Housing Issues in the 115th Congress
Congressional research reportFeb 25, 2019
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Housing Issues in the 115th Congress
Katie Jones, Coordinator
Analyst in Housing Policy
Eugene Boyd
Analyst in Federalism and Economic Development Policy
David H. Carpenter
Legislative Attorney
Mark P. Keightley
Specialist in Economics
Maggie McCarty
Specialist in Housing Policy
Libby Perl
Specialist in Housing Policy
N. Eric Weiss
Specialist in Financial Economics
Updated February 25, 2019
Congressional Research Service
7-....
www.crs.gov
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SUMMARY
Housing Issues in the 115th Congress
A variety of housing-related issues were active during the 115th Congress. These issues included
topics related to housing finance, tax provisions related to housing, housing assistance and grant
programs administered by the Department of Housing and Urban Development (HUD), and
regulatory review efforts underway at HUD. In some cases, the 115th Congress considered or
passed legislation related to certain housing issues, such as mortgage-related provisions enacted
as part of broader financial “regulatory relief” legislation and particular housing-related tax
provisions. In other cases, Congress conducted oversight or otherwise expressed interest in
actions taken by HUD or other entities involved in housing, such as Fannie Mae and Freddie
Mac.
Many of the housing-related topics that were of interest during the 115th Congress are ongoing
issues, though some involved particular actions that took place during the 115th Congress. Issues
of interest during the Congress included the following:
Housing finance issues included changes to certain mortgage-related requirements and
other housing provisions included in broader financial legislation that became law in
May 2018. Congress also expressed ongoing interest in certain issues related to the
Federal Housing Administration (FHA): (1) a forthcoming final rule on FHA’s
requirements for insuring mortgages on condominiums and (2) the level of the mortgage
insurance premiums charged by FHA. Comprehensive housing finance reform that
would address the status of Fannie Mae and Freddie Mac is also an ongoing topic of
interest, although the 115th Congress did not actively consider comprehensive housing
finance reform legislation.
R45296
February 25, 2019
Katie Jones, Coordinator
Analyst in Housing Policy
-redacted-@crs.loc.gov
Eugene Boyd
Analyst in Federalism and
Economic Development
Policy
-redacted-@crs.loc.gov
David H. Carpenter
Legislative Attorney
-redacted-@crs.loc.gov
Mark P. Keightley
Specialist in Economics
-redacted-@crs.loc.gov
Maggie McCarty
Specialist in Housing Policy
-redacted-@crs.loc.gov
Libby Perl
Specialist in Housing Policy
-redacted-@crs.loc.gov
Tax issues included changes to housing-related tax provisions in the tax revision law
enacted at the end of 2017 (P.L. 115-97); extensions of other, temporary housing-related
tax provisions through 2017 by the Bipartisan Budget Act of 2018 (P.L. 115-123); and
changes to the low-income housing tax credit in the Consolidated Appropriations Act,
2018 (P.L. 115-141).
Housing assistance issues included considerations related to HUD appropriations,
please call 7-.... or visit
www.crs.gov.
ongoing initiatives or proposed changes to HUD rental assistance programs, committee
consideration of legislation to reauthorize the Native American Housing Assistance and
Self-Determination Act (NAHASDA), issues related to the housing response to presidentially declared
major disasters, and a variety of introduced bills that were meant to address housing affordability issues in
various ways.
N. Eric Weiss
Specialist in Financial
Economics
-redacted-@crs.loc.gov
For a copy of the full report,
HUD began a variety of regulatory review efforts in keeping with Executive Order 13777, which directed
federal agencies to evaluate existing regulations and identify opportunities for reform. Specific HUD
actions included suspending a rule related to small-area fair market rents (the suspension has since been
voided by a preliminary court injunction); initiating a broad review of manufactured housing regulations;
suspending certain regulations governing how HUD funding recipients must comply with the requirement
to affirmatively further fair housing; and publishing an Advanced Notice of Proposed Rulemaking seeking
public comment on whether its regulations related to disparate impact and the Fair Housing Act should be
amended.
Housing and mortgage market conditions provide important context for these issues, although housing markets are generally
local in nature and national housing market indicators do not necessarily accurately reflect conditions in specific
communities. Generally speaking, owner-occupied housing markets in recent years have been characterized by rising house
prices, relatively low levels of housing starts and housing inventory, and relatively strong home sales. Rising house prices
combined with rising mortgage interest rates have raised concerns about the affordability of buying a home, although interest
rates remain low by historical standards. Rental housing markets have also raised affordability concerns. Nearly 21 million
renter households are considered to be cost burdened, meaning they spend more than 30% of their incomes on rent. The share
of households who rent, rather than own, their homes has increased in the years since the housing market turmoil that began
around 2007, contributing to lower rental vacancy rates and increasing rents. Increases in household income in recent years
have generally not kept pace with increases in house prices or rents, contributing to affordability concerns.
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Housing Issues in the 115th Congress
Contents
Introduction ..................................................................................................................................... 1
Housing and Mortgage Market Conditions ..................................................................................... 1
Owner-Occupied Housing Markets and the Mortgage Market ................................................. 2
Rental Housing Markets ............................................................................................................ 9
Housing Finance Issues in the 115th Congress .............................................................................. 13
Financial “Regulatory Relief” Legislation and Housing ......................................................... 13
Housing Finance Reform ........................................................................................................ 15
Federal Housing Administration Mortgage Insurance Premiums ........................................... 18
FHA Requirements for Insuring Mortgages on Condominium Units ..................................... 19
Housing-Related Tax Issues in the 115th Congress ........................................................................ 21
Housing Provisions in the Tax Revision Law ......................................................................... 21
Housing Provisions in Tax Extenders Legislation................................................................... 23
Changes to the Low-Income Housing Tax Credit ................................................................... 24
Housing Assistance Issues in the 115th Congress .......................................................................... 25
HUD Appropriations ............................................................................................................... 25
HUD Rental Assistance Programs........................................................................................... 27
Native American Housing Programs ....................................................................................... 31
Housing and Disaster Response .............................................................................................. 33
Other Affordable Housing Proposals ...................................................................................... 35
HUD Regulatory Reviews During the 115th Congress .................................................................. 36
Small Area Fair Market Rents ................................................................................................. 37
Manufactured Housing ............................................................................................................ 38
Affirmatively Furthering Fair Housing ................................................................................... 39
Disparate Impact Standard under the Fair Housing Act .......................................................... 41
Figures
Figure 1. Year-over-Year House Price Changes (Nominal) ............................................................. 3
Figure 2. Mortgage Interest Rates ................................................................................................... 4
Figure 3. Housing Starts .................................................................................................................. 6
Figure 4. New and Existing Home Sales ......................................................................................... 7
Figure 5. Share of Mortgage Originations by Type ......................................................................... 9
Figure 6. Rental and Homeownership Rates ................................................................................. 10
Figure 7. Rental Vacancy Rates ......................................................................................................11
Figure 8. Share of Cost-Burdened Renter Households by Income ................................................ 13
Contacts
Author Contact Information .......................................................................................................... 44
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Housing Issues in the 115th Congress
Introduction
A variety of issues related to housing were active during the 115th Congress, including issues
related to housing finance, housing-related tax provisions, housing assistance and grant programs
(including in response to presidentially declared major disasters), and actions undertaken by the
Department of Housing and Urban Development (HUD) as part of its efforts to review existing
department regulations. This report provides a high-level overview of the most prominent
housing-related issues during the Congress, including brief background on each and discussion of
legislative or other relevant activity.
This report is meant to provide a broad overview of major issues and is not intended to provide
detailed information or analysis. However, it includes references to more in-depth CRS reports on
the issues where possible.
Housing and Mortgage Market Conditions
This section provides background on housing and mortgage market conditions to provide context
for the housing policy issues discussed later in the report. This discussion of market conditions is
at the national level; however, it is important to be aware that local housing market conditions can
vary dramatically, and national housing market trends may not reflect the conditions in a specific
area. Nevertheless, national housing market indicators can provide an overall sense of general
trends in housing.
For several years since the housing and financial market turmoil of the late 2000s, housing
markets have been recovering from house price declines, high rates of mortgage foreclosures, and
other symptoms of the housing crisis. While some areas of the country have not fully recovered,
most housing market indicators have rebounded. For example, house prices have been increasing
for several years, and in many areas have passed their pre-crisis peaks in nominal terms;
foreclosure rates have generally declined to levels similar to the years preceding the housing
market turmoil; and housing market activity in general is increasing. As many communities have
recovered, other housing market conditions have received increased attention. Some of the most
prominent considerations that are often discussed in relation to current housing markets include
the following:
Affordability of Both Owner-Occupied and Rental Housing: In many areas of
the country, housing affordability has been an ongoing issue for both homebuyers
and renters. House prices and rental costs have increased in recent years and have
generally increased faster than incomes. Despite concerns about the affordability
of owner-occupied housing, many metrics suggest that homeownership is
currently relatively affordable by historical standards; however, such measures
generally focus on the ability of households to afford monthly mortgage
payments and do not consider other costs of purchasing a home, such as saving
for a down payment.
Housing Inventory: The available housing inventory is one factor that affects
housing affordability, as too few homes available for sale or rent can increase
home prices or rents. Limited inventory, particularly of modestly priced housing,
appears to be impacting affordability and home sales in many housing markets.
Relatively low levels of new home construction is one of the factors contributing
to lower levels of housing inventory.
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Mortgage Access: The availability of mortgage credit tightened in the aftermath
of the housing crisis, for a variety of reasons. While credit is not currently as tight
as it was at the peak, some argue that it is still too difficult for some creditworthy
households to obtain affordable mortgages. Others, however, argue that mortgage
standards are loosening too much for certain types of mortgages.
The following subsections provide an overview of selected indicators reflecting conditions in
owner-occupied housing markets and the mortgage market, and rental markets, respectively,
during the 115th Congress. Some of the included graphics show housing market indicators over
time; these graphics highlight the time period of the 115th Congress to allow readers easily to see
the levels and trends in these indicators during the Congress. In some cases, these graphics
include data for the entire 115th Congress (2017-2018), while in other cases data covering the full
time period of the 115th Congress were not available as of the date of the final update of this
report.
Owner-Occupied Housing Markets and the Mortgage Market
Over the past few years, on a national level, markets for owner-occupied housing have generally
been characterized by rising home prices, low inventory levels, housing starts that are increasing
but remain relatively low by historical standards, and home buying activity that is beginning to
return to pre-crisis levels. Housing starts remain below the levels seen in the mid-1990s and early
2000s. For the most part, mortgage foreclosures1 and negative equity,2 which characterized the
housing and economic turmoil that began around 2007, have eased.3 However, national statistics
can mask the experience of local housing markets, and not all communities have recovered
equally from the effects of the housing crisis.4
Most homebuyers take out a mortgage to purchase a home. Therefore, owner-occupied housing
markets are closely linked to the mortgage market, although they are not the same. The ability of
prospective homebuyers to obtain mortgages and the costs of those mortgages impact housing
demand and affordability.
House Prices
As shown in Figure 1, on a national basis, nominal house prices have been increasing on a yearover-year basis in each quarter since the beginning of 2012. Year-over-year house price changes
have been above 5% in each quarter since the second quarter of 2015 and over 6% since mid-
1 Foreclosure refers to formal legal proceedings initiated by a mortgage holder to repossess a home after a mortgage
borrower has missed a certain number of payments on the mortgage. The foreclosure process is governed by state law.
In general, the term “foreclosure” can refer to the foreclosure process or the completion of a foreclosure.
2 Negative equity refers to a situation where a mortgage borrower owes more on the mortgage than the home is
currently worth.
3 According to CoreLogic, a data and analytics company, the rate of mortgages in the foreclosure process at the end of
2017 was 0.6%, similar to the average rate in the years preceding the housing and economic turmoil. CoreLogic also
reports that the national share of mortgaged homes in negative equity was below 5% at the end of 2017, down from a
high of over 25% at the end of 2009. See Molly Boesel, “Loan Performance Insights Report Highlights: December
2017,” CoreLogic Insights Blog, March 13, 2018, https://www.corelogic.com/blog/2018/03/loan-performance-insightsreport-highlights-december-2017.aspx and “Borrower Equity Update: Fourth Quarter 2017,” CoreLogic Insights Blog,
March 15, 2018, https://www.corelogic.com/blog/2018/03/borrower-equity-update-fourth-quarter-2017.aspx.
4 For a discussion of variations in house price recovery and negative equity both across and within local areas, see Joint
Center for Housing Studies of Harvard University, The State of the Nation’s Housing 2017, pp. 10-11,
http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_state_of_the_nations_housing_2017.pdf.
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2017. These increases follow almost five years of house price declines in the years during and
surrounding the economic recession of 2007-2009 and associated housing market turmoil.
Figure 1.Year-over-Year House Price Changes (Nominal)
Q1 1995–Q3 2018
Source: Figure created by CRS using data from the Federal Housing Finance Agency House Price Index
(Seasonally Adjusted Purchase-Only Index).
Notes: Figure shows the percentage change in nominal house prices compared to the same quarter in the
previous year.
House prices vary greatly across local housing markets. In some areas of the country, prices have
fully regained or even exceeded their pre-recession levels in nominal terms, while in other areas
prices remain below those levels.5 Furthermore, house price increases affect participants in the
housing market differently. Rising prices reduce affordability for prospective homebuyers, but
they are generally beneficial for current homeowners, who benefit from the increased home
equity that accompanies them (although rising house prices also have the potential to negatively
impact affordability for current homeowners through increased property taxes).
Mortgage Interest Rates
For several years, mortgage interest rates have been low by historical standards. As shown in
Figure 2, average mortgage interest rates have been consistently below 5% since May 2010 and
have been below 4% for several stretches during that time. Lower interest rates increase mortgage
affordability and make it easier for some households to purchase homes or refinance their existing
mortgages.
Mortgage interest rates have generally increased since the start of 2018, though they decreased
somewhat in December 2018, ending the year at 4.64%. Rising interest rates may make
mortgages less affordable for some households, contributing to homeownership affordability
pressures.
5 Joint Center for Housing Studies, State of the Nation’s Housing 2018, pp. 10-11, http://www.jchs.harvard.edu/state-
nations-housing-2018.
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Figure 2. Mortgage Interest Rates
January 1995–December 2018
Source: Figure created by CRS based on data from Freddie Mac’s Primary Mortgage Market Survey, 30Year Fixed Rate Historic Tables, available at http://www.freddiemac.com/pmms/.
Notes: Freddie Mac surveys lenders on the interest rates they are charging for certain types of mortgage
products. The actual interest rate paid by any given borrower will depend on a number of factors.
Owner-Occupied Housing Affordability
As house prices have been rising for several years on a national basis, and as mortgage interest
rates have also begun to rise, concerns about the affordability of owner-occupied housing have
increased. Incomes have also been rising in recent years, helping to mitigate some affordability
pressures, but in general incomes have not been rising as quickly as house prices.6
Despite rising house prices, many metrics of housing affordability suggest that owner-occupied
housing is currently relatively affordable. These metrics generally measure the share of income
that a median-income family would need to qualify for a mortgage to purchase a median-priced
home, subject to certain assumptions.7 Therefore, rising incomes and, especially, interest rates
that are still low by historical standards contribute to homes, and borrowers’ monthly mortgage
payments in particular, being considered affordable despite recent house price increases.8
6 See Joint Center for Housing Studies of Harvard University, State of the Nation’s Housing 2018, p. 22,
http://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2018.pdf, showing
changes in median house prices and median household incomes (in real terms).
7 For example, see HUD’s Housing Market Indicators Monthly Update, May 2018, p. 3, https://www.huduser.gov/
portal/sites/default/files/pdf/Housing-Market-Indicators-Report-May-2018.pdf, showing the National Association of
Realtors Housing Affordability Index (HAI) compared to its historical norm. (For more information on the HAI, see the
National Association of Realtors website at https://www.nar.realtor/research-and-statistics/housing-statistics/housingaffordability-index/methodology.) See also the Urban Institute’s Housing Finance Policy Center’s Housing Finance at
a Glance: A Monthly Chartbook, May 2018, p. 19, https://www.urban.org/sites/default/files/publication/98495/
housing_finance_at_a_glance_a_monthly_chartbook_may_2018.pdf, on mortgage affordability.
