Fannie Mae and Freddie Mac for revision.
Proposed a rule to require Fannie Mae and Freddie Mac submit annual capital plans to FHFA and provide prior notice for certain capital actions
Issued a statement acknowledging the risk that climate change poses to the U.S. housing finance system. In the statement, FHFA instructed Fannie Mae and Freddie Mac, and encouraged the Federal Home Loan Banks, to designate climate change as a priority concern and actively consider its effects in their decision making.
Treasury Releases Final Rule on State and Local Fiscal Recovery Funds
On January 6th, the U.S. Treasury Department issued a final rule for the $350 billion program for state and local governments created by the American Rescue Plan Act (ARPA) to help them respond to the COVID-19 pandemic. The final rule for the State and Local Fiscal Recovery Funds (SLFRF) program provides more detailed guidance on how state and local governments can use the funds, including improvements for affordable housing.
Unfortunately, the final rule did not address a problem identified by Housing Finance Agencies and the affordable housing industry requesting the use of this funding for loans instead of grants on Housing Credit projects.