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State Minimum Wages: An Overview

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State Minimum Wages: An Overview

Updated November 1, 2019 (R43792)
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Summary

The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal law that establishes the general minimum wage that must be paid to all covered workers. While the FLSA mandates broad minimum wage coverage, states have the option of establishing minimum wage rates that are different from those set in it. Under the provisions of the FLSA, an individual is generally covered by the higher of the state or federal minimum wage.

As of 2020, minimum wage rates are above the federal rate of $7.25 per hour in 29 states and the District of Columbia, ranging from $1.31 to $7.75 above the federal rate. Another 14 states have minimum wage rates equal to the federal rate. The remaining 7 states have minimum wage rates below the federal rate or do not have a state minimum wage requirement. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates.

In any given year, the exact number of states with a minimum wage rate above the federal rate may vary, depending on the interaction between the federal rate and the mechanisms in place to adjust the state minimum wage. Adjusting minimum wage rates is typically done in one of two ways: (1) legislatively scheduled rate increases that may include one or several increments; (2) a measure of inflation to index the value of the minimum wage to the general change in prices.

Of the 29 states and the District of Columbia with minimum wage rates above the federal rate, 5 currently have no scheduled increases beyond 2020, 7 states have legislatively scheduled rate increases only after 2020, and 17 states and the District of Columbia have scheduled increases through a combination of planned increases and current- or future-year indexation of state minimum wage rates to a measure of inflation. In addition, currently six states—California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey—and the District of Columbia have scheduled rate increases to $15.00 per hour at some point between 2020 and 2025.

Because the federal and state minimum wage rates change at various times and in various increments, the share of the labor force for which the federal rate is the binding wage floor has changed over time. Since 1981, there have been three series of increases in the federal minimum wage rate—1990-1991, 1996-1997, and 2007-2009. During that same period, there have been numerous changes in state minimum wage policies. As a result of those interactions, the share of the U.S. civilian labor force living in states in which the federal minimum wage is the floor has fluctuated but generally declined, and is about 39% as of 2019.


Introduction

The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers.1 The FLSA mandates broad minimum wage coverage. It also specifies certain categories of workers who are not covered by general FLSA wage standards, such as workers with disabilities or certain youth workers.

In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically to expand coverage or raise the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times.2 The most recent change was enacted through P.L. 110-28 in 2007, which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps (the final step occurring in 2009).

States generally have three options in setting their minimum wage policies: (1) they can set their own minimum wage provisions that differ from those in the FLSA, (2) they can explicitly tie their minimum wage provisions to the FLSA, or (3) they can include no specific minimum wage provisions in state law.

This report begins with a brief discussion of FLSA minimum wage coverage. It then provides a summary of state minimum wage laws, followed by an examination of rates and mechanisms of adjustments in states with minimum wage levels above the FLSA rate (Table 1 provides summary data). Next, the report discusses the interaction of federal and state minimum wages over time, and finally, the Appendix provides detailed information on the major components of minimum wage policies in all 50 states and the District of Columbia.

The state policies covered in this report include currently effective policies and policies enacted with an effective date at some point in 2020. While most states' scheduled state minimum wage rate changes (due to inflation adjustments or statutorily scheduled changes) occurred on January 1 of each year, a few states have rate increases scheduled for later in the year. Effective dates of rate increases are noted in Table 1 and in the Appendix.

The FLSA Minimum Wage

The FLSA extends two types of minimum wage coverage to individuals: "enterprise coverage" and "individual coverage."3 An individual is covered if they meet the criteria for either category.

Enterprise Coverage

To be covered by the FLSA at the enterprise or business level, an enterprise must have at least two employees and annual sales or "business done" of at least $500,000. Annual sales or business done includes all business activities that can be measured in dollars. Thus, for example, retailers are covered by the FLSA if their annual sales are at least $500,000.4 In non-sales cases, a measure other than sales must be used to determine business done. For example, for enterprises engaged in leasing property, gross amounts paid by tenants for property rental will be considered business done for purposes of determining enterprise coverage.

In addition, regardless of the dollar volume of business, the FLSA applies to hospitals or other institutions primarily providing medical or nursing care for residents; schools (preschool through institutions of higher education); and federal, state, and local governments.

Thus, regardless of how enterprise coverage is determined (by business done or by specified institutional type), all employees of a covered enterprise are considered to be covered by the FLSA.

Individual Coverage

Although an enterprise may not be subject to minimum wage requirements if it has less than $500,000 in annual sales or business done, employees of the enterprise may be covered if they are individually engaged in interstate commerce or in the production of goods for interstate commerce. To be engaged in interstate commerce—the definition of which is fairly broad—employees must produce goods (or have indirect input to the production of those goods) that will be shipped out of the state of production, travel to other states for work, make phone calls or send emails to persons in other states, handle records that are involved in interstate transactions, or provide services to buildings (e.g., janitorial work) in which goods are produced for shipment outside of the state.5

While individual coverage is broad under the FLSA, there are also specific exemptions from the federal rate, including individuals with disabilities; youth workers; tipped workers; and executive, administrative, and professional workers, among others.6

FLSA Minimum Wage Rates

In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 (P.L. 110-28), which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. On July 18, 2019, the House passed H.R. 582, which would increase the federal minimum wage to $15 per hour by 2025, index the rate to changes in the median hourly wage, and phase out subminimum wages for tipped workers, youth, and individuals with disabilities.7

Figure 1 shows the nominal and real (inflation-adjusted) value of the federal minimum wage from its enactment in 1938 through 2019. The real value of the minimum wage generally rose from 1938 to 1968, after which it has generally fallen in real terms, with some brief increases in value following periodic statutory rate changes. From an initial rate of $0.25 per hour in 1938 ($4.51 in inflation-adjusted terms), the minimum wage increased to $1.60 per hour in 1968 ($11.70 in inflation-adjusted terms), a peak value to date. The real value of the minimum wage has fallen by $1.35 since it was increased to $7.25 in 2009.

Figure 1. The Federal Minimum Wage 1938 to 2019

Source: Figure created by CRS using data from the DOL Wage and Hour Division, https://www.dol.gov/whd/minwage/chart.htm.

Notes: The inflation-adjusted minimum wage is expressed in 2019 dollars based on the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average. The CPI-U value for 2019 is the semi-annual average for the first half of 2019.

Minimum Wage Policies in the States

State policymakers may also choose to set labor standards that are different from federal statutes. The FLSA establishes that if a state enacts minimum wage, overtime, or child labor laws more protective of employees than those provided in the FLSA, then state law applies. In the case of minimum wages, this means FLSA-covered workers are entitled to the higher state minimum wage in those states with rates above the federal minimum. On the other hand, FLSA-covered workers would receive the FLSA minimum wage in states that have set minimum wages lower than the federal rate. Given the generally broad minimum wage coverage of the FLSA, it is likely that most workers in states with minimum wages below the federal rate are covered by the FLSA rate.

In 2020, the range of state minimum wage rates is as follows:

  • 29 states and the District of Columbia have enacted minimum wage rates above the federal rate of $7.25 per hour;
  • 2 states have minimum wage rates below the federal rate;
  • 5 states have no state minimum wage requirement; and
  • the remaining 14 states have minimum wage rates equal to the federal rate.8

In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates.

The Appendix provides detailed information on state minimum wage policy in all 50 states and the District of Columbia, including the legislation authorizing the state minimum wage and the relevant legislative language regarding the rate and mechanism of adjustment.

The remainder of this report focuses on states with minimum wages above the federal rate.

Rates and Mechanisms of Adjustment

In states with minimum wage rates above the federal rate, variation occurs mainly across two dimensions: the rate and the mechanism of adjustment to the rate. This section (including data in Table 1) summarizes these two dimensions for the states with rates currently above the federal minimum. State rates range from $1.31 to $7.75 above the federal rate, with a majority of these states using some sort of inflation measure to index the state minimum wage.

Rates

In the 29 states and the District of Columbia with minimum wage rates above the federal rate in 2020, minimum hourly rates range from $8.56 per hour in Florida to $13.50 per hour in Washington and $15.00 in the District of Columbia. Of the states with minimum wage rates above $7.25:

  • 8 states have rates between $1.00 and $2.00 per hour above the federal rate;
  • 8 states have rates between $2.00 and $3.00 per hour above the federal rate;
  • 4 states have rates between $3.00 and $4.00 per hour above the federal rate;
  • 9 states and the District of Columbia have rates greater than $4.00 per hour above the federal rate (i.e., $11.26 or higher).

In these 29 states and the District of Columbia, the unweighted average minimum wage is $10.64 per hour and the most common minimum wage rate is $12.00 per hour (Arizona, Connecticut, Maine, Oregon, and Colorado). In addition, currently six states—California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey—and the District of Columbia have scheduled rate increases to $15.00 per hour at some point between 2020 and 2025.

Figure 2 shows the geographic and rate dispersion of state minimum wages. In terms of coverage, a majority of the civilian labor force is in states with a minimum wage rate above the federal rate of $7.25. Specifically, the 29 states and the District of Columbia with minimum wage rates above $7.25 represent about 61% of the total civilian labor force, which means the federal rate is the wage floor in states representing 39% of the labor force.9

Figure 2. State Minimum Wage Rates in 2020

Source: CRS analysis of U.S. Department of Labor data.

Notes: Rates in Figure 2 are either currently in effect or are scheduled to be in effect at some point in 2020.

Mechanisms for Future Adjustments

In any given year, the exact number of states with a minimum wage rate above the federal rate may vary, depending on what mechanism is in place to adjust the state minimum wage. Some states specifically set rates above the federal rate. Other states have rates above the federal minimum wage because the state minimum wage rate is indexed to a measure of inflation or is increased in legislatively scheduled increments, and thus the state rate changes even if the federal minimum wage stays unchanged.

Below are the two main approaches to regulating the adjustment of state minimum wage rates in states with rates above the federal minimum: legislatively scheduled increases and indexing to inflation.10 In this section, states are counted by the primary method of adjustment. While most states use only one of these methods, some states combine a series of scheduled increases followed by indexing the state rate to a measure of inflation. In these cases, states are counted as "indexing to inflation," as that is the long-term mechanism of adjustment in place.

Legislatively Scheduled Increases

If a state adopts a minimum wage higher than the federal rate, the state legislature may specify a single rate in the enacting legislation and then choose not to address future rates. In these cases, the only mechanism for future rate changes is future legislative action. Alternatively, a state may specify future rates in legislation through a given date. Rhode Island in 2017, for example, set a rate of $10.10 per hour beginning January 1, 2018, and $10.50 beginning January 1, 2019. After the final increase, the rate will remain at $10.50 per hour until further legislative action. This is the same approach taken in the most recent federal minimum wage increase (P.L. 110-28), which increased the minimum wage from $5.15 an hour in 2007 to $7.25 per hour in 2009 in three phases. Of the 29 states and the District of Columbia with minimum wage rates above the federal rate, 5 currently have no scheduled increases beyond 2020, while Arkansas, Illinois, Maryland, Massachusetts, Michigan, Nevada, and New Mexico have legislatively scheduled rate increases after 2020.11

Indexing to Inflation

If a minimum wage rate is established as a fixed amount and not increased, its value will erode over time due to inflation.12 For this reason, several states have attempted to maintain the value of the minimum wage over time by indexing the rate to some measure of inflation. This mechanism provides for automatic changes in the minimum wage over time and does not require legislative action to make annual adjustments.

Currently, 6 states index state minimum wages to a measure of inflation. In addition, another 11 states and the District of Columbia are scheduled in a future year to index state minimum wage rates to a measure of inflation. Thus, of the total of 17 states and the District of Columbia that currently or are scheduled to index minimum wage rates,

  • 6 states—Arizona, Montana, New York, Oregon, South Dakota, and Vermont—index the state minimum wage to the national Consumer Price Index for All Urban Consumers (CPI-U);
  • 5 states—California, Missouri, New Jersey, Ohio, and Washington—index the state minimum wage to the national Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W);
  • 2 states—Alaska and Colorado—and the District of Columbia use a subnational version of the CPI-U to index the state minimum wage;
  • 2 states—Florida and Maine—use a regional version of the CPI-W to index the minimum wage;
  • 1 state (Minnesota) uses the implicit price deflator for Personal Consumption Expenditures (PCE) to index the minimum wage; and
  • 1 state (Connecticut) uses the Employment Cost Index (ECI) to index the minimum wage.

Reference to the Federal Rate

While scheduled increases and indexation are the two main ways that states adjust their minimum wage rates, a few states also add a reference to the federal minimum wage rate as a possible mechanism of adjustment. Thus any time the federal rate changes, the state rate may change.13 Currently, Alaska, Connecticut, the District of Columbia, and Massachusetts use this federal reference to supplement their primary mechanisms of adjusting state minimum wage rates.

  • In Alaska, the state minimum wage rate is indexed to the CPI-U for Anchorage Metropolitan Statistical Area. However, Alaska state law requires that the state minimum wage must be at least $1.00 per hour higher than the federal rate. So it is possible that a federal wage increase could trigger an increase in the Alaska minimum wage, but the main mechanism is indexation to inflation.
  • Connecticut state law requires that the state rate must be increased to one-half of one percent more than federal rate in the event that the federal rate increases above Connecticut's minimum wage.
  • The District of Columbia's minimum wage rate is the higher of the level required by the District of Columbia statute or the federal rate plus $1.00. Starting in 2021, the District of Columbia minimum wage will be indexed to inflation and the reference to the federal rate will no longer be in effect.
  • While Massachusetts law includes scheduled rate increases in the minimum wage through 2023, the law also requires that the state rate must be at least $0.50 above federal minimum wage rate.

Table 1. Summary of States with Enacted Minimum Wage Rates Above $7.25

As of January 1, 2020 (unless otherwise noted)

State

2019

2020

2021

2022

2023

2024

2025

Alaska

$9.89

$10.19

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Arizona

$11.00

$12.00

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Arkansas

$9.25

$10.00

$11.00

$11.00

$11.00

$11.00

$11.00

Californiaa

$12.00

$13.00

$14.00

$15.00

CPI-W

CPI-W

CPI-W

Colorado

$11.10

$12.00

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Connecticutb

$11.00

$12.00

$13.00

$14.00

$15.00

ECI

ECI

Delawarec

$9.25

$9.25

$9.25

$9.25

$9.25

$9.25

$9.25

District of Columbiad

$14.00

$15.00

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Florida

$8.46

$8.56

CPI-W

CPI-W

CPI-W

CPI-W

CPI-W

Hawaii

$10.10

$10.10

$10.10

$10.10

$10.10

$10.10

$10.10

Illinois

$8.25

$10.00

$11.00

$12.00

$13.00

$14.00

$15.00

Maine

$11.00

$12.00

CPI-W

CPI-W

CPI-W

CPI-W

CPI-W

Marylande

$10.10

$11.00

$11.75

$12.50

$13.25

$14.00

$15.00

Massachusetts

$12.00

$12.75

$13.50

$14.25

$15.00

$15.00

$15.00

Michiganf

$9.45

$9.65

$9.87

$10.10

$10.33

$10.56

$10.80

Minnesotag

$9.86

$10.00

PCE

PCE

PCE

PCE

PCE

Missouri

$8.60

$9.45

$10.30

$11.15

$12.00

CPI-W

CPI-W

Montana

$8.50

$8.65

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Nebraska

$9.00

$9.00

$9.00

$9.00

$9.00

$9.00

$9.00

Nevadah

$8.25

$9.00

$9.75

$10.50

$11.25

$12.00

$12.00

New Jersey

$10.00

$11.00

$12.00

$13.00

$14.00

$15.00

CPI-W

New Mexico

$7.50

$9.00

$10.50

$11.50

$12.00

$12.00

$12.00

New Yorki

$11.10

$11.80

$12.50

CPI-U

CPI-U

CPI-U

CPI-U

Ohio

$8.55

$8.70

CPI-W

CPI-W

CPI-W

CPI-W

CPI-W

Oregonj

$11.25

$12.00

$12.75

$13.50

CPI-U

CPI-U

CPI-U

Rhode Island

$10.50

$10.50

$10.50

$10.50

$10.50

$10.50

$10.50

South Dakota

$9.10

$9.30

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Vermont

$10.78

$10.96

CPI-U

CPI-U

CPI-U

CPI-U

CPI-U

Washington

$12.00

$13.50

CPI-W

CPI-W

CPI-W

CPI-W

CPI-W

West Virginia

$8.75

$8.75

$8.75

$8.75

$8.75

$8.75

$8.75

Source: Minimum wage rates are from U.S. Dept. of Labor, http://www.dol.gov/whd/minwage/america.htm and state websites; Adjustment mechanisms are from state websites and National Conference of State Legislatures, http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx.

Notes: In Table 1, cells with "CPI-U," "CPI-W," or "PCE" indicate that the state minimum rate is indexed to the relevant inflation measure in those years.

a. The minimum wage for California in Table 1 is for large employers, which are defined as any employer employing 26 or more employees. For employers with 25 or fewer employees, the minimum wage in 2020 is $12.00 per hour and is scheduled to reach $15.00 on January 1, 2023.

b. The effective dates for minimum wage increases in Connecticut are October 1, 2019; September 1, 2020; August 1, 2021; July 1, 2022; and June 1, 2023. Starting on January 1, 2024, and each January thereafter, the minimum wage is scheduled to be increased by changes in the Employment Cost Index (ECI).

c. The minimum wage in Delaware was $8.75 per hour from January 1, 2019, through September 30, 2019. As of October 1, 2019, the minimum wage is $9.25 per hour.

d. The minimum wage in the District of Columbia is $14.00 per hour through June 30, 2020. The new rate of $15.00 in the District of Columbia is scheduled to go into effect July 1, 2020. Future rate increases begin on July 1.

e. The minimum wage for Maryland in Table 1 is for large employers, which are defined as any employer employing 15 or more employees. For employers with 14 or fewer employees, the minimum wage in 2020 is $11.00 per hour and is scheduled to reach $15.00 on July 1, 2026.

f. As of March 29, 2019, the minimum wage was $9.45 per hour. Future rate increases begin on January 1. The minimum wage is scheduled to increase to $12.05 by January 1, 2030.

g. The minimum wage for Minnesota in Table 1 is for large employers, which are defined as enterprises "whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated) and covered by the Minnesota Fair Labor Standards Act." The minimum wage for small employers (defined as enterprises "whose annual gross volume of sales made or business done is less than $500,000") is $8.15 as of January 1, 2020.

h. Nevada maintains a two-tier minimum wage system. The minimum wage for Nevada in Table 1 is for workers who do not receive qualified health benefits from their employer. The minimum wage for workers receiving qualified health benefits is $1.00 less per hour. Annual adjustments occur on July 1 of each year.

i. The state of New York has four minimum wage rates—large employers in New York City, small employers in New York City, New York City suburbs, and the Remainder of the State—each with different scheduled rate increases. Following scheduled increases for large employers (11 or more employees) in New York City, small employers (10 or fewer employees) in New York City, and New York City suburbs to $15 per hour (in 2019, 2020, and 2022, respectively), the minimum wage rate for the Remainder of the State becomes indexed in 2022 from its scheduled rate of $12.50 at that time and remains indexed until it reaches $15 per hour. Indexation is not applied to the other three New York rates after they reach $15 per hour. The rate in Table 1 is for the Remainder of the State (outside of New York City and Nassau, Suffolk, and Westchester counties). Future rate increases begin on December 31. See Table A-1 for details.

j. The state of Oregon has three minimum wage rates—Standard, Portland Metro, and Nonurban Counties—each with different scheduled rate increases. The rate in Table 1 is the Standard rate. Future rate increases begin on July 1. See Table A-1 for details.

Trends in State Minimum Wages

Because federal and state minimum wages do not change in regular intervals or by regular increments, the number of states and the share of the labor force covered by higher minimum wages changes annually. In general, during periods in which the federal minimum wage remains constant, more states enact higher minimum wages and the share of the workforce for which the federal rate serves as the floor likewise decreases. When the federal rate increases, some state rates become equal to or less than the federal rate.

Table 1 presents a snapshot of minimum wage rates in the 29 states and the District of Columbia with minimum wages above the federal rate from 2019 through 2025, while Figure 3 shows the changes in the coverage of the federal minimum wage.14 Specifically, Figure 3 plots the percentage of the civilian labor force residing in states in which the federal wage serves as the floor.15 If no state had a minimum wage above the federal rate, then the federal minimum wage would be the floor for states in which 100% of the labor force resides. Similarly, if every state had a minimum wage above the current rate of $7.25, then the federal rate would not be binding for the labor force. Instead the interaction of federal and state rates has led to the federal minimum wage playing a fluctuating, but generally decreasing, role in establishing a wage floor for the civilian labor force, particularly during periods in which the federal rate is not increased.

Figure 3. How Binding is the Federal Minimum Wage?

The Share of the U.S. Labor Force Residing in States with the Federal Minimum Wage as the Floor

Source: CRS analysis of Tax Policy Center, State Minimum Wage Rates: 1983-2014, Washington, DC, http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=603; U.S. Department of Labor, Wage and Hour Division, Changes in Basic Minimum Wages in Non-Farm Employment Under State Law: Selected Years 1968-2013, Washington, DC, http://www.dol.gov/whd/state/stateMinWageHis.htm, and Bureau of Labor Statistics, Monthly Labor Review, Washington, DC, multiple years.

Notes: Prior to 1993, the District of Columbia did not have a broad minimum wage covering the general population. Thus for periods prior to 1993, this report uses a weighted average of occupation-specific minimum wages, as reported in David Neumark and Olena Nizalova, Minimum Wage Effects in the Longer Run, National Bureau of Economic Research, Working Paper 10656, Cambridge, MA, March 2006, http://www.nber.org/papers/w10656. Based on this data, the District of Columbia has maintained a minimum wage above the federal rate for the entire 1983-2019 period.

Examining the specific time periods around changes in the federal minimum wage (see Figure 1 for the history of federal minimum wage rate changes), data in Figure 3 show a general trend toward a lower share of the labor force being covered by the federal minimum wage only. Federal rate increases in 2007 through 2009 mitigated this reduction, as did earlier changes in the federal rate.

  • In the period from 1983 through 1989, the federal minimum wage remained constant at $3.35 per hour. Prior to the federal increases in 1990 and 1991, the number of states with higher minimum wages rose from 3 in 1984 to 16 in 1989 and the share of the U.S. civilian labor force in states for which the federal rate was the floor fell from 98% to 70%.
  • Following a two-step federal increase in 1990 and 1991 from $3.35 to $4.25 per hour, the number of states with higher minimum wages fell to 8 in 1992, which meant that the federal rate was the floor for states comprising 92% of the civilian labor force.
  • The next federal minimum wage increase occurred in two steps in 1996 and 1997, increasing from $4.25 to $5.15 per hour. Prior to that increase, in 1995, there were 10 states, representing 10% of the civilian labor force, with minimum wages above the federal rate. After the second increase in 1997, the number of states with higher minimum wages dropped to 8, but the share of the labor force in states for which the federal rate served as a floor decreased to 82%.
  • The federal minimum wage did not increase after 1997 until 2007. During much of that period the number of states with higher minimum wages stayed somewhat steady, increasing from 8 (comprising 18% of the civilian labor force) in 1998 to 12 (comprising 21% of the civilian labor force) in 2003. However, by 2006, 22 states representing 50% of the civilian labor force had minimum wage rates above the federal rate. This increase was due in part to a few populous states, such as Florida, Michigan, and New York, adopting minimum wage rates above the federal rate in this period.
  • Following the three-step increase in the federal minimum wage from $5.15 to the current $7.25 (2007-2009), 15 states, comprising 33% of the civilian labor force, had rates above the federal minimum wage in 2010. By 2019, this rose to 29 states and the District of Columbia, which means that the federal rate is the wage floor in states representing 39% of the civilian labor force.
Appendix. Selected Characteristics of State Minimum Wage Policies

For the 29 states and the District of Columbia with state minimum wage rates above the federal rate as of 2020, Table 1 and much of the text above summarizes information on those states' minimum wage policies, highlighting minimum wage rates and mechanisms used to establish and adjust wage rates. As discussed previously, for those states with current or scheduled minimum wages above the federal rate, three main mechanisms are in place to adjust future rates: (1) scheduled increases, (2) indexation to inflation, or (3) reference to the federal rate plus an add-on (i.e., a state minimum wage is a percentage or dollar amount above the federal rate). For the 21 states with minimum wage rates equal to or below the federal rate, however, there are no mechanisms in place to move rates above the federal rate. Thus, the main difference within this group of states is the relationship of the state rate, if any, to the federal rate.

For those 21 states with minimum wages equal to or below the federal rate, the state rate may be set in four ways:16

  • No state minimum wage provisions: In five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—there are no provisions for state minimum wage rates. In practice, this means that most workers in these states are covered by the FLSA minimum wage provisions since coverage is generally broad.
  • State minimum wage provisions with no reference to the FLSA: Five states have state minimum wage rates but do not reference the FLSA. Two of these states—Georgia and Wyoming—have state rates below $7.25, while three of these states—Kansas, North Dakota, and Wisconsin—have rates equal to $7.25. However, because there is no reference to the FLSA rate or other provision for adjustment in any of these states, the state rate does not change unless the state policy is changed.
  • State minimum wage equals the FLSA rate: Six states—Idaho, Indiana, New Hampshire, Oklahoma, Texas, and Virginia—set the state rate equal to the FLSA rate. Thus, when the FLSA rate changes, the state rates in these six states change to equal the FLSA rate.
  • State minimum wage equals FLSA rate if FLSA is greater: In four states—Iowa, Kentucky, North Carolina, and Pennsylvania—the state rate is specified separately but includes a provision to equal the FLSA rate if the latter is above the state specified rate.

Table A-1 provides detailed information about minimum wage policies in the 50 states and the District of Columbia, including those summarized in a more concise manner in Table 1.

Table A-1. Selected State Minimum Wage Policies

As of January 1, 2020 (unless otherwise noted)

State

State Legislation
or Policy Citation

 

Pertinent Language and Notes

Alabama

No state minimum wage law

 

n/a

Alaska

Alaska Statute 23.10.065

 

"(a) Except as otherwise provided for in law, an employer shall pay to each employee a minimum wage, as established herein, for hours worked in a pay period, whether the work is measured by time, piece, commission or otherwise. An employer may not apply tips or gratuities bestowed upon employees as a credit toward payment of the minimum hourly wage required by this section. Tip credit as defined by the Fair Labor Standards Act of 1938 as amendment does not apply to the minimum wage established by this section. Beginning with the passage of this Act, the minimum wage shall be $8.75 per hour effective January 1, 2015, $9.75 per hour effective January 1, 2016 and thereafter adjusted annually for inflation. The adjustment shall be calculated each September 30, for the proceeding January-December calendar year, by the Alaska Department of Labor and Workforce Development, using 100 percent of the rate of inflation based on the Consumer Price Index for all urban consumers for the Anchorage metropolitan area, compiled by the Bureau of Labor Statistics, United States Department of Labor; the department shall round the adjusted minimum hourly wage up to the nearest one cent; the adjusted minimum hourly wage shall apply to work performed beginning on January 1 through December 31 of the year for which it is effective.

(d)If the minimum wage determined under (a) of this section is less than one dollar over the federal minimum wage, the Alaska minimum wage shall be set at one dollar over the federal minimum wage. This amount shall be adjusted in subsequent years by the method established in (a) of this section."

Arizona

Arizona Revised Statutes, 23-363

 

"A. Employers shall pay employees no less than the minimum wage, which shall be not less than:

1. $10 on and after January 1, 2017.