8 For example, see the reference to the Joint Center for Housing Studies, State of the Nation’s Housing 2018 report in
footnote 6. The same figure shows that homeowners’ monthly housing costs are relatively low (although rising in
recent years) despite house price increases.
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Some factors that affect housing affordability may not be captured by these metrics, however. For
example, many of the metrics are based on certain assumptions (such as a borrower making a
20% down payment) that may not apply to many households. Furthermore, since they typically
measure the affordability of monthly mortgage payments, they often do not take into account
other affordability challenges that homebuyers may face, such as affording a down payment and
other upfront costs of purchasing a home (costs that generally increase as home prices rise). Other
factors—such as the ability to qualify for a mortgage, the availability of homes on the market, and
regional differences in house prices and income—may also make homeownership less attainable
for some households.9 Finally, some of these factors may have a bigger impact on affordability
for certain specific demographic groups, as income trends and housing preferences are not
uniform across all segments of the population.10
To the extent that house prices and interest rates continue to increase, housing affordability could
become more of an issue going forward.11
Inventory and Housing Starts
Many market observers have pointed to low levels of housing inventory as being a key
contributor to rising house prices.12 One measure of the housing inventory is the months’ supply
of new and existing homes for sale—that is, how many months it would take for all of the homes
that are currently on the market to sell based on the current pace of home sales, assuming no
additional homes were placed on the market. According to HUD, using data from the National
Association of Realtors and the U.S. Census Bureau, the months’ supply of homes for sale has
generally been below the historical average of six months of late, and the inventory of homes for
sale has been low for several years.13
One factor that affects housing inventory is the decision of existing homeowners to put their
homes on the market. A number of considerations may be impacting owners’ decisions about
whether to sell their homes, including concerns about being able to find a suitable new home to
purchase. Another factor that affects the housing inventory is the amount of new construction. In
9 Freddie Mac Insight, If Housing Is So Affordable, Why Doesn’t It Feel That Way?, July 19, 2017,
http://www.freddiemac.com/research/insight/20170719_affordability.html.
10 For example, see the discussion of affordability challenges for younger households in Freddie Mac Insight, Locked
Out? Are Rising Housing Costs Barring Young Adults from Buying Their First Homes?, June 2018,
http://www.freddiemac.com/research/pdf/201806-Insight-05.pdf.
11 For example, see Black Knight, Inc., “Black Knight’s April 2018 Mortgage Monitor: Housing Affordability
Stretched as Average Monthly Payment to Purchase Median-Priced Home Rises 14 Percent Since Start of Year,” press
release, June 4, 2018, https://www.blackknightinc.com/black-knights-april-2018-mortgage-monitor/, stating that its
modeling suggests that “even with historically strong income growth, the current combination of home price and
interest rate increases isn’t sustainable.”
12 For example, see National Association of Realtors, “Realtors Midyear Forecast: Home Sales, Prices to Rise Despite
Inventory, Affordability Challenges,” press release, May 17, 2018, https://www.nar.realtor/newsroom/realtors-midyearforecast-home-sales-prices-to-rise-despite-inventory-affordability-challenges; Svenja Gudell, “Inventory Remains at
Historic Lows; Majority of Homes for Sale are Higher End (March 2018 Market Report),” Zillow, April 26, 2018,
https://www.zillow.com/research/low-end-inventory-shortage-19704/; and Robert Abare, “Ten years after the crash,
what is the state of the housing market?,” The Urban Institute’s Urban Wire blog, May 30, 2018,
https://www.urban.org/urban-wire/ten-years-after-crash-what-state-housing-market.
13 See HUD, Housing Market Indicators Monthly Update, November 2018, pp. 1-3, available at
https://www.huduser.gov/portal/ushmc/hmi-update.html.
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recent years, levels of new construction have been relatively low by historical standards,
reflecting a variety of considerations including labor shortages and the cost of building.14
One measure of the amount of new construction is housing starts. Housing starts are the number
of new housing units on which construction is started in a given period and are typically reported
monthly as a “seasonally adjusted annual rate.” This means that the number of housing starts
reported for a given month (1) has been adjusted to account for seasonal factors and (2) has been
multiplied by 12 to reflect what the total number of housing starts would be if the current month’s
pace continued for an entire year. That is, the number reported for a given month is the annual
number of housing starts that would result if the number of starts per month continued at the
current month’s rate for 12 months.15
Figure 3 shows the seasonally adjusted annual rate of starts on one-unit homes for each month
from January 1995 through November 2018.
Figure 3. Housing Starts
January 1995–November 2018
Source: Figure created by CRS using data from the U.S. Census Bureau, New Residential Construction
Historical Data, http://www.census.gov/construction/nrc/historical_data/. Data are through November 2018.
Notes: Figure reflects starts in one-unit structures only, some of which may be built for rent rather than sale.
The seasonally adjusted annual rate is the number of housing starts that would be expected if the number of
homes started in that month (on a seasonally adjusted basis) were extrapolated over an entire year.
Housing starts for single-family homes fell during the housing market turmoil, reflecting
decreased home purchase demand. In recent years, as demand has increased, housing starts have
been mostly increasing as well, though they remain below the levels seen in the late 1990s and
early 2000s. From 2000 through 2007, the seasonally adjusted annual rate of housing starts in
one-unit residential buildings was generally between 1.2 million and 1.8 million each month,
before falling to a rate of between 400,000 and 600,000 for each month until about 2013. More
14 Freddie Mac, “What is Causing the Lean Inventory of Houses?,” Outlook Report, July 27, 2017,
http://www.freddiemac.com/research/outlook/20170726_lean_inventory_of_houses.html.
15 The Census Bureau defines the seasonally adjusted annual rate as “the seasonally adjusted monthly value multiplied
by 12” and notes that it “is neither a forecast nor a projection; rather it is a description of the rate of building permits,
housing starts, housing completions, or new home sales in the particular month for which they are calculated.” See
https://www.census.gov/construction/nrc/definitions/index.html#s.
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recently, housing starts have been trending upward, and the seasonally adjusted annual rate
averaged about 850,000 during 2017. In November 2018, the seasonally adjusted annual rate of
housing starts was 824,000.
Home Sales
Despite limited inventory and rising home prices, home sales have been increasing in recent
years. Home sales include sales of both existing and newly built homes. Existing home sales
generally number in the millions each year, while new home sales are usually in the hundreds of
thousands.
Figure 4 shows the annual number of existing and new home sales for each year from 1995
through 2017. Existing home sales numbered about 5.5 million in 2017, representing the third
straight year of increases and the highest level since 2006. New home sales numbered about
614,000 in 2017. This was the highest level since 2007, but the number of new home sales
remains appreciably lower than in the late 1990s and early 2000s, when they tended to be
between 800,000 and 1 million per year.16
Figure 4. New and Existing Home Sales
Source: Figure created by CRS using data from HUD’s U.S. Housing Market Conditions reports, available at
https://www.huduser.gov/portal/ushmc/home.html; the National Association of Realtors Existing Home Sales
Overview Chart at https://www.nar.realtor/topics/existing-home-sales; and the U.S. Census Bureau, New Residential
Sales Historical Data, Houses Sold (Annual), https://www.census.gov/construction/nrs/historical_data/index.html.
Mortgage Credit Access
Some prospective homebuyers may find themselves unable to obtain mortgages due to their credit
histories, other financial characteristics, the cost of obtaining a mortgage (such as down payments
and closing costs), or other factors. In general, it is beneficial to the housing market when
creditworthy homebuyers are able to obtain mortgages to purchase homes. However, access to
mortgages must be balanced against the risk of offering them to people who will not be willing or
16 The number of housing starts is consistently higher than the number of new home sales. This is primarily because
housing starts include homes that are not intended to be put on the for-sale market, such as homes built by the owner of
the land or homes built for rental. See the U.S. Census Bureau, “Comparing New Home Sales and New Residential
Construction,” https://www.census.gov/construction/nrc/salesvsstarts.html.
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able to repay the money they borrowed. Striking the right balance of credit access and risk
management and the question of who is considered to be “creditworthy” are subjects of ongoing
debate.
A variety of organizations attempt to measure the availability of mortgage credit. While their
methods vary, many experts agree that access to mortgage credit is tighter than it was in the early
2000s, prior to the housing bubble that preceded the housing market turmoil later in the decade,
although it has eased somewhat of late. Despite this easing, some have argued that access to
mortgage credit is still too tight, and that the mortgage market is taking on less default risk than it
did in the years prior to the loosening of credit standards during the housing bubble.17
Others have argued that mortgage credit standards are easing too much, focusing on the fact that
credit standards for certain types of mortgages, such as those insured by the Federal Housing
Administration (FHA), have appeared to loosen somewhat in recent years compared to the
immediate aftermath of the housing market turmoil when standards tightened across the board.
They argue that easing credit standards unsustainably increases the risk of certain types of
mortgages and contributes to higher house prices by allowing households to leverage higher
amounts of mortgage debt.18 FHA itself has noted that it is monitoring certain trends, such as a
larger share of new FHA-insured mortgages with higher debt-to-income ratios and the
performance of loans with certain types of down payment assistance, that have the potential to
increase risk to FHA.19
Mortgage Market Composition
When a lender originates a mortgage, it can choose to hold that mortgage in its own portfolio, sell
it to a private company, or sell it to Fannie Mae or Freddie Mac, two congressionally chartered
government-sponsored enterprises (GSEs). Fannie Mae and Freddie Mac bundle mortgages into
securities and guarantee investors payments on those securities. Furthermore, a mortgage might
be insured by a federal government agency, such as the FHA or the Department of Veterans
Affairs (VA). Most FHA-insured or VA-guaranteed mortgages are included in mortgage-backed
securities that are guaranteed by Ginnie Mae, another government agency.20
In the years after the housing bubble burst, there was an increase in the share of mortgages that
either had mortgage insurance from a government agency or were guaranteed by Fannie Mae or
Freddie Mac, leading some to express concern about increased government exposure to risk and a
lack of private capital in the mortgage market.
17 For example, see the Urban Institute Housing Finance Policy Center’s Housing Credit Availability Index,
https://www.urban.org/policy-centers/housing-finance-policy-center/projects/housing-credit-availability-index.
18 For example, see Edward J. Pinto and Tobias Peter, American Enterprise Institute Center on Housing Markets and
Finance, “Mortgage Risk Index release of October 2018 data,” January 28, 2019, available at http://www.aei.org/
housing/mortgage-risk-index/.
19 U.S. Department of Housing and Urban Development, Annual Report to Congress Regarding the Financial Status of
the FHA Mutual Mortgage Insurance Fund, Fiscal Year 2018, pp.13-14, https://www.hud.gov/sites/dfiles/Housing/
documents/2018fhaannualreportMMIFund.pdf.
20 Fannie Mae and Freddie Mac purchase eligible mortgages, package them into mortgage-backed securities that they
either sell to investors or hold in their own portfolios, and guarantee payments to investors on those mortgage-backed
securities. Ginnie Mae, which is part of HUD, guarantees mortgage-backed securities that are made up solely of
government-insured mortgages (mostly mortgages insured by FHA or guaranteed by VA). Unlike Fannie Mae and
Freddie Mac, Ginnie Mae does not issue the mortgage-backed securities itself, but rather guarantees securities issued
by private companies that have been approved to be Ginnie Mae issuers. Private companies can also issue mortgagebacked securities without a Fannie Mae, Freddie Mac, or Ginnie Mae guarantee, but there has been very little privatelabel securitization in the years since the housing market turmoil.
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As shown in Figure 5, about two-thirds of
the total dollar volume of mortgages
originated during the first three-quarters of
2018 were either guaranteed by a federal
agency such as FHA or VA (22%) or backed
by Fannie Mae or Freddie Mac (45%). Close
to one-third of the dollar volume of
mortgages originated was held in bank
portfolios (31%), while about 2% was
securitized in the private market.
Figure 5. Share of Mortgage Originations
by Type
2018 (Q1-Q3)
The share of new mortgage originations, by
dollar volume, insured by a federal agency or
guaranteed by Fannie Mae or Freddie Mac
has fallen from a high of nearly 90% in 2009,
during the housing market turmoil.
Nevertheless, the share of mortgage
originations with federal mortgage insurance
or a Fannie Mae or Freddie Mac guarantee
Source: Figure created by CRS based on Inside
remains elevated compared to the 2002-2007
Mortgage Finance data as reported in Urban Institute,
period, when FHA and VA mortgages
Housing Finance Policy Center, Housing Finance at a
constituted a small share of the mortgage
Glance: A Monthly Chartbook, January 2019, p. 8.
market and the GSE share ranged from about
Notes: Figure shows share of first-lien mortgage
21
30% to 50%. The FHA and VA share of
originations by dollar volume.
mortgages during the 2002-2007 period was
low by historical standards, however, as many households opted for other types of mortgages,
including subprime mortgages, during that time.
Rental Housing Markets
In the years since the housing market turmoil began, the homeownership rate has decreased while
the percentage of renter households has correspondingly increased. Although new rental housing
units have also been created, both through new construction and as some formerly owneroccupied homes are converted to rentals, in many markets the rise in the number of renters
increased competition for rental housing, leading to lower rental vacancy rates and higher rents in
recent years.22 This, in turn, has resulted in more renter households being considered costburdened, commonly defined as paying more than 30% of income toward housing costs.
Share of Renters
As shown in Figure 6, the share of renters has generally been increasing for the last decade,
reaching close to 37% of all occupied housing units in 2016. This was the highest share of renters
since the early 1990s. The homeownership rate has correspondingly decreased, falling from a
21 Urban Institute, Housing Finance Policy Center, Housing Finance at a Glance: A Monthly Chartbook, December
2018, p. 8.
22 Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2017, December 14, 2017, pp.
20-22, http://www.jchs.harvard.edu/research-areas/reports/americas-rental-housing-2017.
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high of 69% in 2004 to just over 63% in 2016.23 Most recently, in 2017, the share of renters
decreased slightly, to about 36%, and the homeownership rate increased slightly, to nearly 64%.
Figure 6. Rental and Homeownership Rates
1965-2017
Source: Figure prepared by CRS based on data from the U.S. Census Bureau, Annual Housing Vacancy
and Homeownership Survey, Annual Statistics, Table 14, “Homeownership Rates by Area.”
In addition to an increase in the share of households who rent, the overall number of renter
households has been increasing as well. In 2016, there were nearly 43.3 million occupied rental
housing units, compared to 40 million in 2013 and 35.9 million in 2008. The number of renter
households decreased in 2017, to 43.1 million.24 (In comparison, the number of housing units
occupied by an owner decreased somewhat after 2008 before beginning to rise again in recent
years. The number of housing units occupied by owners was 76.6 million in 2017, compared to
about 75.7 million in 2008.25)
Vacancy Rates
In general, the increase in renters has led to a decrease in rental vacancy rates in many, though not
all, areas of the country. This has been the case in many areas despite the creation of new rental
units through both new construction and the conversion of some previously owner-occupied
single-family units to rental housing. In many cases, the increase in the rental housing supply has
not kept up with the increase in rental housing demand.
As shown in Figure 7, on a national basis the rental vacancy rate was over 10% in most quarters
from 2008 through 2010. Since then, the rate has mostly declined, reaching about 8% at the end
of 2013 and 7% at the end of each year from 2014 through 2017. The rental vacancy rate did
increase somewhat throughout much of 2017, reaching 7.5% in the third quarter, before
23 U.S. Census Bureau, Housing Vacancies and Homeownership, Annual Statistics, http://www.census.gov/housing/
hvs/data/prevann.html.
24 U.S. Census Bureau, Housing Vacancies and Homeownership, Historical Tables, Table 7, “Annual Estimates of the
Housing Inventory: 1965 to Present,” http://www.census.gov/housing/hvs/data/histtabs.html.
25 Ibid.
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decreasing back to about 7% for most of 2018.26 Furthermore, the market for affordable rental
units has been particularly tight, as many of the rental units that have been constructed in recent
years have been at the higher end of the market.27
Figure 7. Rental Vacancy Rates
Q1 1995–Q3 2018
Source: Figure created by CRS based on data from U.S. Census Bureau, Housing Vacancies and
Homeownership Historical Tables, Table 1, “Quarterly Rental Vacancy Rates: 1956 to
Present,” http://www.census.gov/housing/hvs/data/histtabs.html.
