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Alignment of Public Sector Regulatory and Underwriting Policies with Sustainable Ownership

All stakeholders benefit when nonprofit owners and developers have financial incentives to be effective owners of affordable housing. For these organizations to succeed in their work, they need statutes and policies that require long-term stewardship of the properties, and within those requirements, the tools and freedom to do what makes sense to accomplish their missions.

Cash flow from properties is a mainstay of a nonprofit owner’s business.Too often, public policy fails to recognize this need for cash flow and in some cases even imposes discriminatory restrictions on nonprofit owners. Nonprofit owners and developers are asked to own and operate properties that have restricted income potential but no limits on operating expenses, thereby leaving them with no source of cash flow to run their business, creating a disincentive to grow their portfolios.

A nonprofit owner’s ability to generate revenues that can be retained as earnings to build the organization’s capital base and allow for portfolio-wide planning would be enhanced if specific restrictions that artificially limit owner access to revenues or inhibit the accurate underwriting and sustainable operations of affordable housing projects can be identified and changed or eliminated.

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Policy Working Group 
This group is working with representatives from a cross-section of the three co-sponsoring networks’ members to document, through case studies, the barriers imposed on nonprofit owners and developers by current restrictions of public sector funders at the federal, state (housing finance agencies) and local (multiple funding sources) levels. Through a series of focus group calls, several issues were identified as key barriers. Legal counsel has provided suggested policy changes to override current federal regulations and thus incentivize effective long-term ownership. Working group representatives have also begun a policy dialogue with state housing finance agencies regarding the impact of underwriting practices on sustainable ownership.