2. $10.50 on and after January 1, 2018.

3. $11 on and after January 1, 2019.

4. $12 on and after January 1, 2020.

B. The minimum wage shall be increased on January 1, 2021 and on January 1 of successive years, by the increase in the cost of living. The increase in the cost of living shall be measured by the percentage increase as of August of the immediately preceding year over the level as of August of the previous year of the consumer price index (all urban consumers, U.S. city average for all items) or its successor index as published by the U.S. department of labor or its successor agency, with the amount of the minimum wage increase rounded to the nearest multiple of five cents."

Arkansas

Arkansas Code
§ 11-4-210

 

"(a)(3) Beginning January 1, 2019, every employer shall pay each of his or her employees wages at the rate of not less than nine dollars and twenty-five cents ($9.25) per hour, beginning January 1, 2020 the rate of not less than ten dollars ($10.00) per hour and beginning January 1, 2021 the rate of not less than eleven dollars ($11.00) per hour except as otherwise provided in this subchapter."

California

California Labor Code 1182.12

 

"Notwithstanding any other provision of this part, on and after July 1, 2014, the minimum wage for all industries shall be not less than nine dollars ($9.00) per hour, and on and after January 1, 2016, the minimum wage for all industries shall be not less than ten dollars ($10.00) per hour.

(1) For any employer who employs 26 or more employees, the minimum wage shall be as follows:

(A) From January 1, 2017, to December 31, 2017, inclusive,—ten dollars and fifty cents ($10.50) per hour. (B) From January 1, 2018, to December 31, 2018, inclusive,—eleven dollars ($11) per hour. (C) From January 1, 2019, to December 31, 2019, inclusive,—twelve dollars ($12) per hour. (D) From January 1, 2020, to December 31, 2020, inclusive,—thirteen dollars ($13) per hour. (E) From January 1, 2021, to December 31, 2021, inclusive,—fourteen dollars ($14) per hour. (F) From January 1, 2022, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

(2) For any employer who employs 25 or fewer employees, the minimum wage shall be as follows:

(A) From January 1, 2018, to December 31, 2018, inclusive,—ten dollars and fifty cents ($10.50) per hour. (B) From January 1, 2019, to December 31, 2019, inclusive,—eleven dollars ($11) per hour. (C) From January 1, 2020, to December 31, 2020, inclusive,—twelve dollars ($12) per hour. (D) From January 1, 2021, to December 31, 2021, inclusive—thirteen dollars ($13) per hour. (E) From January 1, 2022, to December 31, 2022, inclusive,—fourteen dollars ($14) per hour. (F) From January 1, 2023, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

c) (1) Following the implementation of the minimum wage increase specified in subparagraph (F) of paragraph (2) of subdivision (b), on or before August 1 of that year, and on or before each August 1 thereafter, the Director of Finance shall calculate an adjusted minimum wage. The calculation shall increase the minimum wage by the lesser of 3.5 percent and the rate of change in the averages of the most recent July 1 to June 30, inclusive, period over the preceding July 1 to June 30, inclusive, period for the United States Bureau of Labor Statistics nonseasonally adjusted United States Consumer Price Index for Urban Wage Earners."

Colorado

Colorado Constitution, Art. XVIII, Section 15

 

"Effective January 1, 2017, Colorado's minimum wage is increased to $ 9.30 per hour and is increased annually by $ 0.90 each January 1 until it reaches $ 12 per hour effective January 2020, and thereafter is adjusted annually for cost of living increases, as measured by the Consumer Price Index used for Colorado. This minimum wage shall be paid to employees who receive the state or federal minimum wage."

Connecticut

Connecticut State Statutes Section 31-58, Connecticut House Bill No. 5004, Public Act No. 19-4

 

"…effective January 1, 2014, not less than eight dollars and seventy cents per hour, and effective January 1, 2015, not less than nine dollars and fifteen cents per hour, and effective January 1, 2016, not less than nine dollars and sixty cents per hour, and effective January 1, 2017, not less than ten dollars and ten cents per hour, and effective October 1, 2019, not less than eleven dollars per hour, and effective September 1, 2020, not less than twelve dollars per hour, and effective August 1, 2021, not less than thirteen dollars per hour, and effective July 1, 2022, not less than fourteen dollars per hour, and effective June 1, 2023, not less than fifteen dollars per hour. On October 15, 2023, and on each October fifteenth thereafter, the Labor Commissioner shall announce the adjustment in the minimum fair wage which shall become the new minimum fair wage and shall be effective on January first immediately following. On January 1, 2024, and not later than each January first thereafter, the minimum fair wage shall be adjusted by the percentage change in the employment cost index, or its successor index, for wages and salaries for all civilian workers, as calculated by the United States Department of Labor, over the twelve-month period ending on June thirtieth of the preceding year, rounded to the nearest whole cent."

Delaware

Delaware Code Title
19-902

 

"(a) Except as may otherwise be provided under this chapter, every employer shall pay to every employee in any occupation wages of a rate:

(1) Not less than $7.75 per hour effective June 1, 2014; and

(2) Not less than $8.25 per hour effective June 1, 2015;

(3) Not less than $8.75 per hour effective January 1, 2019;

(4) Not less than $9.25 per hour effective October 1, 2019.

Upon the establishment of a federal minimum wage in excess of the state minimum wage, the minimum wage in this State shall be equal in amount to the federal minimum wage, except as may otherwise be provided under this chapter."

The District of Columbia

D.C. Code Section 32-1003

 

"(5)(A) Except as provided in subsection (h) of this section and subparagraph (B) of this paragraph, the minimum hourly wage required to be paid to an employee by an employer shall be as of:

(i) July 1, 2016: $11.50;

(ii) July 1, 2017: $12.50;

(iii) July 1, 2018: $13.25;

(iv) July 1, 2019: $14.00; and

(v) July 1, 2020: $15.00.

(B) If the minimum wage set by the United States government pursuant to the Fair Labor Standards Act ("U.S. minimum wage") is greater than the minimum hourly wage currently being paid pursuant to subparagraph (A) of this paragraph, the minimum hourly wage paid to an employee by an employer shall be the U.S. minimum wage plus $1.

(6)(A) Except as provided in subsection (h) of this section, beginning on July 1, 2021, and no later than July 1 of each successive year, the minimum wage provided in this subsection shall be increased in proportion to the annual average increase, if any, in the Consumer Price Index for All Urban Consumers in the Washington Metropolitan Statistical Area published by the Bureau of Labor Statistics of the United States Department of Labor for the previous calendar year. Any increase under this paragraph shall be adjusted to the nearest multiple of $.05."

Florida

Florida Labor Statute 448-110 (4)(a)

 

"Beginning September 30, 2005, and annually on September 30 thereafter, the Department of Economic Opportunity shall calculate an adjusted state minimum wage rate by increasing the state minimum wage by the rate of inflation for the 12 months prior to September 1. In calculating the adjusted state minimum wage, the Department of Economic Opportunity shall use the Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, for the South Region or a successor index as calculated by the United States Department of Labor. Each adjusted state minimum wage rate shall take effect on the following January 1, with the initial adjusted minimum wage rate to take effect on January 1, 2006."

Georgia

Georgia Code 34-4-3

 

"(a) Except as otherwise provided in this Code section, every employer, whether a person, firm, or corporation, shall pay to all covered employees a minimum wage which shall be not less than $5.15 per hour for each hour worked in the employment of such employer."

Hawaii

Hawaii Revised Statutes 387-2

 

"(a) Except as provided in section 387-9 and this section, every employer shall pay to each employee employed by the employer, wages at the rate of not less than:

(1) $6.25 per hour beginning January 1, 2003;

(2) $6.75 per hour beginning January 1, 2006;

(3) $7.25 per hour beginning January 1, 2007;

(4) $7.75 per hour beginning January 1, 2015;

(5) $8.50 per hour beginning January 1, 2016;

(6) $9.25 per hour beginning January 1, 2017; and

(7) $10.10 per hour beginning January 1, 2018."

Idaho

Idaho Statutes 44-1502

 

"MINIMUM WAGES. (1) Except as hereinafter otherwise provided, no employer shall pay to any of his employees any wages computed at a rate of less than seven dollars and twenty-five cents ($7.25) per hour for employment. The amount of the minimum wage shall conform to, and track with, the federal minimum wage.

4) No political subdivision of this state, as defined by section 6-902, Idaho Code, shall establish by ordinance or other action minimum wages higher than the minimum wages provided in this section."

Illinois

Illinois Compiled Statutes 820-105/4

 

"From July 1, 2010 through December 31, 2019 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $8.25 per hour, and from January 1, 2020 through June 30, 2020, every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $9.25 per hour, and from July 1, 2020 through December 31, 2020 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $10 per hour, and from January 1, 2021 through December 31, 2021 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $11 per hour, and from January 1, 2022 through December 31, 2022 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $12 per hour, and from January 1, 2023 through December 31, 2023 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $13 per hour, and from January 1, 2024 through December 31, 2024, every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $14 per hour; and on and after January 1, 2025, every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $15 per hour."

Indiana

Indiana Code 22-2-2-4

 

"(h) Except as provided in subsections (c) and (j), every employer employing at least two (2) employees during a work week shall, in any work week in which the employer is subject to this chapter, pay each of the employees in any work week beginning on or after June 30, 2007, wages of not less than the minimum wage payable under the federal Fair Labor Standards Act of 1938, as amended (29 U.S.C. 201 et seq.)."

Iowa

Iowa Code 91D.1

 

"1. a. The state hourly wage shall be at least $6.20 as of April 1, 2007, and $7.25 as of January 1, 2008.

b. Every employer, as defined in the federal Fair Labor Standards Act of 1938, as amended to January 1, 2007, shall pay to each of the employer's employees, as defined in the federal Fair Labor Standards Act of 1938, as amended to January 1, 2007, the state hourly wage stated in paragraph "a", or the current federal minimum wage, pursuant to 29 U.S.C. § 206, as amended, whichever is greater."

Kansas

Kansas Statute 44-1203

 

"Except as otherwise provided in the minimum wage and maximum hours law, every employer shall pay to each employee wages at a rate as follows:

(1) Prior to January 1, 2010, employee wages shall be paid at a rate of not less than $2.65 an hour; and

(2) on and after January 1, 2010, employee wages shall be paid at a rate of not less than $7.25 an hour."

Kentucky

Kentucky Revised Code 337.275

 

"Except as may otherwise be provided by this chapter, every employer shall pay to each of his employees wages at a rate of not less than five dollars and eighty-five cents ($5.85) an hour beginning on June 26, 2007, not less than six dollars and fifty-five cents ($6.55) an hour beginning July 1, 2008, and not less than seven dollars and twenty-five cents ($7.25) an hour beginning July 1, 2009. If the federal minimum hourly wage as prescribed by 29 U.S.C. sec. 206(a)(1) is increased in excess of the minimum hourly wage in effect under this subsection, the minimum hourly wage under this subsection shall be increased to the same amount, effective on the same date as the federal minimum hourly wage rate."

Louisiana

No state minimum wage law

 

 

Maine

Maine Revised Statutes 26, Section 664 (1)

 

"1. Minimum wage.  The minimum hourly wage is $7.50 per hour. Starting January 1, 2017, the minimum hourly wage is $9.00 per hour; starting January 1, 2018, the minimum hourly wage is $10.00 per hour; starting January 1, 2019, the minimum hourly wage is $11.00 per hour; and starting January 1, 2020, the minimum hourly wage is $12.00 per hour. On January 1, 2021 and each January 1st thereafter, the minimum hourly wage then in effect must be increased by the increase, if any, in the cost of living. The increase in the cost of living must be measured by the percentage increase, if any, as of August of the previous year over the level as of August of the year preceding that year in the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W, for the Northeast Region, or its successor index, as published by the United States Department of Labor, Bureau of Labor Statistics or its successor agency, with the amount of the minimum wage increase rounded to the nearest multiple of 5¢. If the highest federal minimum wage is increased in excess of the minimum wage in effect under this section, the minimum wage under this section is increased to the same amount, effective on the same date as the increase in the federal minimum wage, and must be increased in accordance with this section thereafter."

Maryland

Maryland Labor and Employment Code 3-413

 

§3–413.

(a)(1) In this section the following words have the meanings indicated.

(2) "Employer" includes a governmental unit.

(3) "Small employer" means an employer that employs 14 or fewer employees.

(b) Except as provided in subsection (d) of this section and §§ 3–413.1 and 3–414 of this subtitle, each employer shall pay:

(1) to each employee who is subject to both the federal Act and this subtitle, at least the greater of:

(i) the minimum wage for that employee under the federal Act; or

(ii) the State minimum wage set under subsection (c) of this section; and

(2) to each other employee who is subject to this subtitle, at least the greater of:

(i) the highest minimum wage under the federal Act; or

(ii) the State minimum wage set under subsection (c) of this section.

(c)(1) Subject to § 3–413.1 of this subtitle and except as provided in paragraph (2) of this subsection, the State minimum wage rate is:

(i) for the 12–month period beginning July 1, 2017, $9.25 per hour;

(ii) for the 18–month period beginning July 1, 2018, $10.10 per hour;

(iii) for the 12–month period beginning January 1, 2020, $11.00 per hour;

(iv) for the 12–month period beginning January 1, 2021, $11.75 per hour;

(v) for the 12–month period beginning January 1, 2022, $12.50 per hour;

(vi) for the 12–month period beginning January 1, 2023, $13.25 per hour;

(vii) for the 12–month period beginning January 1, 2024, $14.00 per hour; and

(viii) beginning January 1, 2025, $15.00 per hour.

(2) Subject to § 3–413.1 of this subtitle, the State minimum wage rate for a small employer is:

(i) for the 18–month period beginning July 1, 2018, $10.10 per hour;

(ii) for the 12–month period beginning January 1, 2020, $11.00 per hour;

(iii) for the 12–month period beginning January 1, 2021, $11.60 per hour;

(iv) for the 12–month period beginning January 1, 2022, $12.20 per hour;

(v) for the 12–month period beginning January 1, 2023, $12.80 per hour;

(vi) for the 12–month period beginning January 1, 2024, $13.40 per hour;

(vii) for the 12–month period beginning January 1, 2025, $14.00 per hour;

(viii) for the 6–month period beginning January 1, 2026, $14.60 per hour; and

(ix) beginning July 1, 2026, $15.00 per hour.

Massachusetts

Massachusetts General Laws Chapter 151, Section 1

Massachusetts Session Laws 2018, Chapter 121, amended MA General Laws Chapter 151, Section 1.

 

"A wage of less than $12.00 per hour, in any occupation, as defined in this chapter, shall conclusively be presumed to be oppressive and unreasonable ... Notwithstanding the provisions of this section, in no case shall the minimum wage rate be less than $.50 higher than the effective federal minimum rate."

"SECTION 17. Section 1 of chapter 151 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by striking out, in line 6, the figure '$11.00' and inserting in place thereof the following figure:- $12.00.

SECTION 18. Said section 1 of said chapter 151 is hereby further amended by striking out the figure '$12.00', inserted by section 17, and inserting in place thereof the following figure:- $12.75.

SECTION 19. Said section 1 of said chapter 151 is hereby further amended by striking out the figure '$12.75', inserted by section 18, and inserting in place thereof the following figure:- $13.50.

SECTION 20. Said section 1 of said chapter 151 is hereby further amended by striking out the figure '$13.50', inserted by section 19, and inserting in place thereof the following figure:- $14.25.

SECTION 21. Said section 1 of said chapter 151 is hereby further amended by striking out the figure '$14.25', inserted by section 20, and inserting in place thereof the following figure:- $15.00.

SECTION 32. Sections 6, 11, 18 and 23 shall take effect on January 1, 2020.

SECTION 33. Sections 7, 12, 19, 24 and subsection (a) of section 2 of chapter 175M of the General Laws shall take effect on January 1, 2021.

SECTION 35. Sections 8, 13, 20 and 25 shall take effect on January 1, 2022.

SECTION 36. Sections 9, 14, 16, 21 and 26 shall take effect on January 1, 2023.

Michigan

Michigan Compiled Laws 408.934

 

Sec. 4. (1) Subject to the exceptions specified in this act, the minimum hourly wage rate is:

(a) Before September 1, 2014, $7.40.

(b) Beginning September 1, 2014, $8.15.

(c) Beginning January 1, 2016, $8.50.

(d) Beginning January 1, 2017, $8.90.

(e) Beginning January 1, 2018, $9.25.

(f) In calendar year 2019, or a subsequent calendar year as described in subsection (2), $9.45.

(g) In calendar year 2020, or a subsequent calendar year as described in subsection (2), $9.65.

(h) In calendar year 2021, or a subsequent calendar year as described in subsection (2), $9.87.

(i) In calendar year 2022, or a subsequent calendar year as described in subsection (2), $10.10.

(j) In calendar year 2023, or a subsequent calendar year as described in subsection (2), $10.33.

(k) In calendar year 2024, or a subsequent calendar year as described in subsection (2), $10.56.

(l) In calendar year 2025, or a subsequent calendar year as described in subsection (2), $10.80.

(m) In calendar year 2026, or a subsequent calendar year as described in subsection (2), $11.04.

(n) In calendar year 2027, or a subsequent calendar year as described in subsection (2), $11.29.

(o) In calendar year 2028, or a subsequent calendar year as described in subsection (2), $11.54.

(p) In calendar year 2029, or a subsequent calendar year as described in subsection (2), $11.79.

(q) In calendar year 2030, or a subsequent calendar year as described in subsection (2), $12.05.

(2) An increase in the minimum hourly wage rate as prescribed in subsection (1) does not take effect if the unemployment rate for this state, as determined by the Bureau of Labor Statistics, United States Department of Labor, is 8.5% or greater for the calendar year preceding the calendar year of the prescribed increase. An increase in the minimum hourly wage rate as prescribed in subsection (1) that does not take effect pursuant to this subsection takes effect in the first calendar year following a calendar year for which the unemployment rate for this state, as determined by the Bureau of Labor Statistics, United States Department of Labor, is less than 8.5%."

Minnesota

Minnesota Statutes 177.24

 

"(a) For purposes of this subdivision, the terms defined in this paragraph have the meanings given them.

(1) 'Large employer' means an enterprise whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated) and covered by the Minnesota Fair Labor Standards Act, sections 177.21 to 177.35.

(2) 'Small employer' means an enterprise whose annual gross volume of sales made or business done is less than $500,000 (exclusive of excise taxes at the retail level that are separately stated) and covered by the Minnesota Fair Labor Standards Act, sections 177.21 to 177.35.

(b) Except as otherwise provided in sections 177.21 to 177.35:

(1) every large employer must pay each employee wages at a rate of at least:

(i) $8.00 per hour beginning August 1, 2014;

(ii) $9.00 per hour beginning August 1, 2015;

(iii) $9.50 per hour beginning August 1, 2016; and

(iv) the rate established under paragraph (f) beginning January 1, 2018; and

(2) every small employer must pay each employee at a rate of at least:

(i) $6.50 per hour beginning August 1, 2014;

(ii) $7.25 per hour beginning August 1, 2015;

(iii) $7.75 per hour beginning August 1, 2016; and

(iv) the rate established under paragraph (f) beginning January 1, 2018.

(f) No later than August 31 of each year, beginning in 2017, the commissioner shall determine the percentage increase in the rate of inflation, as measured by the implicit price deflator, national data for personal consumption expenditures as determined by the United States Department of Commerce, Bureau of Economic Analysis during the 12-month period immediately preceding that August or, if that data is unavailable, during the most recent 12-month period for which data is available. The minimum wage rates in paragraphs (b), (c), (d), and (e) are increased by the lesser of: (1) 2.5 percent, rounded to the nearest cent; or (2) the percentage calculated by the commissioner, rounded to the nearest cent. A minimum wage rate shall not be reduced under this paragraph. The new minimum wage rates determined under this paragraph take effect on the next January 1."

Mississippi

No state minimum wage law

 

n/a

Missouri

Missouri Revised Statutes 290.502

 

"2. The minimum wage shall be increased or decreased on January 1, 2008, and on January 1 of successive years, by the increase or decrease in the cost of living. On September 30, 2007, and on each September 30 of each successive year, the director shall measure the increase or decrease in the cost of living by the percentage increase or decrease as of the preceding July over the level as of July of the immediately preceding year of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or successor index as published by the U.S. Department of Labor or its successor agency, with the amount of the minimum wage increase or decrease rounded to the nearest five cents."

3. Except as may be otherwise provided pursuant to sections 290.500 to 290.530, and notwithstanding subsection 1* of this section, effective January 1, 2019, every employer shall pay to each employee wages at the rate of not less than $8.60 per hour, or wages at the same rate or rates set under the provisions of federal law as the prevailing federal minimum wage applicable to those covered jobs in interstate commerce, whichever rate per hour is higher. Thereafter, the minimum wage established by this subsection shall be increased each year by $.85 per hour, effective January 1 of each of the next four years, until it reaches $12.00 per hour, effective January 1, 2023. Thereafter, the minimum wage established by this subsection shall be increased or decreased on January 1, 2024, and on January 1 of successive years, per the method set forth in subsection 2** of this section. If at any time the federal minimum wage rate is above or is thereafter increased above the minimum wage then in effect under this subsection, the minimum wage required by this subsection shall continue to be increased pursuant to this subsection ***, but the higher federal rate shall immediately become the minimum wage required by this subsection and shall be increased or decreased per the method set forth in subsection 2** for so long as it remains higher than the state minimum wage required and increased pursuant to this subsection.

Montana

Montana Code Annotated 39-3-409

 

"(1) The minimum wage, except as provided in subsection (3), must be the greater of either:
     (a) the minimum hourly wage rate as provided under the federal Fair Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)), excluding the value of tips received by the employee and the special provisions for a training wage; or
     (b) $6.15 an hour, excluding the value of tips received by the employee and the special provisions for a training wage.
     (2) (a) The minimum wage is subject to a cost-of-living adjustment, as provided in subsection (2)(b).
     (b) No later than September 30 of each year, an adjustment of the wage amount specified in subsection (1) must be made based upon the increase, if any, from August of the preceding year to August of the year in which the calculation is made in the consumer price index, U.S. city average, all urban consumers, for all items, as published by the bureau of labor statistics of the United States department of labor.
     (c) The wage amount established under this subsection (2):
     (i) must be rounded to the nearest 5 cents; and
     (ii) becomes effective as the new minimum wage, replacing the dollar figure specified in subsection (1), on January 1 of the following year.
     (3) The minimum wage rate for a business whose annual gross sales are $110,000 or less is $4 an hour."

Nebraska

Nebraska Revised Statutes 48-1203

 

"Except as otherwise provided in this section and section 48-1203.01, every employer shall pay to each of his or her employees a minimum wage of:

(a) Seven dollars and twenty-five cents per hour through December 31, 2014;

(b) Eight dollars per hour on and after January 1, 2015, through December 31, 2015; and

(c) Nine dollars per hour on and after January 1, 2016."

Nevada

For current text, see Nevada AB 456, 2019 Chapter 591, Section 1.5

Nevada Constitution Article 15 Sect. 16

 

Each employer shall pay to each employee of the employer a wage of not less than:

(a) Beginning July 1, 2019:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $7.25 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $8.25 per hour worked.

(b) Beginning July 1, 2020:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $8.00 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $9.00 per hour worked.

(c) Beginning July 1, 2021:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $8.75 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $9.75 per hour worked.

(d) Beginning July 1, 2022:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $9.50 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $10.50 per hour worked.

(e) Beginning July 1, 2023:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $10.25 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $11.25 per hour worked.

(f) Beginning July 1, 2024:

(1) If the employer offers health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $11.00 per hour worked.

(2) If the employer does not offer health benefits to the employee in the manner described in Section 16 of Article 15 of the Nevada Constitution, $12.00 per hour worked.

New Hampshire

New Hampshire Revised Statutes 279:21

 

 "Unless otherwise provided by statute, no person, firm, or corporation shall employ any employee at an hourly rate lower than that set forth in the federal minimum wage law, as amended."

New Jersey

New Jersey Legislative Statutes 34:11-56a4

 

"5. a. Except as provided in subsections c., d., e. and g. of this section, each employer shall pay to each of his employees wages at a rate of not less than $8.85 per hour as of January 1, 2019 and, on January 1 of 2020 and January 1 of each subsequent year, the minimum wage shall be increased by any increase in the consumer price index for all urban wage earners and clerical workers (CPI-W) as calculated by the federal government for the 12 months prior to the September 30 preceding that January 1, except that any of the following rates shall apply if it exceeds the rate determined in accordance with the applicable increase in the CPI-W for the indicated year: on July 1, 2019, the minimum wage shall be $10.00 per hour; on January 1, 2020, the minimum wage shall be $11.00 per hour; and on January 1 of each year from 2021 to 2024, inclusive, the minimum wage shall be increased from the rate of the preceding year by $1.00 per hour. If the federal minimum hourly wage rate set by section 6 of the federal "Fair Labor Standards Act of 1938" (29 U.S.C. s.206), or a successor federal law, is raised to a level higher than the State minimum wage rate set by this subsection, then the State minimum wage rate shall be increased to the level of the federal minimum wage rate and subsequent increases based on increases in the CPI-W pursuant to this section shall be applied to the higher minimum wage rate.

New Mexico

New Mexico Statutes 50-4-22

New Mexico 2019 Chapter Law 114, § 2

 

"An employer shall pay an employee the minimum wage rate of six dollars fifty cents ($ 6.50) an hour. As of January 1, 2009, an employer shall pay the minimum wage rate of seven dollars fifty cents ($7.50) an hour." 

(Effective January 1, 2020. 2019, ch. 114, § 2.)

A.  Except as provided in Subsection B or D of this section, an employer shall pay to an employee a minimum wage rate of:

(1)       prior to January 1, 2020, at least seven dollars fifty cents ($7.50) an hour;

(2)       beginning January 1, 2020 and prior to January 1, 2021, at least nine dollars ($9.00) an hour;

(3)       beginning January 1, 2021 and prior to January 1, 2022, at least ten dollars fifty cents ($10.50) an hour;

(4)       beginning January 1, 2022 and prior to January 1, 2023, at least eleven dollars fifty cents ($11.50) an hour; and

(5)       on and after January 1, 2023, at least twelve dollars ($12.00) an hour.

New York

New York Labor Law, Minimum Wage Act, Article 19, Section 652

 

(a) New York City. (i) Large employers. Every employer of eleven or more employees shall pay to each of its employees for each hour worked in the city of New York a wage of not less than:

$15.00 per hour on and after December 31, 2018, or, if greater, such other wage as may be established by federal law pursuant to 29 U.S.C. section 206 or its successors or such other wage as may be established in accordance with the provisions of this article.

(ii) Small employers. Every employer of ten or less employees shall pay to each of its employees for each hour worked in the city of New York a wage of not less than:

..

$13.50 per hour on and after December 31, 2018,

$15.00 per hour on and after December 31, 2019, or, if greater, such other wage as may be established by federal law pursuant to 29 U.S.C. section 206 or its successors or such other wage as may be established in accordance with the provisions of this article.

(b) Remainder of downstate. Every employer shall pay to each of its employees for each hour worked in the counties of Nassau, Suffolk and Westchester a wage not less than:

..

$12.00 per hour on and after December 31, 2018,

$13.00 per hour on and after December 31, 2019,

$14.00 per hour on and after December 31, 2020,

$15.00 per hour on and after December 31, 2021,

or, if greater, such other wage as may be established by federal law pursuant to 29 U.S.C. section 206 or its successors or such other wage as may be established in accordance with the provisions of this article.