Rental Housing Affordability
Rental housing affordability is impacted by a variety of factors, including the supply of rental
housing units available, the characteristics of those units (e.g., age and amenities), and the
demand for available units. As noted previously, new housing units have been added to the rental
stock in recent years through both construction of new rental units and conversions of existing
owner-occupied units to rental housing. At the same time, however, the demand for rental housing
has increased as more households have become renters. Furthermore, much of the new rental
housing construction in recent years has been higher-end construction rather than lower-cost
units.28
The increased demand for rental housing, as well as the concentration of new rental construction
in higher-cost units, has led to increases in rents in recent years. Median renter incomes have also
been increasing for the last several years, at times outpacing increases in rents. However, over the
longer term, median rents have increased faster than renter incomes. For example, between 2001
and 2017, in real terms the median rent (less utilities) for recent movers has risen over 25% while
26 U.S. Census Bureau, Housing Vacancies and Homeownership, Historical Tables, Table 1, “Quarterly Rental
Vacancy Rates: 1956 to Present,” http://www.census.gov/housing/hvs/data/histtabs.html.
27 For example, see Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2017, pp. 3-4,
http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_americas_rental_housing_2017.pdf, showing
that vacancy rates in professionally managed multifamily apartment buildings were lowest for the lowest-cost rental
units and highest for the highest-cost rental units in recent quarters.
28 Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2017, pp. 3 and 17.
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the median renter income has increased about 6%, reducing rental affordability over that time
period.29
Rising rental costs and renter incomes that are not keeping up with rent increases over the long
term can contribute to housing affordability problems, particularly for households with lower
incomes. Under one common definition, housing is considered to be affordable if a household is
paying no more than 30% of its income in housing costs. Under this definition, households that
pay more than 30% are considered to be cost-burdened, and those that pay more than 50% are
considered to be severely cost-burdened.
The overall number of cost-burdened renter households has generally increased in recent years,
from 15.7 million in 2003 to 20.8 million in 2016, although the number of cost-burdened renter
households in 2016 represented a decrease from over 21 million in both 2014 and 2015. (Over
this time period, the overall number of renter households has increased as well.)
As shown in Figure 8, cost burdens are most prevalent among lower-income renter households.
Among renter households with incomes below $30,000, 80% are cost-burdened, with over half
experiencing severe cost burdens. However, cost burdens affect households of all incomes: half of
renter households with incomes of at least $30,000 but less than $45,000, and over 20% of renter
households with incomes of at least $45,000 but less than $75,000, were cost burdened in 2016.
Moderate-income renter households have experienced some of the greatest increases in cost
burdens since the early 2000s.30
29 See HUD, Office of Policy Development and Research, U.S. Housing Market Conditions National Housing Market
Summary 3rd Quarter 2018, December 2018, pp. 4-5, and underlying data available at https://www.huduser.gov/portal/
ushmc/quarterly_commentary.html. Data on median rents reflect median rents for recent movers less the cost of
utilities. For more information on data sources used, see HUD Office of Policy Development and Research, HUD’s
New Rental Affordability Index, https://www.huduser.gov/portal/pdredge/pdr-edge-trending-110716.html. For another
comparison of median rents and median renter incomes, see Joint Center for Housing Studies, America’s Rental
Housing 2017, pp. 26-27, http://www.jchs.harvard.edu/sites/default/files/
05_harvard_jchs_americas_rental_housing_2017.pdf.
30 Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2017, p. 28,
http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/harvard_jchs_americas_rental_housing_2017.pdf.
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Figure 8. Share of Cost-Burdened Renter Households by Income
2016
Source: Figure created by CRS based on data in Joint Center for Housing Studies, State of the Nation’s
Housing 2018, Appendix Tables, showing Joint Center for Housing Studies tabulations of American Community
Survey data.
Furthermore, according to HUD, 8.3 million renter households were considered to have “worstcase housing needs” in 2015 (the most recent data available).31 Households with worst-case
housing needs are defined as renter households with incomes at or below 50% of area median
income who do not receive federal housing assistance and who pay more than half of their
incomes for rent, live in severely inadequate conditions, or both. The 8.3 million renter
households with worst-case housing needs in 2015 represented an increase from 7.7 million in
2013 and was similar to 2011 (8.5 million households). In comparison, the number of renter
households with worst-case housing needs in 2005 and 2007 was about 6 million.
Housing Finance Issues in the 115th Congress
Several of the issues that were of interest during the 115th Congress are related to the financing of
housing. In some cases, these issues can impact the financing of both owner-occupied housing
and rental housing, though in other cases they are primarily relevant to one or the other.
Financial “Regulatory Relief” Legislation and Housing
Background
The financial crisis of 2007-2009 led to a variety of legislative and regulatory responses intended
to address its perceived causes. These responses included new requirements on financial
institutions, some of which were related to mortgages. Many of these requirements were enacted
in the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) in 2010.32
31 U.S. Department of Housing and Urban Development, Worst Case Housing Needs: 2017 Report to Congress, p. 1,
https://www.huduser.gov/portal/sites/default/files/pdf/Worst-Case-Housing-Needs.pdf.
32 For an overview of the Dodd-Frank Act, see CRS Report R41350, The Dodd-Frank Wall Street Reform and
Consumer Protection Act: Background and Summary.
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In the years since, there has been ongoing debate about the extent to which the new requirements
achieve the right balance of protecting consumers and the financial system from potentially risky
mortgage features without unduly restricting access to credit for creditworthy households.
Recent Developments
During the 115th Congress, a variety of bills were considered to amend certain financial
regulatory requirements, including requirements related to mortgages. Most notable among these
for housing was the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L.
115-174), which became law in May 2018.33 The act includes a variety of provisions related to
financial regulatory requirements, including some mortgage-related requirements. In general, it
modifies these mortgage-related requirements rather than eliminating them entirely. The act also
includes some additional provisions related to housing.
Provisions of the act that modify mortgage-related requirements that were put in place after the
housing market turmoil include the following:
allowing certain mortgages originated and held in portfolio by small depository
institutions to be considered “qualified mortgages” for the purposes of complying
with the ability-to-repay rule;34
making changes to requirements related to certain property appraisals;
exempting some banks and credit unions that make fewer than a particular
number of mortgage loans from specified new reporting requirements under the
Home Mortgage Disclosure Act (HMDA);
providing grace periods for individuals working as mortgage originators to obtain
the proper licensing to originate mortgages in their new positions when they
move from banks to nonbanks or across state lines;
expanding the circumstances under which manufactured home retailers and their
employees can be excluded from the definition of mortgage originators, and
therefore exempt from certain requirements that apply to mortgage originators,
subject to specified conditions; and
waiving the waiting period between receipt of particular mortgage-related
disclosures and the mortgage closing when a borrower is offered a lower interest
rate after initial receipt of the disclosures.
While supporters of the act argued that these are targeted changes that will help to ease
unnecessarily burdensome regulations and increase the availability of mortgage credit, opponents
argued that they weaken or eliminate certain protections that were put in place in response to
practices that harmed consumers and ultimately the broader mortgage market.
The act also includes several other mortgage- or housing-related provisions. These include the
following:
requirements intended to address concerns about certain refinancing practices
related to some mortgages guaranteed by the Department of Veterans Affairs;
33 The bill was passed by the Senate in March 2018. It was passed by the House and subsequently signed by the
President in May 2018.
34 For more information on the ability-to-repay rule, see CRS Report R42056, Ability to Repay, Risk-Retention
Standards, and Mortgage Credit Access.
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making permanent specified protections for renters in foreclosed properties that
had been put in place by the Protecting Tenants at Foreclosure Act (Title VII of
the Helping Families Save Their Homes Act, P.L. 111-22) in 2009 but had since
expired;
making permanent a one-year protection against foreclosure for active duty
servicemembers under particular circumstances;
requiring Fannie Mae and Freddie Mac to consider alternative credit scoring
models for mortgages purchased by those institutions;
making Property Assessed Clean Energy (PACE) loans, which allow some
homeowners to finance specified energy improvements through property tax
assessments, subject to the ability-to-repay requirements that apply to most
mortgages;
certain changes related to small public housing agencies;
changes to HUD’s Family Self-Sufficiency program, an asset-building program
for residents of public and assisted housing; and
requiring certain reports, including a report by HUD on lead paint hazards and
abatement and a Government Accountability Office (GAO) report on
foreclosures in Puerto Rico in the aftermath of Hurricane Maria.
Additional information:
For an expanded discussion of the provisions of P.L. 115-174, see CRS Report
R45073, Economic Growth, Regulatory Relief, and Consumer Protection Act
(P.L. 115-174) and Selected Policy Issues.
Housing Finance Reform
Background
The U.S. housing finance system supports about $10 trillion in outstanding single-family
residential mortgage debt and over $1 trillion in multifamily residential mortgage debt.35 Two
major players in the housing finance system are Fannie Mae and Freddie Mac, governmentsponsored enterprises (GSEs) that were created by Congress to provide liquidity to the mortgage
market. By law, Fannie Mae and Freddie Mac cannot make mortgages; rather, they are restricted
to purchasing mortgages that meet certain requirements from lenders. Once the GSEs purchase a
mortgage, they either package it with others into a mortgage-backed security (MBS), which they
guarantee and sell to institutional investors, or retain it as a portfolio investment. Fannie Mae and
Freddie Mac are involved in both single-family and multifamily housing, though their singlefamily businesses are much larger.
In 2008, during the housing and mortgage market turmoil, Fannie Mae and Freddie Mac entered
voluntary conservatorship overseen by their regulator, the Federal Housing Finance Agency
(FHFA). As part of the legal arrangements of this conservatorship, the Department of the Treasury
contracted to purchase over $200 billion of new senior preferred stock from each of the GSEs; in
35 Board of Governors of the Federal Reserve System, Mortgage Debt Outstanding, https://www.federalreserve.gov/
data/mortoutstand/current.htm.
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return for this support, Fannie Mae and Freddie Mac pay dividends on this stock to Treasury.36 To
date, Treasury has purchased a total of over $191 billion of senior preferred stock from the two
GSEs and has received a total of nearly $280 billion in dividends.37 These funds become general
revenues. Since the first quarter of 2012, the only time Fannie Mae and Freddie Mac have drawn
on their lines of credit with Treasury was in the fourth quarter of 2017; this draw was attributed to
changes in the value of deferred tax assets as a result of the tax revision law that was enacted in
late 2017 (P.L. 115-97).38
Recent Developments
Since Fannie Mae and Freddie Mac were placed in conservatorship in 2008, policymakers have
largely agreed on the need for comprehensive housing finance reform legislation that would
transform or eliminate the GSEs’ role in the housing finance system. While there is broad
agreement on certain principles of housing finance reform—such as increasing the private
sector’s role in the mortgage market and maintaining access to affordable mortgages for
creditworthy households—there is disagreement over how best to achieve these objectives and
over the technical details of how a restructured housing finance system should operate.
The 113th Congress considered, but did not enact, housing finance reform legislation.39 The 114th
Congress considered a number of more-targeted reforms to Fannie Mae and Freddie Mac, but did
not actively consider comprehensive housing finance reform legislation.40 During the 115th
Congress, Members on the House and Senate committees of jurisdiction and Administration
officials indicated that housing finance reform would be a priority.41 However, little formal
legislative action on the issue took place, and in July 2018, Treasury Secretary Steven Mnuchin
suggested at a House Financial Services Committee hearing that housing finance reform would be
a focus in the 116th Congress.42
36 To conserve cash, FHFA ordered Fannie Mae and Freddie Mac to stop paying dividends on all other stock.
37 Federal Housing Finance Agency, Treasury and Federal Reserve Purchase Programs for GSE and Mortgage-
Related Securities, data as of June 29, 2018, https://www.fhfa.gov/DataTools/Downloads/Pages/Treasury-and-FederalReserve-Purchase-Programs-for-GSE-and-Mortgage-Related-Securities.aspx.
38 For more information on this draw in the fourth quarter of 2017, see CRS In Focus IF10851, Housing Finance:
Recent Policy Developments.
39 In the 113th Congress, H.R. 2767, the Protecting American Taxpayers and Homeowners Act of 2013, was ordered to
be reported out of the Financial Services Committee, while S. 1217, the Housing Finance Reform and Taxpayer
Protection Act of 2014, was reported out of the Senate Banking Committee. For more information on these bills from
the 113th Congress, see archived CRS Report R43219, Selected Legislative Proposals to Reform the Housing Finance
System.
40 For a discussion of congressional action related to Fannie Mae and Freddie Mac in the 114th Congress, see CRS
Report R44304, Housing Issues in the 114th Congress.
41 For example, see the House Financial Services Committee, “Hensarling Lays Out Principles for Housing Finance
Reform, Expresses Support for Bipartisan Approach,” press release, December 6, 2017,
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=402755; Senate Banking Committee,
Statement of Chairman Mike Crapo at a hearing on “Ten Years of Conservatorship: The Status of the Housing Finance
System,” May 23, 2018, https://www.banking.senate.gov/hearings/ten-years-of-conservatorship-the-status-of-thehousing-finance-system; and the written statement of Treasury Secretary Mnuchin at a House Financial Services
Committee hearing on “The Annual Testimony of the Secretary of the Treasury on the State of the International
Finance System,” July 27, 2017, p. 3, https://financialservices.house.gov/uploadedfiles/hhrg-115-ba00-wstatesmnuchin-20170727.pdf.
42 Secretary Mnuchin made this comment in response to a question during a hearing before the House Financial
Services Committee on “The Annual Testimony of the Secretary of the Treasury on the State of the International
Financial System,” July 12, 2018.
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In September 2018, House Financial Services Committee Chairman Jeb Hensarling released a
discussion draft of a comprehensive housing finance reform bill with some bipartisan support.43
Chairman Hensarling also indicated plans to reintroduce the Protecting American Taxpayers and
Homeowners Act (PATH Act) from the 113th Congress, which takes a different approach to
housing finance reform. However, noting that the reintroduced PATH Act (H.R. 6746) was
considered unlikely to pass, he said that he would pursue the discussion draft bill as an
alternative.44 The Financial Services Committee held a hearing on the discussion draft bill in
December 2018.45
In addition to considering the role of the GSEs in the housing finance system, any future housing
finance reform legislation could also consider changes to the Federal Housing Administration
(FHA). FHA is a part of the Department of Housing and Urban Development (HUD) and insures
certain mortgages made by private lenders against the possibility of borrower default. By insuring
these mortgages, FHA helps to make affordable mortgages more available to borrowers who
might otherwise not be well-served by the private mortgage market, such as borrowers with low
down payments.
Apart from comprehensive reform of the housing finance system, several additional issues related
to Fannie Mae and Freddie Mac received attention during the 115th Congress. These included (1)
an FHFA decision to allow Fannie Mae and Freddie Mac to each retain $3 billion in capital
(under the terms of the Treasury support agreements, the amount of capital they are allowed to
retain was scheduled to fall to zero at the beginning of 2018), (2) the need for both Fannie Mae
and Freddie Mac to draw on their lines of credit with Treasury in the fourth quarter of 2017 due to
a reduction in the value of deferred tax assets as a result of the tax revision law passed in late
2017, and (3) FHFA directing Fannie Mae and Freddie Mac to continue to make required
contributions to certain affordable housing funds despite the draw from Treasury. For more
information on these issues in particular, see CRS In Focus IF10851, Housing Finance: Recent
Policy Developments.
Additional information:
For background on the housing finance system in general, see CRS Report
R42995, An Overview of the Housing Finance System in the United States.
For information on Fannie Mae and Freddie Mac and their conservatorship, see
CRS Report R44525, Fannie Mae and Freddie Mac in Conservatorship:
Frequently Asked Questions.
For background on FHA, see CRS Report RS20530, FHA-Insured Home Loans:
An Overview.
43 See House Financial Services Committee, “Chairman Hensarling Delivers Opening Statement, Unveils Bipartisan
GSE Reform Bill,” press release, September 6, 2018, https://financialservices.house.gov/news/documentsingle.aspx?
DocumentID=403883; and Congressman John Delaney, “Hensarling-Delaney-Himes Announce Bipartisan Housing
Finance Reform Act,” press release, September 6, 2018, https://delaney.house.gov/news/press-releases/hensarlingdelaney-himes-announce-bipartisan-housing-finance-reform-act.
