U.S. Senators Want Less NIMBYism, More Agency Lending To Support Affordable Housing

The issue of housing affordability has increasingly become a national priority as more people across the country struggle to afford the cost of living, and federal policymakers are pursuing a range of strategies to try to spur affordable housing development from Washington.

A U.S. senator from each side of the aisle and a Trump administration official came together at Bisnow's Multifamily Annual Conference Thursday and discussed various ways to tackle housing affordability, from shaping local policies to prevent NIMBYism to allowing Fannie Mae and Freddie Mac to finance more residential projects. 

The officials each agreed that more housing needs to be built across the country, including affordable and market-rate. Department of Housing and Urban Development Deputy Chief of Staff Alfonso Costa said the way people talk about housing is an important step to solving the problem. 

"We're underbuilding by hundreds of thousands of units each year," Costa said. "This is in fact a crisis. If we keep saying 'we need to build more affordable housing' instead of 'we need to build more housing so it's affordable,' we're going to continue to have this crisis."

Many of the policies that affect housing are made at the local level, but the senators think there is a way Congress can help encourage localities to adopt pro-housing policies. Sen. Todd Young (R-IN) in June introduced the Yes In My Backyard Act, an attempt to shed light on local policies influenced by a NIMBY mindset that can stifle the supply of housing. 

The bill doesn't require localities to change their policies, but it would require jurisdictions receiving Community Development Block Grants from the federal government to explain the rationale behind policies that are inconsistent with established pro-affordability practices.

"The YIMBY Act requests from municipalities an itemization of different ordinances that might run afoul of certain anti-discriminatory parameters we've laid out on a bipartisan basis," Young said. "Then constituents would decide whether or not it's appropriate, and local policymakers would have to perhaps rethink their decisions if they're concerned about the impression that will be left with making public the rationale for certain policies."

Sen. Chris Van Hollen (D-MD) agreed it is important to encourage local governments to embrace housing development to help solve the affordability crisis. 

"We all agree that supply and demand is still a fundamental economic principle, and to the extent you're limiting supply unnecessarily at the local level, you're obviously driving up the costs of housing," Van Hollen said. 

Developers who deal with local housing policies every day said they see NIMBY mindsets that can make it harder to build new residential projects. ZOM Living CEO Greg West, whose firm has developed nearly 20,000 apartments nationwide, said he appreciated the senators' comments about NIMBYism. 

West said local governments are often hesitant to allow creative methods of building housing such as adaptive reuse of vacant retail properties.  

"Delapidated retail should be repurposed for multifamily to create housing that helps to solve the problem in a meaningful way," West said. "Government is in the way of that happening in so many of the jurisdictions we work."

Apartments can have a negative connotation in the minds of local officials that does not fit with the reality of the rental housing market, West said. 

"There are places where governments won't allow rezoning of properties because there's a belief that bad people live in apartments, either you own your house or you're a scoundrel," West said. "Everybody in this room knows that's not true."

Neighborhood Development Co. CEO Adrian Washington said he thinks practices that make housing construction more difficult can be attributed to anti-development activists influencing local officials. 

"People on staff are good, honest people who care, but the political leadership is influenced by knee-jerk NIMBYism," Washington said.

He added that D.C.'s process allows activists to easily delay publicly approved developments with court appeals, a frequent occurrence over the last three years. 

"You can go through a whole long process and if one person doesn't like it, they can appeal," Washington said. 

One developer who has gone through that ordeal is MidCity, with its 1,700-unit RIA development in Northeast D.C. appealed in May 2018 remaining in limbo.

MidCity Executive Vice President Michael Meers said the company plans to hold the property for the long-term and will make it through the appeal, but he said the litigation is primarily hurting the residents of the Brookland Manor community that are being deprived of new replacement housing. 

"One resident and an enterprising attorney appealed the Zoning Commission decision and are battling in court," Meers said. "The real victims here are the people who live there. They would have brand-new housing with the same rent they're paying for 1938 housing. That's just the story of our community, but every community has a similar tale."

While the federal government may have some leverage to influence local housing policy and prevent NIMBYism, it has much more power over the agencies that provide capital to support housing development: Fannie Mae and Freddie Mac. 

Van Hollen said members of Congress who support affordable housing should oppose efforts to reduce the amount of capital Fannie Mae and Freddie Mac can put into the market. 

"Everybody's goal is to increase the supply of affordable housing, and access to capital is a critical part of that," Van Hollen said. "To the extent that we reduce the footprint of entities like Fannie or Freddie in that area, in my view we are reducing access to affordable housing."

Additionally, Van Hollen said Congress should increase the amount that the agencies can spend on affordable housing projects in the future. 

"I think we need to up our affordable housing goals as part of the next generation of legislation regarding Fannie and Freddie," Van Hollen said. 

Representatives from Fannie and Freddie, sharing a stage at Thursday's event, detailed their renewed activity in the market. 

The two government-sponsored enterprises had pulled back on spending over the summer as they awaited new rules. Then in August, the Federal Housing Finance Agency announced new multifamily loan purchase caps that will allow Fannie and Freddie to spend a combined $200B over a 15-month period from October through the end of 2020. 

Walker & Dunlop Managing Director Brendan Coleman, whose firm arranges loans with Fannie and Freddie, expressed how the uncertainty around agency spending caps created stress in the industry. 

"Holy shit this has been a crazy year for agency lenders," Coleman said, to laughs from the audience. "I almost had to go see a therapist because I developed a level of cap anxiety that I don't think a lot of people in my life could relate to."

While the summer of uncertainty was a stressful time in the industry, Coleman said there was relief when the new spending caps were announced. Fannie Mae Multifamily Chief Credit Officer Charles Ostroff said people who work at the agency were also happy to see the new spending caps. 

"Everybody was excited; we have capital to put out on the street," Ostroff said.

The caps will give each agency roughly $80B to spend during 2020, a number Ostroff said he is comfortable with. 

"There is a need within the market, and there is a realization that we're here to fill that need," Ostroff said. "$80B is a good number, and it's achievable."

Freddie Mac Multifamily Chief Business Officer Lauren Garren said the agency is looking at ways it can help spur affordable housing development, the mission Van Hollen said he hoped the agencies could support. 

"The bottom line is supply is the issue, so we need to figure out how to tackle the supply issue, which we're thinking about every day," Garren said.