Expand Housing Trust Fund Aid

Section 1 of the bill would repeal Private Housing Finance Law § 49 to remove the authority for New York State to effect redemptions of HFA bonds under certain circumstances.

Section 2 of the bill would repeal Private Housing Finance Law § 51 to remove the requirement that the Commissioner of Taxation and Finance approve HFA's contracts with the holders of any of its notes or bonds, as to the custody, collection, securing, investment, and payment of any monies of the agency, of any monies held in trust or otherwise for the payment of notes or bonds, and to carry out such contract.

Htfc

Section 3 of the bill would amend Private Housing Finance Law § 1102 to remove the 30 year loan term maximum and substitute 50 years, and change the maximum loan or grant amount per dwelling unit from $125,000 to $250,000.

Section 4 of the bill would provide for an immediate effective date.

Justification

HFA:

a. Right of redemption

Despite the fact that the State has never invoked its redemption right, the provision continues to have an adverse impact on HFA. Any redemption rights granted to a bond issuer, such as HFA in connection with its own bonds, and to the State under this provision are of crucial importance to the buyers of those bonds.

Prospective bond purchasers in many cases base their bond buying decisions on the likelihood that their bonds will be redeemed prior to their scheduled maturity. As a result, HFA, and all bond issuers, are required to detail the specific redemption rights in their bond offering documents.

b. Approval of resolution by Taxation and Finance

The provision in the HFA statute that requires that prior to HFA executing a bond resolution in connection with the issuance of any of its bonds it obtain the written approval thereof of the New York State Commissioner of Taxation and Finance was inserted into the HFA statute in 1961, when HFA was originally created. Ever since its inception, HFA has been required to obtain this approval for all of its bond resolutions.

This bill would repeal the requirement to eliminate an extraordinary administrative burden for HFA's bond issues. When the provision was inserted, certain monies of HFA were (as they still are today) disbursed by the Commissioner. But the monies over which Taxation and Finance had (and has) control were non-bond moneys. Section 51's approval requirement also applies, however, to funds obtained by HFA through bond issues, which the Commissioner of Taxation and Finance has never disbursed.

HTFC

Under current law, HTFC is authorized to enter into contracts with eligible applicants for the furnishing by such applicants of housing for persons of low income, provided that each such contract, among other things, provides that: (i) no payments, grants or loans under such contracts shall exceed a total of one hundred twenty-five thousand dollars per dwelling unit (the "Per Unit Cost Provision"), and (ii) that the length of any loan (the "Term Loan Restriction") shall not exceed thirty years. This bill would make the following changes:

a. Per unit cost provision:

Land and construction costs continue to rise across the State, increasing the cost of all development projects, including affordable housing. While HCR has implemented cost containment measures, the Per Unit Cost Provision in the HTFC statute has not been revised since 2008, when the Per Unit Cost Provision was increased from $75,000 to $125,000. The Per Unit Cost Provision had originally been set at $55,000 and was increased in 2004 to $75,000. It has now been eight (8) years since the last change, and in order to keep pace with the market's increase and continue HCR's effort to provide a range of affordable housing across the State, the per unit maximum must be increased.

To increase production in order to help meet the critical need for affordable housing across the State, HCR will increasingly rely on its tax-exempt bond program. As way of background, HCR has two primary means to finance affordable housing - either through the federal Low Income Housing Tax Credit ("LIHTC 9%") program which is allocated to the State at a level that has been fixed for years. This program historically has a 4 to 5 times demand to supply ratio. HCR can meet increased demand through its other primary means, the issuance of tax-exempt bonds. The tax-exempt bond program allows projects to benefit from as of right 4% low income housing tax credits, but these credits do not bring as much equity to a project as the allocated 9% LIHTC. As a result, some projects will require higher subordinate funding on a per unit basis.

b. Term Loan Restriction Provision:

There are several factors that underlie the need to extend the term of HTFC's subordinate loan programs. These include the following: a) Matching the term of the subordinate loan to the first mortgage. First mortgage products can be longer than 30 years, most often 35. In some cases projects may not be able to benefit from such programs as a result of the Term Loan Restriction Provision. Longer first mortgage terms are sometimes beneficial to the project and help reduce state resources needed for the project.

(b) Assuring value exceeds the amount of subordinate debt. In distressed markets the projected value of the property in 30 years may not exceed the value of the subordinate financing, which causes technical problems with the financing of projects. The ability to extend the mortgage term is one strategy to deal with this issue.

(c) Extending regulatory periods. The ability to have longer subordinate financing term supports the State's goal of creating and preserving affordable housing as HCR can require longer regulatory periods to accompany the longer financing term.

(d) To assure the supportive housing requirement for a continuation of use for 40 years. The limitation of 30 years on the subordinate debt makes this requirement problematic.

Prior legislative history

None.

Fiscal implications

None.

Effective date

Immediate.