(c) Remainder of state. Every employer shall pay to each of its employees for each hour worked outside of the city of New York and the counties of Nassau, Suffolk, and Westchester, a wage of not less than:

..

$11.10 on and after December 31, 2018,

$11.80 on and after December 31, 2019,

$12.50 on and after December 31, 2020,

and on each following December thirty-first, a wage published by the commissioner on or before October first, based on the then current minimum wage increased by a percentage determined by the director of the budget in consultation with the commissioner, with the result rounded to the nearest five cents, totaling no more than fifteen dollars, where the percentage increase shall be based on indices including, but not limited to, (i) the rate of inflation for the most recent twelve month period ending June of that year based on the consumer price index for all urban consumers on a national and seasonally unadjusted basis (CPI-U), or a successor index as calculated by the United States department of labor,

(ii) the rate of state personal income growth for the prior calendar year, or a successor index, published by the bureau of economic analysis of the United States department of commerce, or (iii) wage growth; or, if greater, such other wage as may be established by federal law pursuant to 29 U.S.C. section 206 or its successors or such other wage as may be established in accordance with the provisions of this article.

North Carolina

North Carolina General Statutes 95-25.3

 

"Every employer shall pay to each employee who in any workweek performs any work, wages of at least six dollars and fifteen cents ($6.15) per hour or the minimum wage set forth in paragraph 1 of section 6(a) of the Fair Labor Standards Act, 29 U.S.C. 206(a)(1), as that wage may change from time to time, whichever is higher, except as otherwise provided in this section."

North Dakota

North Dakota Code 34-06-22

 

"Except as otherwise provided under this chapter and rules adopted by the commissioner, every employer shall pay to each of the employer's employees:

a. Effective on the effective date of this section, a wage of at least five dollars and eighty-five cents per hour;

b. Effective twelve months after the effective date of this section, a wage of at least six dollars and fifty-five cents per hour; and

c. Effective twenty-four months after the effective date of this section, a wage of at least seven dollars and twenty-five cents per hour."

Ohio

Ohio Constitution 2.34a

 

"On the thirtieth day of each September, beginning in 2007, this state minimum wage rate shall be increased effective the first day of the following January by the rate of inflation for the twelve month period prior to that September according to the consumer price index or its successor index for all urban wage earners and clerical workers for all items as calculated by the federal government rounded to the nearest five cents."

Oklahoma

Oklahoma Statutes 40-197.2

 

"Except as otherwise provided in the Oklahoma Minimum Wage Act, no employer within the State of Oklahoma shall pay any employee a wage of less than the current federal minimum wage for all hours worked."

Oregon

Oregon Revised Statutes 653.025 (see Oregon Laws 2016, Chap. 12)

 

"(1) Except as provided in subsections (2) and (3) of this section, ORS 652.020 and the rules of the Commissioner of the Bureau of Labor and Industries issued under ORS 653.030 and 653.261, for each hour of work time that the employee is gainfully employed, no employer shall employ or agree to employ any employee at wages computed at a rate lower than:…

(f) From July 1, 2019, to June 30, 2020, $11.25.

(g) From July 1, 2020, to June 30, 2021, $12.

(h) From July 1, 2021, to June 30, 2022, $12.75.

(i) From July 1, 2022, to June 30, 2023, $13.50.

(j) After June 30, 2023, beginning on July 1 of each year, a rate adjusted annually for inflation as described in subsection (5) of this section.

(2) If the employer is located within the urban growth boundary of a metropolitan service district organized under ORS chapter 268, …

(d) From July 1, 2019, to June 30, 2020, $12.50.

(e) From July 1, 2020, to June 30, 2021, $13.25.

(f) From July 1, 2021, to June 30, 2022, $14.

(g) From July 1, 2022, to June 30, 2023, $14.75.

(h) After June 30, 2023, $1.25 per hour more than the minimum wage determined under subsection (1)(j) of this section.

(3) If the employer is located within a nonurban county as described in ORS 653.026…

(d) From July 1, 2019, to June 30, 2020, $11.

(e) From July 1, 2020, to June 30, 2021, $11.50.

(f) From July 1, 2021, to June 30, 2022, $12.

(g) From July 1, 2022, to June 30, 2023, $12.50.

(h) After June 30, 2023, $1 per hour less than the minimum wage determined under subsection (1)(j) of this section.

(4) The commissioner shall adopt rules for determining an employer's location under subsection (2) of this section.

(5)(a) The Oregon minimum wage shall be adjusted for inflation as provided in paragraph (b) of this subsection.

(b) No later than April 30 of each year, beginning in 2023, the commissioner shall calculate an adjustment of the wage amount specified in subsection (1)(j) of this section based upon the increase, if any, from March of the preceding year to March of the year in which the calculation is made in the U.S. City Average Consumer Price Index for All Urban Consumers for All Items as prepared by the Bureau of Labor Statistics of the United States Department of Labor or its successor.

(c) The wage amount as adjusted under this subsection shall be rounded to the nearest five cents.

(d) The wage amount as adjusted under this subsection becomes effective as the new Oregon minimum wage amount, replacing the minimum wage amount specified in subsection (1)(j) of this section, on July 1 of the year in which the calculation is made.

Pennsylvania

Pennsylvania Statutes, 43 P.S. §333.104

 

"Except as may otherwise be provided under this act:

(a) Every employer shall pay to each of his or her employees wages for all hours worked at a rate of not less than:

(1) Two dollars sixty-five cents ($2.65) an hour upon the effective date of this amendment.

(2) Two dollars ninety cents ($2.90) an hour during the year beginning January 1, 1979.

(3) Three dollars ten cents ($3.10) an hour during the year beginning January 1, 1980.

(4) Three dollars thirty-five cents ($3.35) an hour after December 31, 1980.

(5) Three dollars seventy cents ($3.70) an hour beginning February 1, 1989, and thereafter.

(6) Five dollars fifteen cents ($5.15) an hour beginning September 1, 1997.

(7) Six dollars twenty-five cents ($6.25) an hour beginning January 1, 2007.

(8) Seven dollars fifteen cents ($7.15) an hour beginning July 1, 2007.

(a.1) If the minimum wage set forth in the Fair Labor Standards Act of 1938 (52 Stat. 1060, 29 U.S.C. §201 et seq.) is increased above the minimum wage required under this section, the minimum wage required under this section shall be increased by the same amounts and effective the same date as the increases under the Fair Labor Standards Act, and the provisions of subsection (a) are suspended to the extent they differ from those set forth under the Fair Labor Standards Act."

Rhode Island

Rhode Island General Laws 28-12-3.

 

"(a) Every employer shall pay to each of his or her employees: commencing July 1, 1999, at least the minimum wage of five dollars and sixty five cents ($5.65) per hour. Commencing September 1, 2000, the minimum wage is six dollars and fifteen cents ($6.15) per hour.

(b) Commencing January 1, 2004, the minimum wage is six dollars and seventy-five cents ($6.75) per hour.

(c) Commencing March 1, 2006, the minimum wage is seven dollars and ten cents ($7.10) per hour.

(d) Commencing January 1, 2007, the minimum wage is seven dollars and forty cents ($7.40) per hour.

(e) Commencing January 1, 2013, the minimum wage is seven dollars and seventy-five cents ($7.75) per hour.

(f) Commencing January 1, 2014, the minimum wage is eight dollars ($8.00) per hour.

(g) Commencing January 1, 2015, the minimum wage is nine dollars ($9.00) per hour.

(h) Commencing January 1, 2016, the minimum wage is nine dollars and sixty cents ($9.60) per hour.

(i) Commencing January 1, 2018, the minimum wage is ten dollars and ten cents ($10.10) per hour.

(j) Commencing January 1, 2019, the minimum wage is ten dollars and fifty cents ($10.50) per hour."

South Carolina

No state minimum wage law

 

n/a

South Dakota

South Dakota Code 60-11-3; 11-3.2

 

"Every employer shall pay to each employee wages at a rate of not less than eight dollars and fifty cents an hour."

"Beginning January 1, 2016, and again on January 1 of each year thereafter, the minimum wage provided by § 60-11-3 shall be adjusted by the increase, if any, in the cost of living. The increase in the cost of living shall be measured by the percentage increase as of August of the immediately preceding year over the level as measured as of August of the previous year of the Consumer Price Index (all urban consumers, U.S. city average for all items) or its successor index as published by the U.S. Department of Labor or its successor agency, with the amount of the minimum wage increase, if any, rounded up to the nearest five cents. In no case shall the minimum wage be decreased. The Secretary of the South Dakota Department of Labor and Regulation or its designee shall publish the adjusted minimum wage rate for the forthcoming year on its internet home page by October 15 of each year, and it shall become effective on January 1 of the forthcoming year."

Tennessee

No state minimum wage law

 

n/a

Texas

Texas Labor Code Annotated 62.051

 

"Except as provided by Section 62.057, an employer shall pay to each employee the federal minimum wage under Section 6, Fair Labor Standards Act of 1938 (29 U.S.C. Section 206)."

Utah

Utah Code Annotated 34-40-103

 

"Minimum wage—Commission to review and modify minimum wage.

(1)(a) The minimum wage for all private and public employees within the state shall be $3.35 per hour.

(b) Effective April 1, 1990, the minimum wage shall be $3.80 per hour.

(2)(a) After July 1, 1990, the commission may by rule establish the minimum wage or wages as provided in this chapter that may be paid to employees in public and private employment within the state.

(b) The minimum wage, as established by the commission, may not exceed the federal minimum wage as provided in 29 U.S.C. Sec. 201 et seq., the Fair Labor Standards Act of 1938, as amended, in effect at the time of implementation of this section."

 Vermont

Vermont Statutes Annotated, 21 Section 384

 

"(a) An employer shall not employ any employee at a rate of less than $9.15. Beginning on January 1, 2016, an employer shall not employ any employee at a rate of less than $9.60. Beginning on January 1, 2017, an employer shall not employ any employee at a rate of less than $10.00. Beginning on January 1, 2018, an employer shall not employ any employee at a rate of less than $10.50, and beginning on January 1, 2019 and on each subsequent January 1, the minimum wage rate shall be increased by five percent or the percentage increase of the Consumer Price Index, CPI-U, U.S. city average, not seasonally adjusted, or successor index, as calculated by the U.S. Department of Labor or successor agency for the 12 months preceding the previous September 1, whichever is smaller, but in no event shall the minimum wage be decreased. The minimum wage shall be rounded off to the nearest $0.01.

If the minimum wage rate established by the U.S. government is greater than the rate established for Vermont for any year, the minimum wage rate for that year shall be the rate established by the U.S. government."

Virginia

Virginia Code Annotated 40.1-28.10

 

"Every employer shall pay to each of his employees wages at a rate not less than the federal minimum wage and a training wage as prescribed by the U.S. Fair Labor Standards Act (29 U.S.C. § 201 et seq.)."

Washington

Revised Code of Washington 49.46.020

 

"(1)(a) Beginning January 1, 2017, and until January 1, 2018, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than eleven dollars per hour.

(b) Beginning January 1, 2018, and until January 1, 2019, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than eleven dollars and fifty cents per hour.

(c) Beginning January 1, 2019, and until January 1, 2020, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than twelve dollars per hour.

(d) Beginning January 1, 2020, and until January 1, 2021, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than thirteen dollars and fifty cents per hour.

(2)(a) Beginning on January 1, 2021, and each following January 1st as set forth under (b) of this subsection, every employer shall pay to each of his or her employees who has reached the age of eighteen years wages at a rate of not less than the amount established under (b) of this subsection.

(b) On September 30, 2020, and on each following September 30th, the department of labor and industries shall calculate an adjusted minimum wage rate to maintain employee purchasing power by increasing the current year's minimum wage rate by the rate of inflation. The adjusted minimum wage rate shall be calculated to the nearest cent using the consumer price index for urban wage earners and clerical workers, CPI-W, or a successor index, for the twelve months prior to each September 1st as calculated by the United States department of labor. Each adjusted minimum wage rate calculated under this subsection (2)(b) takes effect on the following January 1st.

West Virginia

West Virginia Code 21-5C-2

 

"(a) Minimum wage:

(1) After June 30, 2006, every employer shall pay to each of his or her employees wages at a rate not less than $5.85 per hour.

(2) After June 30, 2007, every employer shall pay to each of his or her employees wages at a rate not less than $6.55 per hour.

(3) After June 30, 2008, every employer shall pay to each of his or her employees wages at a rate not less than $7.25 per hour.

(4) After December 31, 2014, every employer shall pay to each of his or her employees wages at a rate not less than $8.00 per hour.

(5) After December 31, 2015, every employer shall pay to each of his or her employees wages at a rate not less than $8.75 per hour.

(6) When the federal minimum hourly wage as prescribed by 29 U.S.C. §206 (a) (1) is equal to or greater than the wage rate prescribed in the applicable provision of this subsection, every employer shall pay to each of his or her employees wages at a rate of not less than the federal minimum hourly wage as prescribed by 29 U.S.C. §206 (a) (1). The minimum wage rates required under this subsection shall be thereafter adjusted in accordance with adjustments made in the federal minimum hourly rate."

Wisconsin

Wisconsin Administrative Code 272.03

 

"This subsection is effective on July 24, 2009. Except as provided in ss. DWD 272.05 to 272.09, no employer may employ any employee in any occupation, trade, or industry at a lesser hourly rate than as follows:

(a) All employees except opportunity and minor employees $7.25 per hour.

(b) Minor employees $7.25 per hour.

(c) Opportunity employees $5.90 per hour."

Wyoming

Wyoming Statutes Annotated 27-4-202

 

"Every employer shall pay to each of his or her employees wages at a rate of not less than five dollars and fifteen cents ($5.15) per hour"

Source: Compiled by CRS from state statutes.

Author Contact Information

David H. Bradley, Specialist in Labor Economics ([email address scrubbed], [phone number scrubbed])
Abigail R. Overbay, Senior Research Librarian ([email address scrubbed], [phone number scrubbed])

Footnotes

1.

In addition, the FLSA provides for overtime pay and child labor protections. For a broader overview of the minimum wage, see CRS Report R43089, The Federal Minimum Wage: In Brief, by David H. Bradley.

2.

Although the rate has increased 22 separate times, this does not mean that there have been 22 separately enacted laws to increase the minimum wage. In some cases, one law contained multiple increases in the minimum wage rate that were phased in over time.

3.

29 U.S.C. §206(a). State laws generally cover and exempt similar types of workers as those covered and exempted in the FLSA. While there are some cases in which state laws seem to cover different types or classes of workers than the FLSA, these coverage differentials appear to be relatively minor.

4.

The $500,000 threshold refers to the annual gross volume of sales. It is not a measure of net revenue or profits.

5.

U.S. Department of Labor, Coverage Under the Fair Labor Standards Act, available at http://www.dol.gov/whd/regs/compliance/whdfs14.pdf. (Hereinafter cited as DOL, Coverage Under the Fair Labor Standards Act.) These examples are not exhaustive but are meant to illustrate the relatively broad range of activities comprising "interstate commerce."

6.

DOL provides a series of fact sheets on the various individual minimum wage exemptions in the FLSA. See http://www.dol.gov/whd/fact-sheets-index.htm for individual fact sheets.

7.

For additional information, see CRS In Focus IF11282, Minimum Wages and the Raise the Wage Act (H.R. 582), by David H. Bradley and Julie M. Whittaker.

8.

State codes and U.S. Department of Labor, Wage and Hour Division, Minimum Wage Laws in the States, http://www.dol.gov/whd/minwage/america.htm and state websites. See the Appendix for details and sources.

9.

This figure – 61% of the labor force – is derived from the civilian labor force estimates from the Bureau of Labor Statistics (BLS) Local Area Unemployment Statistics (LAUS) program. Specifically, 2019 (August, seasonally adjusted) total civilian labor force in each state was totaled for the 29 states and the District of Columbia with a minimum wage higher than the federal minimum wage. This total was then divided by the 2019 civilian labor force for all states and the District of Columbia.

10.

States may also not provide any mechanism for future minimum wage changes. Of the 29 states and the District of Columbia with minimum wages above the federal rate in 2019, five—Delaware, Hawaii, Nebraska, Rhode Island, and West Virginia—currently do not provide a mechanism for a future rate adjustment beyond 2020. Table A-1 provides details.

11.

This total does not include states that have scheduled increases, followed by indexation to a measure of inflation in future years. It only includes states that solely use legislatively scheduled rate increases.

12.

For a detailed discussion of indexing the minimum wage, see CRS Report R44667, The Federal Minimum Wage: Indexation, by David H. Bradley.

13.

The mechanisms discussed here use the federal rate plus an add-on to set a state rate above the federal rate. Many states set the state rate equal to the federal rate, so that the state rate automatically changes when the federal rate changes.

14.

Because the prevailing federal minimum wage and state minimum wages go into effect at various points in a given year, the analysis in this section considers the years before and after federal changes have gone into effect. This is because the number of states with higher minimum wages may be different on January 1 of a given year than on December 31 of that same year. To avoid complications of within-year changes, the summaries in this section are based on rate increases that occurred any time during the year (e.g., the federal increase to $7.25 on July 24, 2009, is reflected as a rate of $7.25 for all of 2009). In addition, unless otherwise noted in this section, the District of Columbia is counted as a state for simplicity of presentation.

15.

The federal minimum wage is the floor for "covered workers" (see previous discussion on enterprise and individual coverage) in these states. Generally, the great majority of workers are covered. For those who are not covered, the state minimum wage is likely to be the wage floor.

16.

Utah does not fit entirely into any of the four categories. Utah state law authorizes the Utah Labor Commissioner to set the state rate but prohibits the commissioner from setting a rate higher than the FLSA rate.

