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Real Estate

Housing authorities see greatest benefit from spending bill

Enhances programs that affect housing finance

A new report from S&P Global Ratings and Moody’s Investors Service show the housing sector could become the greatest beneficiaries of the recently passed spending plan.

On March 23, 2018, President Donald Trump hesitantly signed a $1.3 trillion budget into law that will fund the U.S. government until September 30, 2018.

The plan includes $42.7 billion in total net appropriations for the U.S. Department of Housing and Urban Development. This is up $3.9 billion from fiscal 2017 levels and up $12 billion from Trump’s proposed budget for the agency.

S&P and Moody’s explained that this increases funding for public housing authorities and capital fund financing programs while enhancing programs that affect housing finance agencies and sparing cuts to the community development financial institutions fund.

Public housing authorities and capital funds are the greatest beneficiaries of the fiscal 2018 omnibus spending plan, according to the reports. This partly alleviates the risk to volatile federal funding.

“With demand for affordable rental units at a record high, increases in tenant-based and project-based rental assistance, increases in low-income housing tax credit allocation, and the income-averaging option will benefit the affordable multifamily housing sector,” said Marian Zucker S&P Global Ratings credit analyst.

“This includes multifamily properties' abilities to cover debt service obligations, meet potential loan loss stresses, and improve their overall physical condition, which are all factors we consider in our ratings analysis,” Zucker said. “Therefore, the omnibus spending plan’s good news for the housing sector supports our stable outlook for 2018.”

Moody’s agreed, saying the increase is a much-needed boost to help housing finance agencies combat the lack of affordable housing supply.

“The increase in authority will allow HFAs a greater amount of tax credits to allocate among competing multifamily private-sector developers, resulting in increased multifamily housing production,” Moody’s said in its report. “The increase is particularly positive for HFAs that administer multifamily bond programs.”

“With about $18 billion in multifamily bond programs sponsored by 22 Moody’s-rated HFAs funding more than 5,000 loans, the increase in tax credit authority bodes well for continued multifamily production,” the report said.

But while S&P claims this is great news for the housing industry, some experts disagree. The National Association of Home Builders, for example, said the spending bill does not do “nearly enough to meet the affordable housing needs of this country.”

To read more about what the housing industry thinks of the bill, click here.

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