44 House Financial Services Committee, “Chairman Hensarling Delivers Opening Statement.” In the 113th Congress,
the PATH Act was H.R. 2767 and was ordered to be reported by the Financial Services Committee.
45 U.S. Congress, House Committee on Financial Services, A Legislative Proposal to Provide for a Sustainable
Housing Finance System: The Bipartisan Housing Finance Reform Act of 2018, 115th Cong., 2nd sess., December 21,
2018, https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=401698.
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Federal Housing Administration Mortgage Insurance Premiums
Background
The Federal Housing Administration (FHA), part of HUD, insures certain mortgages made by
private lenders against the possibility of the borrower defaulting. FHA insurance protects the
lender in the event of borrower default, which is intended to increase the availability of affordable
mortgage credit to households who might otherwise be underserved by the private mortgage
market.
FHA charges borrowers both upfront and annual fees, referred to as mortgage insurance
premiums, in exchange for this insurance. These fees are supposed to cover the costs of paying a
claim to a lender if an FHA-insured mortgage defaults and goes to foreclosure. By law, the HUD
Secretary has a responsibility to ensure that the FHA single-family mortgage insurance fund
remains financially sound46 and that the fund is in compliance with a requirement that it maintain
a capital ratio of at least 2%.47
FHA raised the premiums it charges several times in the years during and following the housing
market turmoil in response to concerns about rising mortgage delinquency rates and FHA’s
ability to maintain compliance with the capital ratio requirement. It then lowered the annual
premiums in 2015 as mortgage delinquency rates began to decrease and its financial position
stabilized. The level of the premiums charged by FHA is often a topic of interest. The premiums
have implications for the affordability and availability of FHA-insured mortgages for certain
homebuyers, on the one hand, and for the financial health of the FHA insurance fund, on the
other; setting the appropriate premium level involves balancing these considerations.
Recent Developments
Early in January 2017, HUD announced that it planned to decrease the annual mortgage insurance
premium it charged for new mortgages that closed on or after January 27, 2017.48 However, on
January 20, 2017, the first day of the Trump Administration, HUD suspended the planned
decrease before it went into effect, citing a need to further analyze the potential impact that a
mortgage insurance premium decrease could have on the FHA insurance fund.49
In its Annual Report to Congress on the Financial Status of the Mutual Mortgage Insurance Fund
(MMI Fund) in November 2017, FHA stated that had the planned premium decrease gone into
effect, the estimated capital ratio for the MMI Fund would have fallen below the statutorily
mandated capital ratio requirement of 2% for FY2017.50 (The actual estimated capital ratio for
46 12 U.S.C. 1708 (a)(3).
47 12 U.S.C. 1711(f). The capital ratio is defined as the economic value of the MMI Fund divided by the total dollar
volume of mortgages insured under the MMI Fund. Economic value, in turn, is defined as the capital resources that the
MMI Fund currently has on hand plus the net present value of the estimated future cash inflows and outflows on the
mortgages that are currently insured under the MMI Fund. It is essentially a measure of how much money the MMI
Fund would expect to have available to pay for additional, unexpected losses on its currently insured mortgages beyond
the losses it currently anticipates. The capital ratio is defined in statute at 12 U.S.C. 1711(f)(4).
48 FHA Mortgagee Letter 2017-01, “Reduction of Federal Housing Administration (FHA) Annual Mortgage Insurance
Premium Rates,” January 9, 2017, https://www.hud.gov/sites/documents/17-01ML.PDF.
49 FHA Mortgagee Letter 2017-07, “Suspension of Mortgagee Letter 2017-01 – Reduction of Federal Housing
Administration (FHA) Annual Mortgage Insurance Premium (MIP) Rates,” January 20, 2017, https://www.hud.gov/
sites/documents/17-07ML.PDF.
50 Department of Housing and Urban Development, Annual Report to Congress Regarding the Financial Status of the
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FY2017 was lower than FY2016, but remained above 2%.) The estimated lower capital ratio
would have been due to a combination of (1) less premium revenue coming into the fund as a
result of the lower premiums and (2) an increase in the total dollar amount of mortgages that
would have been insured as a result of more borrowers obtaining FHA-insured mortgages due to
the lower premiums. The report also suggests, however, that reverse mortgages insured by FHA
are having a disproportionately negative impact on the insurance fund, raising questions about the
extent to which the performance of the reverse mortgage portfolio may, or should, impact
decisions about the premiums charged to forward-mortgage borrowers.51
Additional information:
For more information on FHA-insured mortgages in general, including the
current premium levels, see CRS Report RS20530, FHA-Insured Home Loans:
An Overview.
For more information on the financial status of FHA’s single-family mortgage
insurance fund, see CRS Report R42875, FHA Single-Family Mortgage
Insurance: Financial Status of the Mutual Mortgage Insurance Fund (MMI
Fund).
FHA Requirements for Insuring Mortgages on Condominium Units
Background
FHA-insured mortgages can be used to purchase condominium units as well as other types of
single-family homes. However, HUD places specific requirements on FHA-insured mortgages for
condominiums that may affect the eligibility of a condominium mortgage for the insurance.
In order for FHA to insure a mortgage on a condominium unit, HUD requires that the entire
condominium project where the unit is located have FHA approval. In order for the condominium
project to be approved, it must meet a variety of requirements. These include, among others, a
minimum percentage of units that must be owner-occupied, and limits on the amount of
nonresidential space and the percentage of units that are behind on their association dues.
Condominium buildings seeking FHA approval must go through a certification process and a
periodic recertification process to maintain FHA approval.
In 2009, HUD made a number of changes related to condominium mortgage insurance.52 In
addition to tightening several requirements, it ended a practice known as “spot approval,” in
which a mortgage on a condominium located in a project that did not have FHA approval could
qualify for FHA insurance on a case-by-case basis. Requirements placed on condominium
projects seeking FHA approval are intended to ensure that the buildings themselves are wellFHA Mutual Mortgage Insurance Fund, Fiscal Year 2017, November 15, 2017, pp. 57-58, https://www.hud.gov/sites/
dfiles/Housing/documents/2017fhaannualreportMMIFund.pdf.
51 Reverse mortgages allow older homeowners to borrow against the equity in their homes and repay the loans at a later
time, after they sell the home or pass away. FHA-insured reverse mortgages are called Home Equity Conversion
Mortgages (HECMs). For more information on HECMs, see CRS Report R44128, HUD’s Reverse Mortgage Insurance
Program: Home Equity Conversion Mortgages.
52 FHA’s current requirements for approving condominium buildings are included in the Condominium Project
Approval and Processing Guide, available at https://www.hud.gov/sites/documents/11-22MLGUIDE.PDF, subject to
certain temporary changes that were most recently extended by FHA Mortgagee Letter 2017-13, Extension of
Temporary Approval Provisions for the Federal Housing Administration (FHA) Condominium Project Approval
Process, August 30, 2017, https://www.hud.gov/sites/documents/17-13ML.PDF.
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managed and financially stable, which in turn is thought to make mortgages on individual units in
the building less risky. However, some industry groups and others have argued that many of the
changes that FHA made are too strict and unnecessarily reduce access to FHA-insured mortgages
for prospective condominium buyers and for condominium owners who seek FHA-insured
reverse mortgages.53
While the specifics of debates around individual requirements related to FHA approval of
condominium buildings may vary, in general the debate around these requirements is usually
framed as a question of how to balance access to FHA-insured mortgages with making sure that
insured mortgages do not pose an undue risk to the financial health of the FHA insurance fund.
Recent Developments
In July 2016, towards the end of the 114th Congress, the Housing Opportunity Through
Modernization Act (HOTMA, P.L. 114-201) was enacted. While most of the provisions of
HOTMA affected HUD rental assistance programs, there were four provisions related to FHA’s
requirements for insuring mortgages on condominium units. These provisions directed the HUD
Secretary to (1) streamline the recertification process for FHA approval of condominium
buildings to make it less burdensome, (2) make changes to the process for granting exceptions for
exceeding FHA’s limits on commercial space, (3) adopt Federal Housing Finance Agency
(FHFA) regulations related to transfer fees and condominiums,54 and (4) issue new guidance, and
a justification, addressing the required percentage of owner-occupied units in the building.55
In September 2016, during the 114th Congress, HUD issued a comprehensive proposed rule
related to approval of condominium projects.56 While this rulemaking takes the HOTMA
provisions into account, it is broader than just the areas addressed by HOTMA and had been in
the development stages prior to the passage of the act. Among other things, it proposed a singleunit approval process, similar to the previous spot approval process, to provide a way for FHAinsured mortgages to be approved for condominiums in buildings that are not FHA-approved,
subject to certain conditions.
In June 2018, over a hundred Members of Congress signed a letter to HUD urging it to finalize
the rule.57 As of the end of the 115th Congress, HUD had not yet issued a final rule.
53 For example, see the National Association of Realtors, Condominium Resource Book, https://www.nar.realtor/
condominiums/condominium-resource-book.
54 According to the Spring 2018 Unified Agenda of Regulatory and Deregulatory Actions, HUD expects to issue a
notice of proposed rulemaking that will address these transfer fee requirements in 2019. See https://www.reginfo.gov/
public/do/eAgendaViewRule?pubId=201804&RIN=2502-AJ41.
55 HUD issued guidance related to owner-occupancy requirements in FHA Mortgagee Letter 2016-15, Federal Housing
Administration (FHA) Condominium Project Approval – Owner Occupancy Requirement, October 26, 2016,
https://www.hud.gov/sites/documents/16-15ML.PDF. This guidance generally maintained FHA’s existing owneroccupancy requirements of 50% for existing projects and 30% for new projects, but it did provide for lower owneroccupancy percentages for buildings that meet specified conditions. HOTMA had provided that if HUD did not issue
its guidance within 90 days, the owner-occupancy percentage would be set at 35%. Since HUD did issue guidance
within the required time period, the 35% requirement did not go into effect.
56 Department of Housing and Urban Development, “Project Approval for Single-Family Condominiums,” 81 Federal
Register 66565-66576, September 28, 2016, https://www.federalregister.gov/documents/2016/09/28/2016-23258/
project-approval-for-single-family-condominiums.
57 See the hearing transcript for House Financial Services Committee, Oversight of the Department of Housing and
Urban Development, Full Committee Hearing, June 27, 2018.
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Additional information:
For more information on the condominium-related provisions included in
HOTMA, see CRS Report R44358, Housing Opportunity Through
Modernization Act (H.R. 3700).
Housing-Related Tax Issues in the 115th Congress
During the 115th Congress, a number of housing-related tax provisions were modified or extended
through different pieces of enacted legislation: a broad tax revision law that included changes to
housing-related tax provisions, tax extenders legislation that extended temporary tax provisions
related to housing, and an appropriations law that included changes to the low-income housing
tax credit.
Housing Provisions in the Tax Revision Law
Background
Two of the largest and most well-known tax incentives available to homeowners are the mortgage
interest deduction and the deduction for property taxes.
Homeowners are allowed to deduct interest paid on a mortgage that finances the acquisition of a
primary or secondary residence as long as the homeowner itemizes their tax deductions.
Historically, the amount of interest that was allowed to be deducted was limited to the interest
incurred on the first $1 million of combined mortgage debt and the first $100,000 of home equity
debt ($1.1 million total). If a taxpayer’s mortgage debt exceeded $1 million, they were still
allowed to claim a deduction for a percentage of interest paid.58 Homeowners also benefit from
the ability to deduct state and local property taxes. Historically, homeowners were allowed to
claim an itemized deduction equal to the full amount of state and local property taxes paid.
Not all homeowners claim these deductions. Some have no mortgage, and hence no interest to
deduct. Others may be toward the end of their mortgage repayment period, and thus paying
relatively little interest, so the deduction for interest is not worth much. Some homeowners live in
states with low state and local taxes, and may find the standard deduction to be more valuable.
Some may also live in low-cost areas and therefore have a relatively small mortgage and property
taxes. There may also be interactions with other drivers of itemization. For example, itemization
rates tend to be lower in states with an income tax, which can also lead to fewer homeowners
claiming the deductions for mortgage interest and property taxes.
Among households that do claim the deductions, the majority of their advantages tend to benefit
those with higher income. This is in part because these households are more likely to have a
financial incentive to itemize their taxes and claim the deductions. It is also because higherincome households are more likely to have more expensive homes with larger mortgages, and
therefore more likely to have higher property taxes and larger amounts of mortgage interest to
deduct, and because the tax benefits increase with higher marginal tax rates in higher income
brackets.
58 The percentage of interest that was deductible was equal to $1 million divided by the mortgage balance (a similar
calculation was made separately in cases where home equity debt exceeds $100,000). For example, a homeowner with
a mortgage of $1.25 million would have been permitted to deduct 80% ($1 million divided by $1.25 million) of their
interest payments.
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Some have argued that the ability to deduct mortgage interest and property taxes incentivize
homeownership and have pointed to several perceived benefits of homeownership as a rationale
for these tax benefits. However, some researchers have suggested that these deductions have little
effect on the homeownership rate, in part because they do not reduce the upfront cost of buying a
home, which is one of the biggest barriers to homeownership for many households. This research
suggests that the tax benefits may incentivize homebuyers to purchase larger homes than they
otherwise would, however, because they increase households’ purchasing power and the benefit
of the deductions increases with more expensive homes and larger mortgages.
The above discussion draws from CRS Report R41596, The Mortgage Interest and Property Tax
Deductions: Analysis and Options. Readers can refer to that report for a fuller exploration of
these tax benefits, including the rationales put forward for them, an economic analysis of their
effects, and a discussion of research related to their impact.
Recent Developments
In late 2017, a broad tax revision law (P.L. 115-97) that substantively changed the federal tax
system was signed into law by President Trump. The legislation temporarily reduced the
maximum amount of mortgage debt for which interest can be deducted to $750,000 ($375,000 for
married filing separately) for debt incurred after December 15, 2017. For mortgage debt incurred
on or before December 15, 2017, the combined mortgage limit remains $1 million ($500,000 for
married filing separately). Refinanced mortgage debt will be treated as having been incurred on
the date of the original mortgage for purposes of determining which mortgage limit applies
($750,000 or $1 million). The interest on a home equity loan that is secured by a principal or
second residence and is used to buy, build, or substantially improve a taxpayer’s home is still
deductible, but the home equity loan amount counts towards the maximum eligible mortgage
amount ($750,000 or $1 million). After 2025, the mortgage limit for all new and existing
qualifying mortgage interest will revert to $1 million, plus $100,000 in home equity indebtedness
(regardless of its use).
The 2017 tax revision also limits the deduction for state and local property and income taxes to
$10,000 until the end of 2025. Additionally, P.L. 115-97 increased the standard deduction to
$12,000 (single) or $24,000 (married), which is expected to further reduce the number of
taxpayers who itemize deductions generally.
The increase in the standard deduction will mitigate the impact of the changes to the mortgage
interest and property tax deductions for many households, though some will pay more in taxes as
a result of these changes. The limit to the deduction for property taxes could have implications for
some states and localities with high property taxes, and to the extent that the value of the
mortgage interest deduction has been capitalized into home prices, the lower limits on the amount
of mortgage interest that can be deducted could exert downward pressure on home prices in some
areas. However, at this point the size and scope of any effects these changes may have is unclear.
Additional information:
For more on how the tax revision law affected the mortgage interest deduction,
see CRS Insight IN10845, P.L. 115-97: The Mortgage Interest Deduction.
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Housing Provisions in Tax Extenders Legislation
Background
In the past, Congress has regularly extended a number of temporary tax provisions that address a
variety of policy issues, including housing. This set of temporary provisions is commonly
referred to as “tax extenders.” Two housing-related provisions that have been included in tax
extenders packages in the recent past are the exclusion for canceled mortgage debt, and the
deduction for mortgage insurance premiums.
Exclusion for Canceled Mortgage Debt
Historically, when all or part of a taxpayer’s mortgage debt has been forgiven, the forgiven
amount has been included in the taxpayer’s gross income for tax purposes.59 This income is
typically referred to as canceled mortgage debt income.