Housing Issues in the 116th Congress October 16, 2020 Since the outbreak of the Coronavirus Disease 2019 (COVID-19) pandemic in early 2020 and the resulting economic recession, pandemic relief and response has dominated the housing policy Katie Jones, Coordinator considerations of the second session of the 116th Congress. The CARES Act (P.L. 116-136), Analyst in Housing Policy enacted in March 2020, contained several housing-related provisions. These included nearly $15 billion in supplemental funding for housing-related COVID-19 relief and response as well as policies such as a temporary eviction moratorium for some properties and forbearance for some Darryl E. Getter mortgages. Since then, the Administration issued an order implementing a nationwide eviction Specialist in Financial Economics moratorium, and additional relief legislation has been introduced and considered in Congress. Pandemic relief and response are not the only housing issues that have been considered by the Mark P. Keightley 116th Congress. Others include topics related to housing finance, federal housing assistance Specialist in Economics programs, and housing-related tax provisions, among other things. Particular issues that have been of interest to Congress include the following: Maggie McCarty Specialist in Housing Policy  The status of Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that have been in conservatorship since 2008, including administrative actions Libby Perl taken by their regulator, the Federal Housing Finance Agency (FHFA). Specialist in Housing Policy  Appropriations for federal housing programs, including programs at the Department of Housing and Urban Development (HUD) and rural housing programs administered by Elizabeth M. Webster the U.S. Department of Agriculture (USDA). Analyst in Emergency  Oversight of the implementation of certain changes to federal assisted housing programs Management and Disaster that were enacted in prior Congresses, such as expansions of HUD’s Moving to Work Recovery (MTW) program and Rental Assistance Demonstration (RAD) program, and proposed Administration actions, including a proposed rule to modify noncitizen eligibility for Lida R. Weinstock assisted housing programs. Analyst in Macroeconomic  Considerations related to housing and the federal response to major disasters, including Policy emergency sheltering options that may be implemented during the COVID-19 pandemic, ongoing issues related to oversight of the Federal Emergency Managemen t Agency’s (FEMA’s) implementation of certain changes to assistance that were enacted in the previous Congress, and a bill to formally authorize the Community Development Block Grant-Disaster Recovery program.  Consideration of legislation related to certain federal housing programs, including bills related to programs that provide assistance to Native Americans living in tribal areas , to serve youth aging out of foster care, and to further regulate the quality of federally assisted housing.  Consideration of legislation to extend certain temporary tax provisions that had expired, including housing- related provisions that provide a tax exclusion for canceled mortgage debt and allow for the deductibility of mortgage insurance premiums, respectively. Housing and mortgage market conditions provide context for these and other issues that Congress may consider, although housing markets are local in nature and national housing market indicators do not necessarily accurately reflect conditions in specific communities. On a national basis, some key characteristics of owner-occupied housing markets and the mortgage market in recent years include increasing housing prices, low mortgage interest rates, and home sales that have been increasing but constrained by a limited inventory of homes on the market. Key characteristics of rental housing markets include an increasing number of renters, low rental vacancy rates, and increasing rents. Rising home prices and rents that have outpaced income growth in recent years have led to policymakers and others increasingly raising concerns about the affordability of both owner-occupied and rental housing. Affordability challenges are most prominent among the lowest-income renter households, reflecting a shortage of rental housing units that are both affordable and available to this population. The housing-related implications of the COVID-19 pandemic and its resulting recession on U.S. markets and households are still unfolding. Congressional Research Service link to page 5 link to page 5 link to page 6 link to page 6 link to page 7 link to page 8 link to page 9 link to page 10 link to page 12 link to page 13 link to page 13 link to page 14 link to page 15 link to page 16 link to page 16 link to page 18 link to page 18 link to page 20 link to page 23 link to page 24 link to page 25 link to page 25 link to page 25 link to page 30 link to page 32 link to page 32 link to page 32 link to page 34 link to page 35 link to page 37 link to page 38 link to page 39 link to page 41 link to page 41 link to page 42 link to page 43 link to page 43 link to page 44 link to page 46 link to page 47 link to page 47 link to page 49 link to page 51 link to page 51 link to page 52 link to page 52 Housing Issues in the 116th Congress Contents Introduction ................................................................................................................... 1 Housing and Mortgage Market Conditions .......................................................................... 1 Owner-Occupied Housing Markets and the Mortgage Market ........................................... 2 House Prices........................................................................................................ 2 Interest Rates ....................................................................................................... 3 Homeownership Affordability ................................................................................ 4 Home Sales ......................................................................................................... 5 Housing Inventory and Housing Starts..................................................................... 6 Mortgage Market Composition ............................................................................... 8 Rental Housing Markets ............................................................................................. 9 Share of Renters................................................................................................... 9 Rental Vacancy Rates.......................................................................................... 10 Rental Housing Affordability ............................................................................... 11 The COVID-19 Pandemic and Housing ............................................................................ 12 COVID-19 and Effects on Housing ............................................................................ 12 Federal Housing Responses to COVID-19 ................................................................... 14 Federal Interventions Related to Rental Housing ..................................................... 14 Federal Interventions Related to Mortgages ............................................................ 16 Increased Funding for Housing Programs............................................................... 19 Proposals for Additional Action ................................................................................. 20 Other Housing Issues in the 116th Congress ....................................................................... 21 Housing Finance ..................................................................................................... 21 Status of Fannie Mae and Freddie Mac .................................................................. 21 CFPB’s Proposed Changes to the Qualified Mortgage Rule and the GSE Patch............ 26 Department of Veterans Affairs Loan Guaranty and Maximum Loan Amounts ............. 28 Housing Assistance .................................................................................................. 28 Appropriations for Housing Programs ................................................................... 28 Housing Vouchers for Foster Youth ....................................................................... 30 Implementation of Housing Assistance Legislation .................................................. 31 Quality of Federal y Assisted Housing ................................................................... 33 Native American Housing Programs...................................................................... 34 Proposed New Investments in Affordable Housing .................................................. 35 Selected Administrative Actions Related to Affordable Housing ..................................... 37 HUD Noncitizen Eligibility and Documentation Proposed Rule................................. 37 Equal Access to Housing ..................................................................................... 38 Regulatory Barriers Council................................................................................. 39 Affirmatively Furthering Fair Housing................................................................... 39 Housing and Disaster Response and Recovery ............................................................. 40 Emergency Sheltering Options During the COVID-19 Pandemic ............................... 42 Implementation of Housing-Related Provisions of the Disaster Recovery Reform Act (DRRA) ................................................................................................... 43 FEMA Short-term, Emergency Housing Program Change......................................... 45 Community Development Block Grants-Disaster Recovery (CDBG-DR).................... 47 Housing-Related Tax Extenders ................................................................................. 47 Exclusion for Canceled Mortgage Debt.................................................................. 48 Deductibility of Mortgage Insurance Premiums....................................................... 48 Congressional Research Service link to page 6 link to page 7 link to page 9 link to page 11 link to page 12 link to page 13 link to page 14 link to page 17 link to page 53 Housing Issues in the 116th Congress Figures Figure 1. Year-over-Year House Price Changes (Nominal) ..................................................... 2 Figure 2. Mortgage Interest Rates ...................................................................................... 3 Figure 3. New and Existing Home Sales ............................................................................. 5 Figure 4. Housing Starts ................................................................................................... 7 Figure 5. Share of Mortgage Originations by Type ............................................................... 8 Figure 6. Rental and Homeownership Rates ........................................................................ 9 Figure 7. Rental Vacancy Rates ....................................................................................... 10 Figure 8. Renters and Owners Having Difficulty Making Housing Payments.......................... 13 Contacts Author Information ....................................................................................................... 49 Congressional Research Service Housing Issues in the 116th Congress Introduction In March 2020, the Coronavirus Disease 2019 (COVID-19) pandemic began having wide-ranging public health and economic effects in the United States. The impacts of the pandemic have implications for housing, including the ability of households experiencing income disruptions to make housing payments. In response, Congress and the Administration have taken a variety of actions related to COVID-19 and housing. However, the pandemic is continuing and the economy is in a recession. Some initial assistance measures have ended, and there have been cal s for additional action. The longer-term consequences of the pandemic and associated economic turmoil on housing markets remain unclear. Outside of pandemic-related housing issues, several other housing-related issues have been active during the 116th Congress. These include issues related to assisted housing programs, such as those administered by the Department of Housing and Urban Development (HUD), and issues related to housing finance, among other things. Specific topics of interest include issues such as the status of two government-sponsored enterprises, Fannie Mae and Freddie Mac; how to prioritize appropriations for federal housing programs in a limited funding environment; oversight of the implementation of changes to certain housing programs that were enacted in prior Congresses; administrative changes to certain affordable housing policies and programs; and the extension of certain temporary housing-related tax provisions. This report provides a high-level overview of the most prominent housing-related issues that have been of interest during the 116th Congress. It begins with an overview of housing and mortgage market conditions during the Congress to date. While this overview includes some national-level statistics from the months after the pandemic began, it is stil too early to know how the pandemic wil ultimately affect housing markets in the medium or longer term. The following section discusses housing-related concerns related to the COVID-19 pandemic and federal housing responses. Final y, the report discusses other housing issues that have been active during the 116th Congress. The discussion in this report provides a broad overview of major issues and is not intended to provide detailed information or analysis. It includes references to more in-depth CRS reports on these issues where possible. Housing and Mortgage Market Conditions This section provides background on housing and mortgage market conditions during the 116th Congress to provide context for the housing policy issues discussed in the remainder of the report. This discussion of market conditions is at the national level. Local housing market conditions can vary dramatical y, and national housing market trends may not reflect the conditions in a specific area. Nevertheless, national housing market indicators can provide an overal sense of general trends in housing. In general, rising home prices, low interest rates, and rising rental costs have been prominent features of housing and mortgage markets in recent years. Although interest rates have remained low, rising house prices and rental costs that in many cases have outpaced income growth have led to increased concerns about housing affordability for both prospective homebuyers and renters. As the COVID-19 pandemic took hold in the United States beginning in March 2020, some housing indicators showed notable changes. For example, interest rates fel , and home sales and Congressional Research Service 1 link to page 6 Housing Issues in the 116th Congress construction activity experienced significant declines, although sales and construction indicators rebounded to varying degrees in subsequent months. Other housing market indicators, such as house prices, have shown only relatively slight changes to date. Since these indicators reflect national-level conditions, conditions in specific local housing markets may differ. Going forward, the pandemic’s impacts on housing market conditions are highly uncertain and wil depend on a variety of factors. Owner-Occupied Housing Markets and the Mortgage Market Most homebuyers take out a mortgage to purchase a home. Therefore, owner-occupied housing markets and the mortgage market are closely linked, although they are not the same. The ability of prospective homebuyers to obtain mortgages, and the costs of those mortgages, impact housing demand and affordability. The following subsections show current trends in selected owner- occupied housing and mortgage market indicators. House Prices As shown in Figure 1, nominal house prices have increased national y on a year-over-year basis in each quarter since the beginning of 2012, with year-over-year increases exceeding 5% for much of that time period and exceeding 6% at times. These increases followed almost five years of house price declines in the years during and surrounding the economic recession of 2007-2009 and associated housing market turmoil. Year-over-year house price increases have slowed somewhat but continued to exceed 5% through the second quarter of 2020, despite the onset of the COVID-19 pandemic.1 Figure 1. Year-over-Year House Price Changes (Nominal) Q1 1995–Q2 2020 Source: Figure created by CRS using data from the Federal Housing Finance Agency House Price Index (Seasonal y Adjusted Purchase-Only Index). Notes: Figure shows the percentage change in nominal house prices compared to the same quarter in the previous year. 1 See Federal Housing Finance Agency, House Price Index (HPI) Quarterly Report, 2020Q2 and June 2020, August 25, 2020, https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2020Q2_HPI.pdf. Congressional Research Service 2 link to page 7 Housing Issues in the 116th Congress House prices, and changes in house prices, vary greatly across local housing markets. Some areas of the country can experience rapid increases in house prices while other areas experience slower or stagnating house price growth. Furthermore, house price increases affect participants in the housing market differently. Rising prices reduce affordability for prospective homebuyers, but they are general y beneficial for current homeowners due to the increased home equity that accompanies them (although rising house prices also have the potential to negatively impact affordability for current homeowners through increased property taxes). Interest Rates For several years, mortgage interest rates have been low by historical standards. Lower interest rates increase mortgage affordability and make it easier for some households to purchase homes or refinance their existing mortgages. As shown in Figure 2, average mortgage interest rates have been consistently below 5% since May 2010 and have been below 4% for several stretches during that time. After starting to increase somewhat in late 2017 and much of 2018, mortgage interest rates have been general y declining since late 2018. Since the COVID-19 pandemic began, interest rates have fal en even further, in part due to federal monetary policy responses to the pandemic. At times, interest rates have been below 3%, their lowest levels since at least 1971.2 The average mortgage interest rate for August 2020 was 2.94%, compared to 3.02% in the previous month and 3.62% a year earlier. Figure 2. Mortgage Interest Rates January 1995–August 2020 Source: Figure created by CRS based on data from Freddie Mac’s Primary Mortgage Market Survey, 30-Year Fixed Rate Historic Tables, available athttp://www.freddiemac.com/pmms/. Notes: Freddie Mac surveys lenders on the interest rates they are charging for certain types of mortgage products. The actual interest rate paid by any given borrower wil depend on a number of factors. 2 For example, see Freddie Mac, “Mortgage Rates Drop, Hitting a Record Low for th e Eighth T ime this Year,” press release, August 6, 2020, https://freddiemac.gcs-web.com/node/20476/pdf. Congressional Research Service 3 Housing Issues in the 116th Congress Homeownership Affordability House prices have been rising for several years on a national basis, and mortgage interest rates, while low currently, have also risen for certain stretches. While incomes have also been rising in recent years, helping to mitigate some affordability pressures, on the whole house price increases have outpaced income increases.3 Home price-to-income ratios have been generally trending upwards since around 2012, with the national median sales price for an existing home more than 4.1 times the median household income in 2018.4 These trends have led to increased concerns about the affordability of owner-occupied housing. Despite rising house prices, many metrics of housing affordability suggest that owner-occupied housing is currently relatively affordable.5 These metrics general y measure the share of income that a median-income family would need to qualify for a mortgage to purchase a median-priced home, subject to certain assumptions. Therefore, rising incomes and, especial y, interest rates that are stil low by historical standards contribute to monthly mortgage payments being considered affordable under these measures despite recent house price increases. Some factors that affect housing affordability may not be captured by these metrics. For example, several of the metrics are based on certain assumptions (such as a borrower making a 20% down payment) that may not apply to many households. Furthermore, because they typical y measure the affordability of monthly mortgage payments, they often do not take into account other affordability chal enges that homebuyers may face, such as affording a down payment and other upfront costs of purchasing a home (costs that general y increase as home prices rise). Other factors—such as the ability to qualify for a mortgage, the availability of homes on the market, and regional differences in house prices and income—may also make homeownership less attainable for some households.6 Some of these factors may have a bigger impact on affordability for specific demographic groups, as income trends and housing preferences are not uniform across al segments of the population.7 It is unclear how the COVID-19 pandemic may ultimately impact the affordability of homeownership. The pandemic could have implications for a variety of interrelated factors that affect affordability, including factors related to both the supply of homes on the market and the demand for homes. 3 See Joint Center for Housing Studies of Harvard University, State of the Nation’s Housing 2018, p. 22, http://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2018.pdf , showing changes in median house prices and median household incomes (in real terms). 4 Joint Center for Housing Studies of Harvard University, State of the Nation’s Housing 2019, p.12, https://www.jchs.harvard.edu/state-nations-housing-2019. 5 For example, see U.S. Department of Housing and Urban Development (HUD), Housing Market Indicators Monthly Update, August 2020, p.3, https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market -Indicators-Report -August-2020.pdf, showing the National Association of Realtors Housing Affordability Index (HAI) compared to its historical norm. (For more information on the HAI, see the National Association of Realtors website at https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index/methodology.) See also the Urban Institute’s Housing Finance Policy Center’s Housing Finance at a Glance: A Monthly Chartbook, August 2020, p. 21, https://www.urban.org/sites/default/files/publication/102776/august-chartbook-2020.pdf. 6 Freddie Mac Insight, If Housing Is So Affordable, Why Doesn't It Feel That Way?, July 19, 2017, http://www.freddiemac.com/research/insight/20170719_affordability.html. 7 For example, see the discussion of affordability challenges for younger households in Freddie Mac Insight , Locked Out? Are Rising Housing Costs Barring Young Adults from Buying Their First Hom es?, June 2018, http://www.freddiemac.com/research/pdf/201806-Insight -05.pdf. Congressional Research Service 4 link to page 9 link to page 9 Housing Issues in the 116th Congress Home Sales Annual home sales increased between 2014 and 2017, improving from their levels during the housing market turmoil of the late 2000s. The overal number of home sales declined from the previous year in 2018 and remained steady in 2019. While home sales have been improving somewhat in recent years (prior to fal ing in 2018), the supply of homes on the market has general y not been keeping pace with the demand for homes, thereby limiting home sales activity and contributing to house price increases. Home sales include sales of both existing and newly built homes. Existing home sales general y number in the mil ions each year, while new home sales are usual y in the hundreds of thousands. Figure 3 shows the annual number of existing and new home sales for each year from 1995 through 2019. Existing home sales numbered about 5.3 mil ion in 2019, steady from the previous year and a decline from 5.5 mil ion in 2017 (existing home sales in 2017 were the highest level since 2006). New home sales numbered about 683,000 in 2019, an increase from 617,000 in 2018 and the highest level since 2007. However, the number of new home sales remains appreciably lower than in the late 1990s and early 2000s, when they tended to be between 800,000 and 1 mil ion per year. Figure 3. New and Existing Home Sales Annual, 1995–2019 Source: Figure created by CRS using data from HUD’s U.S. Housing Market Conditions reports, available at https://www.huduser.gov/portal/ushmc/home.html, which use data from the National Association of Realtors for existing home sales and the U.S. Census Bureau for new home sales. While Figure 3 shows annual home sales through 2019, monthly home sales have been impacted since the pandemic began. Both new and existing home sales fel sharply in March and April 2020, though both rebounded during the summer months.8 8 HUD, Housing Market Indicators Monthly Update, August 2020 , pages 1-2, https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market -Indicators-Report -August-2020.pdf. Congressional Research Service 5 link to page 11 Housing Issues in the 116th Congress Housing Inventory and Housing Starts The number and types of homes on the market affect home sales and home prices. On a national basis, the supply of homes on the market has been relatively low in recent years,9 and in general new construction has not been creating enough new homes to meet demand.10 However, as noted previously, national housing market indicators are not necessarily indicative of local conditions. While many areas of the country are experiencing low levels of housing inventory that contribute to higher home prices, other areas, particularly those experiencing population declines, face a different set of housing chal enges, including surplus housing inventory and higher levels of vacant homes.11 On a national basis, the inventory of homes on the market has been below historical averages in recent years, though the inventory of new homes, in particular, has begun to increase somewhat of late.12 Homes come onto the market through the construction of new homes and when current homeowners decide to sel their existing homes. Existing homeowners’ decisions to sel their homes can be influenced by expectations about housing inventory and affordability. For example, current homeowners may choose not to sel if they are uncertain about finding new homes that meet their needs, or if their interest rates on new mortgages would be substantial y higher than the interest rates on their current mortgages. New construction activity is influenced by a variety of factors including labor, materials, and other costs as wel as the expected demand for new homes. One measure of the amount of new construction is housing starts. Housing starts are the number of new housing units on which construction is started in a given period and are typical y reported monthly as a “seasonal y adjusted annual rate.” This means that the number of housing starts reported for a given month (1) has been adjusted to account for seasonal factors and (2) has been multiplied by 12 to reflect what the annual number of housing starts would be if the current month’s pace continued for an entire year.13 Figure 4 shows the seasonal y adjusted annual rate of starts on one-unit homes for each month from January 1995 through July 2020.14 Housing starts for single-family homes fel during the 9 For example, see HUD’s U.S. Housing Market Conditions National Housing Market Summary, 1st Quarter 2020, June 2020, p. 3, https://www.huduser.gov/portal/sites/default/files/pdf/NationalSummary_1Q20.pdf. 10 For example, see Freddie Mac, The Major Challenge of Inadequate U.S. Housing Supply, Economic & Housing Research Insight, December 2018, http://www.freddiemac.com/fmac-resources/research/pdf/201811-Insight-06.pdf and The Housing Supply Shortage: State of the States, Economic & Housing Research Insight, February 2020, http://www.freddiemac.com/fmac-resources/research/pdf/202002-Insight -12.pdf. 11 For example, see Freddie Mac, The Housing Supply Shortage: State of the States, Economic & Housing Research Insight, February 2020, p. 3, http://www.freddiemac.com/fmac-resources/research/pdf/202002-Insight -12.pdf; Jenny Schuetz, The Goldilocks problem of housing supply: Too little, too m uch, or just right? , Brookings Institution, December 14, 2018, https://www.brookings.edu/research/the-goldilocks-problem-of-housing-supply-too-little-too-much-or-just-right/; and Alan Mallach, The Em pty House Next Door: Understanding and Reducing Vacancy and Hypervacancy in the United States, Lincoln Institute of Land Policy, 2018, pp. 22 -26, https://www.lincolninst.edu/sites/default/files/pubfiles/empty-house-next -door-full.pdf. 12 HUD, U.S. Housing Market Conditions National Housing Market Summary, 1st Quarter 2020, June 2020, pp. 1-3, https://www.huduser.gov/portal/sites/default/files/pdf/NationalSummary_1Q20.pdf. 13 T he Census Bureau defines the seasonally adjusted annual rate as “the seasonally adjusted monthly value multiplied by 12” and notes that it “is neither a forecast nor a projection; rather it is a description of the rate of building permits, housing starts, housing completions, or new home sales in the particular month for which they are calculated.” See U.S. Census Bureau, “New Residential Construction,” at https://www.census.gov/construction/nrc/definitions/index.html#s. 14 T he number of housing starts is consistently higher than the number of new home sales. T his is prima rily because housing starts include homes that are not intended to be put on the for -sale market, such as homes built by the owner of the land or homes built for rental. See the U.S. Census Bureau, “Comparing New Home Sales and New Residential Congressional Research Service 6 Housing Issues in the 116th Congress housing market turmoil of the late 2000s, reflecting decreased home purchase demand. In recent years, levels of new construction have remained relatively low by historical standards, reflecting a variety of considerations including labor shortages and the cost of building.15 Housing starts have general y been increasing since about 2012, but remain wel below their levels from the late 1990s through the mid-2000s. For 2019, the seasonal y adjusted annual rate of housing starts averaged about 893,000. In comparison, the seasonal y adjusted annual rate of housing starts exceeded 1 mil ion from the late 1990s through the mid-2000s. Single-family housing starts showed a significant drop as the pandemic began, though they have begun to recover somewhat in the months since then.16 Single-family housing starts in July were higher than in the previous July, though not as high as the months in late 2019 and early 2020.17 Figure 4. Housing Starts By month; seasonal y adjusted annual rate Source: Figure created by CRS using data from the U.S. Census Bureau, New Residential Construction Historical Data, http://www.census.gov/construction/nrc/historical_data/. Data are through July 2020. Notes: Figure reflects starts in one-unit structures only, some of which may be built for rent rather than sale. The seasonal y adjusted annual rate is the number of housing starts that would be expected if the number of homes started in that month (on a seasonal y adjusted basis) were extrapolated over an entire year. High housing construction costs have led to a greater share of new housing being built at the more expensive end of the market over the last several years. To the extent that new homes are Construction,” https://www.census.gov/construction/nrc/salesvsstarts.html. 15 For example, see Freddie Mac, “What is Causing the Lean Inventory of Houses?,” Outlook Report, July 27, 2017, http://www.freddiemac.com/research/forecast/20170726_lean_inventory_of_houses.page. 16 T he Census Bureau notes that its data collection methods for this survey were impacted by the pandemic, though it says that “ ... processing and data quality were monitored throughout the month [of July] and quality metrics, including response rates, fell within normal ranges for these surveys.” For more information on how data collection was impacted, see U.S. Census Bureau, “Frequently Asked Questions (FAQs) COVID-19’s Effect on the July 2020 New Residential Construction Indicator,” https://www.census.gov/construction/nrc/pdf/newresconst_202007_notes.pdf. 17 For data on housing starts and other measures of residential construction (both single-family and multifamily), see U.S. Census Bureau, New Residential Construction, https://www.census.gov/construction/nrc/index.html. Congressional Research Service 7 link to page 12 Housing Issues in the 116th Congress concentrated at higher price points, supply and price pressures may be exacerbated for lower- priced homes.18 Mortgage Market Composition After a mortgage is originated, it might be held in a financial institution’s asset Figure 5. Share of Mortgage Originations portfolio, or it might be securitized through by Type one of several channels.19 Two government- 2019 sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, issue mortgage-backed securities and guarantee investors’ payments on those securities. Mortgages that are insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), are eligible to be included in mortgage-backed securities guaranteed by Ginnie Mae, part of the Department of Housing and Urban Development (HUD). Private companies can also issue mortgage-backed securities without a government or GSE guarantee, known as private label securities. The Source: Figure created by CRS based on Inside Mortgage Finance data as reported in Urban Institute, shares of mortgages that are provided Housing Finance Policy Center, Housing Finance at a through each of these channels may be Glance: A Monthly Chartbook, February 2020, p. 8. relevant to policymakers because of their Notes: Figure shows share of first-lien mortgage implications for mortgage access and originations by dol ar volume. affordability as wel as the federal government’s exposure to risk. As shown in Figure 5, a little under two-thirds of the total dollar volume of mortgages originated was either backed by Fannie Mae or Freddie Mac (43%) or guaranteed by a federal agency such as FHA or VA (19%) in 2019. Over one-third of the dollar volume of mortgages originated was held in bank portfolios, while close to 2% was included in a private-label security without government backing. The shares of mortgage originations backed by Fannie Mae and Freddie Mac and held in bank portfolios are roughly similar to their respective shares in the early 2000s. The share of private-label securitization has been, and continues to be, smal since the housing market turmoil of the late 2000s, while the FHA/VA share is higher than it was in the early and mid-2000s.20 The share of mortgages insured by FHA or guaranteed by VA was low by historical standards during that 18 For example, see Joint Center for Housing Studies of Harvard University, State of the Nation’s Housing, 2019, p. 8, https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_ State_of_the_Nations_Housing_2019.pdf ; and Jung Hyun Choi, Laurie Goodman, and Bing Bai, “Four ways today’s high home prices affect the larger economy,” Urban Institute, Urban Wire blog, October 11, 2018, https://www.urban.org/urban-wire/four-ways-todays-high-home-prices-affect -larger-economy. 