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August 28, 2014

New Federal Guidance on Joint Development: What it Means for Affordable Housing and Community Development

By Michael A. Spotts, Senior Analyst – Project Manager

On August 25, the Federal Transit Administration (FTA) released its final Guidance on Joint Development (FTA Circular 7050.1).  Joint development is a subset of transit-oriented development (TOD) that generally occurs when a project sponsor (often a transit agency) partners with the private sector (or other public agencies) to develop on transit agency land in which there is a federal financial interest. Such projects often include residential or commercial developments. This release is the culmination of a public comment process which began in early 2013 (see Enterprise’s previous comment letter on joint development). The final guidance includes changes to the rules and procedures that could have an impact on the ability of project sponsors to incorporate affordable housing into these types of projects. Most notably, a new “fair share of revenue” standard must be met, which increases the emphasis on revenue generation and value capture as an outcome of joint development. Revenue earned from the lease or sale of land can be used to support the public transportation system as government funding sources come under pressure. 

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August 21, 2014

Bank of America’s $7 Billion Consumer Relief Obligation

By Andrew Jakabovics, Senior Director, Policy Development and Research; and Allison Charette, Research Analyst

Earlier today, Bank of America reached a record-setting $16.65 billion settlement agreement with the Department of Justice (DOJ) and six states’ attorneys general regarding residential mortgage-backed securities sold in the lead-up to the housing crisis. This deal follows settlement agreements made with Citigroup (Citi) last month and JPMorgan Chase (Chase) last year, as well as the National Mortgage Settlement (NMS) made in 2012. Similar to these previous agreements, in addition to paying fines and penalties to the government, Bank of America is obligated to assist struggling borrowers and communities through various consumer relief activities. Under the terms of the agreement, the bank’s creditable activities must total at least $7 billion and be completed by August 31, 2018 (see below for comparisons of the four settlements).

Similar in most respects to the Citi settlement reached in July, the consumer relief agreement of the Bank of America settlement is far more nuanced than those of Chase or the NMS. It prioritizes the most effective strategies in modifying loans to best assist struggling borrowers and adopts best practices in stabilizing communities. It also requires the bank to make financing available for the preservation and construction of affordable multifamily rental developments at a time in which the need for affordable rentals is growing.

This settlement requires deeper principal reductions than previous settlements, mandating that the bank reduce principal to no more than 75 percent loan-to-value (LTV) for their portfolio loans, coupled with a 2 percent permanent interest rate cap, and no more than 100 percent LTV for investor-owned properties. There are also increased incentives for deeper mods and credit for investor payments. The community reinvestment and neighborhood stabilization provisions have also been strengthened, eliminating credit for so-called “bank walkaways” by stipulating that credit is offered for lien releases only when the property is occupied. Under the Chase and Citi settlements, banks could get credit even if they stopped foreclosure on abandoned properties that fall into limbo and are often a source of blight on communities.

There are some additional differences between this settlement and the Citi settlement. They include:

  • Bank of America receives a 15 percent incentive credit for completed modifications in Hardest Hit Areas beyond the requirement that half of all credit for modifications come from those areas
  • Bank receives increased credit for forgiveness on FHA- and VA-insured loans
  • A 50 percent enhanced early incentive credit for first-lien principal reductions completed by May 31, 2015 (in addition to the standard 15percent credit for all activities offered or completed by Aug. 31, 2015)
  • Anti-blight activities include donations to nonprofits to facilitate reduction, rehabilitation or maintenance of abandoned and uninhabitable residential properties donated
  • Affordable rental housing minimum obligation reduced to $100M from Citi’s $180M, including $35.7M dedicated to lending in New York
  • Any funds not spent before Aug. 31, 2018 go to NeighborWorks (25 percent) and to state-based Interest on Lawyers’ Trust Account (IOLTA) organizations or other intermediaries that provide funds to legal aid organizations

Notably, until the Mortgage Forgiveness Debt Relief Act is reinstated, the bank must establish a fund for tax payments on consumer relief for homeowners. The fund will offset tax liability that consumers would incur when principal is forgiven. Under current law, debt forgiveness is treated as a taxable event with the amount forgiven considered as income. Without the offsetting payment, most borrowers given mortgage assistance would be hit with a significant tax bill as a result. Money paid into the fund does not count toward the bank’s $7 billion obligation for consumer relief.