During the housing market turmoil of the late 2000s, some efforts to help troubled borrowers
avoid foreclosure resulted in canceled mortgage debt.60 The Mortgage Forgiveness Debt Relief
Act of 2007 (P.L. 110-142), signed into law in December 2007, temporarily excluded qualified
canceled mortgage debt income that is associated with a primary residence from taxation. The
provision was originally effective for debt discharged before January 1, 2010, and was
subsequently extended several times.
Rationales put forward for extending the exclusion have included minimizing hardship for
distressed households, lessening the risk that nontax homeownership retention efforts will be
thwarted by tax policy, and assisting in the recoveries of the housing market and overall economy.
Arguments against the exclusion have included concerns that it makes debt forgiveness more
attractive for homeowners, which could encourage homeowners to be less responsible about
fulfilling debt obligations, and concerns about fairness as the ability to realize the benefits
depends on a variety of factors.61 Furthermore, to the extent that housing markets and the
economy have improved in recent years, and foreclosure rates have returned to more typical
levels, some may argue that the exclusion is less necessary now than it may have been during the
height of the housing and mortgage market turmoil.
Deductibility of Mortgage Insurance Premiums
As described earlier, homeowners traditionally have been able to deduct the interest paid on their
mortgage, as well as property taxes they pay, as long as they itemize their tax deductions.
Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a
result of the Tax Relief and Health Care Act of 2006 (P.L. 109-432).62 Specifically, homeowners
59 Generally, any type of canceled debt is to be included in a taxpayer’s gross income. Several permanent exceptions to
this general tax treatment of canceled debt exist. They are discussed in CRS Report RL34212, Analysis of the Tax
Exclusion for Canceled Mortgage Debt Income.
60 For example, canceled mortgage debt is common in a “short sale,” when the lender allows the borrower to sell the
home for less than the remaining amount owed on the mortgage and may forgive the remaining debt.
61 For example, being able to take advantage of the exclusion depends on whether or not a homeowner is able to
negotiate a debt cancelation, the income tax bracket of the taxpayer, and whether or not the taxpayer retains ownership
of the house following the debt cancellation.
62 In general, lenders require mortgage insurance for mortgages where the borrower makes a down payment of less than
20%. Mortgage insurance protects the lender in the event that the borrower defaults on the mortgage. Mortgage
insurance fees, or premiums, are usually paid by the borrower.
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could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making
the premiums deductible if homeowners itemized and their adjusted gross incomes were below a
specified threshold ($55,000 for single, $110,000 for married filing jointly). Originally, the
deduction was to be available only for 2007, but it was subsequently extended several times.
Two rationales that have been put forward for allowing the deduction of mortgage insurance
premiums are the promotion of homeownership and the recovery of the housing market.
However, it is not clear that the deduction has an effect on the homeownership rate, nor is it clear
that the deduction is still needed to assist in the recovery of the housing market, given that
housing market indicators suggest that it is stronger as a whole than when the provision was
originally enacted (although some areas have not fully recovered from the housing market
turmoil). Furthermore, to the degree that owner-occupied housing is over subsidized, extending
the deduction could lead to a greater misallocation of resources that are directed toward the
housing industry. Extending the deduction, however, may assist some households who are in
financial distress because of burdensome housing payments.
Recent Developments
Congress most recently enacted tax extenders legislation in the Bipartisan Budget Act of 2018
(P.L. 115-123). The legislation extended the exclusion for canceled mortgage debt and the ability
to deduct mortgage insurance premiums, each of which had previously expired at the end of
2016, through the end of 2017. No additional tax extenders legislation was enacted during the
115th Congress.
Additional information:
For more on the tax extenders in the Bipartisan Budget Act, see CRS Report
R44925, Recently Expired Individual Tax Provisions (“Tax Extenders”): In Brief.
For background on the tax exclusion for canceled mortgage debt, see CRS Report
RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income.
Changes to the Low-Income Housing Tax Credit
Background
The low-income housing tax credit (LIHTC) is one of the primary sources of federal funding that
is used for affordable rental housing development, which it incentivizes with federal tax credits
administered through the Internal Revenue Service. The tax credits are provided to states based
on population, and states award the credits to housing developers that agree to build or
rehabilitate housing where a certain percentage of units will be affordable to low-income
households. Housing developers then sell the credits to investors and use the proceeds to help
finance the housing developments.
Historically, LIHTC-assisted developments have had to meet one of two income tests: either a
“20-50” test or a “40-60” test. Under the former, at least 20% of units have to be occupied by
households with incomes at or below 50% of the area’s median gross income (area median
income, or AMI), adjusted for family size. Under the latter, at least 40% of the units have to be
occupied by individuals with incomes at or below 60% of the area’s median gross income,
adjusted for family size.
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Recent Developments
The Consolidated Appropriations Act, 2018 (P.L. 115-141) made two changes to the LIHTC
program. The first change added a third option for complying with the income test for LIHTC
developments in addition to the 20-50 or 40-60 tests. This option allows for income averaging,
and the income test is satisfied if at least 40% of the units are occupied by tenants with an
average income of no greater than 60% of AMI, and no individual tenant has an income
exceeding 80% of AMI. Thus, for example, renting to someone with an income equal to 80% of
AMI would also require renting to someone with an income no greater than 40% of AMI, so the
tenants would have an average income equal to 60% of AMI. Proponents of income averaging
have argued that it will have a variety of benefits, including potentially making it easier for
LIHTC developments to include more deeply income-targeted units for households with the
lowest incomes, increasing the number of households that are eligible to live in LIHTC
properties, and making it easier to use LIHTC for mixed-income housing.63
The second change made by P.L. 115-141 increased the amount of LIHTC credits available to
states by 12.5% per year for each of FY2018-FY2021.
The broader tax revision law (P.L. 115-97) did not make any changes directly to the LIHTC
program. However, certain changes that were included in the law—such as reductions in
corporate tax rates—could affect the demand for LIHTCs and the price that investors are willing
to pay for them. If investors pay less for tax credits, then the credits would generate less money
for affordable housing development, all else equal. The increase in tax credits included in P.L.
115-141 may help to alleviate concerns about the potential impact of the tax revision law on the
price for LIHTCs.
Additional information:
For more information on the low-income housing tax credit in general, and these
recent changes to the program, see CRS Report RS22389, An Introduction to the
Low-Income Housing Tax Credit.
Housing Assistance Issues in the 115th Congress
Some of the housing-related issues that were active in the 115th Congress have to do with federal
programs or activities that provide housing assistance to low-income households or other
households with particular housing needs.
HUD Appropriations
Background
For several years, concern in Congress about federal budget deficits has led to increased interest
in reducing the amount of discretionary funding provided each year through the annual
appropriations process. This interest was most manifest by the enactment of the Budget Control
Act of 2011 (P.L. 112-25), which set enforceable limits for both mandatory and discretionary
63 For example, see Michael Novogradac, “Income Averaging Option Creates More Opportunities for Affordable
Housing,” Novogradac & Company, June 1, 2018, https://www.novoco.com/periodicals/articles/income-averagingoption-creates-more-opportunities-affordable-housing.
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spending.64 The limits on discretionary spending, which have been amended and adjusted since
they were first enacted,65 have implications for HUD’s budget, the largest source of funding for
direct housing assistance, because it is made up almost entirely of discretionary appropriations.66
More than three-quarters of HUD’s appropriations are devoted to three rental assistance programs
serving more than 4 million families: the Section 8 Housing Choice Voucher (HCV) program,
Section 8 project-based rental assistance, and the public housing program. Funding for the HCV
program and project-based rental assistance has been increasing in recent years, largely because
of the increased costs of maintaining assistance for households that are currently served by the
programs.67 Public housing has, arguably, been underfunded (based on studies undertaken by
HUD of what it should cost to operate and maintain it) for many years.68 Despite the large share
of total HUD funding these rental assistance programs command, their combined funding levels
only permit them to serve an estimated one in four eligible families, which creates long waiting
lists for assistance in most communities.69
In a budget environment featuring limits on discretionary spending, the pressure to provide
increased funding to maintain current services for HUD’s largest programs must be balanced
against the pressure from states, localities, and advocates to maintain or increase funding for other
HUD programs, such as the Community Development Block Grant (CDBG) program, grants for
homelessness assistance, and funding for Native American housing.
Recent Developments
The Trump Administration’s budget requests for FY2018 and FY2019 each proposed decreases in
funding for HUD as compared to the prior year. Both budget requests proposed to eliminate
funding for several programs, including multiple HUD block grants (CDBG, the HOME
Investment Partnerships Program, and the Self-Help and Assisted Homeownership Opportunity
Program (SHOP)), and to decrease funding for most other HUD programs. In proposing to
eliminate the block grant programs, the Administration cited budget constraints and proposed that
state and local governments should take on more of a role in the housing and community
development activities funded by these programs.
In February 2018, Congress enacted the Bipartisan Budget Act of FY2018 (BBA; P.L. 115-123),
which, among other things, increased the statutory limits on discretionary spending for FY2018
and FY2019. Following passage of the BBA, the Consolidated Appropriations Act, 2018 (P.L.
64 For more information, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions.
65 Ibid.
66 Funding levels for HUD are determined by the Transportation, HUD, and Related Agencies (THUD) appropriations
subcommittee, generally in a bill by the same name. While HUD’s budget is generally smaller than the Department of
Transportation’s, it makes up the largest share of the discretionary funding in the THUD appropriations bill each year
because the majority of DOT’s budget is made up of mandatory funding.
67 For the Section 8 HCV program, funding has been increasing in part because Congress has created more vouchers
each year over the past several years (largely to replace units lost to the affordable housing stock in other assisted
housing programs or to provide targeted assistance for homeless veterans), and in part because the cost of renewing
individual vouchers has been rising as gaps between low-income tenants’ incomes and rents in the market have been
growing. For the project-based Section 8 program, the increased funding is due to more long-term rental assistance
contracts on older properties expiring and being renewed, requiring new appropriations.
68 For example, see Meryl Finkel et al., “Capital Needs in the Public Housing Program: Revised Final Report,”
prepared for the Department of Housing and Urban Development, November 24, 2010, http://portal.hud.gov/hudportal/
documents/huddoc?id=PH_Capital_Needs.pdf.
69 See Figure 6 of Joint Center for Housing Studies of Harvard University, America’s Rental Housing, 2017, p.6,
http://www.jchs.harvard.edu//research-areas/reports/americas-rental-housing-2017.
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115-141) was enacted in March 2018, providing final FY2018 appropriations for HUD. The
enacted legislation increased overall funding for HUD by nearly 10% compared to FY2017 and
did not adopt the program eliminations proposed in the President’s budget request. Most HUD
funding accounts saw increases in FY2018 compared to FY2017.
As of the end of the 115th Congress, final FY2019 appropriations for HUD had not yet been
enacted. HUD programs and activities were funded under continuing resolutions through
December 21, 2018, at which point funding lapsed. This funding lapse was still underway when
the 115th Congress ended.
Additional information:
For more on HUD appropriations trends in general, see CRS Report R42542,
Department of Housing and Urban Development (HUD): Funding Trends Since
FY2002.
For more on FY2018 HUD appropriations, see CRS Report R44931, HUD
FY2018 Appropriations: In Brief.
For more on the FY2019 HUD budget request, see CRS Report R45166,
Department of Housing and Urban Development (HUD): FY2019 Budget
Request Fact Sheet.
HUD Rental Assistance Programs
Background
As noted, HUD administers three primary direct rental assistance programs: the Housing Choice
Voucher program, the public housing program, and project-based rental assistance (including
project-based Section 8). Combined, these programs serve more than 4 million families at a cost
of nearly $40 billion per year, accounting for the vast majority of HUD’s total budget. While the
three programs provide different forms of assistance—rental vouchers, publicly owned subsidized
apartments, and privately owned subsidized apartments—they all allow low-income individuals
and families to pay rent considered affordable (generally 30% of adjusted family income). About
half of the families served by the combined programs are headed by persons who are elderly or
have disabilities and the other half are primarily other families with children. Although these are
the largest federal housing assistance programs for low-income families, they are estimated to
serve only approximately one in four eligible families due to funding limitations, and most
communities have long waiting lists for assistance.
Recent Developments
The size and scope of HUD’s rental assistance programs mean they are often of interest to
policymakers. Specifically in the 115th Congress, cost considerations, interest in broader welfare
reform ideas such as work requirements, and concerns about administrative efficiencies led to
various policy proposals and debates.
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Administration Rent Reform and Work Requirement Proposal
In April 2018, HUD Secretary Carson announced the Administration’s Making Affordable
Housing Work Act of 2018 (MAHWA) legislative proposal.70 If enacted, the proposal would have
made a number of changes to the way tenant rents are calculated in HUD rental assistance
programs. These changes would have resulted in rent increases for assisted housing recipients,
and corresponding decreases in the cost of federal subsidies. Specifically, MAHWA proposed to
eliminate the current income deductions used when calculating tenant rent and establish two rent
structures: one for elderly and disabled households, based on 30% of gross income; and one for
other families, based on 35% of gross income, with a mandatory minimum rent based on parttime work at the minimum wage. While these changes would have resulted in rent increases for
tenants, the language would have allowed the Secretary to phase in the increases. Additionally,
the proposal would have authorized the Secretary to establish other rent structures, and would
have authorized local program administrators to establish still other rent structures, with the
Secretary’s authorization. Further, the proposal would have permitted local program
administrators or property owners to institute work requirements for recipients. Given the
variation that would have resulted from these last two elements permitting local discretion, it is
difficult to estimate what the consequences of the changes would have been for any given
family.71
In announcing the proposal, HUD described it as setting the programs on “a more fiscally
sustainable path,” creating administrative efficiency, and promoting self-sufficiency.72 Lowincome housing advocates have been critical of the proposal, particularly the effect increased rent
payments may have on families.73 Legislation to implement the Administration’s proposal was
not introduced in the 115th Congress.74
Rental Assistance Demonstration
The Rental Assistance Demonstration (RAD) was an Obama Administration initiative initially
designed to test the feasibility of addressing the estimated $25.6 billion backlog in unmet capital
needs in the public housing program75 by allowing local public housing authorities (PHAs) to
70 HUD, “Secretary Carson Proposes Rent Reform: Reforms to make current rent policies simpler, more transparent
and predictable,” press release, April 25, 2018 https://www.hud.gov/press/press_releases_media_advisories/
HUD_No_18_033.
71 Some advocacy groups have attempted to quantify the effect of the rent increases outlined in the proposal (not
accounting for the alternative rent models authorized under the bill). For example, see Will Fischer, “Trump, Ross Rent
Plans Would Harm Low-Income People in Every State,” Center on Budget and Policy Priorities, June 7, 2018,
available at https://www.cbpp.org/blog/trump-ross-rent-plans-would-harm-low-income-people-in-every-state.
72 HUD, “Secretary Carson Proposes Rent Reform: Reforms to make current rent policies simpler, more transparent
and predictable,” press release, April 25, 2018 https://www.hud.gov/press/press_releases_media_advisories/
HUD_No_18_033.
73 For example, see National Low Income Housing Coalition, “Affordable Housing Advocates Tell HUD and Congress
– Keep Housing Affordable for Low Income Families,” press release, April 25, 2018, http://nlihc.org/press/releases/
10642.
74 A different draft rent reform proposal—the draft “Promoting Resident Opportunity through Rent Reform Act,” to be
sponsored by Congressman Dennis Ross—was the subject of a hearing by the Housing and Insurance subcommittee of
the House Financial Services Committee; U.S. Congress, House Committee on Financial Services, Subcommittee on
Housing and Insurance, HUD’s Role in Rental Assistance: An Oversight and Review of Legislative Proposals on Rent
Reform, 115th Cong., 2nd sess., April 25, 2018. https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=
403333.
75 The backlog estimate comes from Meryl Finkel, Ken Lam, et al., Capital Needs in the Public Housing Program
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convert their public housing properties to either Section 8 Housing Choice Vouchers or Section 8
project-based rental assistance.76 PHAs are limited in their ability to mortgage, and thus raise
private capital for, their public housing properties because of a federal deed restriction placed on
the properties as a condition of federal assistance. When public housing properties are converted
under RAD, that deed restriction is removed.77 As currently authorized, RAD conversions must
be cost-neutral, meaning that the Section 8 rents the converted properties may receive must not
result in higher subsidies than would have been received under the public housing program.