19 For more information on different types of mortgages and mortgage securitization channels, see CRS Report R42995, An Overview of the Housing Finance System in the United States. 20 See Urban Institute, Housing Finance Policy Center, Housing Finance at a Glance: A Monthly Chartbook, July 2020, p. 8, for a graph showing mortgage market composition since 2001 . Congressional Research Service 8 link to page 13 Housing Issues in the 116th Congress time period as many households opted for other types of mortgages, including subprime mortgages. Rental Housing Markets As has been the case in owner-occupied housing markets, affordability has been a prominent concern in rental markets in recent years. In the years since the housing market turmoil of the late 2000s, the number and share of renter households has increased, leading to lower rental vacancy rates and higher rents in many markets. The extent to which these trends in rents and vacancies wil continue in light of the pandemic and related policy responses—including the imposition of various eviction moratoria discussed later in this report—is unclear. Share of Renters The housing and mortgage market turmoil of the late 2000s led to a substantial decrease in the homeownership rate and a corresponding increase in the share of renter households. As shown in Figure 6, the share of renters increased from about 31% in 2005 and 2006 to a high of about 36.6% in 2016, before beginning to decrease and reaching 35.4% in 2019. The homeownership rate correspondingly fel from a high of 69% in the mid-2000s to 63.4% in 2016, before rising to 64.6% in 2019.21 Figure 6. Rental and Homeownership Rates 1965–2019 Source: Figure prepared by CRS based on data from the U.S. Census Bureau, Annual Housing Vacancy and Homeownership Survey, Annual Statistics, Table 14, “Homeownership Rates by Area.” The overal number of occupied housing units also increased over this time period, from nearly 110 mil ion in 2006 to 123 mil ion in 2019; most of this increase has been in renter-occupied units.22 The number of renter-occupied units increased from about 34 mil ion in 2006 to about 44 21 U.S. Census Bureau, Housing Vacancies and Homeownership, Annual Statistics, http://www.census.gov/housing/hvs/data/prevann.html. 22 U.S. Census Bureau, Housing Vacancies and Homeownership, Historical T ables, T able 7, “Annual Estimates of the Housing Inventory: 1965 to Present,” http://www.census.gov/housing/hvs/data/histtabs.html. Congressional Research Service 9 link to page 14 link to page 14 Housing Issues in the 116th Congress mil ion in 2019. The number of owner-occupied housing units fel from about 75 mil ion units in 2006 to about 74 mil ion in 2014, but has since increased to about 79 mil ion units in 2019. In general, it is too early to know how the COVID-19 pandemic may influence the share of households who rent or own their homes, as it wil take time for the effects of the pandemic on owners and renters to fully play out and be reflected in the data.23 Rental Vacancy Rates The higher number and share of renter households has had implications for rental vacancy rates and rental housing costs. More renter households increases competition for rental housing, which may in turn drive up rents if there is not enough new rental housing created (whether through new construction or conversion of owner-occupied units to rental units) to meet the increased demand. As shown in Figure 7, the rental vacancy rate has general y declined in recent years and was 6.4% at the end of 2019. The potential impact of the COVID-19 pandemic on rental vacancy rates is unclear, in part because the pandemic has affected more recent data collection for this survey.24 Figure 7. Rental Vacancy Rates Q1 1995–Q4 2019 Source: Figure created by CRS based on data from U.S. Census Bureau, Housing Vacancies and Homeownership Historical Tables, Table 1, “Quarterly Rental Vacancy Rates: 1956 to Present,” http://www.census.gov/housing/hvs/data/histtabs.html. 23 T he pandemic has impacted data collection for this survey, affecting the comparabilit y of the 2020 quarterly dat a to previous periods. See, for example, Census Bureau, Frequently asked questions: The im pact of the coronavirus (COVID-19) pandem ic on the Current Population Survey/Housing Vacancy Survey (CPS/HVS) , https://www.census.gov/housing/hvs/files/qtr220/impact_coronavirus_20q2.pdf; and McCue, Daniel, “ Buyer Beware: A Cautionary Note on the Most Recent Homeownership Data from HVS,” Joint Cen ter for Housing Studies of Harvard University, blog post, August 10, 2020, https://www.jchs.harvard.edu/blog/buyer-beware-a-cautionary-note-on-the-most -recent -homeownership-data-from-hvs/. 24 See footnote 23 for more on how the pandemic has affected data collection for this survey. Congressional Research Service 10 Housing Issues in the 116th Congress Rental Housing Affordability Rental housing affordability is impacted by a variety of factors, including the supply of rental housing units available, the characteristics of those units (e.g., age and amenities), the demand for available units, and renter incomes. New housing units have been added to the rental stock in recent years through both construction of new rental units and conversions of existing owner- occupied units to rental housing. However, the supply of rental housing has not necessarily kept pace with the demand, particularly among lower-cost rental units, and low vacancy rates have been especial y pronounced in less-expensive units.25 The increased demand for rental housing, as wel as the concentration of new rental construction in higher-cost units, has led to increases in rents in recent years. Rents have increased faster than renter incomes, reducing rental affordability.26 Rising rental costs and renter incomes that are not keeping up with rent increases over the long term can contribute to housing affordability chal enges, particularly for households with lower incomes. Under the most commonly used definition, housing is considered to be affordable if a household is paying no more than 30% of its income in housing costs. Households that pay more than 30% are considered to be cost-burdened, and those that pay more than 50% are considered to be severely cost-burdened. The overal number of cost-burdened renter households increased from 14.8 mil ion in 2001 to 20.8 mil ion in 2018, or about 47% of al renters.27 (Over this time period, the overal number of renter households has increased as wel .) While housing cost burdens can affect households of al income levels, and have been growing among middle-income households,28 they are most prevalent among the lowest-income households. In 2018, 83% of renter households with incomes below $15,000 experienced housing cost burdens, and 72% experienced severe cost burdens.29 A shortage of lower-cost rental units that are both available and affordable to extremely low-income renter households (households that earn no more than 30% of area median income), in particular, contributes to these cost burdens.30 25 For example, see Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2020, pp. 3, https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Americas_Rental_Housing_2020.pdf. 26 See HUD, Office of Policy Development and Research, U.S. Housing Market Conditions National Housing Market Sum m ary 1st Quarter 2020, June 2020, pp. 5-6, and underlying data available at https://www.huduser.gov/portal/ushmc/quarterly_commentary.html. Data on median rents reflect median rents for recent movers less the cost of utilities. For more information on data sources used, see HUD Office of Policy Development and Research, HUD’s New Rental Affordability Index, https://www.huduser.gov/portal/pdredge/pdr-edge-trending-110716.html. 27 Joint Center for Housing Studies, America’s Rental Housing 2020, Appendix T ables, https://www.jchs.harvard.edu/americas-rental-housing-2020, showing Joint Center for Housing Studies tabulations of American Community Survey data. 28 See, for example, Whitney Airgood-Obrycki, “America’s Rental Affordability Crisis is Climbing the Income Ladder,” Joint Center for Housing Studies of Harvard University, blog post, January 31, 2020, https://www.jchs.harvard.edu/blog/americas-rental-affordability-crisis-is-climbing-the-income-ladder/. 29 Joint Center for Housing Studies, America’s Rental Housing 2020, Appendix T ables, https://www.jchs.harvard.edu/americas-rental-housing-2020, showing Joint Center for Housing Studies tabulations of American Community Survey data. 30 See Joint Center for Housing Studies of Harvard University, America’s Rental Housing 2020, p. 31, https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Americas_Rental_Housing_2020.pdf; and National Low Income Housing Coalition, The Gap: A Shortage of Affordable Hom es, March 2020, available at https://reports.nlihc.org/gap. Congressional Research Service 11 link to page 17 Housing Issues in the 116th Congress The COVID-19 Pandemic and Housing The COVID-19 pandemic that began in early 2020 is having wide-ranging effects on public health and the economy. The pandemic has led to a number of housing-related concerns, including, among other things, concerns about housing insecurity among both renters and homeowners. Congress and federal agencies have responded to these concerns by taking a variety of actions. In general, these actions have included providing additional federal funding for several housing programs, establishing temporary protections for certain renters and homeowners, and taking actions intended to support the housing finance system more broadly. As the economy has entered recession and some temporary assistance measures have begun to expire, many policymakers and others have cal ed for additional federal action. Numerous bil s that would further address COVID-19-related housing issues have been introduced and some have been considered. This section of the report discusses the effects of COVID-19 on housing and federal responses to date. COVID-19 and Effects on Housing The pandemic has led to increased housing insecurity as many households experience income disruptions. Such disruptions can lead to difficulties making rent or mortgage payments. According to data from the Census Bureau’s Pulse Survey, and as shown in Figure 8, 21% of renters and 13% of owners reported having not made the current month’s housing payment as of the week that ended on July 21. (These figures include those with deferred payments.) Larger shares (35% and 17%, respectively) expected that they would not be able to pay the following month.31 31 T hese figures reflect CRS calculations based on data in the Week 12 Household Pulse Survey, available at https://www.census.gov/programs-surveys/household-pulse-survey/data.html. T hey include those who missed last month’s payment or whose last month payment was deferred, and those who have slight or no confidence that they will make next month’s payment or anticipate that next month’s payment will be deferred. Congressional Research Service 12 link to page 5 Housing Issues in the 116th Congress Figure 8. Renters and Owners Having Difficulty Making Housing Payments For the week ending July 21, 2020 Source: Figure created by CRS based on data from the Census Bureau’s Household Pulse Survey for Week 12 (July 16-July 21). Thus far, many households have been protected by federal and state or local eviction or foreclosure moratoriums. It is not yet clear to what extent renters and homeowners wil be able to make their rent or mortgage payments or make up missed payments when protections expire. (The end dates for eviction and foreclosure protections depend on a variety of factors, including the specific protection in question and whether any extensions are issued.) As described in the “Housing and Mortgage Market Conditions” section, data are beginning to emerge about the trajectory of national housing market indicators during the first few months of the pandemic. However, the full effects of COVID-19 on housing markets wil not be known for some time. Such effects wil depend on a variety of factors, including the duration of the public health threat and the timing and pattern of economic recovery, and involve a high degree of uncertainty. Impacts may vary across the country based on differences in local housing markets as wel as geographic variation in the prevalence of COVID-19 and local responses. The impacts are likely to vary across demographic groups, due in part to existing differences in housing conditions as wel as the uneven distribution of the health and economic consequences of the pandemic.32 32 For example, see Sharon Cornelissen and Alexander Hermann, A Triple Pandemic? The Economic Impacts of COVID-19 Disproportionately Affect Black and Hispanic Households, Joint Center for Housing Studies of Harvard University, July 7, 2020, https://www.jchs.harvard.edu/blog/a-triple-pandemic-the-economic-impacts-of-covid-19-disproportionately-affect-black-and-hispanic-households/; and Michael Neal and Alanna McCargo, How Econom ic Crises and Sudden Disasters Increase Racial Disparities in Hom eownership, T he Urban Institute’s Housing Finance Policy Center, June 1, 2020, https://www.urban.org/research/publication/how-economic-crises-and-sudden-disasters-increase-racial-disparities-homeownership. Congressional Research Service 13 Housing Issues in the 116th Congress Federal Housing Responses to COVID-19 On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136), a COVID-19 response package that included, among many other things, several provisions related to housing. These included certain temporary protections for renters in properties with federal assistance or federal bac king and homeowners with federally backed mortgages, as wel as increased funding for several housing programs. Both prior to and since the passage of the CARES Act, federal agencies have taken various administrative actions to address housing concerns related to COVID-19. In addition, on August 8, 2020, President Trump signed an Executive Order related to COVID-19 and housing.33 The Executive Order directed several federal agencies to examine authorities or resources that they may be able to use to further assist tenants or homeowners affected by COVID-19 to help them avoid eviction or foreclosure. It did not itself provide any new resources or implement any additional actions related to evictions and foreclosures. (For more information on this Executive Order, see CRS Legal Sidebar LSB10532, President Trump’s Executive Actions on Student Loans, Wage Assistance, Payroll Taxes, and Evictions: Initial Takeaways.) The Executive Order, among other things, directed the Secretary of Health and Human Services (HHS) and the Centers for Disease Control and Prevention (CDC) to consider whether measures to temporarily pause evictions were necessary to prevent the spread of COVID-19 between states. On September 4, 2020, the CDC announced a national eviction moratorium to last until the end of the year. Lawmakers have also introduced a variety of additional bil s to further address housing issues related to COVID-19, though as of the date of this report none has been enacted. Federal Interventions Related to Rental Housing While al types of households may be at risk of housing instability due to COVID-19, renters may be particularly vulnerable. This is both because more financial y vulnerable populations are more likely to be renters, and because the process for evicting a household from a rental unit is general y faster than the process of foreclosing on a mortgage. As such, there have been several policy interventions aimed specifical y at aiding renters. CARES Act Rental Housing Provisions To protect renters experiencing COVID-19-related financial hardships, the CARES Act included a 120-day moratorium on eviction filings for tenants in rental properties with federal assistance or federal y related financing, as wel as a prohibition on charging late fees for nonpayment of rent for the same time period. These protections were designed to al eviate the economic and public health consequences of tenant displacement during the pandemic. They supplemented temporary eviction moratoria and rent freezes implemented in states and cities by governors and local officials using emergency powers. The CARES Act eviction moratorium expired on July 24, though the law also required that landlords provide tenants with at least 30 days’ notice before requiring tenants to vacate a covered property after the moratorium expired. Therefore, tenants should not have been required to leave covered rental units until at least August 23. 33 Executive Order on Fighting the Spread of COVID-19 by Providing Assistance to Renters and Homeowners, issued on August 8, 2020, https://www.whitehouse.gov/presidential-actions/executive-order-fighting-spread-covid-19-providing-assistance-renters-homeowners/. Congressional Research Service 14 Housing Issues in the 116th Congress Separate from the eviction moratorium, the CARES Act also included provisions related to forbearance for federally backed multifamily mortgages (discussed further below). The CARES Act provided that multifamily mortgage borrowers receiving forbearance must provide certain tenant protections during the forbearance period. Namely, owners cannot evict tenants for nonpayment of rent or charge late fees for the duration of the forbearance. Therefore, some tenants may benefit from federal protection from eviction because they live in a property with a federal y backed multifamily mortgage subject to a forbearance agreement. In addition, other assistance provided in the CARES Act, such as federal unemployment insurance supplemental payments (which have now expired), likely helped renters make housing payments and therefore avoid eviction. While this assistance was not specific to housing, households could use it to help maintain housing in light of income disruptions. For more information on CARES Act protections for renters, see the following:  CRS Insight IN11320, CARES Act Eviction Moratorium. CDC’s National Eviction Moratorium On September 4, the Centers for Disease Control and Prevention published an order in the Federal Register implementing a national eviction moratorium through December 31, 2020.34 The moratorium protects certain tenants from eviction for non-payment of rent. The CDC relied on broad authority that it has to take actions to prevent the spread of communicable diseases between states to implement this moratorium.35 In the Federal Register notice announcing it, the CDC described the public health risks posed by evictions and their effects during a pandemic. Unlike the CARES Act eviction moratorium, the CDC’s eviction moratorium potential y applies to renters in any rental property, not just those with federal financing or federal assistance. While the CARES Act moratorium applied automatical y to renters in covered properties, the CDC moratorium requires eligible renters to provide landlords a document that attests to their eligibility. Eligible renters must attest that they  meet income eligibility criteria; namely, that they either 1) expect to have incomes no higher than $99,000 ($198,000 if filing a joint tax return) in 2020, 2) were not required to report income to the Internal Revenue Service in 2019, or 3) received an Economic Impact Payment under Section 2201 of the CARES Act;  have made “best efforts to obtain al available government assistance” to pay rent;  are unable to pay full rent due to certain specified hardships;  are making “best efforts” to make partial payments as close as possible to the full payment as circumstances permit; and  would likely become homeless, move to a homeless shelter, or move into housing with others in close quarters if evicted due to a lack of available housing options. Renters must also attest that they understand that the order does not relieve them of the obligation to pay rent, and does not prohibit landlords from charging fees, penalties, or interest in 34 Centers for Disease Control and Prevention, Department of Health and Human Services, “T emporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19,” 85 Federal Register 55292-55297, September 4, 2020. 35 T he CDC’s order cites its authority under Section 361 of the Public Health Service Act (42 U.S.C. §264) and regulations at 42 CFR 70.2. See the Federal Register notice for the CDC’s discussion of the risk s that evictions pose to public health. Congressional Research Service 15 Housing Issues in the 116th Congress accordance with applicable contracts. (In contrast, the CARES Act prohibited landlords from charging fees, penalties, or interest during the eviction moratorium.) The CDC moratorium does not supersede state or local eviction moratoria that provide greater protections. While the CARES Act did not explicitly include any penalties for noncompliance, the CDC’s order specifies potential penalties (fines and/or jail time) for landlords who do not comply. Renters who are not truthful in their attestations could be found guilty of perjury and be subject to associated penalties. The CDC’s national eviction moratorium order raises a variety of questions and is the subject of legal chal enges.36 In addition to questions surrounding the CDC’s authority to issue such a moratorium, there are questions around issues such as how enforcement is being carried out and how many renters may seek protection. Industry groups representing property owners have raised concerns about the impact of the eviction moratorium on owners, who may have difficulty covering the costs of the property if tenants are unable to pay rent.37 Tenant advocates, while general y welcoming the moratorium, have also noted that it does not help tenants pay rent and have raised concerns about what happens to renters when the moratorium ends.38 Both owner and tenant advocates have cal ed for federal rental assistance to help tenants make rent payments.39 For more information on the CDC’s eviction moratorium, see CRS Insight IN11516, Federal Eviction Moratoriums in Response to the COVID-19 Pandemic. Federal Interventions Related to Mortgages The CARES Act requires mortgage servicers to grant forbearance requests for borrowers with federal y backed mortgages who are experiencing a financial hardship related to COVID-19.40 Mortgage forbearance al ows a household to reduce or suspend mortgage payments for an agreed-upon period of time, but it does not forgive the amounts owed; borrowers and mortgage servicers must negotiate an agreement for the repayment of the missed amounts. Under the CARES Act, forbearance for federal y backed single-family mortgages can be for up to 360 days (an initial period of up to 180 days, with an extension of up to an additional 180 days). For federally backed multifamily mortgages, the forbearance can be for up to 90 days (an initial period of up to 30 days, with two possible 30-day extensions).41 Federal y backed mortgages 36 See, for example, Brown v. Azar et al., 1:20-CV-03702, N.D. Ga. 37 See, for example, National Multifamily Housing Council, “Statement by NMHC President Doug Bibby on Administration’s Enactment of Federal Eviction Moratorium,” September 1, 2020, https://www.nmhc.org/news/press-release/2020/statement-by-nmhc-president -doug-bibby-on-administrations-enactment -of-federal-eviction-moratorium/. 38 See, for example, National Low Income Housing Coalition, “Statement from National Low Income Housing Coalition President and CEO Diane Yentel on the White House Morato rium on Evictions for Nonpayment of Rent,” September 1, 2020, https://nlihc.org/news/statement-national-low-income-housing-coalition-president -and-ceo-diane-yentel-white-house. 39 Letter from California Housing Consortium et al., August 21, 2020, https://www.irem.org/File%20Library/GlobalNavigation/Advocacy/CoalitionLetters/2020/08212020RentalAssistanceCoalitionLetter.pdf. 40 Prior to passage of the CARES Act, the federal agencies that back mortgages and the government -sponsored enterprises Fannie Mae and Freddie Mac had each released guidance reminding mortgage servicers of existing options to help borrowers having difficulties making mortgage payments, including forbearance, and encouraging or requiring temporary suspensions on foreclosures. While much of this guidance was similar to the provisions included in the CARES Act, the specifics varied by agency. 41 FHFA has since announced the availability of forbearance for multifamily mortgages backed by Fannie Mae or Freddie Mac for up to an additional three months; tenant protections must apply for the duration of the forbearance. See FHFA, “FHFA Provides T enant Protections,” press release, June 29, 2020, https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Provides-T enant -Protections.aspx. HUD has also stated that FHA-insured multifamily mortgages in Congressional Research Service 16 Housing Issues in the 116th Congress include those insured, guaranteed, or originated by a federal agency, such as HUD, USDA, or VA, or purchased or securitized by two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. They are estimated to constitute approximately 70% of outstanding single-family mortgages.42 The CARES Act also temporarily suspended foreclosures on federally backed single-family mortgages. The CARES Act foreclosure moratorium was in effect for 60 days from March 18, 2020; however, the federal agencies that back mortgages and Fannie Mae and Freddie Mac have al since announced extensions. As of the date of this report, these entities had extended the foreclosure moratorium for mortgages they back through December 31, 2020.43 Federal agencies that back mortgages, such as the Federal Housing Administration, and GSEs such as Fannie Mae and Freddie Mac (along with their regulator, the Federal Housing Finance Agency, or FHFA44) have also taken additional steps to assist borrowers and other mortgage market participants.45 These steps have included the following:  Assistance for Mortgage Borrowers: One question following mortgage forbearance is how the borrower wil be required to repay missed payments. The CARES Act was silent on this question. Several of the federal entities involved in mortgages have stated that borrowers with mortgages they back who are not able to repay the missed amounts in a lump sum at the end of the forbearance wil be offered other repayment options,46 and forbearance may be able to have forbearance periods extended, and that tenant protections will apply during any extended forbearance. See HUD Housing Notice H 20 -07, “ Coronavirus Aid, Relief, and Economic Security (CARES) Act Eviction Moratorium,” issued July 1, 2020, p. 3, https://www.hud.gov/sites/dfiles/OCHCO/documents/20-07hsgn.pdf.pdf. 42 See, for example, Karan Kaul and Laurie Goodman, “T he Price T ag for Keeping 29 Million Families in T heir Homes: $162 Billion,” T he Urban Institute’s Housing Finance Policy Center, March 27, 2020, https://www.urban.org/urban-wire/price-tag-keeping-29-million-families-their-homes-162-billion. 43 FHA Mortgagee Letter 2020-27, https://www.hud.gov/sites/dfiles/OCHCO/documents/2020-27hsgml.pdf; FHFA, “FHFA Extends Foreclosure and REO Eviction Moratoriums,” https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-Foreclosure-and-REO-Eviction-Moratoriums.aspx; VA Circular 26-20-30, https://www.benefits.va.gov/HOMELOANS/documents/circulars/26-20-30.pdf; USDA, “ USDA Implements Immediate Measures to Help Rural Residents, Businesses and Communities Affected by COVID -19,” updated August 28, 2020, https://www.rd.usda.gov/sites/default/files/COVID19_CUMULAT IVE_StakeholderNotification_WEEKLY_Aug28.pdf ; and HUD Office of Public and Indian Housing Dear Lender Letter 2020-10, https://www.hud.gov/sites/dfiles/PIH/documents/DLL_2020-10_Eviction_Moratorium_and_Loan_Processing_Flexibilities_Extension.pdf . 44 T he Federal Housing Finance Agency is the regulator and conservator for Fannie Mae and Freddie Mac as well as the regulator of a third housing GSE, the Federal Home Loan Bank (FHLB) system. T he FHLBs have also taken steps to address COVID-19-related issues; see the FHLB website at https://fhlbanks.com/covid-19/. For more information on the FHLBs in general, see CRS Report R46499, The Federal Hom e Loan Bank (FHLB) System and Selected Policy Issues. 45 Administrative actions and guidance related to the pandemic continue to evolve. Many federal agencies involved in housing post pandemic-related guidance in a centralized location. For example, see HUD’s webpage on coronavirus resources at https://www.hud.gov/coronavirus, the Federal Housing Finance Agency’s webpage on coronavirus assistance information at https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspx, and USDA’s Rural Development COVID-19 response page at https://www.rd.usda.gov/coronavirus. 46 See “CARES Act Forbearance Fact Sheet for Borrowers with FHA, VA, or USDA Loans,” https://www.hud.gov/sites/dfiles/SFH/documents/IACOVID19FBFactSheetConsumer.pdf; and FHFA, “ ‘No Lump Sum Required at the End of Forbearance’ says FHFA’s Calabria,” press release, April 27, 2020, https://www.fhfa.gov/Media/PublicAffairs/Pages/No-Lump-Sum-Required-at-the-End-of-Forbearance-says-FHFAs-Calabria.aspx. Congressional Research Service 17 Housing Issues in the 116th Congress have announced specific options for deferring the missed amounts to the end of the loan term.47  Temporary Mortgage Origination Flexibilities: Certain aspects of the mortgage origination process present chal enges during the pandemic. In response, federal entities have made temporary changes to certain requirements for mortgages that they back in order to minimize the effects on mortgage origination and home buying. These changes include al owing for alternatives to interior home appraisals in some circumstances and providing flexibilities related to the process for re-verifying a borrower’s employment before closing.48 FHA and Fannie Mae and Freddie Mac have each also announced temporary policies that al ow them to insure or purchase, respectively, mortgages that otherwise meet their requirements but are in forbearance.49 (Usual y, mortgages that are already in forbearance are not eligible for FHA insurance or purchase by Fannie Mae or Freddie Mac.) To help balance the increased risk that these mortgages pose to these entities, their acceptance of these mortgages is subject to certain conditions.50 Some lawmakers have raised concerns about these conditions, however, and their potential impact on mortgage credit access.51  Support for Mortgage Servicers: Mortgage servicers are often required to advance payments to investors in mortgage-backed securities even if the borrower has not made their payments on time, including in the case of forbearance. Large volumes of delinquent payments or mortgage forbearances can therefore cause liquidity issues for some 47 See FHA Mortgagee Letter 2020-06, “FHA’s Loss Mitigation Options for Single Family Borrowers Affected by the Presidentially-Declared COVID-19 National Emergency in Accordance with the CARES Act,” April 1, 2020, https://www.hud.gov/sites/dfiles/OCHCO/ documents/20-06hsngml.pdf; FHA Mortgagee Letter 2020-22, “ FHA’s COVID-19 Loss Mitigation Options,” https://www.hud.gov/sites/dfiles/OCHCO/documents/20-22hsgml.pdf; and FHFA, “FHFA Announces Payment Deferral as New Repayment Option for Homeowners in COVID-19 Forbearance Plans,” press release, May 13, 2020, https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Payment-Deferral-as-New-Repayment -Option-for-Homeowners-in-COVID-19-Forbearance-Plans.aspx. 48 See, for example, FHFA, “FHFA Directs Enterprises to Grant Flexibilities for Appraisal and Employment Verifications,” press release, March 23, 2020, https://www.fhfa.gov/media/PublicAffairs/Pages/FHFA-Directs-Enterprises-to-Grant-Flexibilities-for-Appraisal-and-Employment-Verifications.aspx; and HUD, “ Re-verification of Employment and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single Family Programs Impacted By COVID-19,” FHA Mortgagee Letter 2020-05, March 27, 2020, https://www.hud.gov/sites/dfiles/OCHCO/documents/20-05hsgml.pdf. T he flexibilities provided in each of these documents were subsequently extended. 49 FHFA, “FHFA Announces that Enterprises will Purchase Qualified Loans in Forbearance to Keep Lending Flowing,” press release, April 22, 2020, https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-that-Enterprises-will-Purchase-Qualified-Loans.aspx; and FHA Mortgagee Letter 2020-16, “ Endorsement of Mortgages under Forbearance for Borrowers Affected by the Presidentially -Declared COVID-19 National Emergency consistent with the Coronavirus Aid, Relief, and Economic Security (CARES) Act,” https://www.hud.gov/sites/dfiles/OCHCO/documents/2020-16hsngml.pdf. As of the date of this report, FHA’s policy is in effect through November 30, 2020, and FHFA’s policy had been ext ended through October 31, 2020. 50 Ibid. Fannie Mae and Freddie Mac charge additional fees for purchasing mortgages in forbearance, while FHA requires a lender to continue to bear some of the risk of such mortgages by signing a partial indemnification agree ment. 51 Letter from House Financial Services Committee Chairwoman Maxine Waters et al. to HUD Secretary Benjamin S. Carson and FHFA Director Mark Calabria, June 25, 2020, https://financialservices.house.gov/uploadedfiles/ltr_to_hud_and_fhfa_re_ef_6-25-20.pdf. Bills introduced in the House (H.R. 6794) and Senate (S. 4260) would prohibit FHA and Fannie Mae and Freddie Mac from imposing additional costs or other terms on such mortgages solely based on their forbearance status. Congressional Research Service 18 Housing Issues in the 116th Congress servicers.52 In response, Ginnie Mae and Fannie Mae and Freddie Mac have each taken certain steps to address potential servicer liquidity issues for mortgages that they back.53 In addition, the Federal Reserve has agreed to purchase mortgage-backed securities to help provide liquidity and stability in the mortgage market.54 These purchases can facilitate the funding of mortgages, even if investors’ demand for mortgage-backed securities declines during the pandemic. For more information, see the following:  CRS Insight IN11334, Mortgage Provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  CRS Insight IN11316, COVID-19: Support for Mortgage Lenders and Servicers.  