Good morning, my name is Joseph Reilly, and I am a Senior Vice President in the Community Development Group at JPMorgan Chase. During the 24 years I have been involved in affordable housing and community development, I have seen the issues from a variety of perspectives: a faith-based organization, the Northwest Bronx Community and Clergy Coalition; New York City’s Department of Housing Preservation and Development; and now with JPMorgan Chase, where I manage a staff of 40 professionals who finance affordable housing and commercial real estate projects in areas served by our bank. Over the past five years, JPMorgan Chase has provided over $2.6 billion in community development financing. We continue to seek new and innovative ways to provide financing which will strengthen the communities we serve.
While much has been done to solve the problems American families are facing in finding decent, affordable housing, much remains to be done. Many high cost areas like New York suffer from a profound shortage of both rental housing and homeownership opportunities, not only for very low-income families but also for low- and moderate-income families. We have a growing crisis that requires the ongoing attention of policymakers, and both short-term and long-term measures to achieve our national goal of a decent home in a suitable living environment for all Americans.
MUCH HAS BEEN ACCOMPLISHED OVER THE PAST DECADE
The good news is that during the past decade our industry has experienced a significant strengthening in learning how to produce decent, affordable housing for low- and moderate-income families and communities. For-profit and non-profit developers, lenders, investors, community leaders and government at all levels have learned to collaborate as partners in devising new solutions and creative financing strategies for producing affordable housing in thousands of communities.
We have built the infrastructure necessary to have a major impact on housing needs, and coped with the often conflicting requirements of the many Federal, state and local subsidies we need to do our work. We have learned over the years how to do it right---how to build affordable housing for rent and homeownership that contains a mix of incomes, that is built with the discipline of the private market and leverages public resources responsibly, that is of high quality and lasting value, that stays affordable over the long run, and that people are proud to call home.
Insured depository institutions like JPMorgan Chase are an important part of this infrastructure. The U.S. Treasury documented that, from 1993-1998, the amount of mortgage lending to low- and moderate-income communities and borrowers by CRA-covered lenders rose 80%. In 1998 alone, Treasury reported at least $135 billion in mortgages to these borrowers, made by insured depository institutions.
THREE MAJOR CONSTRAINTS
As good as these solutions are, they come nowhere near meeting the need. The
public, non-profit, and for-profit organizations that have mobilized and partnered to provide affordable housing face three major constraints in our ability to deliver more decent, affordable units.
First, Federal funds are often encumbered by well-meant legislative and regulatory constraints that impair needed flexibility to meet community needs. Sometimes, something gets lost in the translation of housing policy when it is regulated into practice. And inevitably, the more tightly the subsidies are targeted to those most in need, the greater the financing gap and the harder it is to make the deal economically viable.
Second, we could finance more affordable housing if we had more resources. The past decade has confirmed that there is no magic to the provision of affordable rental housing. Affordable housing can only be built if public subsidies fill the gap that exists between what families can afford to pay and the costs associated with the construction, operation and maintenance of decent, affordable housing.
Federal programs such as HOME, CDBG and the Low Income Housing Credit have played valuable roles in helping to fill that gap, but rarely do it alone. For example, many housing credit deals in low-income communities require additional subsidies to fill financing gaps. But funding levels for all Federal programs have failed to keep pace with rapidly growing need, and these programs come with complex requirements that slow, or even discourage, development of new units.
Unfortunately, over the past decade the focus at the federal level has shifted to demand-side subsidies, which do not increase the supply of affordable units. In addition, there is an aging housing stock of affordable units that needs new roofs, new mechanicals, and sometimes new systems to remain viable, at the same time that communities are seeking to replace the old public housing units with mixed-income, affordable housing.
Third, in some states there is a scarcity of permanent financing for multi-family affordable housing. Affordable housing developments often involve subordinated debt and low-income housing tax credits that make multifamily mortgages "non-conforming" for sale to the secondary market.
TO DO: SHORT-TERM WAYS TO LEVERAGE MORE PRIVATE CAPITAL
The more we can simplify the regulations, processes, and paperwork of federal assistance, the more we will increase the efficiency of the programs and private sector participation. Simple, flexible funding sources that have had real impact with maximum efficiency include the Affordable Housing Program of the Federal Home Loan Banks and the Community Development Financial Institutions’ fund. A streamlined, permanent loan product, which made "non-conforming" affordable housing loans more attractive to investors, would also be extremely helpful.
TO DO: LONG-TERM
The Federal government can be a catalyst for attracting more private capital to affordable housing by providing a stable, predictable source of capital that would not be subject to the annual appropriations process, in keeping with the long-term nature of community development.
It is also clear that homeownership opportunities for low-income families and communities are not keeping pace with rapidly growing need. The President’s Budget proposes a tax credit for developing affordable homes that builds on the success of the Low Income Housing Credit and would do much to alleviate the shortage of affordable homeownership opportunities in our neediest communities. NAAHL has endorsed this
single family tax credit and asks Congress to enact it as soon as possible. Similarly, the proposed quadrupling of the American Dream Downpayment Fund will help many low-income homebuyers achieve their own home, while the proposed increase in housing counseling funds will help those struggling to keep their homes.
Thank you very much for the opportunity to be here today.
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