Given this restriction, and without additional subsidy, not all public housing properties can use a
conversion to raise private capital, potentially limiting the usefulness of a conversion for some
properties.78
RAD was first authorized by Congress in the FY2012 HUD appropriations law and was originally
limited to 60,000 units of public housing (out of roughly 1 million units).79 However, Congress
has since expanded the demonstration. Most recently, in FY2018, Congress raised the cap so that
up to 455,000 units of public housing will be permitted to convert to Section 8 under RAD. Given
the most recent expansion, nearly half of all public housing units could ultimately convert.
While RAD conversions have been popular with PHAs,80 and HUD’s initial evaluations of the
program have been favorable,81 a recent GAO study has raised questions about HUD’s oversight
of it, as well as how much private funding is actually being raised for public housing through the
conversions.82
Moving to Work Expansion
In the FY2016 HUD appropriations law, Congress mandated that HUD expand the Moving to
Work (MTW) demonstration by 100 PHAs.83 MTW is a waiver program that allows a limited
number of participating PHAs to get exceptions from HUD for most of the rules and regulations
governing the public housing and voucher programs. MTW has been controversial for many
years, with PHAs supporting the flexibility the demonstration provides (e.g., allowing PHAs to
(Cambridge, MA: November 24, 2011).
76 While most of the focus of RAD has been on public housing conversions, the 2012 law also authorized a separate
component of RAD that allows for the conversion of older forms of rental assistance contracts (Rental Assistance
Payment and Rent Supplement contracts, which predate the Section 8 program) to Section 8. Absent this conversion,
HUD has no authority to renew those old contracts when they expire.
77 New affordability restrictions are placed on the property as a condition of a RAD conversion, but they do not require
the same deep affordability as is required under the public housing deed restriction (called a Declaration of Trust).
78 While the raising of private capital is the most common incentive for conversion, not all conversions feature it. For
more information, see Econometrica, Inc. Evaluation of HUD’s Rental Assistance Demonstration, Department of
Housing and Urban Development, interim report, September 2016, https://www.huduser.gov/portal/sites/default/files/
pdf/RAD-InterimRpt.pdf.
79 P.L. 112-55; 125 Stat. 673.
80 For example, see Letter from Sunia Zaterman, Executive Director, CLPHA, Saul Ramirez, Executive Director,
NAHRO, and Timothy G. Kaiser, Executive Director, PHADA, to House and Senate Appropriations Committee Chairs
and Ranking Members, April 16, 2017, http://www.clpha.org/uploads/Public_Housing/5-1614IndustryGroupLetteronRADCap.pdf.
81 For example, see Econometrica, Inc., Evaluation of HUD’s Rental Assistance Demonstration, Department of
Housing and Urban Development, interim report, September 2016, https://www.huduser.gov/portal/sites/default/files/
pdf/RAD-InterimRpt.pdf.
82 U.S. Government Accountability Office, Rental Assistance Demonstration: HUD Needs to Take Action to Improve
Metrics and Ongoing Oversight, GAO-18-123, February 2018, https://www.gao.gov/products/GAO-18-123.
83 See Section 239, Title II, Division L of P.L. 114-113.
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move funding between programs), and low-income housing advocates criticizing some of the
policies being adopted by PHAs (e.g., work requirements and time limits). Most recently, GAO
issued a report raising concerns about HUD’s oversight of MTW, including the lack of
monitoring of the effects of policy changes under MTW on tenants.84
The FY2016 expansion required that HUD phase in the expansion and that it evaluate any new
policies adopted by participating PHAs. Following a series of listening sessions, and at the very
end of the Obama Administration, HUD published a notice in the Federal Register in January
2017 soliciting comments on the expansion process for MTW.85 In May 2017, HUD issued
several revisions and reopened the comment period for that notice.86 In October 2018, HUD
published a notice to select the first expansion cohort87 and a final expansion operations notice for
comment, reflecting the comments it had received on the earlier versions.88 Thus, while actions
were taken to expand MTW, no additional agencies were selected for participation in the
demonstration before the end of the 115th Congress.
Other Assisted Housing Legislation
A number of more narrowly targeted housing assistance bills were approved by committee,
considered on the floor, or enacted into law during the 115th Congress. These include the
following:
P.L. 115-174, the Economic Growth, Regulatory Relief, and Consumer
Protection Act, signed into law in May 2018, contained two assisted housing
provisions: one making changes to the Family Self Sufficiency program that
largely mirrors H.R. 4258, the Family Self Sufficiency Act, which was reported
by the House Financial Services Committee in December 2017 and approved by
the House in January 2018; and one offering various regulatory streamlining
provisions for small PHAs.
H.R. 5793, the Housing Choice Voucher Mobility Demonstration Act of 2018,
ordered reported by the House Financial Services Committee in May 2018 and
passed by the House in July 2018 (on a vote of 412-5, Roll no. 22), would have
authorized HUD to conduct a mobility demonstration to test regional
administration of the Housing Choice Voucher program and its effects on
encouraging and supporting moves by voucher holders to lower-poverty and
higher-opportunity areas. The text of H.R. 5793 was also incorporated as Section
238 of the House Appropriations Committee-reported FY2019 HUD
appropriations bill (H.R. 6072). Neither form of this legislation was enacted
before the end of the 115th Congress.
84 U.S. Government Accountability Office, Rental Housing: Improvements Needed to Better Monitor the Moving to
Work Demonstration, Including Effects on Tenants, GAO-18-150, January 25, 2018, https://www.gao.gov/products/
GAO-18-150.
85 HUD, “Operations Notice for the Expansion of the Moving to Work Demonstration Program Solicitation of
Comment,” 83 Federal Register 13, January 23, 2017.
86 HUD, “Operations Notice for the Expansion of the Moving to Work Demonstration Program Solicitation of
Comment; Waiver Revision and Reopening of Comment Period.” 83 Federal Register 85, May 4, 2017.
87 HUD Notice PH 2018-17, Request for Letters of Interest and Applications under the Moving to Work Demonstration
Program for Fiscal Year 2019: Cohort #1 – Overall Impact of Moving to Work Flexibility.
88 HUD, “Operations Notice for the Expansion of the Moving to Work Demonstration Program; Republication and
Extension of Comment Period.” 83 Federal Register 197, October 11, 2018.
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H.R. 5735, the THRIVE Act, ordered reported by the House Financial Services
Committee in May 2018 and passed by the House in June 2018 (on a vote of 230173, Roll no. 266), would have required HUD to undertake a demonstration
program, setting aside up to 10,000 existing Housing Choice Vouchers, to test
temporary supportive housing approaches for individuals recovering from opioid
and other substance use disorders. This legislation was not enacted before the end
of the 115th Congress.
H.R. 2069, the Fostering Stable Housing Opportunities Act of 2017, ordered to
be reported by the House Financial Services Committee in July 2018 (on a vote
of 34-23), would have created a new federal preference for youth aging out of
foster care and at risk of homelessness across most federal housing assistance
programs and required that youth accessing assistance via the preference be
subject to education, training, or work requirements as set by local program
administrators. This legislation was not enacted before the end of the 115th
Congress.
H.R. 1511, the Homeless Children and Youth Act of 2017, ordered to be reported
by the House Financial Services Committee in July 2018 (on a vote of 39-18),
would have expanded the definition of homelessness governing the HUD
homeless programs, while maintaining existing resources for the programs, to
include homeless families with children and youth certified as homeless under
other federal programs that have less-restrictive definitions. This legislation was
not enacted before the end of the 115th Congress.
Native American Housing Programs
Background
Native Americans living in tribal areas experience a variety of housing challenges. Housing
conditions in tribal areas are generally worse than those for the United States as a whole, and
factors such as the legal status of trust lands present additional complications.89
The main federal program that provides housing assistance to Native American tribes and Alaska
Native villages is the Native American Housing Block Grant (NAHBG), which was authorized by
the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA, P.L.
104-330). NAHASDA reorganized the federal system of housing assistance for tribes while
recognizing the rights of tribal self-governance and self-determination. The NAHBG provides
formula funding to tribes for a range of affordable housing activities that benefit primarily lowincome Native Americans or Alaska Natives living in tribal areas. A separate block grant program
authorized by NAHASDA, the Native Hawaiian Housing Block Grant (NHHBG), provides
funding for affordable housing activities that benefit Native Hawaiians eligible to reside on the
Hawaiian Home Lands.90
Although the NAHBG is the largest source of federal housing assistance to tribes, other federal
housing programs also provide tribal housing assistance. One of these is the Tribal HUD-Veterans
89 U.S. Department of Housing and Urban Development, Assessment of American Indian, Alaska Native, and Native
Hawaiian Housing Needs, https://www.huduser.gov/portal/native_american_assessment/home.html.
90 For more information on the Hawaiian Home Lands, and the eligibility requirements for Native Hawaiians to reside
on them, see the Department of Hawaiian Home Lands website at http://dhhl.hawaii.gov/about/.
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Affairs Supportive Housing (Tribal HUD-VASH) program, which provides rental assistance and
supportive services to Native American veterans who are homeless or at risk of homelessness. 91
Tribal HUD-VASH was initially created and funded through the FY2015 HUD appropriations act
(P.L. 113-235), and funds to renew rental assistance were provided in FY2017 and FY2018. No
separate authorizing legislation for the program currently exists.
Recent Developments
The most recent authorization for most NAHASDA programs expired at the end of FY2013,
although these programs have generally continued to be funded in annual appropriations laws.
(The NHHBG has not been reauthorized since its original authorization expired in FY2005,
though it has continued to receive funding in most years.92)
Both the 113th and 114th Congresses considered NAHASDA reauthorization legislation, though
none was enacted. In the 115th Congress, NAHASDA reauthorization bills were again introduced
in both the House and the Senate; these bills were similar, but not identical, to one another. In the
House, H.R. 3864 was reported by the Financial Services Committee in March 2018, while in the
Senate S. 1895 was referred to the Committee on Indian Affairs.93 NAHASDA reauthorization
legislation was not enacted by the end of the 115th Congress.
As introduced, both the House and the Senate bills would have reauthorized the NAHBG and the
NHHBG as well as two home loan guarantee programs that benefit Native Americans and Native
Hawaiians, respectively.94 However, as reported by the House Financial Services Committee,
H.R. 3864 did not include reauthorization of the Native Hawaiian programs. Both bills would
have also made certain changes to NAHBG program requirements, authorized a demonstration
program intended to allow participating tribes to use their NAHBG funds in specified ways to
support more private financing for housing activities in tribal areas, and required the HUD
Secretary to set aside at least 5% of HUD-VASH funding for the Tribal HUD-VASH program. In
response to concerns about certain tribes not spending their NAHBG funds in a timely fashion,
both bills also included a provision to reduce funding to tribes with annual allocations of $5
million or more who have large balances of unexpended NAHBG funds. (The vast majority of
tribes receive annual allocations below $5 million.)
While tribes and Congress are generally supportive of NAHASDA, there has been some
disagreement in Congress over specific provisions or policy proposals that have been included in
reauthorization bills, such as a provision that would allow tribes to set maximum rents for
NAHASDA-assisted housing units that exceed 30% of tenant incomes. There has also been
91 Tribal HUD-VASH is modeled on the broader HUD-Veterans Affairs Supportive Housing (VASH) program, which
provides rental assistance and supportive services for homeless veterans. For more information on HUD-VASH and
Tribal HUD-VASH, see CRS Report RL34024, Veterans and Homelessness.
92 In FY2016, no funding was appropriated for the NHHBG. However, HUD’s budget justification for FY2016 (as well
as other years) indicated that HUD would have sufficient carryover balances from prior-year appropriations to continue
to carry out activities under the program without a new appropriation.
93 Another Senate bill, the Bringing Useful Initiatives for Indian Land Development (BUILD Act, S. 1275), would also
have made certain changes to NAHASDA and reauthorized the NAHBG and an Indian housing loan guarantee
program. The Indian Affairs Committee held a hearing on the BUILD Act in June 2017.
94 These programs are HUD’s Indian Home Loan Guarantee Program (the Section 184 Program) and the Native
Hawaiian Housing Loan Guarantee Program (the Section 184A program). They are authorized under the Housing and
Community Development Act of 1992 (P.L. 102-550), as amended, rather than by NAHASDA. For more information
on these programs, see https://www.hud.gov/program_offices/public_indian_housing/ih/homeownership/184 and
https://www.hud.gov/program_offices/public_indian_housing/ih/codetalk/onap/program184a, respectively.
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disagreement over the Native Hawaiian housing programs for many years. This disagreement
reflects a broader debate about the appropriate relationship of the federal government to Native
Hawaiians and whether programs that solely benefit Native Hawaiians could be construed to
provide benefits based on race.95 Supporters of the Native Hawaiian housing programs argue that
the funding is necessary due to housing conditions on the Hawaiian Home Lands and the history
of the federal government’s involvement with Native Hawaiians.96
Separately from NAHASDA, a stand-alone Senate bill (S. 1333) would have codified the Tribal
HUD-VASH program.97 The Senate passed S. 1333 in May 2018, but the House did not consider
the bill.
Additional information:
For more on NAHASDA and the NAHBG, see CRS Report R43307, The Native
American Housing Assistance and Self-Determination Act of 1996 (NAHASDA):
Background and Funding.
Housing and Disaster Response
Background
During the 115th Congress, several major disasters struck the United States (including Hurricanes
Harvey, Irma, and Maria and significant wildfires in California) that resulted in presidential
disaster declarations. These declarations trigger aid that protects property, public health, and
safety, primarily provided through the Federal Emergency Management Agency (FEMA).
FEMA’s housing-related assistance may include, depending on the needs created by the specific
disaster, emergency shelter, temporary housing assistance, and assistance with long-term housing
recovery. In many cases, Congress will also provide supplemental funding, often through HUD’s
Community Development Block Grant-Disaster Recovery (CDBG-DR) grant program, to further
support long-term recovery efforts following major disasters.
Recent Developments
CDBG-DR
The 115th Congress provided substantial supplemental appropriations, including $37 billion in
total supplemental CDBG-DR funding in FY2017, FY2018, and FY2019 combined, to aid
disaster-affected communities with long-term recovery, including the restoration of housing,
infrastructure, and economic activity.98
95 For example, see debate on the NHHBG during the consideration of a NAHASDA reauthorization bill in 2007 in
“Native American Housing Assistance and Self-Determination Reauthorization Act of 2007,” Congressional Record,
vol. 153 (September 6, 2007), pp. H10187-H10190, https://www.congress.gov/crec/2007/09/06/CREC-2007-09-06pt1-PgH10182.pdf.
96 For example, see the minority views in U.S. Congress, House Committee on Financial Services, Native American
Housing Assistance and Self-Determination Reauthorization Act of 2017, report to accompany H.R. 3864, 115th Cong.,
2nd sess., March 8, 2018, H.Rept. 115-591 (Washington, DC: GPO, 2018), p. 101, https://www.congress.gov/115/crpt/
hrpt591/CRPT-115hrpt591.pdf.
97 An identical House bill, H.R. 4359, was referred to the House Committee on Financial Services.
98 For the allocation of these funds, see https://www.hudexchange.info/programs/cdbg-dr/cdbg-dr-grantee-contactinformation/#all-disasters. While the bulk of the funding was provided in response to the 2017 hurricanes, other 2017
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While CDBG-DR has had a significant role in funding recovery efforts from past disasters, and is
slated to play a major role in the recovery from the 2017 hurricanes, the program is not formally
authorized, meaning the rules that govern the funding use and oversight vary with HUD guidance
accompanying each allocation. Some Members of the 115th Congress expressed interest in
formally authorizing the CDBG-DR program, in part in response to concerns about HUD’s
oversight of CDBG-DR funding. The House Financial Services Committee’s Subcommittee on
Oversight and Investigations held a hearing on CDBG-DR oversight and potential for future
reforms, including authorization of the program.99 The House Financial Services Committee later
ordered to be reported H.R. 4557, the Reforming Disaster Recovery Act of 2017. The bill would
have authorized the CDBG-DR program and included a number of provisions to codify financial
controls over program funds.
Disaster Housing Assistance Program
Advocates for low-income housing100 and some Members of Congress101 have been critical of
FEMA’s housing response to the 2017 hurricanes, and they have called for HUD to play a larger
role, particularly for residents of Puerto Rico displaced as a result of Hurricane Maria.