CRS Insight IN11385, The Impact of COVID-19-Related Forbearances on the Federal Mortgage Finance System. Increased Funding for Housing Programs The CARES Act appropriated an additional $12.4 bil ion for HUD housing programs in FY2020. These funds were directed to several HUD programs to provide additional resources to address emerging housing needs caused by COVID-19, to help cover increased costs in rental assistance programs, and for administrative capacity and oversight. The CARES Act also provides the HUD Secretary broad waiver authority in most accounts to expedite or facilitate the use of these funds to respond to the coronavirus. The majority of the funds—about $9.4 bil ion—were for several HUD grant programs, many of which provide relatively flexible funding to state and local governments or other entities for eligible affordable housing, community development, or related activities. Because these programs general y fund a range of al owable activities, they can be used to address a variety of emerging needs related to the pandemic. The largest amounts were for the Community Development Fund, the account that funds Community Development Block Grants (CDBG) ($5 bil ion), and Emergency Solutions Grants (ESG) ($4 bil ion). States and local governments can use CDBG funds for a range of housing and community development activities, while ESG, one of the Homeless Assistance Grants, can be used for a range of services for those who are homeless or at risk of homelessness. The law also provided funds to grant programs that assist tribes, fair housing programs, and the Housing Opportunities for Persons with AIDS (HOPWA) program. The CARES Act also provided about $3 bil ion to maintain existing rental assistance in several HUD programs. HUD rental assistance programs subsidize the difference between tenant 52 For more information on mortgage servicing considerations, see CRS Insight IN11377, Mortgage Servicing Rights and Selected Market Developm ents. 53 Ginnie Mae expanded access to the Pass T hrough Assistance Program (PT AP), through which Ginnie Mae lends money to servicers to make required advances if they cannot obtain funding through other sources. FHFA announced that Fannie Mae servicers would only be required to advance four months of principal and interest payments (this was already t he policy for Freddie Mac servicers). See Ginnie Mae, “ Ginnie Mae Announces Changes to its Pass-T hrough Assistance Program in Response to COVID-19 National Emergency,” press release, April 10, 2020, https://ginniemae.gov/newsroom/Pages/PressReleaseDispPage.aspx?ParamID=196; and FHFA, “ FHFA Addresses Servicer Liquidity Concerns, Announces Four Month Advance Obligation Limit for Loans in Forbearance,” press release, April 21, 2020, https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Addresses- Servicer-Liquidity-Concerns-Announces-Four-Month-Advance-Obligation-Limit-for-Loans-in-Forbearance.aspx. 54 Board of Governors of the Federal Reserve System, “Federal Reserve Issues FOMC Statement,” March 23, 2020, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm. Congressional Research Service 19 Housing Issues in the 116th Congress contributions toward rent and a unit’s rent (or operating expenses). When tenants’ incomes are reduced—such as by rising unemployment triggered by the pandemic—their rent contributions decrease, which increases federal subsidy costs. The CARES Act provided supplemental funding to help cover those anticipated increased costs in several HUD programs, inc luding the public housing, Housing Choice Voucher, and project-based Section 8 programs. The CARES Act also provided $50 mil ion for HUD administrative offices and $5 mil ion for the HUD Office of the Inspector General for oversight of activities funded under the CARES Act. For more information, see the following:  CRS Insight IN11319, Funding for HUD in the CARES Act.  CRS Insight IN11315, Community Development Block Grants and the CARES Act.  CRS Insight IN11277, Responding to the COVID-19 Pandemic with Community Development Block Grant (CDBG) Authorities Proposals for Additional Action As the pandemic continues, there have been cal s for additional federal policy interventions. Dozens of bil s have been introduced in Congress that would address various housing-related issues caused by the pandemic. Some cal s have been for additional assistance to renters and homeowners so they do not fal behind on their payments and risk eviction or foreclosure, and possibly homelessness, when moratoria or forbearance periods end. Such assistance could take various forms. Some have proposed expansions or extensions of existing eviction or foreclosure moratoria or additional protections related to CARES Act mortgage forbearance requirements. Others have proposed other types of assistance, such as direct payments to help households make their rental or mortgage payments for a period of time. For example, even before the national eviction moratorium was announced, a broad coalition of low-income housing advocates, real estate interests, and other stakeholders had come together to cal for emergency rental assistance.55 Some have also cal ed for additional assistance for other housing market participants that are affected when renters or mortgage borrowers miss payments; namely, landlords and mortgage servicers. (Proposals to assist households by providing direct financial assistance to help with rent or mortgage payments would also benefit landlords and servicers, respectively, by reducing the amount of missed payments.) In addition to experiencing a loss of income, which could be particularly significant for landlords whose rental properties represent their primary source of income, some landlords may have difficulty sustaining mortgage payments, operating costs, or other expenses related to maintaining rental housing if tenants are unable to pay rent. Tenants who work in industries at higher risk of job loss may be more likely to rent units in single-family homes or smal multifamily properties, and many of the smal er landlords of these properties, in particular, may struggle to withstand months without rental income.56 Some owners of rental 55 Letter from Aeon et al. to Congressional Leadership, May 4, 2020, https://nhc.org/wp-content/uploads/2020/05/FinalHousingCoalitionERALetter2020-05-04.pdf. 56 For example, see Whitney Airgood-Obrycki and Alexander Hermann, “COVID-19 Rent Shortfalls in Small Buildings,” Joint Center for Housing Studies of Harvard University, May 26, 2020, https://www.jchs.harvard.edu/blog/covid-19-rent-shortfalls-in-small-buildings/; and Jung Hyun Choi and Caitlin Young, “ Owners and Renters of 6.2 Million Units in Small Buildings Are Particularly Vulnerable during the Pandemic,” Urban Institute Housing Finance Policy Center, August 10, 2020, https://www.urban.org/urban-wire/owners-and-renters-62-million-units-small- Congressional Research Service 20 Housing Issues in the 116th Congress properties were eligible for Smal Business Administration Economic Injury Disaster Loans as authorized under the CARES Act,57 but there have been cal s for additional or more targeted assistance. Similarly, while Ginnie Mae and FHFA have taken some administrative actions to address concerns about mortgage servicer liquidity, some have cal ed for additional actions to provide additional financial support for mortgage servicers.58 A variety of bil s introduced in Congress would address these or other pandemic-related housing issues, and some have been considered. The Heroes Act (H.R. 6800), which the House passed in May, includes several housing-related provisions in Division K. These include additional funding for some existing housing programs as wel as for certain new programs to respond to pandemic -related housing needs; extensions, expansions, and changes to the CARES Act eviction moratorium, foreclosure moratorium, and mortgage forbearance provisions; and access to financial support for landlords and mortgage servicers.59 These provisions were also included in a standalone bil , the Emergency Housing Protections and Relief Act of 2020 (H.R. 7301), which has also passed the House. The House passed a revised version of the Heroes Act (H.R. 925) on October 1; the broad contours of the housing-related provisions in H.R. 925 are largely similar to those in H.R. 6800, though there are some differences in the details and in the specific provisions that are included. For more information, see the following:  CRS Report R46434, HEROES Act, Division K—COVID-19 Housing, Economic Relief, and Oversight Act. Other Housing Issues in the 116th Congress Outside of the pandemic, a variety of other housing-related issues have been of interest during the 116th Congress, including issues related to housing finance, housing assistance programs, administrative actions related to affordable housing, housing and disaster relief, and housing- related tax provisions. Housing Finance Status of Fannie Mae and Freddie Mac Fannie Mae and Freddie Mac are two government-sponsored enterprises (GSEs) chartered by Congress to provide liquidity to the secondary markets for single-family and multifamily residential mortgages. The GSEs purchase mortgages from loan originators, retain the credit (default) risk from the mortgages they purchase, and subsequently issue mortgage-backed securities (MBS). Investors who purchase the MBS are guaranteed to get their initial principal investment returned, but they assume the risk that borrowers may choose to repay their mortgages buildings-are-particularly-vulnerable-during-pandemic. 57 For more information on these loans, see https://www.sba.gov/funding-programs/loans/coronavirus-relief-options. 58 For example, see Karen Kaul and T ed T ozer, The Need for a Federal Liquidity Facility for Government Loan Servicing, Urban Institute Housing Finance Policy Center, July 2020, https://www.urban.org/sites/default/files/publication/102580/the-need-for-a-federal-liquidity-facility-for-government-loan-servicing_0.pdf. 59 T he Heroes Act, as passed by the House, would also continue the UI expansion and provide a second $1,200 relief payment for most households. While not specific housing provisions, such assistance could potentially be used to address housing-related needs. Congressional Research Service 21 Housing Issues in the 116th Congress ahead of schedule (e.g., by refinancing or sel ing the home), known as prepayment risk.60 In short, the GSEs’ securitization process detaches two mortgage risks into separate components.61 The GSEs retain the default risk component for a fee and transfer the prepayment risk component to MBS investors. The Federal Housing Finance Agency (FHFA), an independent federal government agency created by the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289), regulates the GSEs for prudential safety and soundness and ensures they meet their affordable housing mission goals. In September 2008, the GSEs experienced losses that exceeded their statutory minimum capital requirement levels due to the high rate of mortgage defaults. The GSEs also experienced losses following spikes in short-term borrowing rates that occurred while they were funding long-term assets held in their portfolios. The GSEs subsequently agreed to be placed under conservatorship by FHFA, which now has the powers of management, boards, and shareholders.62 Since Fannie Mae and Freddie Mac entered conservatorship in 2008, policymakers have expressed interest in comprehensive housing finance reform legislation that would resolve the conservatorships of these GSEs and address the underlying issues that are perceived to have led to their financial trouble and conservatorships. Previous Congresses have considered housing finance reform legislation to varying degrees, but none has been enacted. Early in the 116th Congress, Senate Committee on Banking, Housing, and Urban Affairs Chairman Mike Crapo released an outline for potential housing finance reform legislation.63 The committee held hearings on it shortly thereafter.64 In March 2019, President Trump issued a Memorandum on Federal Housing Finance Reform directing the Treasury and HUD secretaries to develop plans to achieve certain housing finance reform goals, including both legislative and administrative reforms.65 Treasury and HUD released these plans on September 5, 2019.66 Both plans include a variety of legislative recommendations, as wel as recommendations for steps that the agencies could take administratively in the absence 60 Prepayment risk is one type of the broader category of risks linked to changes in interest rates. Following interest rates changes, the market value of a loan (or bond) asset can change; for assets that give borrowers the option to prepay their loans ahead of schedule, the prepayment risk may offset market value changes. On the liability side, interest rate changes affect the lenders’ costs to borrow funds used to finance assets held in their portfolios. Hence, lenders can take advantage of the GSEs’ securitization process to reduce the various interest rate risks associated with holding highly interest -sensitive assets such as 30-year fixed rate mortgages. 61 For more on default and prepayment risk, see CRS In Focus IF10993, Consumer Credit Markets and Loan Pricing: The Basics. 62 For more background on the conservatorship of Fannie Mae and Freddie Mac, see CRS Report R44525, Fannie Mae and Freddie Mac in Conservatorship: Frequently Asked Questions; and FHFA, “ Conservatorship,” at https://www.fhfa.gov/Conservatorship. 63 U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, “Chairman Crapo Releases Outline for Housing Finance Reform,” press release, February 1, 2019, https://www.banking.senate.gov/newsroom/majority/chairman-crapo-releases-outline-for-housing-finance-reform. 64 U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Chairman’s Housing Reform Outline: Part 1, 116th Cong., 1st sess., March 26, 2019; and U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Chairm an’s Housing Reform Outline: Part 2 , 116th Cong., 1st sess., March 27, 2019. 65 Presidential Memorandum, Memorandum on Federal Housing Finance Reform , March 27, 2019, https://www.whitehouse.gov/presidential-actions/memorandum-federal-housing-finance-reform/. 66 Department of the Treasury, Housing Reform Plan Pursuant to the Presidential Memorandum Issued March 27, 2019, September 2019, https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf; and Department of Housing and Urban Development, Housing Finance Reform Plan Pursuant to the Presidential Mem orandum Issued March 27, 2019, September 2019, https://home.treasury.gov/system/files/136/HUD-Housing-Finance-Reform-Plan-September-2019.pdf. Congressional Research Service 22 Housing Issues in the 116th Congress of legislation. The Senate Banking Committee and the House Financial Services Committee each held a hearing on the plans.67 Outside of any legislative efforts related to housing finance reform, FHFA has taken a variety of administrative and regulatory actions related to Fannie Mae and Freddie Mac in its dual roles as their regulator and conservator. Status of FHFA Administrative Requirements for GSEs While Under Conservatorship Since conservatorship, the FHFA has focused on initiatives to standardize many aspects of the GSEs’ operations, which include their mortgage data collection processes, securitization processes, mortgage servicing policies (e.g., resolving delinquencies), and MBS issuances. Such standardization arguably increases transparency, reduces the length of the single-family mortgage origination and securitization processes, and ultimately increases the liquidity and uniform pricing of the GSEs’ issued securities.68 These efforts have resulted in the GSEs issuing two types of securities to facilitate lending in the single-family mortgage market. The GSEs continue to transfer prepayment risks but via a new financial instrument (the uniform mortgage-backed security); and they now transfer default risks (credit risk transfers, CRT) to private investors. Uniform Mortgage-Backed Security The FHFA, under the single security initiative, directed the GSEs to align their key contractual and business practices by acquiring mortgages with similar prepayment speeds along with other features.69 Each GSE continues to separately purchase conforming mortgages and guarantee the credit risks linked to the MBS trusts it creates. The prepayment speeds, however, are now required to align such that they do not diverge by more than 2% over a three-month interval.70 With similar prepayment characteristics, Fannie Mae’s and Freddie Mac’s MBS trusts would generate similar cash-flow predictability and prepayment speeds and, therefore, facilitate the creation of uniform securities. Rather than separate MBS issuances, the FHFA directed the GSEs to issue one common security—the uniform mortgage-backed security (UMBS). However, the GSEs would continue to separately issue and guarantee MBS that do not meet the standardization requirements for UMBS. 67 U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Housing Finance Reform: Next Steps, 116th Cong., 1st sess., September 10, 2019; and U.S. Congress, House Committee on Financial Services, The End of Affordable Housing? A Review of the Trump Administration’s Plans to Change Housing Finance in America , 116th Cong., 1st sess., October 22, 2019. 68 For more information on the mortgage servicing and loss mitigation initiatives, see FHFA, “Mortgage Servicing,” at https://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Mortgage-Servicing.aspx; and Karan Kaul et al., The Case for Uniform Mortgage Servicing Data Standards, Urban Institute, November 2018, at https://www.urban.org/sites/default/files/publication/99317/uniform_mortgage_servicing_data_standards_0.pdf. T he standardization of servicing may enhance the attractiveness of CRT investments by clarifying the procedures for handling nonp erforming mortgages, thus clarifying how losses will be distributed among the various tranche classes. For more information, see Basel Committee on Banking Supervision: T he Joint Forum, Report on Asset Securitisation Incentives, July 2011, at https://www.bis.org/publ/joint26.pdf; and Patricia A. McCoy, Barriers to Federal Hom e Mortgage Modification Efforts During the Financial Crisis, Joint Center for Housing Studies: Harvard University, August 2010, at https://www.jchs.harvard.edu/sites/default/files/mf10-6.pdf. 69 See FHFA, “Uniform Mortgage-Backed Security,” 84 Federal Register 7793-7801, March 5, 2019. 70 See FHFA, “Uniform Mortgage-Backed Security,” 84 Federal Register 7793-7801, March 5, 2019. Congressional Research Service 23 Housing Issues in the 116th Congress The issuance of UMBS began on June 3, 2019.71 The combined market for the GSEs’ MBS issuances is expected to be more liquid because the UMBSs trade at a single price (rather than at two different prices).72 FHFA monitors the GSEs to ensure that their underwriting policies remain intact to avoid material misalignment that compromises interchangeability of the underlying mortgages used to create UMBS.73 Credit Risk Transfer In July 2013, the GSEs initiated new CRT programs to share with the private sector a portion of the default risk linked to their guaranteed single-family mortgages held in the MBS trusts.74 Investors preferring exposure only to mortgage prepayment risk may continue to purchase MBSs; however, the private sector may now purchase CRT issuances, which function similarly to MBSs, to earn revenue in exchange for assuming exposure to the credit risk.75 The GSEs typical y transfer to CRT investors some of the credit risk linked to mortgages with loan-to-values (LTVs) greater than 60% (or borrowers with 40% or less in accumulated home equity, meaning that they are more vulnerable to the possibility of owing more than the value of their homes if housing prices were to fal ).76 When defaults occur, the GSEs reduce the returns paid to CRT investors (similar to reducing the returns to MBSs investors after prepayments occur). Conversely, the GSEs retain the credit risk for mortgages with lower LTVs (or borrowers with 41% or more in accumulated home equity such that their outstanding balances are significantly below the value of their residential properties), which are less likely to default.77 From 2013 to 2019, the GSEs have transferred a total of $3.479 tril ion of credit risk to private investors.78 71 See FHFA, “Statement of FHFA Deputy Director Robert Fishman on the Launch of the New Uniform Mortgage -Backed Security (UMBS),” press release, June 3, 2019, at https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-FHFA-Deputy-Director-Robert-Fishman-on-the-launch-of-the-new-Uniform-Mortgage-Backed-Security.aspx. 72 FHFA, An Update on the Structure of the Single Security, May 15, 2015, p. 4, at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Single%20Security%20Update%20final.pdf. For a discussion of the pricing differential that existed between Fannie Mae’s and Freddie Mac’s MBSs, see CRS Report R45828, Overview of Recent Administrative Reform s of Fannie Mae and Freddie Mac; and Laurie Goodman, The $400 Million Case for a Single GSE Security, Urban Institute, September 5, 2014, at http://www.urban.org/urban-wire/400-million-case-single-gse-security. For a discussion on the effects of standardization in the mortgage and MBS markets, see Adam J. Levit in and Susan M. Wachter, “Explaining the Housing Bubble,” The Georgetown Law Journal, vol. 100, no. 4 (April 12, 2012), pp. 1177-1258. 73 For more information, see CRS Report R45828, Overview of Recent Administrative Reforms of Fannie Mae and Freddie Mac. 74 T he GSEs had existing programs to redistribute more than 90% of the credit risk on their multi-family programs. Fannie Mae issues instruments linked to credit risk stemming from its multi-family mortgages through its Delegated Underwriting and Servicing Program (DUS); the corresponding Freddie Mac instruments are known as K -Deals. See U.S. Government Accountability Office (GAO), Financial Audit: Federal Housing Finance Agency’s Fiscal Years 2018 and 2017 Financial Statements, GAO-19-183R, November 15, 2018, at https://www.gao.gov/assets/700/695479.pdf; and FHFA, Overview of Fannie Mae and Freddie Mac Credit Risk Transfer Transactions, August 2015, at https://www.fhfa.gov/aboutus/reports/reportdocuments/crt-overview-8-21-2015.pdf. 75 Fannie Mae’s CRT instruments are known as Connecticut Avenue Securities (CAS); Freddie Mac’s CRT instruments are known as Structural Agency Credit Risk (ST ACR). 76 See FHFA, Performance and Accountability Report, FY2018, at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2018-PAR.pdf. 77 T he GSEs may also transfer the credit risk of mortgages retained in their portfolios (typically because they lack the standardized features that would make them eligible for placement into an MBS trust for securitization). 78 For more information, see FHFA, “Credit Risk T ransfer Progress Report,” Fourth Quarter 2019, at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/CRT -Progress-Report -4Q2019.pdf. Congressional Research Service 24 Housing Issues in the 116th Congress Proposed Capital Rule Although the exact definition of capital for financial firms is determined by law and regulation, it general y refers to common or preferred equity (as a percentage of assets), which can absorb financial losses. The FHFA suspended the GSEs’ capital requirements during conservatorship, and they must pay dividends only to Treasury (as opposed to private shareholders) while they are under conservatorship. As a prerequisite for exiting conservatorship, the GSEs must increase their holdings of capital reserves.79 Given that pre-conservatorship capital levels for the GSEs were not sufficient to avoid conservatorship, HERA gave FHFA the authority to increase capital standards above the statutory minimum as necessary.80 On May 20, 2020, FHFA released a proposed rule that would establish a new regulatory capital framework for Fannie Mae and Freddie Mac to be in place once they are returned to stockholder control.81 The proposed framework borrows concepts from the capital regulatory framework for large banks such as the definition of capital, various capital buffers, and a risk weight capital floor that would be applied for any CRT exposures retained in portfolio.82 Comments on the proposal were due by August 31, 2020. Multifamily Housing Financing Activities Multifamily properties are general y defined as properties that include five or more housing units. FHFA has placed various directives on the GSEs’ multifamily programs since conservatorship.83 Namely, in 2014, it placed annual caps on the overal dollar volume of multifamily mortgages that each GSE can purchase to shrink their multifamily operations and resulting risks to taxpayers.84 It excluded mission-driven purchases from counting toward the cap to encourage GSE support in the affordable housing and underserved market segments.85 Beginning in 2016, FHFA also excluded loans that would finance certain energy and water efficiency improvements (i.e., green loans) from the multifamily purchase caps to retain focus on mission goals. On September 13, 2019, FHFA revised its directive regarding the multifamily purchase caps, increasing them from the previous caps of $35 bil ion each to $100 bil ion each for Fannie Mae and Freddie Mac. Al multifamily mortgage purchases wil now count toward the cap—no exemptions or exclusions for mission-driven or green loans. 86 However, 37.5% of the GSEs’ loan 79 P.L. 102-550, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, establishes the statutory minimum leverage (unweighted) capital requirement; P.L. 110-289, the Housing Economic and Recovery Act of 2008, gave FHFA the authority to increase capital standards above the statutory minimum as necessary. 80 T he statutory minimum leverage (unweighted) capital requirement, specified in P.L. 102-550, the Federal Housing Enterprises Safety and Soundness Act of 1992, is equal to 2.5% of on -balance sheet (portfolio) assets and 0.45% of off-balance sheet (MBS trust) obligations. 81 See FHFA, “FHFA Releases Re-Proposed Capital Rule for the Enterprises,” May 20, 2020, at https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Releases-Re-Proposed-Capital-Rule-for-the-Enterprises.aspx. 82 See FHFA, “Enterprise Regulatory Capital Framework,” 85 Federal Register 39274-39406, June 30, 2020. 83 For more information, see CRS Report R46480, Multifamily Housing Finance and Selected Policy Issues. 84 See FHFA, “FHFA Seeks Public Input on Reducing Fannie Mae and Freddie Mac Multifamily Businesses,” press release, August 9, 2013, at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/MultifamilyInput080913Final.pdf; and FHFA, Conservatorship Strategic Plan: Perform ance Goals for 2013 , at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2013EnterpriseScorecard_508.pdf. 85 See FHFA, “Fact Sheet: New Multifamily Caps for Fannie Mae and Freddie Mac,” press release, at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/newmultifamilycaps-9132019.pdf. 86 See FHFA, “FHFA Revises Multifamily Loan Purchase Caps for Fannie Mae and Freddie Mac,” press release, September 13, 2019, at https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Revises-Multifamily-Loan-Purchase- Congressional Research Service 25 Housing Issues in the 116th Congress purchases must be mission driven. The FHFA Director stated that this revision narrows the scope of the GSEs’ multifamily programs to maintain the focus on affordable rental units for low- and moderate-income households and other historical y underserved renters.87 CFPB’s Proposed Changes to the Qualified Mortgage Rule and the GSE Patch The Dodd-Frank Wal Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111- 203) requires lenders to make a good faith effort to ensure that certain mortgage borrowers have the ability to repay the loans they offer. Lenders that are found to violate the requirement can be required to pay monetary damages.88 On January 10, 2013, the Consumer Financial Protection Bureau (CFPB) released a final rule implementing these ability-to-repay (ATR) requirements; the rule took effect on January 10, 2014.89 The final rule provides multiple ways for a loan originator to comply with the ATR requirements,90 one of which is by originating a qualified mortgage (QM). QMs are mortgages that meet certain underwriting standards and lack various risky product-features. When a lender issues a QM, it creates a presumption that the lender has complied with its ATR responsibilities, reducing the lender’s legal exposure. The level of protection afforded a lender varies according to the loan’s pricing.91 QMs with annual percentage rates (APRs) not exceeding the Average Prime Offer Rate (APOR) by more than 1.5 percentage points qualify for safe harbor status. QMs with APRs exceeding the APOR by more than that amount are considered higher-priced QMs and benefit from a rebuttable presumption of compliance. The CFPB has explained these legal protections in this way: Under a safe harbor, if a court finds that a mortgage you originated was a QM, then that finding conclusively establishes that you complied with the ATR requirements when you originated the mortgage. ... Under a rebuttable presumption, if a court finds that a mortgage you originated was a higher-priced QM, a consumer can argue that you violated the ATR rule. However, to prevail on that argument, the consumer must show that based on the information available to you at the time the mortgage was made, the consumer did not have enough residual income left to meet living expenses after paying their mortgage and other debts.92 Lenders may be less likely to originate non-QM loans due to the increased legal exposure. Limiting the borrower’s debt-to-income (DTI) ratio to 43% is one of the current underwriting requirements for a loan to receive general QM status. Mortgages with DTIs exceeding 43% may stil qualify as QMs if (1) they are eligible to be insured or guaranteed by FHA, USDA, or VA and meet permanent QM standards established by each of those agencies,93 or (2) they are eligible for Caps-for-Fannie-Mae-and-Freddie-Mac.aspx. 87 See FHFA, “FHFA Revises Multifamily Loan Purchase Caps for Fannie Mae and Freddie Mac,” press release, September 13, 2019, at https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Revises-Multifamily-Loan-Purchase-Caps-for-Fannie-Mae-and-Freddie-Mac.aspx. 88 15 U.S.C. §1640 89 See Bureau of Consumer Financial Protection (CFPB), “Ability -to-repay and Qualified Mortgage Standards Under the T ruth in Lending Act (Regulation Z),” 78 Federal Register 6408-6620, January 30, 2013. 90 For a comparison of the different ways the lenders can comply with the AT R requirements, see https://files.consumerfinance.gov/f/documents/201603_cfpb_atr-and-qm-comparison-chart.pdf. 91 All QM loans must meet certain underwriting and product feature requirements. 92 CFPB, Ability-to-Repay and Qualified Mortgage Rule Small Entity Compliance Guide, March 2016, pp. 33-34, https://files.consumerfinance.gov/f/documents/bcfp__atr-qm_small-entity_compliance-guide.pdf. 93 T he Dodd-Frank Act allowed federal agencies that guarantee mortgages to issue their own definitions of a QM. T he Federal Housing Administration, U.S. Department of Veterans Affairs, and United States Department of Agriculture Congressional Research Service 26 Housing Issues in the 116th Congress purchase by two government sponsored enterprises (GSEs), Fannie Mae or Freddie Mac.94 The GSE QM option, which is referred to as the QM patch, al ows the GSEs to operate under their own QM rules for seven years (until January 10, 2021) or until they exit conservatorship, whichever is sooner.95 On June 22, 2020, the CFPB proposed revisions to the current QM definition.96 Some of the proposed revisions include the following:97  For the QM definition, the proposal would remove the 43% DTI ratio requirement and replace it with requirements that are based on the mortgage pricing, which reflects the credit quality of borrowers. The rule would continue to grant safe harbor QM status to a first-lien (primary) mortgage in which the difference between its APR and the APOR is less than 1.5 percentage points.98 To qualify as a QM with rebuttable presumption, however, the proposal would limit the difference between the APR and APOR for first- lien mortgages to no more than 2 percentage points.99  The CFPB also seeks comments on removing Appendix Q, which creditors are currently required to use to verify borrower debt and income for QMs, and granting safe harbor to creditors that use specified income and debt verification standards such as one or more of the following: Fannie Mae’s Single Family Sel ing Guide, Freddie Mac’s Single-Family Sel er/Servicer Guide, FHA’s Single Family Housing Policy Handbook, the Veteran Administrations Lenders Handbook, and the Field Office Handbook for the Direct Single Family Housing Program and Handbook for the Single Family Guaranteed Loan Program of the U.S. Department of Agriculture (USDA). did not adopt a 43% DT I requirement for the mortgages they guarantee. Instead, these agencies adopted their own QM definitions, which included the exclusion of product features they considered would impede repayment from borrowers they predominantly serve—but they did not limit DT Is to 43%. See Department of Housing and Urban Development, “Qualified Mortgage Definition for HUD Insured and Guaranteed Single Family Mortgages,” 78 Federal Register 75215-75238, December 13, 2013; Department of Veterans Affairs, “ Loan Guaranty: Ability -T o-Repay Standards and Qualified Mortgage Definition Under the T ruth in Lending Act,” 79 Federal Register 26620-26628, May 9, 2014; and Department of Agriculture, Rural Housing Service, “Single Family Housing Guaranteed Loan Program,” 81 Federal Register 26461-26465, May 3, 2016. 94 See CFPB, Ability-to-Repay and Qualified Mortgage Rule Assessment Report, January 2019, at https://files.consumerfinance.gov/f/documents/cfpb_ability-to-repay-qualified-mortgage_assessment -report.pdf. 95 See CFPB, “Ability-to-Repay and Qualified Mortgage Standards Under the T ruth in Lending Act (Regulation Z),” 78 Federal Register 6049, January 30, 2013; Bing Bai, Laurie Goodman, and Ellen Seidman, Has the QM Rule Made It Harder to Get a Mortgage?, Urban Institute, March 2016, at https://www.urban.org/sites/default/files/publication/78266/2000640-Has-the-QM-Rule-Made-It-Harder-to-Get-a-Mortgage.pdf; and Karan Kaul and Laurie Goodman, What, If Anything, Should Replace the QM GSE Patch? , Urban Institute, August 2018, at https://www.urban.org/sites/default/files/publication/98949/2018_10_30_qualified_mortgage_rule_finalizedv2_0.pdf. 96 See CFPB, “Qualified Mortgage Definition Under the T ruth in Lending Act (Regulation Z): General QM Loan Definition,” 85 Federal Register 41716-41778, July 10, 2020. 97 For a summary of the proposal, see CFPB, Summary of Proposed Rule-Makings: June 2020 Proposals to Amend the ATR-QM Rule, June 22, 2020, at https://files.consumerfinance.gov/f/documents/cfpb_atr-qm_summary-of-proposals_2020-06.pdf. 98 Consistent with the current rule, the CFPB proposes higher thresholds for loans with smaller loan amounts and for subordinate-lien transactions, which typically have higher APRs. For more information on how the CFPB defines the benchmark APOR, see, CFPB, “ What is a ‘Higher-Priced Mortgage Loan?’”, September 17, 2013, at https://www.consumerfinance.gov/ask-cfpb/what -is-a-higher-priced-mortgage-loan-en-1797/. 