Learn more about the consumer relief agreements made in previous mortgage settlements:
Understanding Citi’s Consumer Relief Obligations in Today’s Settlement
What the JPMorgan Chase Settlement means for Consumers: An Analysis of the $4 Billion in Consumer Relief Obligations

Reducing Water & Energy Use in Affordable Housing

National Housing Trust/Enterprise Preservation Corporation shares smart practices for investing in sustainability

Jared Lang Headshot

When Jared Lang was brought on board to help integrate sustainability into National Housing Trust/Enterprise Preservation Corporation’s (NHT/Enterprise) housing portfolio, he faced a quandary familiar to many affordable housing property managers. Namely, how do you reduce water and energy use on a moderate budget?

The kind of green building projects that tend to capture the public’s attention and imagination often depend on cutting-edge but pricey technologies, like building integrated wind turbines. The appeal certainly makes sense. After all, seeing a wind turbine lazily turning atop a 40-story skyscraper telegraphs sustainability in a way that, say, swapping out light bulbs – even if equally as efficient – does not.

But while these types of projects help to push the envelope on building practices, and move sustainability from best to common practice, their methods and budgets were ill-suited to the needs of NHT/Enterprise housing. NHT/Enterprise is a nonprofit organization that buys, refinances and renovates affordable housing to preserve the homes in gentrifying neighborhoods close to transit. Like many nonprofits, it has moderate funds with which to make efficiency upgrades.

And yet, through Jared’s work, NHT/Enterprise was able to slash the water usage on R Street Apartments, an affordable housing property located in Washington, DC by 40 percent using the equivalent of $10,000 dollars worth of investment.

We say “equivalent costs” because NHT/Enterprise was able to take advantage of a utility rebate that covered almost all of the upfront costs. The annual savings, roughly $27,000, covered the value of the upgrades in a mere six months.

NHT/Enterprise‘s success lies in their relentless attention to small yet critical details.

For example, everyone knows that low-flow showerheads use less water. While a conventional showerhead uses between three and four gallons of water per minute, a low-flow showerhead uses roughly two gallons of water per minute. But NHT/Enterprise’s research went further, asking, “How important is the quality of that showerhead to residents?”

“You can get a cheap low-flow showerhead for as little as $5 [wholesale],” says Jared, “but it’s not going to be a good product. We chose a product that costs $25 [wholesale] that’s equipped with the right aerators.” Aerators add air to the water stream, conserving water while mimicking the feel of a higher water flow. The result, says Jared, “is a product that doesn’t leave you feeling like you’re compromising.” To Jared’s knowledge, the change to water-conserving showerheads has been seamless – NHT/Enterprise has fielded no complaints from residents.


While resident behavior around sustainability is what Jared calls “the hardest nut to crack,” (which is why Enterprise Green Communities created resident engagement tools), it’s by connecting to residents’ behavior that NHT/Enterprise realized its biggest savings not only in water, but also in energy.

When residents went to shower, it would take a while for the water to warm up. They would turn the showers on, wander away to tend to a task while the water warmed. This was an efficient use of their time – but an inefficient use of energy intensive hot water. Knowing the situation, NHT/Enterprise invested not just in a low-flow showerhead, but specifically in an Evolve ShowerStart showerhead. Evolve showerheads are unique because they run out the cold water. Once the showerhead reaches 100 degrees Fahrenheit, it slows the flow to a trickle as an auditory signal to residents that the shower is ready for their use. Then, they pull a cord on the showerhead to restart the warm shower.

At R Street Apartments, integrating this unique showerhead saved at least 180,000 gallons of water per year.

By sharing NHT/Enterprise’s experience, Jared hopes to inform other property owners that investing in sustainability doesn’t have to be expensive or difficult. It does have to be smart, and you have to make sure that residents and property managers are engaged in the process, but it’s possible.

Interested in learning more about how to structure your retrofits? See Enterprise’s multifamily retrofit toolkit.