Specifically, they have called for FEMA to enter into an interagency agreement with HUD to
provide longer-term temporary rental assistance. This was done after Hurricanes Katrina and Ike
in 2005 and 2008, and to a more limited extent after Hurricane Sandy in 2012. The program of
assistance to residents resulting from those interagency agreements was referred to as the Disaster
Housing Assistance Program (DHAP). DHAP was structured somewhat differently after each of
those past disasters (in terms of who was eligible, how long they received rental assistance, how
they were transitioned off of assistance, etc.), but it generally featured FEMA-funded rental
assistance administered by local PHAs and modeled after Section 8 Housing Choice Vouchers.102
The structure of a future DHAP would depend on what was negotiated between FEMA and HUD,
unless otherwise specified by Congress.
Although the governor of Puerto Rico explicitly requested in December 2017 that FEMA initiate
a DHAP in response to Hurricane Maria, FEMA denied that request in May of 2018, arguing
DHAP was neither necessary nor cost effective.103 Instead, FEMA has made various forms of
temporary housing assistance available for Puerto Ricans displaced to the mainland United States,
primarily funding extended hotel and motel stays through the Transitional Sheltering Assistance
disasters were also eligible for funding, and a portion of the money provided was set aside for disaster mitigation and
made available to a broader set of communities (all who had received CDBG-DR funding since FY2014).
99 U.S. Congress, House Financial Services Committee, Oversight and Investigations Subcommittee, “Community
Development Block Grant-Disaster Recovery Program – Stakeholder Perspectives” hearing, 115th Cong., 2nd Sess.,
May 17, 2018.
100 For example, see letter from the Hurricane Housing Recovery Coalition (led by the National Low Income Housing
Coalition, representing over 500 organizations and local governments) to Majority Leader McConnell, Minority Leader
Schumer, Speaker of the House Ryan, and Minority Leader Pelosi, recommending DHAP, among other changes in
response to the 2017 disasters, available at http://nlihc.org/sites/default/files/Congressional-Disaster-RecoveryRecommendations_092017.pdf.
101 For example, see the Housing Victims of Major Disasters Act of 2018 (H.R. 5474/S. 2996), which would have
required FEMA to enter into a DHAP contract with HUD.
102 For more information about DHAP-Katrina, see Gretchen Locke and Larry Buron, Study of Household Transition
from the Disaster Housing Assistance Program (DHAP-Katrina), Abt Associates, Inc., final report, March 2013,
https://www.huduser.gov/portal/publications/destech/DHAP.html. For more information on DHAP-Ike, see
https://www.hud.gov/program_offices/public_indian_housing/publications/ike. For more information on DHAP-Sandy,
see https://www.hud.gov/program_offices/public_indian_housing/programs/ph/sandy.
103 See http://nlihc.org/sites/default/files/DHAP_FEMA-answer.pdf.
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(TSA) program,104 which was repeatedly extended, including by court order, but expired in
September, 2018.105
Additional information:
For more information on 2017 disaster supplemental funding, see CRS Report
R45084, 2017 Disaster Supplemental Appropriations: Overview.
Other Affordable Housing Proposals
Background
As noted earlier in this report, housing affordability challenges have been increasing, particularly
for lower-income families. The share of families with significant cost burdens has been growing
and a number of research and media reports have highlighted growing concerns about housing
costs outpacing income growth.
Recent Developments
In response to concerns about housing affordability, several bills were introduced in the 115th
Congress that focused on addressing the issue of housing affordability broadly, but through
different approaches.
Some proposals were focused on demand-side solutions, in the form of new or increased
subsidies for certain renters or homeowners meant to make it easier for those households to afford
housing. For example, several bills—S. 3250/H.R. 6671, S. 3342, H.R. 4074, and H.R. 3670—
would have created a renter credit through changes to the tax code. (Some of these bills included
other housing-related provisions as well.) Other proposals were focused on supply-side solutions,
such as in the form of additional resources for existing affordable housing programs that focus on
the production or preservation of affordable housing units. For example, Representative Waters
introduced H.R. 3160 and H.R. 2076, which would have authorized significant increases in
resources for the public housing program and homeless assistance programs, respectively.
Another bill, S. 3231, took a different approach by proposing to authorize a task force to study the
effect of a shortage of affordable housing on life outcomes as well as the impact such a shortage
has on other federal, state, and local programs, and make recommendations to Congress.
The most sweeping affordable housing proposal in the 115th Congress, and arguably in the last
several Congresses, was S. 3503, the American Housing and Economic Mobility Act of 2018,
introduced by Senator Warren. It would have authorized new funding for affordable housing
programs and activities at a level greater than HUD’s entire budget,106 with both supply-side and
demand-side investments, among other changes. Specifically, the bill included the following:
104 U.S. Federal Emergency Management Agency, Individuals and Households Program Unified Guidance (IHPUG),
September 2016, pp. 123-125, at https://www.fema.gov/media-library-data/14835670808281201b6eebf9fbbd7c8a070fddb308971/FEMAIHPUG_CoverEdit_December2016.pdf.
105 See the court order denying an additional extension at https://www.latinojustice.org/sites/default/files/
Order%20Denying%20FEMA%20Extension%20-%20Aug%2030.pdf.
106 The funding authorizations for the Housing Trust Fund ($44.5 billion per year), the Capital Magnet Fund ($2.5
billion per year), local policy grants ($2 billion per year), middle class housing emergency fund ($4 billion for one
year) and grants for helping families with negative equity ($2 billion for one year) total $55 billion in new budget
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authorizations of $44.5 billion per year for 10 years for affordable housing
development through HUD’s Housing Trust Fund, $2.5 billion per year for 10
years for Treasury’s Capital Magnet Fund, and $2.5 billion for FY2019 for
HUD’s Native American Housing Block Grant, as well as additional funding for
certain USDA rural housing programs;
creation of a new $4 billion middle class housing emergency fund;
a new authorization of $2 billion per year for five years for local governments
that agree to reform local land use polices in support of affordable housing
development;
the creation of a new down payment assistance grant program for first-time
homebuyers in low-income communities that were affected by historical
redlining practices;
an authorization of $2 billion for new one-time grants for states to assist
homeowners with negative equity;
modifications and expansions to the Community Reinvestment Act;
amendments to the Fair Housing Act to add sexual orientation, gender identity,
marital status, and source of income to the categories protected from
discrimination, among other changes; and
modifications to the Housing Choice Voucher program to promote regional
mobility.
These changes were to be paid for, at least in part, by changes to the estate tax designed to
increase revenue.
While none of these bills was the subject of legislative action during the 115th Congress, they
received attention among industry and advocacy groups and the media as part of a larger
conversation about how to address housing affordability.
HUD Regulatory Reviews During the 115th Congress
The Trump Administration took office in January 2017, at the beginning of the 115th Congress. In
February 2017, President Trump issued Executive Order 13777 directing agencies to establish a
Regulatory Reform Task Force to evaluate existing agency regulations and identify regulations
that should potentially be modified or repealed.107 In accordance with the order, in May 2017
HUD issued a Federal Register notice requesting public comments “to assist in identifying
existing regulations that may be outdated, ineffective, or excessively burdensome.”108
HUD has since suspended, withdrawn, or considered modifying a variety of regulations and
policy decisions. Not all of these actions have been directly related to the regulatory review
authority, without including the creation of the new down payment assistance grant program. In FY2018, HUD’s total
gross discretionary budget authority totaled $52.7 billion.
107 Executive Order 13777 of February 24, 2017, “Enforcing the Regulatory Reform Agenda,” 82 Federal Register
12285-12287, March 1, 2017, https://www.federalregister.gov/documents/2017/03/01/2017-04107/enforcing-theregulatory-reform-agenda.
108 Department of Housing and Urban Development, “Reducing Regulatory Burden; Enforcing the Regulatory Reform
Agenda Under Executive Order 13777,” 82 Federal Register 22344-22346, May 15, 2017,
https://www.federalregister.gov/documents/2017/05/15/2017-09730/reducing-regulatory-burden-enforcing-theregulatory-reform-agenda-under-executive-order-13777.
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required by Executive Order 13777, though HUD has often described its actions as consistent
with that review or noted public comments received as part of that review in explaining its
decisions. The regulations and policy decisions that have been withdrawn or suspended or that are
under review impact a range of HUD programs and policies. Some of the more high-profile
actions that HUD has taken are discussed in the following sections.
Small Area Fair Market Rents
Background
Fair Market Rents (FMRs) are estimated annually by HUD for use in various HUD programs,
including for setting subsidy levels in the Section 8 Housing Choice Voucher (HCV) program.
FMRs are set at the 40th percentile gross rent of standard-quality housing in a community. HUD
uses Census data and inflation estimates to establish FMRs for the geographies of metropolitan
areas and nonmetropolitan counties. It has long been understood that housing markets are often
more localized than metropolitan areas or counties, but given data limitations these were the
smallest geographies for which HUD would produce regular estimates.
With the introduction of the American Community Survey to replace the decennial Census long
form, more-frequently updated data became available at smaller geographies. Thus, HUD is now
able to calculate FMRs for smaller geographic areas. HUD released its first hypothetical Small
Area FMRs (SAFMRs), with FMRs at the zip code level, in FY2011 and has published them
annually since. With the release of the SAFMRs, HUD also announced a demonstration to test the
use of SAFMRs on the HCV program in selected communities.109
Recent Developments
In June 2016, during the 114th Congress, HUD published a notice in the Federal Register
proposing to require certain PHAs to use SAFMRs in the administration of their HCV programs
if they had high levels of vouchers concentrated in high-poverty areas.110 Some commenters
expressed support, citing the opportunity SAFMRs present to promote mobility and accuracy in
subsidy determination, among other reasons; other commenters opposed the change, expressing
concern about the potential for cost increases in the program resulting in fewer families being
served, among other reasons.111 The rule was finalized in November 2016, at the end of the
Obama Administration.112 Under the final rule, 24 communities113 would be mandated to use
109 For more information about the SAFMR demonstration, see Meryl Finkel et al., Small Area Fair Market Rent
Demonstration Evaluation, Department of Housing and Urban Development, interim report, Washington, DC, August
2017, https://www.huduser.gov/portal/publications/SAFMR-Interim-Report.html.
110 See Department of Housing and Urban Development, “Establishing a More Effective Fair Market Rent (FMR)
System; Using Small Area Fair Market Rents (SAFMRs) in the Housing Choice Voucher Program Instead of the
Current 50th Percentile FMRs,” 81 Federal Register 116, June 2016. As discussed in the background to this proposed
rule, prior to this proposed change, PHAs with high concentrations of voucher holders in high poverty communities
were given 50th percentile FMRs, rather than 40th percentile FMRs, in an attempt to promote deconcentration.
However, HUD research had found the 50th percentile FMRs not to be effective in achieving that goal.
111 See the discussion of public comments in “Establishing a More Effective Fair Market Rent System; Using Small
Area Fair Market Rents in the Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs,” 81
Federal Register 221 (November 16, 2016).
112 Ibid.
113 The affected areas are Atlanta-Sandy Springs-Roswell, GA HUD Metro FMR Area; Bergen-Passaic, NJ HUD
Metro FMR Area; Charlotte-Concord-Gastonia, NC-SC HUD Metro FMR Area; Chicago-Joliet-Naperville, IL HUD
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SAFMRs for their HCV programs and any other PHA could choose to use them, beginning on
October 1, 2017.
Following the transition to the Trump Administration, HUD Secretary Carson announced in the
summer of 2017 that he was suspending the mandatory use of SAFMRs for two fiscal years,
citing interim findings from the SAFMR demonstration that raised concerns about the availability
of units for voucher holders, negative public comments during the rulemaking process, and the
need for more guidance and technical assistance for PHAs.114 In response to the suspension, fair
housing advocates sued HUD, and in December 2017 the U.S. District Court for the District of
Columbia entered a preliminary injunction voiding the suspension, thus putting the mandatory
use of SAFMRs into effect. In light of the injunction, HUD issued a notice for the 24 mandatory
communities to begin using SAFMRs “as expeditiously as possible and no later than April 1,
2018.”115 Other PHAs may also voluntarily begin using SAFMRs to administer their HCV
programs.
Manufactured Housing
Background
Manufactured housing—housing that is assembled in a factory setting and transported to a home
site on a permanent chassis—is required to be built in accordance with HUD’s Manufactured
Housing Construction and Safety Standards.116 HUD issues regulations governing the standards,
with the input of the Manufactured Housing Consensus Committee.117 HUD also develops model
manufactured home installation standards;118 states that implement their own manufactured home
installation programs must have standards that at least meet the HUD model standards.
Recent Developments
In January 2018, HUD issued a Federal Register notice stating that, consistent with Executive
Order 13777 and the Regulatory Reform Task Force, it was undertaking a broad review of HUD’s
regulations related to manufactured housing and inviting public comment on regulations that may
warrant review. 119 While HUD rules are generally intended to ensure that manufactured housing
Metro FMR Area; Colorado Springs, CO HUD Metro FMR Area; Dallas, TX HUD Metro FMR Area (Dallas-PlanoIrving, Texas Metro Division); Fort Lauderdale, FL HUD Metro FMR Area; Fort Worth-Arlington, TX HUD Metro
FMR Area; Gary, IN HUD Metro FMR Area; Hartford-West Hartford-East Hartford, CT HUD Metro FMR Area;
Honolulu, HI MSA; Jackson, MS HUD Metro FMR Area; Jacksonville, FL HUD Metro FMR Area; Monmouth-Ocean,
NJ HUD Metro FMR Area; North Port-Sarasota-Bradenton, FL MSA; Palm Bay-Melbourne-Titusville, FL MSA;
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA; Pittsburgh, PA HUD Metro FMR Area; Sacramento—
Roseville—Arden-Arcade, CA HUD Metro FMR Area; San Antonio-New Braunfels, TX HUD Metro FMR Area; San
Diego-Carlsbad, CA MSA; Tampa-St. Petersburg-Clearwater, FL MSA; Washington-Arlington-Alexandria, DC-VAMD HUD Metro FMR Area; West Palm Beach-Boca Raton, FL HUD Metro FMR Area. Note that Dallas-Plano-Irving,
TX Metro area is subject to the use of SAFMRs as the result of a legal settlement, not due to HUD policy changes.
114 Secretary of HUD, Suspension of Small Area Fair Market Rent (FMR) Designations, August 2017,
https://www.huduser.gov/portal/portal/sites/default/files/pdf/SecretarysDetermination.pdf.
115 HUD Notice PIH-2018-01.
116 42 U.S.C. §§5401 et. seq.
117 24 C.F.R. Chapter XX includes HUD regulations related to manufactured housing (including regulations on
construction and safety standards, installation, enforcement, fees, and dispute resolution). The Manufactured Home
Construction and Safety Standards are at 24 C.F.R. Part 3280.
118 The model installation standards are in regulation at 24 C.F.R. Part 3285.
119 Department of Housing and Urban Development, “Regulatory Review of Manufactured Housing Rules,” 83 Federal
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is high quality and safe, some have argued that certain HUD rules are unnecessary or too
inflexible and that they therefore drive up the cost of manufactured housing and reduce access to
it as an affordable housing option. Rules or guidance that have attracted particular attention in
recent years include a final rule related to on-site completions of manufactured homes,120 a
memorandum related to the construction of certain add-on features (such as attached garages) at
the home site and the applicability of HUD alternative construction procedures in those
circumstances,121 and an interpretative bulletin related to foundation requirements in areas subject
to ground freezing.122 HUD specifically requested comments on these and other selected topics, in
addition to requesting comments generally on any of its manufactured housing regulations.123
The House-passed FY2018 consolidated appropriations bill that included HUD appropriations
would have prohibited funds provided in that bill from being used for the three HUD directives
mentioned above.124 While that provision was not included in the enacted FY2018 appropriations
law, the explanatory statement directed HUD to review those specific directives, develop a
solution that balances consumer safety with costs and burdens placed on both manufacturers and
consumers, and report on whether state and local agencies should have jurisdiction over on-site
completion of manufactured homes.125
Affirmatively Furthering Fair Housing
Background
The Fair Housing Act requires HUD to administer its programs in a way that affirmatively
furthers fair housing,126 and statutes or regulations governing specific HUD programs also require
that funding recipients affirmatively further fair housing (AFFH). For many years, public housing
authorities and state and local governments that receive HUD block grant funds satisfied their
obligation to affirmatively further fair housing by certifying to HUD that they conducted an
Analysis of Impediments (AI) to fair housing and were taking appropriate actions to overcome
Register 3635-3636, January 26, 2018, https://www.federalregister.gov/documents/2018/01/26/2018-01276/regulatoryreview-of-manufactured-housing-rules.