99 Under the current rule, there is no limit on the amount by which the APR exceeds the APOR for the purposes of the QM definition, though only QMs where the difference is no more than 1.5 percentage points (for most first -lien mortgages) qualify for a safe harbor. Congressional Research Service 27 Housing Issues in the 116th Congress  The CFPB is also seeking comments on an alternative proposal to consider a DTI range between 45% and 48% rather than removing the DTI requirement entirely. Higher credit-quality applicants likely to qualify for lower mortgage rates could be approved with DTIs near or at the upper end of the range. In this case, a better credit score may act as a compensating factor, a positive risk attribute that may be given additional weight when underwriting applicants with higher DTIs. On June 22, 2020, in a separate proposed rule, the CFPB also proposed revisions to the current GSE/QM patch.100 Specifical y, the CFPB proposes to extend the sunset date for the GSE Patch such that it corresponds to the earlier of either (1) the effective date of the final amendments to the QM rule revisions or (2) the date that the GSEs exit conservatorship. (The CFPB notes that the QM rule revisions are not expected to become effective prior to April 1, 2021.) Department of Veterans Affairs Loan Guaranty and Maximum Loan Amounts The Department of Veterans Affairs (VA) insures home loans to veterans as part of the VA Loan Guaranty program. To date, the maximum amount a veteran can borrow has been limited by the Freddie Mac conforming loan limit.101 While veterans can enter into loans that exceed the conforming loan limit, they cannot do so without making a down payment. The fact that VA loans do not ordinarily require a down payment is a popular feature of the program—in FY2018, nearly 80% of loans did not have a down payment.102 Congress removed the conforming loan limit for VA loans entered into on or after January 1, 2020, as part of the Blue Water Navy Vietnam Veterans Act of 2019 (P.L. 116-23). After the change takes effect, most veterans wil be able to enter into loans of any amount, subject to eligibility, without the need for a down payment. An exception exists for veterans who have outstanding VA loans; they will stil be subject to Freddie Mac conforming loan limits. Housing Assistance Appropriations for Housing Programs For several years, concern in Congress about federal budget deficits led to increased interest in reducing the amount of discretionary funding provided each year through the annual appropriations process. This interest manifested most prominently in the enactment of the Budget Control Act of 2011 (P.L. 112-25), which set enforceable limits for both mandatory and discretionary spending.103 The limits on discretionary spending, which have been amended and adjusted since they were first enacted,104 have implications for HUD’s budget, the largest source of funding for direct housing assistance, because it is made up almost entirely of discretionary 100 See CFPB, “Qualified Mortgage Definition Under the T ruth in Lending Act (Regulation Z): Extension of Sunset Date,” 85 Federal Register 41448-41463, July 10, 2020. 101 In 2019, the conforming loan limit for most areas of the country was $484,350. Ho wever, in certain high-cost areas the conforming loan limit may be as high as 115% of the area median home price, but not to exceed 150% of the conforming loan limit. As a result, in some high-cost areas the 2019 limit is as high as $726,525. (For more inf ormation on the conforming loan limit, see CRS Report R44826, The Loan Lim its for Governm ent-Backed Mortgages.) 102 U.S. Department of Veterans Affairs, FY2018 Annual Benefits Report, Home Loan Guaranty section, p. 8, https://www.benefits.va.gov/REPORT S/abr/docs/2018-loan-guaranty.pdf. 103 For more information, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions. 104 Ibid. Congressional Research Service 28 Housing Issues in the 116th Congress appropriations.105 In FY2020, the discretionary spending limits were slated to decrease, after having been increased in FY2018 and FY2019 by the Bipartisan Budget Act of FY2018 (BBA; P.L. 115-123), but they were raised again for FY2020 and FY2021 by the Bipartisan Budget Act of 2019 (P.L. 116-37).106 More than three-quarters of HUD’s appropriations are devoted to three rental assistance programs serving more than 4 mil ion families: the Section 8 Housing Choice Voucher (HCV) program, Section 8 project-based rental assistance, and the public housing program. Funding for the HCV program and project-based rental assistance has been increasing in recent years, largely because of the increased costs of maintaining assistance for households that are currently served by the programs.107 Public housing has, arguably, been underfunded (based on studies undertaken by HUD of what it should cost to operate and maintain it) for many years.108 Despite the large share of total HUD funding these rental assistance programs command, their combined funding levels only permit them to serve an estimated one in four eligible families, which creates long waiting lists for assistance in most communities.109 A similar dynamic plays out in the U.S. Department of Agriculture’s Rural Housing Service budget. Demand for housing assistance exceeds the supply of subsidies, yet the vast majority of the RHS budget is devoted to maintaining assistance for current residents.110 In a budget environment with limits on discretionary spending, pressure to provide increased funding to maintain current services for existing rental assistance programs competes with pressure from states, localities, and advocates to maintain or increase funding for other popular programs, such as HUD’s Community Development Block Grant (CDBG) program, grants for homelessness assistance, and funding for Native American housing. FY2021 Budget The Trump Administration’s budget request for FY2021 proposed a 15% decrease in new appropriations for HUD’s programs and activities as compared to the prior year.111 As in prior budget requests, it proposed to eliminate funding for several programs, including multiple HUD 105 Funding levels for HUD are determined by the T ransportation, HUD, and Related Agencies (T HUD) Appropriations Subcommittee, generally in a bill by the same name. While HUD’s budget is generally smaller than the Department of T ransportation’s, it makes up the largest share of the discretionary funding in the T HUD appropriations bill each year because the majority of DOT ’s budget is made up of mandatory funding. 106 For more information, see CRS Insight IN11148, The Bipartisan Budget Act of 2019: Changes to the BCA and Debt Lim it. 107 For the Section 8 HCV program, funding has been increasing in p art because Congress has created more vouchers each year over the past several years (largely to replace units lost to the affordable housing stock in other assisted housing programs or to provide targeted assistance for homeless veterans), and in part bec ause the cost of renewing individual vouchers has been rising as gaps between low-income tenants’ incomes and rents in the market have been growing. For the Section 8 project -based program, the increased funding is due to more long-term rental assistance contracts on older properties expiring and being renewed, requiring new appropriations, as well as rent inflation. 108 For example, see Meryl Finkel et al., “Capital Needs in the Public Housing Program: Revised Final Report,” prepared for the Department of Housing and Urban Development, November 24, 2010, http://portal.hud.gov/hudportal/documents/huddoc?id=PH_Capital_Needs.pdf. 109 See Figure 6 of Joint Center for Housing Studies of Harvard University, America’s Rental Housing, 2017, p. 6, http://www.jchs.harvard.edu//research-areas/reports/americas-rental-housing-2017. 110 T he bulk of the RHS budget for rental housing is devoted to renewing existing Section 521 rental assistance contracts in Section 515 and Section 514/516 rental housing properties. For more information about USDA’s rural housing programs, see CRS Report RL31837, An Overview of USDA Rural Developm ent Program s. 111 For more information, see CRS Report R46465, Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations for FY2021: In Brief. Congressional Research Service 29 Housing Issues in the 116th Congress grant programs (CDBG, the HOME Investment Partnerships Program, the Self-Help and Assisted Homeownership Opportunity Program (SHOP), and the public housing Capital Fund), and to decrease funding for most other HUD programs. In proposing to eliminate the grant programs, the Administration cited budget constraints and proposed that state and local governments take on more of a role in the housing and community development activities funded by these programs. Additional y, the budget referenced policy changes designed to reduce the cost of federal rental assistance programs, including the Making Affordable Housing Work Act of 2018 (MAHWA) legislative proposal, released by HUD in April 2018.112 If enacted, the proposal would make a number of changes to the way tenant rents are calculated in HUD rental assistance programs, resulting in rent increases for assisted housing recipients, and corresponding decreases in the cost of federal subsidies. Further, it would permit local program administrators or property owners to institute work requirements for recipients. In announcing the proposal, HUD described it as setting the programs on “a more fiscal y sustainable path,” creating administrative efficiency, and promoting self-sufficiency.113 Low-income housing advocates were critical of it, particularly the effect increased rent payments may have on families.114 Thus far, it has not been considered in Congress. Beyond HUD, the Administration’s FY2021 budget request for USDA’s Rural Housing Service proposed to eliminate funding for most rural housing programs, except for several loan guarantee programs. It would continue to provide funding to renew existing rental assistance, but also proposes a new minimum rent policy for tenants designed to help reduce federal subsidy costs. The funding cuts proposed in the President’s FY2021 budget requests have been included in prior Trump Administration budget requests, but not adopted by Congress. For more on HUD appropriations trends in general, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002. For more on the FY2021 process, see CRS Report R46465, Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations for FY2021: In Brief. Housing Vouchers for Foster Youth Policymakers have raised concerns that youth aging out of foster care lack adequate and affordable housing as they transition to adulthood. A recent national study of young people experiencing homelessness found that one-quarter to one-third had a history of having been in foster care.115 In light of this, both the Administration and Congress have either made or proposed changes to increase access to housing assistance for foster youth. 112 HUD, “Secretary Carson Proposes Rent Reform: Reforms to make current rent policies simpler, more transparent and predictable,” press release, April 25, 2018 https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_033. 113 HUD, “Secretary Carson Proposes Rent Reform: Reforms to make current rent policies simpler, more transparent and predictable,” press release, April 25, 2018 https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_033. 114 For example, see National Low Income Housing Coalition, “Affordable Housing Advocates T ell HUD and Congress – Keep Housing Affordable for Low Income Families,” press release, April 25, 2018, http://nlihc.org/press/releases/10642. 115 University of Chicago, Chapin Hall, Voices of Youth Count, Missed Opportunities: Pathways from Foster Care to Youth Homelessness in America, July 2019, https://voicesofyouthcount.org/wp-content/uploads/2019/04/Chapin-Hall_VoYC_Child-Welfare-Brief_2019-1.pdf Congressional Research Service 30 Housing Issues in the 116th Congress Under current law, HUD’s Family Unification Program (FUP) offers a limited number of vouchers plus services to (1) child welfare involved families for whom lack of stable housing is a risk for family separation or a primary barrier to reunification and (2) youth aging out of foster care and at risk of homelessness. FUP vouchers for youth are unique, in that they are limited to up to 36 months, unlike other vouchers that are not subject to a time limit. Although foster youth are one of the target populations for FUP, according to HUD, only 5% of FUP vouchers are used for youth.116 In July 2019, HUD announced a new Administration initiative cal ed Foster Youth to Independence (FYI). Under FYI, HUD makes additional vouchers, through the tenant protection set-aside in the Housing Choice Voucher Program, available to serve youth in a program modeled after FUP. In Congress, the House passed via voice vote the Fostering Stable Housing Opportunities Act (FSHO; H.R. 4300). The bil would provide explicit statutory authority to use tenant protection vouchers for foster youth consistent with the FUP program and the new FYI initiative, and would al ow for those vouchers to be extended beyond the typical 36-month time limit for youth when a youth is engaged in employment, education, or training activities (or is otherwise exempt from compliance), among other provisions. A companion bil has been introduced in the Senate (S. 2803).117 Implementation of Housing Assistance Legislation Several pieces of assisted housing legislation that were enacted in prior Congresses have been in the process of being implemented during the 116th Congress. Moving to Work (MTW) Expansion In the FY2016 HUD appropriations law, Congress mandated that HUD expand the Moving to Work (MTW) demonstration by 100 public housing authorities (PHAs).118 MTW is a waiver program that al ows a limited number of participating PHAs to receive exceptions from HUD for most of the rules and regulations governing the public housing and voucher programs. MTW has been controversial for many years, with PHAs supporting the flexibility it provides (e.g., al owing PHAs to move funding between programs), and low-income housing advocates criticizing some of the policies being adopted by PHAs (e.g., work requirements and time limits). Most recently, the Government Accountability Office (GAO) issued a report raising concerns about HUD’s oversight of MTW, including the lack of monitoring of the effects of policy changes under MTW on tenants.119 HUD was required to phase in the FY2016 expansion and evaluate any new policies adopted by participating PHAs. Following a series of listening sessions and advisory committee meetings, and several solicitations for comment, HUD issued a solicitation of interest for the first two 116 See HUD Notice PIH 2019-20(HA), Tenant Protection Vouchers for Foster Youth to Independence Initiative, July 26, 2019, https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2019-20.pdf 117 T he bill was discussed during a Senate Banking Committee hearing on November 7, 2019, entitled “Examining Bipartisan Bills to Promote Affordable Housing Access and Safety.” 118 See Section 239, T itle II, Division L of P.L. 114-113. 119 U.S. Government Accountability Office, Rental Housing: Improvements Needed to Better Monitor the Moving to Work Dem onstration, Including Effects on Tenants, GAO-18-150, January 25, 2018, https://www.gao.gov/products/GAO-18-150. Congressional Research Service 31 Housing Issues in the 116th Congress expansion cohorts in December 2018. As of the date of this report, no selections had yet been made for those cohorts.120 Rental Assistance Demonstration Expansion The Rental Assistance Demonstration (RAD) was an Obama Administration initiative initial y designed to test the feasibility of addressing the estimated $25.6 bil ion backlog in unmet capital needs in the public housing program121 by al owing local PHAs to convert their public housing properties to either Section 8 Housing Choice Vouchers or Section 8 project-based rental assistance.122 PHAs are limited in their ability to mortgage, and thus raise private capital for, their public housing properties because of a federal deed restriction placed on the properties as a condition of federal assistance. When public housing properties are converted under RAD, that deed restriction is removed.123 As currently authorized, RAD conversions must be cost-neutral, meaning that the Section 8 rents the converted properties may receive must not result in higher subsidies than would have been received under the public housing program. Given this restriction, and without additional subsidy, not al public housing properties can use a conversion to raise private capital, potential y limiting the usefulness of a conversion for some properties.124 While RAD conversions have been popular with PHAs,125 and HUD’s initial evaluations of the program have been favorable,126 a recent GAO study has raised questions about HUD’s oversight of RAD, and about how much private funding is actual y being raised for public housing through the conversions.127 RAD, as first authorized by Congress in the FY2012 HUD appropriations law, was original y limited to 60,000 units of public housing (out of roughly 1 mil ion units).128 However, Congress has since expanded the demonstration. Most recently, in FY2018, Congress raised the cap so that 120 For more information, see HUD’s website for Cohort #1: https://www.hud.gov/program_offices/public_indian_housing/programs/ph/mtw/expansion/cohort1; and Cohort #2: https://www.hud.gov/program_offices/public_indian_housing/programs/ph/mtw/expansion/cohort2. T he Notice for Cohort #1 is PIH Notice 2018-17, as extended by PIH Notice 2019-03. T he Notice for Cohort #2 is PIH 2019 -04. 121 T he backlog estimate comes from Meryl Finkel, Ken Lam, et al., Capital Needs in the Public Housing Program (Cambridge, MA: November 24, 2011). 122 While most of the focus of RAD has been on public housing conversions, the 2012 law also authorized a separate component of RAD that allows for the conversion of older forms of rental assistance contracts (Rental Assistance Payment and Rent Supplement contracts, which predate the Section 8 program) to Section 8. Absent this conversion, HUD has no authority to renew those old contracts when they expire. 123 New affordability restrictions are placed on the property as a condition of a RAD conversion, but the y do not require the same deep affordability as is required under the public housing deed restriction (called a Declaration of T rust). 124 While the raising of private capital is the most common incentive for conversion, not all conversions feature it. For more information, see Econometrica, Inc. Evaluation of HUD’s Rental Assistance Dem onstration , Department of Housing and Urban Development, interim report, September 2016, https://www.huduser.gov/portal/sites/default/files/pdf/RAD-InterimRpt.pdf. 125 For example, see Letter from Sunia Zaterman, Executive Director, CLPHA, Saul Ramirez, Executive Director, NAHRO, and T imothy G. Kaiser, Executive Director, PHADA, to House and Senate Appropriations Committee Chairs and Ranking Members, April 16, 2017, http://www.clpha.org/uploads/Public_Housing/5-16-14IndustryGroupLetteronRADCap.pdf. 126 For example, see Econometrica, Inc., Evaluation of HUD’s Rental Assistance Demonstration, Department of Housing and Urban Development, interim report, September 2016, https://www.huduser.gov/portal/sites/default/files/pdf/RAD-InterimRpt.pdf. 127 U.S. Government Accountability Office, Rental Assistance Demonstration: HUD Needs to Take Action to Improve Metrics and Ongoing Oversight, GAO-18-123, February 2018, https://www.gao.gov/products/GAO-18-123. 128 P.L. 112-55; 125 Stat. 673. Congressional Research Service 32 Housing Issues in the 116th Congress up to 455,000 units of public housing wil be permitted to convert to Section 8 under RAD, and it further expanded the program so that Section 202 Housing for the Elderly units can also convert. Not only is HUD currently implementing the FY2018 expansion, but the President’s FY2021 budget request to Congress—and past several budget requests to Congress—proposed that the cap on public housing RAD conversions be eliminated completely.129 Quality of Federally Assisted Housing The Housing Act of 1949 set as U.S. policy the promotion of “safe” and “decent” housing. In light of this, federal y assisted housing is general y subject to minimum physical quality standards as a condition of receiving assistance, and to periodic inspection to ensure that quality is maintained. Those inspection protocols, including the exact standards the property must meet, the frequency of inspection, and the entity that conducts the inspections, can al vary by program. In recent years, news articles highlighting poor conditions at federal y assisted properties and concerns raised by tenants and other stakeholders have focused policymakers’ attention on the physical condition of the federal y assisted housing stock general y, and of HUD-assisted properties in particular. This has led to cal s for changes to various elements of the existing protocols. For example, see the following:  Beginning in FY2014 and continuing each year since, Congress has included language in the annual HUD appropriations laws directing HUD to take specific actions when a Section 8 project-based rental assistance property scores below a certain threshold. These laws have also provided a suite of enforcement tools from which the Secretary can choose. The exact provisions and tools have changed over the years, and legislation has been introduced to codify some or al of them in the law governing the Section 8 PBRA program (including H.R. 3745, the HUD Inspection Oversight Act of 2019).  Congress has directed the Government Accountability Office to investigate various elements of HUD’s inspection process, including the presence of lead-based paint in assisted housing. GAO has issued several reports and a series of recommendations, and has more underway.130  Beginning in early 2019, HUD launched the National Standards for the Physical Inspection of Real Estate (NSPIRE) initiative, which HUD has characterized as a “wholesale reexamination” of the agency’s inspection process. It involves a number of administrative changes to the current process (including shortening notice to owners before inspections) as wel as a demonstration to test new standards for inspection and collecting information about HUD-assisted properties that launched in August 2019.131  On November 20, 2019, the Subcommittee on Housing, Community Development, and Insurance of the House Financial Services Committee held a hearing entitled “Safe and Decent? Examining the Current State of Residents’ Health and Safety in HUD Housing.” The hearing featured witnesses from 129 See Section 219 of the General Provisions portion of the FY2020 President’s budget request for HUD. 130 For a summary, see U.S. Government Accountability Office, Rental Housing Assistance: HUD Should Strengthen Physical Inspection of Properties and Oversigh t of Lead Paint Hazards, GAO-20-277T , November 20, 2019, https://www.gao.gov/products/GAO-20-277T . 131 For more information about NSPIRE, see https://www.hud.gov/program_offices/public_indian_housing/reac/nspire/concept . Congressional Research Service 33 Housing Issues in the 116th Congress various housing providers and tenant groups and also discussed various draft and introduced bil s related to reforms to HUD’s inspection and oversight protocols, including H.R. 3745.  A number of bil s have been introduced in the 116th Congress designed to address specific hazards in federal y assisted housing, including lead-based paint hazards, lead hazards in drinking water, and carbon monoxide poisoning.132 Native American Housing Programs Native Americans living in tribal areas experience a variety of housing chal enges. Housing conditions in tribal areas are general y worse than those for the United States as a whole, and factors such as the legal status of trust lands present additional complications for housing.133 In light of these chal enges, and the federal government’s long-standing trust relationship with tribes, certain federal housing programs provide funding specifical y for housing in tribal areas. Tribal HUD-VASH The Tribal HUD-Veterans Affairs Supportive Housing (Tribal HUD-VASH) program provides rental assistance and supportive services to Native American veterans who are homeless or at risk of homelessness. Tribal HUD-VASH is modeled on the broader HUD-Veterans Affairs Supportive Housing (HUD-VASH) program, which provides rental assistance and supportive services for homeless veterans. Tribal HUD-VASH was initial y created and funded through the FY2015 HUD appropriations act (P.L. 113-235), and funds to renew rental assistance have been provided in subsequent appropriations acts. No separate authorizing legislation for Tribal HUD-VASH currently exists. In the 116th Congress, a bil to codify the Tribal HUD-VASH program (S. 257) was ordered to be reported favorably by the Senate Committee on Indian Affairs in February 2019 and passed the full Senate in June 2019. An identical bil (H.R. 2999) has been introduced in the House and referred to the Committee on Financial Services. A substantively identical bil also passed the Senate during the 115th Congress (S. 1333), but the House ultimately did not consider it. For more information on HUD-VASH and Tribal HUD-VASH, see CRS Report RL34024, Veterans and Homelessness. NAHASDA Reauthorization The main federal program that provides housing assistance to Native American tribes and Alaska Native vil ages is the Native American Housing Block Grant (NAHBG), which was authorized by the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA, P.L. 104-330). NAHASDA reorganized the federal system of housing assistance for tribes while recognizing the rights of tribal self-governance and self-determination. The NAHBG provides formula funding to tribes that can be used for a range of affordable housing activities that benefit primarily low-income Native Americans or Alaska Natives living in tribal areas. A separate block 132 For example, the Carbon Monoxide Alarms Leading Every Resident T o Safety Act o f 2019 (H.R. 1690), which was passed by the House; the Safe Housing for Families Act (S. 755); the Get the Lead Out of Assisted Housing Act of 2019 (H.R. 3721/S. 2087); the Lead-Free Future Act of 2019 (H.R. 4416); and the Public Housing Fire Safety Act (S. 3090/H.R. 5969). 133 U.S. Department of Housing and Urban Development, Assessment of American Indian, Alaska Native, and Native Hawaiian Housing Needs, https://www.huduser.gov/portal/native_american_assessment/home.html. Congressional Research Service 34 Housing Issues in the 116th Congress grant program authorized by NAHASDA, the Native Hawai an Housing Block Grant (NHHBG), provides funding for affordable housing activities that benefit Native Hawai ans eligible to reside on the Hawai an Home Lands.134 NAHASDA also authorizes a loan guarantee program, the Title VI Loan Guarantee, for tribes to carry out eligible affordable housing activities. The most recent authorization for most NAHASDA programs expired at the end of FY2013, although NAHASDA programs have general y continued to be funded in annual appropriations laws. (The NHHBG has not been reauthorized since its original authorization expired in FY2005, though it has continued to receive funding in most years.135) NAHASDA reauthorization legislation was considered in varying degrees in the 113th, 114th, and 115th Congresses but none was ultimately enacted.136 In general, tribes and Congress have been supportive of NAHASDA, though there has been some disagreement over specific provisions or policy proposals that have been included in reauthorization bil s. Some of these disagreements involve debates over specific program changes that have been proposed. Others involve debate over broader issues, such as the appropriateness of providing federal funding for programs specifical y for Native Hawai ans and whether such funding could be construed to provide benefits based on race.137 In the 116th Congress, a NAHASDA reauthorization bil (H.R. 5319) was introduced in the House in December 2019. A Senate NAHASDA reauthorization bil (S. 4090) was introduced in June 2020 by Senator Hoeven and Senator Udal , Chairman and Vice Chairman, respectively, of the Senate Committee on Indian Affairs. The bil s contain many similar provisions but also differ in a number of ways. For more information on NAHASDA, see CRS Report R43307, The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA): Background and Funding. Proposed New Investments in Affordable Housing The 116th Congress has seen proposals to expand federal resources for affordable housing in a manner that is largely unprecedented in scope and scale. Some of these proposals were included in the platforms of various 2020 Democratic Presidential candidates,138 including the nominee, former Vice President Joe Biden.139 Some of these proposals have been introduced in Congress and at least two have passed the House. 134 For more information on the Hawaiian Home Lands, and the eligibility requirements for Native Hawaiians to reside on them, see the Department of Hawaiian Home Lands website at http://dhhl.hawaii.gov/about/. 135 In FY2016, no funding was appropriated for the NHHBG. However, HUD’s budget justification for FY2016 (as well as other years) indicated that HUD would have sufficient carryover balances from prior-year appropriations to continue to carry out activities under the program without a new appropriation. 136 In the 113th Congress, a NAHASDA reauthorization bill (H.R. 4329) was passed by the House, while a different bill (S. 1352) was favorably reported out of committee in the Senate. In the 114 th Congress, a bill (H.R. 360) was again passed by the House, while a different bill (S. 710) was favorably reported out of committee in the Senate. In the 115 th Congress, similar, but not identical, bills were introduced in the House and the Senate ( H.R. 3864 and S. 1895, respectively). H.R. 3864 was favorably reported out of committee in the House. 137 For more information on some of the issues that have been debated in the context of NAHASDA rea uthorization in the past, see archived CRS Report R44261, The Native Am erican Housing Assistance and Self-Determ ination Act (NAHASDA): Issues and Reauthorization Legislation in the 114th Congress. 138 Maggie Astor, “How the Democratic Candidates Would T ackle the Housing Crisis,” The New York Times, March 3, 2020, https://www.nytimes.com/2020/03/03/us/politics/housing-homelessness-2020-democrats.html. 139 T he proposal offered by candidate Biden is available at https://joebiden.com/housing/ and includes, among other policies, an expansion of the Section 8 Housing Choice Voucher program to serve all eligible households, a new renters tax credit, and creation of a $100 billion affordable housing fund. Congressional Research Service 35 Housing Issues in the 116th Congress These sweeping new affordable housing proposals—some of which are briefly summarized below—can be considered to include one or both of two main approaches: significant new federal funding for the development or rehabilitation of affordable housing; and significant expansions of direct federal assistance for renters. The first approach, a supply-side approach, is meant to address concerns about the rate of growth in renter households outpacing the supply of rental units affordable to them. A recent report from GAO cited the supply of low-cost rental units not keeping up with demand as a key driver of recent affordability chal enges.140 HUD estimates that only 59 affordable units were available per 100 very low-income renters in 2017, noting that total additions to the nation’s rental supply have been inadequate to meet growing demand.141 The second approach, a demand side approach, recognizes that the vast majority of persons facing affordability chal enges are housed, but that their housing costs are too high to be considered affordable. A recent report from HUD found a 7% reduction in very low-income renters with severe housing problems from 2015 to 2017, and attributed that decline almost solely to income increases (rather than supply additions).142 Funding for New Housing Development There have been a number of proposals to significantly increase funding for the development of new units of affordable housing and/or the rehabilitation of the existing stock of affordable housing. For example, see the following:  The Housing is Infrastructure Act of 2019 (H.R. 5187/S. 2951) would authorize over $100 bil ion for various housing grant programs for the development of affordable housing. For purposes of comparison, the accounts for which these funds would be authorized received less than half that amount in regular appropriations in FY2020. The bil was ordered reported by the House Financial Services Committee in February 2020 and was incorporated into the Moving Forward Act of 2020 (H.R. 2), which passed the House in July.  The FY2021 HUD appropriations bil reported by the House Appropriations Committee (H.R. 7616) and passed by the House (as a part of a multi-bil appropriations package, H.R. 7617) included a new title appropriating an additional $49 bil ion in emergency funding for HUD accounts to fund affordable housing-related infrastructure investments. If approved, this would nearly double HUD’s budget in FY2021.  Other legislation that would provide notable increases in funding for affordable housing development includes the American Housing and Economic Mobility Act of 2019 (H.R. 1737/S. 787), which would authorize $44.5 bil ion per year for 10 years for the Housing Trust Fund (which to date has never received annual funding above $330 mil ion), among other provisions; the Green New Deal for Public Housing (H.R. 5185/S. 2876), which would appropriate “such sums as may be necessary” for 10 years to provide grants for the rehabilitation and energy retrofit needs of public housing, among other provisions; and the Homes for Al Act of 2019 (H.R. 5244), which would appropriate $80 bil ion per year for 10 140 U.S. Government Accountability Office, As More Households Rent, the Poorest Face Affordability and Housing Quality Challenges, GAO-20-427, May 27, 2020, https://www.gao.gov/products/GAO-20-427. 141Nicole Elsasser Watson et al., Worst Case Housing Needs: 2019 Report to Congress, Department of Housing and Urban Development, Washington, DC, June 2020, https://www.huduser.gov/portal/sites/default/files/pdf/worst -case-housing-needs-2020.pdf. 142 Ibid. Congressional Research Service 36 Housing Issues in the 116th Congress years to build new public housing units and would authorize appropriations of $20 bil ion per year for 10 years to fund privately owned affordable housing units, among other provisions. Aid to Renters Federal rental assistance programs are funded to serve roughly one in four eligible households currently, meaning there are long waiting lists for assistance in most communities. Some proposals have included significant expansions of existing rental assistance (i.e., Housing Choice Vouchers); others the creation of new direct subsidies for renters (i.e., refundable tax credits). For example, see the following:  The Pathway to Stable and Affordable Housing for Al Act (H.R. 5813/S. 2946) would provide new mandatory appropriations intended to fund Housing Choice Vouchers for al eligible households. The program currently receives a fixed amount of discretionary appropriations each year, primarily to continue assistance to currently assisted families. (Additional y, it would appropriate $40 bil ion per year for 10 years for the Housing Trust Fund, in addition to providing other mandatory appropriations for homeless assistance.)  