TINA BROOKS
A ‘downgrade’ of bonds
The head of MassHousing, a quasi-public agency that has provided billions of dollars in financing for developers and homebuyers, is urging lawmakers to strike two sections of a $1.25 billion bond bill that would hurt the agency’s bond rating and could force it to shut down.
The bond bill, which has won the support of housing advocates, low-income tenants and nearly 70 lawmakers, includes a provision that would force MassHousing to provide a minimum of $10 million, or 10 percent of its reserve funds, annually to the state. It also would allow the state to place a lien against MassHousing’s assets if the agency doesn’t make the payments.
“As written, the legislation could mean that MassHousing would be obligated to write a check for the commonwealth’s General Fund for more than $170 million every year. This would force MassHousing to shut down its housing programs and in a very short time cause one of the oldest and most innovative housing finance agencies in the country to go out of business,” MassHousing Executive Director Thomas R. Gleason said at a hearing organized by the Legislature’s Joint Committee on Housing last week.
Gleason said the agency supports the bill without those requirements.
The bill includes $500 million for improvements to the state’s public housing developments, as well as $245 million for the Affordable Housing Trust Fund over the next five years.
It also provides millions of dollars for housing programs for people with disabilities and sets aside $125 million for the Housing Stabilization Fund – a resource that has been used to acquire and rehabilitate distressed properties and construct homes that are sold to low-income buyers.
The bill includes an earmark in the stabilization fund for a program that aims to increase homeownership in depressed cities with high concentrations of vacant buildings and assisted housing.
In addition, the proposed legislation would increase the Low Income Housing Tax Credit – which provides state tax credits to investors in multifamily affordable rental projects – from $4 million to $10 million and make the tax credit permanent.
While noting that the bond bill includes funding for critical housing programs, Undersecretary for Housing and Community Development Tina Brooks said Gov. Deval Patrick’s administration does not support the bill’s sections that would require MassHousing to pay an annual fee.
“This particular element would result in a downgrade of existing MassHousing bonds Â… and it would also increase the cost of insurance,” for the agency, Brooks said.
MassHousing raises funds through the sale of tax-exempt and taxable bonds, and uses the money to make low-interest loans to low- and moderate-income homebuyers as well as developers.
‘Extremely Helpful’
Gleason said if an annual fee is imposed on MassHousing it would create concerns for bond rating agencies and likely affect the agency’s bond rating. The agency’s current issuer credit rating is A, which is considered a solid rating.
“This annual payment could likely cause MassHousing to violate the terms of the bond resolutions, indentures and other agreements securing its bonds, exposing the agency to lawsuits from bondholders for substantial damages and the commonwealth to years of complex legal suits and appeals,” he said.
Despite concerns about that aspect of the bill, dozens of people testified in support of the proposed legislation.
Aaron Gornstein, executive director of Boston-based Citizens’ Housing and Planning Association, said passage of the bill is critical because it is needed to help the administration develop a long-term capital budget and keep projects moving forward.
“It will also be extremely helpful for local housing, and agencies and developers who are seeking new sites for affordable housing and need some assurances that state funding will be available,” he said.
CHAPA, and other supporters, are asking the Patrick administration to boost the Department of Housing and Community Development’s bond cap to $200 million from $130 million.
The administration already has committed an additional $30 million on the budget’s capital side for affordable housing, particularly for the renovation of the state’s public housing units. Critics have complained that the state’s public housing authorities have been seriously under-funded over the last several years and a state auditor’s report last year showed that thousands of public housing tenants are living in unsafe and unsanitary conditions.
Restoring the state’s public housing stock is “of the utmost priority,” according to Brooks.
If the bill is passed, housing authorities would be able “to make much-needed repairs and improvements,” said Donna Brown, deputy director of the Massachusetts chapter of the National Association of Housing and Rehabilitation Officials, which represents the state’s 246 housing authorities.
“The bond bill also returns a five-year capital plan, allowing housing authorities to better prioritize, more accurately plan and predictably finance construction projects to extend the life of these irreplaceable housing units,” Brown said in written testimony.
Brooks told lawmakers last week that in addition to the Patrick administration seeking $30 million on the budget’s capital side for public housing, the administration also received a commitment from MassHousing to contribute $40 million for the Affordable Housing Trust Fund.
Sen. Susan C. Tucker, D-Andover, who chairs the housing committee with Rep. Brian G. Honan, D-Brighton, said the committee is likely to issue a recommendation on the bill within two weeks.
“We’re looking forward to getting this bond bill out the door quickly,” she said.
The bill’s sponsors include Honan and Sen. Brian Joyce, D-Milton, along with 68 other lawmakers.
