IMMEDIATE RELEASE
March 13, 2001

Mayors Join With Bankers, Builders to Form the Coalition for Affordable Rental Housing
Nationwide Production of Affordable Rental Housing Slows to a Trickle; Demand Remains At Critical High

Washington, DC -- In an immediate effort to address the growing affordable housing crisis for low- and moderate-income families, The Conference has joined a new coalition that is urging Congress to increase the limits on multifamily loans insured by the Federal Housing Administration (FHA). Such a move could benefit tens of thousands of working families.


Read Mayor Plusquellic's statement.

"In the past four years, in my own city for example, there have been no rental housing units produced by FHA-insured loans," said Akron Mayor Donald Plusquellic, representing the Conference. "Zero. And Akron isnít aloneódozens of cities across the nation face similar crises. Clearly, there must be an immediate, reasonable, nationwide response to this crisis. And thatís the primary mission of the Coalition for Affordable Rental Housing."

At a press conference on March 12, The Coalition for Affordable Rental Housing released data showing that new construction of FHA affordable rental housing has all but disappeared in several large cities where there is a critical need for affordable housing. The figures show that in addition to Akron, there were no new units of FHA multifamily housing produced in 2000New York City, Boston and San Francisco. Dallas, Los Angeles and Washington, DC each saw only one new multifamily development. Other major cities with no new FHA housing in 2000 included Baltimore, Birmingham, Cincinnati, Norfolk, Oakland, Providence, Rochester, Salt Lake City, San Jose, Syracuse and Tampa. Each of these cities has tens of thousands of working families facing a "critical housing need," meaning the family pays more than 50 percent of their income for housing or lives in severely inadequate housing.

The slowdown in affordable rental housing production comes as Americaís working families are increasingly unable to find decent, affordable homes in the communities where they work. Nationwide in 1997, according to the National Housing Conference, 13.7 million households, including 7.5 million renters faced critical housing needs.

The Coalition, whose formation was announced today at a National Housing Summit hosted by Mortgage Bankers of America (MBA), called on Congress to increase by 25 percent the base amount FHA can insure for multifamily housing. The FHA provides insurance to back financing of multifamily housing development. The insurance limits have not been raised since 1992, and as a result, the programs have not kept pace with the increased costs of building new rental housing affordable to low- and moderate-income working families.

"Although homeownership may be the American dream, finding affordable rental housing is often a nightmare for many working families," said Andrew D. Woodward, president of MBA. "We are facing an affordable rental housing crisis in this country. Raising the FHA multifamily loan limits is an important first step in solving this problem. This change will have an immediate impact by allowing the FHA and its housing partners to increase the supply of affordable housing for working families."

In addition to the Conference and MBA, other groups in the Coalition include the AFL-CIO Housing Investment Trust, Americaís Community Bankers, the National Apartment Association, the National Association of Home Builders, the National Leased Housing Association, the National Multi-Housing Council, and the National Association of Realtors.

Under the FHA multifamily programs, lenders obtain insurance on mortgages to build or refinance apartment buildings, up to a maximum mortgage amount per unit set by Congress. In addition to a base insurable amount, the insured loan can be higher in certain high-cost areas. The Coalition wants the base to be raised throughout the country and the high-cost limit to be raised in several cities where the limit is already at its maximum of 210 percent of the base.

These increases would help offset the rise in land, construction and other costs that have occurred since 1992. A 25 percent increase in the base, for example, would mean that the maximum loan amount the FHA would insure for a multifamily building with two-bedroom units and an elevator in a city with a high-cost limit of 150 percent would increase from $68,375 per unit to $85,468 per unit. The additional insurance could provide more incentive for housing partners to develop new affordable housing units.

"It's extremely expensive and difficult to build multifamily projects, and the resulting rents are often higher than what working families can afford," says Bruce Smith, president of the National Association of Home Builders (NAHB) and a home builder from Walnut Creek, CA. "Our builders want nothing more than to be able to meet this great demand, but they are hindered by the FHA loan limits. Raising the cap on FHA-insured multifamily loans would help to finance the construction of affordable rental housing, particularly in high-cost urban areas, where it is desperately needed."

The artificially low FHA loan limits, coupled with rising costs, have contributed to a dearth of affordable rental units. In Boston, for example, almost 300,000 households had "critical housing needs" in 1998 and the cityís apartment vacancy rate now stands at an extremely low 2.7 percent. Yet there have been no FHA multifamily new-construction or substantial-rehabilitation loans made in the past four years.

"Raising the multifamily loan limits should prompt the construction or rehabilitation of thousands of properties around the country," said Steve Coyle, CEO of the AFL-CIO Housing Investment Trust. "This change will help thousands of working families meet their housing needs."

Raising FHAís multifamily loan limits is just the first step toward increasing the production of affordable FHA multifamily housing. The housing coalition will also work on other solutions to the affordable housing crisis, including developing a market-based new production tool that will:

  • Be designed to benefit working families that are not being assisted through other programs
  • Serve a range of incomes
  • Utilize market mechanisms, including debt (loan) programs, insurance products and tax incentives
  • Be complimentary to existing programs
  • Serve all areas of the country
  • Make effective use of the secondary and capital markets
  • Have adequate resources for a meaningful impact

"Our Coalition is committed to working with policy-makers, housing advocates and other concerned parties in developing solutions to our nationís affordable housing crisis," said Donald Plusquellic, Mayor of Akron, Ohio, representing the U.S. Conference of Mayors. "This problem deserves to be a national policy priority, and we intend to make it one."

For more information on the Coalition for Affordable Rental Housing visit the Mortgage Bankers Association of America website at www.mbaa.org.

The United States Conference of Mayors is the official nonpartisan organization of cities with populations of 30,000 or more. There are about 1,100 such cities in the country today. Each city is represented in the Conference by its chief elected official, the mayor.

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