OUP - Abstract

The Entrepreneurial Role of State Housing Finance Agencies in Affordable Housing Policy, Finance, and Administration

Dissertation School: Rutgers, the State University of New Jersey

Pages: 52

Publication Date: 11/2006

Availability:
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Access Number: 5013

Abstract:

Once the primary leader in shaping a national response to housing concerns, the federal government has narrowed its housing agenda and reduced funding over the past several decades. In its place, the private and nonprofit sectors, as well as lower levels of government, have gained new responsibilities and provide a range of incentives for filling the widening gap between the housing needs people have and what the free market will provide to address them. Among these rising actors are state governments, who have created new programs and sources of funds to target specific state housing objectives.

This research seeks to fill several gaps in the existing knowledge of how states are responding to the diminished federal role in the housing arena. First, it links state approaches to housing with theories of policy innovation. Second, it does so through an analysis of the one specific type of housing agency common to all states - state housing finance agencies (HFAs).

Utilizing qualitative interviews, observations, and document analysis, this report presents the results of two case studies - the Illinois Housing Development Authority and the New Jersey Housing and Mortgage Finance Agency - to answer the following research questions:

What role do HFAs play in developing and implementing state housing policy?
What types of programs do they pursue, and why?
What constraints do they face in meeting state housing needs, and how might these be overcome?
How can HUD help HFAs pursue creative strategies at the state level for addressing affordable housing needs?

This research uncovers multiple nuanced roles fulfilled by HFAs beyond their assumed finance responsibilities. They are also engaged in program administration and monitoring, research and planning, coordinating with other state agencies, informing and educating, and influencing statewide housing policy both formally and informally.

A myriad of external pressures - state housing policy context, public perception of a housing crisis, politics, institutional structure, interest groups, and intergovernmental relations - in addition to internal agency factors, such as staff and resources - work to either enhance or constrain HFA ability to innovate within these roles. Specifically, HFAs are more likely to innovate under the following exogenous, or external, conditions:

There is a public perception of a housing crisis, and a high level of dissatisfaction with the status quo.
There is a comprehensive and coordinated approach to statewide housing issues.
The same party controls both the governor's seat and the legislature.
The fewer state governmental entities directly involved in housing provision and services, the more initiative HFAs can take, although they may do so unwillingly.
Interest groups unite to push forward a collective agenda.
Local governments are generally supportive of statewide affordable housing efforts.

Internally, the following endogenous factors matter:

Staff are in place long enough to implement new ideas.
Staff are both receptive and responsive to ideas presented by a variety of housing stakeholders.
Enough flexible resources are available to try new program ideas.
Resource restrictions are not so cumbersome as to thwart creativity or make funds inaccessible to those groups who could mobilize them.

HFAs, state governments, and the federal government all have a role to play in addressing constraints on HFA innovation. For HFAs, recommendations include:

Increase awareness of housing crisis. HFAs could play a bigger role in increasing public awareness of state housing issues, and garnering support for a greater state role in addressing them. They are also strategically positioned to suggest solutions based on their intimate knowledge of local housing markets and financing options.

Improve interest group perceptions and relationships. HFAs can increase their transparency to housing stakeholders, and be clear about their strengths and limitations. Many do not understand the unique function of HFAs, and either expect too much, or demand too little. Clarifying the context in which HFAs operate may open doors to new partnerships, as well as minimize negative perceptions that limit HFA opportunities.

Hire and retain responsive staff. While HFAs cannot prevent political turnover in top staff positions, they can seek professional competent line staff who are responsive to the needs of various housing stakeholders.

Maximize resources by combining and targeting. While many federal and state resources come with a myriad of restrictions on their use, HFAs can lead the way in overcoming hurdles to creatively combine funds and target emerging market needs.

Regardless of their internal agency efforts, HFAs remain creatures of the state, and therefore require a variety of state government interventions to create an environment more conducive to innovation. This research has highlighted a number of areas where states can take a stronger lead in housing:

Create a statewide comprehensive housing policy. States should research existing and future housing needs, and set goals and priorities governing all state housing agencies and resources. A single document describing needs, developing policies, setting targets, coordinating resources, and requiring periodic evaluation is one approach.

Highlight state housing needs. State government should take the lead in promoting the diverse needs of their residents, promulgating policies and programs to address them, and winning public support to fund them.

Make housing part of political agenda. Support from the governor and state legislature is critical to giving HFAs a greater mandate to address state housing needs. Bipartisan commitment is needed to move a housing agenda forward no matter which party controls state government.

Reexamine institutional structures. A variety of state institutional structures exist for serving state housing needs. States should reexamine their structures to ensure that agency roles are well-defined and interagency coordination is a high priority in both word and deed.

Encourage greater municipal cooperation with state housing goals. State laws requiring municipal "fair shares" of regional housing needs do not seem to be producing the desired results. Perhaps they require more incentives for participation ("carrots"), along with more severe consequences ("sticks") for those local governments that refuse. Alternatively, or in addition to these top-down approaches, local advocacy efforts around workforce and "middle-income" housing as a necessity for local economic growth have met with some success, especially when supported by he local business community needing housing for their employees.

Make strategic HFA staffing decisions. In all leadership appointments, critical considerations are an individual's competency to lead the agency, knowledge of state housing needs, understanding of housing markets and finance, and responsiveness to a variety of housing stakeholders.

Increase and preserve available housing funds. Current resources for housing such as housing trust funds, should be preserved for their original purposes instead of redirected to address state deficits in other areas. New state resources for housing are also necessary for meeting state needs. To maximize impacts such resources should be flexible enough to meet emergent needs and evolve with the market.

The federal government both directly and indirectly affects HFA operations. Recommendations on how it can best foster HFA innovation include the following:

Create environment conducive to state comprehensive housing planning. Currently, plans required for the use of federal resources can be viewed as ends in themselves, instead of as a starting point for a more comprehensive state planning endeavor. Federal government can encourage states to engage in more strategic planning and evaluation exercises if there was a mechanism for coordinating federal-and state-level plans without duplicating efforts at the state level.

Encourage interagency coordination.State interagency coordination is hampered by different program requirements attached to diverse federal funding streams. For example, in order to reach special needs populations, HFAs must rely on service dollars provided through other federal sources. Ultimately, the improvement of state-level agency collaboration depends on better coordination of federal agency policies and programs.

Establish regional consistency. Regional inconsistencies within HUD administration can limit HFA flexibility to adapt programs to unique state needs. More flexibility is needed to adapt program criteria to unique state needs at both the regional and federal levels of HUD.

Increase funding. Most HFA funding comes from federal government coffers, directly (housing assistance) or indirectly (tax expenditures), and housing resource demand often outstrips supply. Deep subsidies are required to reach the lowest income populations.

Promote preservation. A growing issue facing all states is the last of subsidized affordable units reaching the end of their affordability controls. Exit tax issues are a significant obstacle to HFA refinancing of existing project-based loans in order to extend the affordability period of the units. Owners needs to be offered an incentive to maintain affordability, rather than drive to convert to market rate.

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