120 Department of Housing and Urban Development, On-Site Completion of Construction of Manufactured Homes, 80
Federal Register 53712-53732, September 8, 2015, https://www.federalregister.gov/documents/2015/09/08/201521774/on-site-completion-of-construction-of-manufactured-homes.
121 Department of Housing and Urban Development, Construction of On-Site Installation of Add-ons, such as an
Attached Garage, memorandum, June 12, 2014, https://www.hud.gov/sites/documents/
MEMOONSITEINSTALLADDON.PDF. HUD regulations related to alternative construction procedures for
manufactured homes in general are at 24 C.F.R. §3282.14.
122 Department of Housing and Urban Development, “Interpretative Bulletin for Model Manufactured Home
Installation Standards Foundation Requirements in Freezing Temperature Areas Under 24 C.F.R. 3285.312(b),” Notice
of proposed installation Interpretative Bulletin I-1-17, June 21, 2017, https://www.federalregister.gov/documents/2017/
06/21/2017-12964/interpretative-bulletin-for-model-manufactured-home-installation-standards-foundationrequirements.
123 83 Federal Register 3636.
124 See Section 424 of H.R. 3354.
125 U.S. Congress, House Committee on Appropriations, Consolidated Appropriations Act, 2018, H.R. 1625/P.L. 115141 [Legislative Text and Explanatory Statement], committee print, 115th Cong., 2nd sess. (Washington, DC: GPO,
2018), p. 1945, https://www.gpo.gov/fdsys/pkg/CPRT-115HPRT29457/pdf/CPRT-115HPRT29457.pdf.
126 42 U.S.C. §3608(e)(5).
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impediments. However, both HUD and GAO had identified certain weaknesses in the AI
process.127
In July 2015, during the 114th Congress, HUD published a final rule (AFFH rule) that more
specifically defines what it means to affirmatively further fair housing and requires that program
participants submit a new Assessment of Fair Housing (AFH) to HUD rather than an AI.128 The
rule also provides that HUD will supply data for program participants to use in preparing their
AFHs and will publish tools that help them through the process.
Recent Developments
On January 5, 2018, HUD issued a notice stating that it would extend the deadline for local
governments receiving more than $500,000 in CDBG funding to submit their AFHs until after
October 31, 2020.129 Under the AFFH rule, these local governments had begun submitting AFHs
starting in 2016. In extending the deadline, HUD stated that, based on reviews of AFHs that had
been submitted so far, it believed that program participants needed more time and technical
assistance to produce acceptable AFHs.130
On May 23, 2018, HUD issued three more notices that effectively suspend indefinitely the
implementation of the AFFH rule and return to the previous AI process. The three notices (1)
withdrew the January 2018 notice that delayed implementation of the AFFH rule for local
governments,131 (2) withdrew the final assessment tool that had been released to assist local
governments in preparing their AFHs,132 and (3) directed program participants that have not
already submitted an AFH under the AFFH rule to comply with the previous AI requirements.133
127 U.S. Department of Housing and Urban Development, Office of Policy Development and Research, Analysis of
Impediments Study: Draft, January 27, 2009, https://ia801002.us.archive.org/20/items/365748-hud-reportingcompliance-report/365748-hud-reporting-compliance-report.pdf; and U.S. Government Accountability Office, Housing
and Community Grants: HUD Needs to Enhance Its Requirements and Oversight of Jurisdictions’ Fair Housing Plans,
GAO-10-905, September 2010, http://www.gao.gov/new.items/d10905.pdf.
128 Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing,” 80 Federal
Register 42272, July 16, 2015, https://www.federalregister.gov/documents/2015/07/16/2015-17032/affirmativelyfurthering-fair-housing.
129 U.S. Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing: Extension of
Deadline for Submission of Assessment of Fair Housing for Consolidated Plan Participants” 83 Federal Register 683685, January 5, 2018.
130 In response to HUD’s actions, on May 8, 2018, a group of organizations filed a complaint in federal court alleging
that by delaying implementation of the rule, HUD had violated the Administrative Procedures Act. A copy of the
complaint, filed in the U.S. District Court for the District of Columbia, is available at http://prrac.org/pdf/
NFHA_v_Carson_complaint.pdf. However, on August 17, 2018, the case was dismissed. The opinion dismissing the
case is available at the U.S. District Court website, https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv107647.
131 Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing: Withdrawing of Notice
Extending the Deadline for Submission of Assessment of Fair Housing for Consolidated Plan Participants,” 83 Federal
Register 23928, May 23, 2018, https://www.federalregister.gov/documents/2018/05/23/2018-11143/affirmativelyfurthering-fair-housing-withdrawal-of-notice-extending-the-deadline-for-submission-of.
132 Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing: Withdrawal of the
Assessment Tool for Local Governments,” 83 Federal Register 23922-23927, May 23, 2018,
https://www.federalregister.gov/documents/2018/05/23/2018-11146/affirmatively-furthering-fair-housing-withdrawalof-the-assessment-tool-for-local-governments.
133 U.S. Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing (AFFH):
Responsibility to Conduct Analysis of Impediments,” 83 Federal Register 23927, May 23, 2018,
https://www.federalregister.gov/documents/2018/05/23/2018-11145/affirmatively-furthering-fair-housing-affh-
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Withdrawing the local government assessment tool delays the AFH submission dates for local
governments because the AFFH rule provides for at least nine months between publication of the
final assessment tool and the AFH due date. HUD states that it withdrew the assessment tool
because it had identified “significant deficiencies” that made the tool “unduly burdensome” for
program participants to use, and that it does not have the personnel to provide technical assistance
that the jurisdictions would need.134 The notice provides that HUD will produce a “more effective
and less burdensome” tool in the future and that it will accept public input on improving the
tool.135
In the 115th Congress, the Restoring Fair Housing Protections Eliminated by HUD Act of 2018
(H.R. 6220) would have required HUD to reinstate the assessment tool for local governments and
require them to submit AFHs. The bill was referred to committee but no further action was taken
during the 115th Congress.
Most recently, on August 13, 2018, HUD announced an Advance Notice of Proposed Rulemaking
(ANPR) stating that it “has determined that a new approach towards AFFH is required” and
requesting public comments on potential changes to the AFFH regulations. The ANPR states that
“HUD is committed to its mission of achieving fair housing opportunity for all,” but that it
believes that the current rule “is not fulfilling its purpose to be an efficient means for guiding
meaningful action by program participants.”136
Additional information:
For more on HUD and fair housing, including HUD’s obligation to affirmatively
further fair housing, see CRS Report R44557, The Fair Housing Act: HUD
Oversight, Programs, and Activities.
Disparate Impact Standard under the Fair Housing Act
Background137
The Fair Housing Act (FHA) was enacted “to provide, within constitutional limitations, for fair
housing throughout the United States.”138 It prohibits discrimination on the basis of race, color,
religion, national origin, sex, physical and mental handicap, and familial status.139 Subject to
certain exemptions,140 the FHA applies to all sorts of private and public housing, including single
family homes, apartments, condominiums, and manufactured homes.141 It also applies to
“residential real estate-related transactions,” which include both the “making [and] purchasing of
responsibility-to-conduct-analysis-of-impediments.
134 83 Federal Register 23923.
135 83 Federal Register 23926.
136 See HUD, “HUD Seeks to Streamline and Enhance ‘Affirmatively Furthering Fair Housing’ Rule,” press release,
August 13, 2018, https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_079 and Department of
Housing and Urban Development, “Affirmatively Furthering Fair Housing: Streamlining and Enhancements,” 83
Federal Register 40713-40715, August 16, 2018, https://www.gpo.gov/fdsys/pkg/FR-2018-08-16/pdf/2018-17671.pdf.
137 This section is adapted from CRS Report R44203, Disparate Impact Claims Under the Fair Housing Act.
138 42 U.S.C. §3601. The FHA, 42 U.S.C. §§3601-31, was originally enacted as Title VIII of the Civil Rights Act of
1968. For a legal analysis of the FHA, see CRS Report 95-710, The Fair Housing Act (FHA): A Legal Overview.
139 42 U.S.C. §§3604-06, 3617.
140 Ibid. at §3607.
141 Ibid. at §§3604-06, 3617.
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loans … secured by residential real estate [and] the selling, brokering, or appraising of residential
real property.”142
In June 2015, the Supreme Court, in Texas Department of Housing Community Affairs v. Inclusive
Communities Project,143 confirmed the long-held interpretation that, in addition to outlawing
intentional discrimination, the FHA prohibits certain housing-related decisions that have a
disparate impact144 on a protected class.145
Historically, courts have generally recognized two types of disparate impacts resulting from
“facially neutral decision[s]” that can result in liability under the FHA.146 First, courts have
recognized disparate impact when a “decision has a greater adverse impact on one [protected]
group than on another.”147 Second, courts consider the “effect which the decision has on the
community involved; if it perpetuates segregation and thereby prevents interracial association it
will be considered invidious under the Fair Housing Act independently of the extent to which it
produces a disparate effect on different racial groups.”148
The Supreme Court’s holding in Inclusive Communities that “disparate-impact claims are
cognizable under the [FHA]”149 mirrors previous interpretations of HUD150 and all 11 federal
courts of appeals151 that had ruled on the issue as of June 2015. However, HUD and these courts
had not all applied the same criteria for determining when a neutral policy that causes a disparate
impact violates the FHA.152 In a stated attempt to harmonize disparate impact analysis across the
country, HUD finalized regulations in 2013 that established uniform standards for determining
when such practices violate the act.153 The Inclusive Communities Court did not expressly adopt
the standards established in HUD’s disparate impact regulations, but instead embraced a similar,
142 Ibid. at §3605.
143 135 S. Ct. 2507 (2015). The Supreme Court had granted certiorari in two similar disparate impact cases in each of
the previous two terms; however, in both those cases the parties reached settlement agreements before the Court had
the opportunity to issue an opinion on whether disparate impact claims are cognizable under the FHA. See Magner v.
Gallagher, 132 S. Ct. 1306 (2012) and Twp. of Mt. Holly v. Mt Holly Garden Citizens in Action, Inc., 134 S. Ct. 636
(2013).
144 In the context of the FHA, the term “disparate impact” is used interchangeably with the term “discriminatory
effect.”
145 Inclusive Communities, 135 S. Ct. at 2525.
146 Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1290 (7 th Cir. 1977).
147 Ibid.
148 Ibid. See also Inclusive Communities, 135 S. Ct. at 2522 (“Rather, the FHA aims to ensure that those [valid
governmental] priorities can be achieved without arbitrarily creating discriminatory effects or perpetuating
segregation.”).
149 Inclusive Communities, 135 S. Ct. at 2525.
150 Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Federal Register 11460 (February
15, 2013).
151 Vill. of Arlington Heights, 558 F.2d at 1290; Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 149-50 (3d Cir. 1977);
Betsey v. Turtle Creek Assocs., 736 F.2d 983, 988-89 (4th Cir. 1984); Keith v. Volpe, 858 F.2d 467, 484 (9th Cir. 1988);
Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 938 (2d Cir. 1988), judgment aff'd, 488 U.S. 15
(1988); Jackson v. Okaloosa Cty., Fla., 21 F.3d 1531, 1543 (11th Cir. 1994); Simms v. First Gibraltar Bank, 83 F.3d
1546, 1555 (5th Cir. 1996); Langlois v. Abington Hous. Auth., 207 F.3d 43, 49-50 (1st Cir. 2000); Charleston Hous.
Auth. v. U.S. Dep't of Agric., 419 F.3d 729, 740-41 (8th Cir. 2005); Graoch Assocs. #33, L.P. v. Louisville/Jefferson
Cty. Metro Human Relations Comm'n, 508 F.3d 366, 374 (6th Cir. 2007); Reinhart v. Lincoln Cty., 482 F.3d 1225,
1229 (10th Cir. 2007).
152 See the “Disparate Impact Analysis Before Inclusive Communities” section of CRS Report R44203, Disparate
Impact Claims Under the Fair Housing Act.
153 78 Federal Register 11460.
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but not identical, three-step burden-shifting test for assessing disparate impact liability under the
FHA.154
At step one, the plaintiff has the burden of establishing evidence that a housing decision or policy
caused a disparate impact on a protected class.155 At step two, defendants can counter the
plaintiff’s prima facie showing by establishing that the challenged policy or decision is
“necessary to achieve a valid interest.”156 The defendant will not be liable for the disparate impact
resulting from a “valid interest” unless, at step three, the plaintiff proves “that there is an
available alternative … practice that has less disparate impact and serves the entity’s legitimate
needs.”157 In addition, the Supreme Court outlined a number of limiting factors that lower courts
and HUD should apply when assessing disparate impact claims.158 The Court stressed that lower
courts and HUD should rigorously evaluate plaintiffs’ claims to ensure that evidence has been
provided to support not only a statistical disparity, but also causality.159 Additionally, the Court
emphasized that claims should be disposed of swiftly in the preliminary stages of litigation if
plaintiffs have failed to establish a prima facie case of disparate impact.160
Recent Developments
On June 20, 2018, HUD published an Advance Notice of Proposed Rulemaking in the Federal
Register seeking public comment on whether the 2013 disparate impact regulations should be
amended in light of the Inclusive Communities decision.161 The Advance Notice of Proposed
Rulemaking noted that the request for comments was “consistent with HUD’s efforts to carry out
the Administration’s regulatory reform efforts” and that HUD had received “numerous”
comments related to this rule in response to its May 2017 Federal Register notice seeking
comment on its regulatory reform agenda.
With the June 2018 Advance Notice of Proposed Rulemaking, HUD specifically sought public
feedback on, among other issues, whether the regulations
“strike the proper balance in encouraging legal action for legitimate disparate
impact cases while avoiding unmeritorious claims”;
sufficiently detail the causality requirements for establishing a prima facie
disparate impact case;
should establish safe harbors from or defenses to disparate impact claims; and
could be amended to “add [] clarity, reduce uncertainty, decrease regulatory
burden, or otherwise assist the regulated entities and other members of the public
in determining what is lawful.”162
The public comment period closed on August 20, 2018.163
154 See the “Significance of the Inclusive Communities Decision” section of CRS Report R44203, Disparate Impact
Claims Under the Fair Housing Act.
155 Inclusive Communities, 135 S. Ct. at 2523.
156 Ibid.
157 Ibid. at 2518 (quoting Ricci v. DeStefano, 557 U. S. 557, 578 (2009)).
158 Ibid. at 2523-24.
159 Ibid.
160 Inclusive Communities, 135 S. Ct. at 2523-24.
161 Reconsideration of HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, 83 Federal
Register 28560 (June 20, 2018).
162 Ibid. at 28561.
163 Ibid. at 28560.
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Author Contact Information
Katie Jones, Coordinator
Analyst in Housing Policy
[redacted]@crs.loc.gov, 7-....
Maggie McCarty
Specialist in Housing Policy
r[ edacted]@crs.loc.gov , 7-....
Eugene Boyd
Analyst in Federalism and Economic Development
Policy
[redacted]@crs.loc.gov
, 7-....
Libby Perl
Specialist in Housing Policy
[redacted]@crs.loc.gov
, 7-....
David H. Carpenter
Legislative Attorney
[redacted]@crs.loc.gov , 7-....
N. Eric Weiss
Specialist in Financial Economics
[redacted]@crs.loc.gov
, 7-....
Mark P. Keightley
Specialist in Economics
r[ edacted]@crs.loc.gov , 7-....
Acknowledgments
Alyse Minter, Research Librarian, assisted in updating the data and discussion in the “Housing and
Mortgage Market Conditions” section of this report. Amber Wilhelm, Visual Information Specialist,
assisted with the graphics.
Congressional Research Service
R45296 · VERSION 7 · UPDATED
44
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