The Rent Relief Act of 2019 (H.R. 2169/S. 1106) would create a new refundable tax credit for renters paying more than 30% of their gross income towards rent, which phases out for renters with higher incomes. Nearly al of these proposals were released before the onset of the global pandemic and its related housing chal enges. Depending on how the economic crisis triggered by the pandemic unfolds, interest in these sweeping approaches to address affordable housing chal enges may increase; or, given their cost and the state of national budget deficits, interest may wane. Selected Administrative Actions Related to Affordable Housing HUD Noncitizen Eligibility and Documentation Proposed Rule On May 10, 2019, HUD released a proposed rule to end eligibility for “mixed status” families in its major rental assistance programs (public housing, Section 8 Housing Choice Vouchers, Section 8 project-based rental assistance).143 Mixed status families comprise both citizens (or eligible noncitizens) and ineligible noncitizens. Under current HUD regulations, mixed status families are eligible to receive prorated assistance, meaning that the household can receive federal housing assistance but their benefit must be reduced proportional y to avoid assisting ineligible noncitizens (general y, nonimmigrants such as those in the country il egal y as wel as those with temporary status, such as tourists and students). Additional y, the proposed rule would establish new requirements that citizens provide documentation of their citizenship status.144 (For more information, see CRS Insight IN11121, HUD’s Proposal to End Assistance to Mixed Status Families.) 143 U.S. Department of Housing and Urban Development, “Amendments to Further Implement Provisions of the Housing and Community Development Act of 1980,” 84 Federal Register 20589, May 10, 2019. 144 For more information, see CRS Insight IN11121, HUD’s Proposal to End Assistance to Mixed Status Families. Congressional Research Service 37 Housing Issues in the 116th Congress Low-income housing advocates145 and stakeholder groups representing program administrators146 have publicly opposed the proposed rule change, citing its potential disruptive effect on the roughly 25,000 currently assisted mixed status families, as wel as the increases in both subsidy costs (estimated at $200 mil ion per year by HUD) and administrative costs it would cause. Legislative language to block implementation of the rule was included in the House-passed FY2021 HUD appropriations bil (H.R. 7616, as incorporated into H.R. 7617); H.R. 2763, as ordered reported by the House Financial Services Committee; and S. 1904, as introduced in the Senate. (Identical appropriations language was included in the House-passed FY2020 HUD appropriations bil , but was not included in the final FY2020 HUD appropriations law, P.L. 116- 94.) As of the date of this report, HUD has not promulgated a final rule. Equal Access to Housing On July 24, 2020, HUD released a proposed rule that would make changes to its Equal Access to Housing rule.147 HUD initial y published an Equal Access to Housing rule in 2012, stating that housing provided through HUD programs must be made available regardless of a person’s sexual orientation, gender identity, or marital status.148 Another Equal Access to Housing rule—specifical y targeted to HUD Community Planning and Development (CPD) programs, where funding can be used to fund shelters for people experiencing homelessness—was published in 2016.149 The 2016 Equal Access to Housing rule requires that placement in facilities with shared sleeping and/or bath accommodations occur in conformance with a person’s gender identity. The 2020 proposed rule would al ow CPD program grant recipients that operate single-sex facilities to consider biological sex in admissions determinations, as long as each recipient’s policy is applied consistently. For example, a single-sex shelter for women could not “decline to accommodate a person who identifies as male but who is a biological female.”150 Where a shelter provider “has a good faith basis to doubt the consistency of the sex asserted with the sex served by the shelter,” then the proposed rule would al ow the provider to ask for such documents as birth certificates or other identification and medical records.151 If a shelter provider were to deny admission to a client based on its single-sex policy, the proposed rule would require that the 145 For example, see “Housing, Faith, Civil Rights, Social Justice, and Immigration Leaders Rally to Oppose HUD Rule T hat Would Separate Families or Evict T hem,” May 10, 2019, a joint press statement, available at https://nlihc.org/news/housing-faith-civil-rights-social-justice-and-immigration-leaders-rally-oppose-hud-rule-would. 146 For example, see “CLPHA Strongly Opposes HUD’s Non -Citizen Proposal,” Council of Large Public Housing Authorities, May 2, 2019, available at https://clpha.org/news/2019/clpha-strongly-opposes-hud%E2%80%99s-non-citizen-proposal. 147 U.S. Department of Housing and Urban Development, “Making Admission or Placement Determinations Based on Sex in Facilities Under Community Planning and Development Housing Programs, ” 85 Federal Register 44811, July 24, 2020. 148 U.S. Department of Housing and Urban Development, “Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identit y,” 77 Federal Register 5662-5676, February 3, 2012, http://portal.hud.gov/hudportal/documents/huddoc?id=12lgbtfinalrule.pdf. 149 U.S. Department of Housing and Urban Development, “Equal Access in Accordance With an Individual’s Gender Identity in Community Planning and Development Programs,” 81 Federal Register 64763-64782, September 21, 2016. 150 85 Federal Register 44812. 151 Ibid., p. 44815. Congressional Research Service 38 Housing Issues in the 116th Congress provider provide a recommendation for another shelter.152 Providers could also choose to continue admissions based on a client’s gender identity.153 Legislation to prohibit HUD from implementing a rule making changes to admissions at single- sex shelters was approved by the House Financial Services Committee on June 11, 2019.154 (See the Ensuring Equal Access to Shelter Act of 2019, H.R. 3018.) In addition, the FY2020 House-passed HUD appropriations bil (Section 236 of Division E of H.R. 3055) would have prevented HUD from making changes to either the 2012 or 2016 Equal Access to Housing rules. (The language from H.R. 3055 was not included in the final FY2020 HUD appropriations law, P.L. 116-94.) The FY2021 House-passed appropriations bil for multiple agencies, including HUD, would not al ow funds to be used to implement, administer, or enforce the proposed rule (Section 235 of HUD General Provisions in H.R. 7617 ). For more information about the Equal Access to Housing rules, see CRS Report R44557, The Fair Housing Act: HUD Oversight, Programs, and Activities. Regulatory Barriers Council On June 25, 2019, President Trump signed an Executive Order establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing.155 The council is to be chaired by the HUD Secretary, but wil include members from eight federal agencies. The council is charged with assessing federal, state, and local regulations and the effect they are having on developing new affordable housing; taking action to reduce federal regulatory barriers; and supporting state and local efforts to reduce regulatory barriers. On November 22, 2019, HUD published a Request for Information in the Federal Register seeking input from the public on “Federal, State, local and Tribal laws, regulations, land use requirements, and administrative practices that artificial y raise the costs of affordable housing development and contribute to shortages in housing supply.”156 Affirmatively Furthering Fair Housing The Fair Housing Act requires HUD to administer its programs in a way that affirmatively furthers fair housing.157 In addition, statutes or regulations governing specific HUD programs require that funding recipients affirmatively further fair housing (AFFH). On July 16, 2015, HUD published a final rule that more specifical y defined what it means to affirmatively further fair housing, and required that local communities and Public Housing Authorities (PHAs) receiving HUD funding assess the needs of their communities and ways in which they c ould improve access to housing, and submit reports, cal ed Assessments of Fair Housing, to HUD. 152 Ibid., p. 44818. 153 Ibid., p. 44812. 154 T he legislation was introduced and considered prior to publication of the proposed rule. As a result, the bill refers to HUD’s proposed new rule as described in the Federal Register Unified Agenda in Spring 2019. See https://www.reginfo.gov/public/do/eAgendaVie wRule?pubId=201904&RIN=2506-AC5. 155 Executive Order 13878, “Establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing,” 84 Federal Register 30853-30856, June 28, 2019. 156 Department of Housing and Urban Development (HUD), “White House Council on Eliminating Regulatory Barriers to Affordable Housing; Request for Information,” 84 Federal Register 64549, November 22, 2019. 157 42 U.S.C. §3608(e)(5). Congressional Research Service 39 Housing Issues in the 116th Congress After the AFFH rule began to be implemented, on May 23, 2018, HUD effectively suspended its implementation. Several months later, on August 13, 2018, HUD announced an Advance Notice of Proposed Rulemaking stating that it “has determined that a new approach towards AFFH is required” and requesting public comments on potential changes to the AFFH regulations.158 On January 14, 2020 HUD released a new proposed AFFH rule;159 the comment period for the proposed rule closed on March 16, 2020. The proposed rule would have instituted a new definition of what it means to affirmatively further fair housing and al owed communities to certify their adherence to requirements through the consolidated planning process. The process would not have applied to PHAs. Before the January 14, 2020 proposed rule could be finalized, HUD issued a different final rule on August 7, 2020, “Preserving Community and Neighborhood Choice.”160 The final rule states that HUD need not go through the notice and comment process normal y required of rulemaking under the Administrative Procedure Act (APA) due to an APA exception for matters “relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”161 The final rule states that fair housing “means housing that, among other attributes, is affordable, safe, decent, free of unlawful discrimination, and accessible as required under civil rights laws,” and that AFFH is “to take any action rational y related to promoting any attribute or attributes of fair housing ... ”162 Communities are to certify that they have satisfied the requirement to affirmatively further fair housing as part of their consolidated plans; the rule does not apply to PHAs. The rule is to take effect 30 days from its publication in the federal register. The FY2021 House-passed appropriations bil for multiple agencies, including HUD, would not al ow funds to be used to implement, administer, or enforce the final rule (Section 506 of the General Provisions for Additional Infrastructure Investments in H.R. 7617). For more information about the AFFH rule, see CRS Report R44557, The Fair Housing Act: HUD Oversight, Programs, and Activities. Housing and Disaster Response and Recovery When disasters occur, the President may authorize an emergency or major disaster declaration163 under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act; P.L. 93-288, as amended). The presidential declaration may authorize the Federal Emergency Management Agency (FEMA) to provide various short-term and interim housing assistance programs.164 158 U.S. Department of Housing and Urban Development, “HUD Seeks to Streamline and Enhance ‘Affirmatively Furthering Fair Housing’ Rule,” press release, August 13, 2018, https://www.hud.gov/press/press_releases_media_advisories/HUD_No_18_079; and U.S. Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing: Streamlining and Enhancemen ts,” 83 Federal Register 40713-40715, August 16, 2018, https://www.gpo.gov/fdsys/pkg/FR-2018-08-16/pdf/2018-17671.pdf. 159 U.S. Department of Housing and Urban Development, “Affirmatively Furthering Fair Housing,” 85 Federal Register 2041, January 14, 2020. 160 U.S. Department of Housing and Urban Development, “Preserving Community and Neighborhood Choice,” 85 Federal Register 47899, August 7, 2020. 161 Ibid.. p. 47904 citing the APA at 5 U.S.C. §553(a)(2). 162 85 Federal Register 47905. 163 For more information about the disaster declaration process, see CRS Report R43784, FEMA’s Disaster Declaration Process: A Prim er. 164 A presidential declaration authorizing Individual Assistance makes Small Business Administration (SBA) Disaster Congressional Research Service 40 Housing Issues in the 116th Congress Emergency sheltering may be authorized under Stafford Act Section 502165 following an emergency declaration, and Stafford Act Section 403166 following a major disaster declaration or Fire Management Assistance Grant declaration (FMAG).167 This assistance is commonly referred to as Public Assistance (PA) Category B—Emergency Protective Measures. When PA is authorized, FEMA wil reimburse state, tribal, territorial, and local governments, as wel as eligible nonprofits (PA Applicants) for at least 75% of eligible costs incurred while performing eligible work.168 FEMA’s regulations on emergency sheltering are limited, though program guidance may be issued for a specific incident. Short-term, emergency sheltering accommodations169 can include congregate and non-congregate sheltering solutions. Although congregate solutions (i.e., sheltering in facilities with large, open spaces, such as schools and community centers) are typical y provided, during the ongoing COVID-19 pandemic, non- congregate solutions (i.e., sheltering that affords privacy, such as dormitories, hotels, and motels) may be provided, per FEMA policy.170 For example, the Transitional Sheltering Assistance (TSA) program may be used to provide short-term hotel/motel accommodations to eligible disaster survivors transitioning from congregate or non-congregate shelters to temporary or permanent housing solutions.171 Interim housing needs may be met through the Individuals and Households Program (IHP), which may be authorized under Stafford Act Section 408 following an emergency or major disaster declaration.172 The federal share of eligible costs associated with IHP housing assistance is 100%.173 IHP housing assistance may include financial assistance (e.g., assistance to rent alternate housing accommodations or repair a homeowner’s primary residence) and/or direct assistance (e.g., a FEMA-provided Manufactured Housing Unit (MHU)) to eligible individuals and Loans available (SBA, A Reference Guide to the SBA Disaster Loan Program, May 2015, p. 4, https://www.sba.gov/sites/default/files/files/SBA_Disaster_Loan_Program_Reference_Guide.pdf). For more information on SBA Disaster Loans, see CRS Report R41309, The SBA Disaster Loan Program : Overview and Possible Issues for Congress. 165 42 U.S.C. §5192. 166 42 U.S.C. §5170b. 167 FEMA, Fire Management Assistance Grant Program Guide, FEMA P-954, February 2014, p. 20, https://www.fema.gov/media-library-data/1581017232216-74156de976d581852e91b9826c2968c2/FMAG_Guide_Feb_2014_508.pdf. 168 42 U.S.C. §5170b(b). 169 Short-term sheltering may be authorized under Stafford Act Section 403 —Essential Assistance. 170 FEMA, “Emergency Non-Congregate Sheltering during the COVID-19 Public Health Emergency (Interim),” FEMA Policy 104-009-18, June 17, 2020, https://www.fema.gov/media-library-data/1592489053244-179ccfba96c36d22d32f9cbbea0108bf/fema_public_assistance_non_covid-19_NCS_Policy.pdf (hereinafter FEMA, “Interim Emergency Non-Congregate Sheltering Policy”). 171 FEMA’s T ransitional Sheltering Assistance (T SA) program is intended to provide short -term hotel/motel accommodations to individuals and families who are unable to return to their pre-disaster primary residence because a declared disaster rendered it uninhabitable or inaccessible. T he initial period of T SA assistance is 5 -14 days, and it can be extended in 14-day intervals for up to six months from the date of the disaster declaration. 42 U.S.C. §5170b; see also Federal Emergency Management Agency (FEMA), Individuals and Households Program Unified Guidance (IHPUG), FP 104-009-03, September 2016, pp. 123-125, https://www.fema.gov/media-library-data/1483567080828-1201b6eebf9fbbd7c8a070fddb308971/FEMAIHPUG_CoverEdit_December2016.pdf (note that FEMA’s IHPUG applies to any disaster declared on or after September 30, 2016); and FEMA, Individual Assistance Program and Policy Guide (IAPPG), FP 104-009-03, March 2019, p. 40, https://www.fema.gov/media-library-data/1551713430046-1abf12182d2d5e622d16accb37c4d163/IAPPG.pdf (hereinafter FEMA, IAPPG) (note that FEMA’s IAPPG applies to any disaster declared on or after March 1, 2019 ). 172 42 U.S.C. §5174. It is uncommon for the Individuals and Households Program to be authorized following an emergency declaration (FEMA, “How a Disaster Gets Declared,” https://www.fema.gov/disasters/how-declared). 173 42 U.S.C. §5174(g)(1). Congressional Research Service 41 link to page 51 link to page 51 Housing Issues in the 116th Congress households who, as a result of an emergency or disaster, have uninsured or under-insured necessary expenses and serious needs that cannot be met through other means or forms of assistance.174 IHP assistance is intended to be temporary and is general y limited to a period of 18 months following the date of the declaration, but it may be extended by FEMA.175 In addition to FEMA assistance, following a disaster, Congress may appropriate funds through HUD’s Community Development Block Grant for disaster recovery (CDBG-DR) to assist communities in long-term rebuilding (see the “Community Development Block Grants-Disaster Recovery (CDBG-DR)” section for more information). Emergency Sheltering Options During the COVID-19 Pandemic According to FEMA, state, local, tribal, and territorial governments (SLTTs) are responsible for coordinating emergency sheltering support after a Stafford Act emergency or major disaster declaration.176 However, the ongoing COVID-19 pandemic may complicate efforts to provide sheltering in typical congregate settings due to the need to ensure appropriate social distancing. To that end, FEMA issued an interim policy for non-congregate sheltering in the event of a Stafford Act declaration through the end of 2020 (this guidance may apply to presidential declarations for hurricanes, wildfires, or other incidents).177 FEMA may authorize non-congregate sheltering as an eligible emergency protective measure when needed, if it is the legal responsibility of the PA Applicant (general y, SLTTs are responsible for protecting public health and safety).178 The policy is applicable for al Stafford Act declared incidents between June 1 and December 31, 2020, beginning six days prior to and up to thirty days following an incident (unless FEMA approves an extension).179 PA Applicants requesting reimbursement must provide sufficient documentation and must follow FEMA’s procurement policies when contracting to carry out emergency protective measures, including the provision of non-congregate sheltering.180 Additional y, PA Applicants may not receive assistance that duplicates assistance from other sources or federal agencies.181 FEMA wil review its policy by December 31, 2020. For more information, see CRS Insight IN11440, Potential FEMA Emergency Sheltering Options During the COVID-19 Pandemic; and CRS Report R46326, Stafford Act Declarations for COVID-19 FAQ. 174 42 U.S.C. §5174. For more information, see CRS Report R46014, FEMA Individual Assistance Programs: An Overview. 175 44 C.F.R. §206.110(e). 176 FEMA, Mass Care/Emergency Assistance Pandemic Planning Considerations For State, Local, T ribal, T erritorial and Non-Government Organizational Planners, Providers and Support Agencies, June 2020, p. 1, https://www.fema.gov/media-library-data/1591805537743-dd381cfb5c45eea9999dac1637815716/MCEA_Pandemic_Planning_Considerations_Guide_508.pdf . 177 FEMA, “Interim Emergency Non-Congregate Sheltering Policy.” 178 FEMA, “Interim Emergency Non-Congregate Sheltering Policy,” pp. 2-3. 179 FEMA, “Interim Emergency Non-Congregate Sheltering Policy,” p. 2. 180 FEMA, “Interim Emergency Non-Congregate Sheltering Policy,” p. 4. 181 FEMA, “Interim Emergency Non-Congregate Sheltering Policy,” p. 5. Congressional Research Service 42 Housing Issues in the 116th Congress Implementation of Housing-Related Provisions of the Disaster Recovery Reform Act (DRRA) The Disaster Recovery Reform Act of 2018 (DRRA, Division D of P.L. 115-254), which was enacted on October 5, 2018, near the end of the 115th Congress, is the most comprehensive reform of FEMA’s disaster assistance programs since the passage of the Sandy Recovery Improvement Act of 2013 (SRIA, Division B of P.L. 113-2) and the Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA, P.L. 109-295). The DRRA legislation focuses on improving pre-disaster planning and mitigation, response, and recovery, and increasing FEMA accountability. As such, it amends many sections of the Stafford Act and includes new standalone authorities. In addition, DRRA requires reports to Congress,182 rulemaking, and other actions. The 116th Congress has expressed interest in the oversight of DRRA’s implementation, including sections that amend FEMA’s temporary housing assistance programs under Stafford Act Section 408, the Individuals and Households Program. These sections include the following:  DRRA Section 1211—State Administration of Assistance for Direct Temporary Housing and Permanent Housing Construction—amended Stafford Act Section 408(f)—Federal Assistance to Individuals and Households, State Role—to al ow state, territorial, or tribal governments to administer Direct Temporary Housing Assistance and Permanent Housing Construction, in addition to Other Needs Assistance (ONA).183 It also provides a mechanism for state and local units of government to be reimbursed for local y implemented housing solutions.184 This provision may al ow states to customize disaster housing solutions and expedite disaster recovery. On July 28, 2020, FEMA announced the publication of the State-Administered Direct Housing Grant Guide, making “[s]tate, local, tribal and territorial governments ... eligible to receive grants in order to provide disaster housing missions to disaster survivors [for a limited period of time].”185 FEMA wil offer the grant, which al ows states, territories, and Indian tribal governments to administer Direct Temporary Housing Assistance and Permanent Housing Construction, under a pilot program that runs until October 5, 2020, and FEMA wil then work to develop and issue final regulations to implement this authority.186 182 Examples include requirements for the FEMA Administrator to review program processes or progress in completing tasks and reporting specific information to the House and Senate committees of jurisdiction (e.g., see DRRA Section 1245—Review of Assistance for Damaged Underground Water Infrastructure, and Section 1242 —FEMA Updates on National Preparedness Assessment); and requirements for the Inspector General of the Department of Homeland Security to conduct audits and report on audit findings and recommendations (e.g., see DRRA §1226 —Inspector General Audit of FEMA Contracts for T arps and Plastic Sheeting). 183 §1211(a) of DRRA, P.L. 115-254. Other Needs Assistance (ONA) provides a grant of financial assistance for other disaster-related necessary expenses and serious needs. ONA may provide assistance to repair or replace items, such as personal property or a vehicle damaged by a disaster, and also may provide assistance with relocating and storing personal property while home repairs are made, Group Flood Insurance policies, and funding to assist with expenses related to funerals, medical and dental care, childcare, as well as miscellaneous expenses, in addition to other things. For more information, see CRS Report R46014, FEMA Individual Assistance Program s: An Overview. 184 §1211(b) of DRRA, P.L. 115-254. 185 FEMA, “FEMA Bulletin Week of July 27, 2020.” https://content.govdelivery.com/accounts/USDHSFEMA/bulletins/297b876. T he State-Adm inistered Direct Housing Grant Guide provides guidance to allow states, territories, and Indian tribal governments to receive grant funds under a cooperative agreement. 186 FEMA stated that it is developing a State-Administered Direct Housing Grant Guide that will serve as interim guidance and will provide the guidance that enables implementation of the pilot program, which will end after two Congressional Research Service 43 Housing Issues in the 116th Congress  DRRA Section 1212—Assistance to Individuals and Households—amended Stafford Act Section 408(h)—Federal Assistance to Individuals and Households, Maximum Amount of Assistance—to separate the cap on the maximum amount of financial assistance eligible individuals and households may receive for housing assistance and ONA.187 Prior to the enactment of DRRA, there was a cap on the maximum amount of financial assistance an individual or household could receive. Financial assistance for both the financial forms of housing assistance and Other Needs Assistance (ONA) combined to count towards the “cap”—or maximum amount of financial assistance. Post-DRRA, financial assistance for housing-related needs may not exceed $35,500 (FY2020; adjusted annual y), and separate from that, financial assistance for ONA may not exceed $35,500 (FY2020; adjusted annual y). DRRA Section 1212 also removed financial assistance to rent alternate housing accommodations from the cap, and created an exception for accessibility-related costs.188 This may better enable FEMA’s disaster assistance programs to meet the recovery-related needs of individuals, including those with disabilities and others with access and functional needs, and households who experience significant damage to their primary residence and personal property as a result of an emergency or major disaster.  DRRA Section 1213—Multifamily Lease and Repair Assistance—amended Stafford Act Section 408(c)(1)(B)—Federal Assistance to Individuals and Households, Direct Assistance—to expand the eligible areas for multifamily lease and repair, and remove the requirement that the value of the improvements or repairs not exceed the value of the lease agreement.189 This may increase housing options for disaster survivors. The Inspector General of the Department of Homeland Security must assess the use of FEMA’s direct assistance authority to justify this alternative to other temporary housing options, and submit a report to Congress.190 Congress may wish to track the implementation of DRRA to review the effectiveness and impacts of FEMA’s DRRA-related regulations and policy guidance, including assessing the effects of DRRA-related changes to federal disaster housing assistance for past and future disasters. For years and will then require a rulemaking. As of the date of publication of this report, FEMA stated that the interim guidance had been transmitted to the Department of Homeland Security for clearance ( email correspondence from FEMA Congressional Affairs staff, November 19, 2019). See also FEMA, Disaster Recovery Reform Act (DRRA) Annual Report, October 2019, p. 13, https://www.fema.gov/media-library-data/1573222648380-b2fc54c82eb3b03c0724cbc696a94613/DRRAAnnualReport_FINAL_PUBLISHED.pdf (hereinafter FEMA, DRRA Annual Report). 187 §1212 of DRRA, P.L. 115-254. Prior to DRRA, an individual or household could receive up to $33,300 (FY2017; adjusted annually) (see FEMA, DHS, “ Notice of Maximum Amount of Assistance Under the Individuals and Households Program,” 81 Federal Register 70431, October 12, 2016, https://www.govinfo.gov/content/pkg/FR-2016-10-12/pdf/2016-24626.pdf). Post-DRRA, financial assistance for housing-related needs may not exceed $35,500 (FY2020; adjusted annually), and separate from that , financial assistance for ONA may not exceed $35,500 (FY2020; adjusted annually) (see §1212 of DRRA, P.L. 115-254; FEMA, “ Notice of Maximum Amount of Assistance,” 84 Federal Register 55323-55324). 188 §1212 of DRRA, P.L. 115-254. 189 §1213 of DRRA, P.L. 115-254. FEMA is updating its IAPPG to implement this provision, and, per the DRRA Annual Report, “ [i]n the interim, FEMA will implement this provision, as warranted by disaster impacts, through policy waivers.” FEMA, DRRA Annual Report, p. 18. 190 §1213(c) of DRRA, P.L. 115-254. T his must be completed within two years of the enactment of DRRA (i.e., it is due by October 5, 2020). Congressional Research Service 44 Housing Issues in the 116th Congress more information on DRRA, including a more detailed analysis of the changes to the Individuals and Households Program and tables of deadlines associated with the implementation actions and requirements of DRRA, see CRS Report R45819, The Disaster Recovery Reform Act of 2018 (DRRA): A Summary of Selected Statutory Provisions. FEMA Short-term, Emergency Housing Program Change FEMA has also made a change to the available assistance options that may be provided under Stafford Act Section 403—Essential Assistance—to meet short-term, emergency sheltering needs. In October 2019, FEMA publicly announced that it was ending the Sheltering and Temporary Essential Power (STEP) pilot program.191 The STEP pilot program provided an alternative emergency sheltering option that al owed disaster survivors to shelter at home. STEP-funded work al owed FEMA to fund “minimal, temporary protective repairs ... to private homes,” the intent being to “quickly make damaged homes habitable in the short term until homeowners could complete more permanent repairs independently through other FEMA programs or using private insurance payments.”192 The justification provided by FEMA for ending the STEP program was that it “was not meeting its established objectives” based on FEMA’s analysis of the program, which was used following several disasters.193 Specifical y, “FEMA found that repairs under the STEP pilot program general y could not be made quickly enough to effectively serve as shelter under section 403 of the Stafford Act.”194 For example, in the U.S. Virgin Islands, although the program was authorized in October 2017, initial repairs did not begin until March 2018, and eligible work was not completed until April 2019. So although the program was intended to run for the three to four months following the disaster, the STEP pilot program operated for 18 months.195 An additional chal enge identified related to limiting the scope of the program to performing minimal, emergency repairs.196 As an example of how the program’s scope shifted, FEMA expanded the STEP pilot program it conducted in the U.S. Virgin Islands to also al ow for permanent repair or replacement of damaged roofs.197 191 FEMA, “Bulletin Week of October 21, 2019,” https://content.govdelivery.com/accounts/USDHSFEMA/bulletins/2679511. In a report by GAO, it was noted that, “ In May 2019, FEMA’s Chief Counsel stated that FEMA had decided to discontinue the ST EP pilot program due to significant challenges and lessons learned from prior experiences implementing the program.” U.S. Government Accountability Office, U.S. Virgin Islands Recovery: Additional Actions Could Strengthen FEMA’s Key Disaster Recovery Efforts, GAO-20-54, November 2019, p. 31, https://www.gao.gov/assets/710/702744.pdf (hereinafter, GAO, U.S. Virgin Islands Recovery). 192 U.S. Government Accountability Office, U.S. Virgin Islands Recovery, pp. 27-28; see also FEMA, “Recovery Program Guidance: Sheltering and T emporary Essential Power (ST EP) Pilot Program for FEMA -4336-DR-PR and FEMA-4339-DR-PR,” October 25, 2017. 193 FEMA, “Bulletin Week of October 21, 2019,” https://content.govdelivery.com/accounts/USDHSFEMA/bulletins/2679511. Although the FEMA Bulletin cites seven disasters, GAO reported that FEMA authorized the ST EP pilot program following eight disasters (GAO, U.S. Virgin Islands Recovery, pp. 34-35). T he GAO report includes an overview of the ST EP pilot programs that FEMA implemented. ST EP was first used in 2012 following Hurricane Sandy. It has also been used in 2016 (Louisiana following severe storms), 2017 (T exas following Hurricane Harvey, Puerto Rico following Hurricane Irma and Hurricane Maria, U.S. Virgin Islands following Hurrica ne Irma and Hurricane Maria), and 2018 (North Carolina following Hurricane Florence). T he GAO report includes brief descriptions of the past ST EP pilot programs (GAO, U.S. Virgin Islands Recovery, pp. 33-34). 194 FEMA, “Bulletin Week of October 21, 2019,” https://content.govdelivery.com/accounts/USDHSFEMA/bulletins/2679511; GAO, U.S. Virgin Islands Recovery, p. 31. 195 GAO, U.S. Virgin Islands Recovery, p. 32. 196 GAO, U.S. Virgin Islands Recovery, p. 31. 197 GAO, U.S. Virgin Islands Recovery, p. 28. Congressional Research Service 45 Housing Issues in the 116th Congress Despite the chal enges FEMA faced with implementing the STEP pilot program, there may stil be a need for a short-term disaster housing program that can serve as an alternative to existing emergency sheltering solutions such as congregate care shelters or the TSA program. In November 2019, GAO published a report noting that “FEMA used the STEP pilot program to supplement other FEMA sheltering programs and provide necessary additional capacity to help address the emergency sheltering needs of disaster-affected communities.”198 The report also noted that “conducting a broad evaluation of FEMA’s emergency sheltering programs and the agency’s options for addressing emergency sheltering needs ... would help FEMA understand its ability to provide sheltering options and to properly plan for the provision of effective emergency sheltering assistance to disaster-affected communities.”199 The Department of Homeland Security concurred with GAO’s recommendation that the FEMA Administrator evaluate FEMA’s options for providing future emergency sheltering assistance,200 and as of August 2020, FEMA has fully implemented the GAO’s suggestion and the GAO considers the recommendation “closed as implemented.”201 Specifical y, FEMA determined that it could provide emergency sheltering to disaster survivors by “using a combination of existing capabilities and building capacity for specialized teams tasked with coordinating with state, local, tribal, and territorial governments to identify viable sheltering options.”202 Congress may stil wish to monitor FEMA’s efforts to implement emergency sheltering assistance programs to meet the short-term emergency housing needs of disaster survivors—particularly those disaster survivors who reside in areas with limited housing stock. Congress may also wish to explore disaster housing solutions that provide the flexibility needed to support disaster survivors when the existing solutions are infeasible or impractical (e.g., there are not enough hotels/motels to shelter people through the TSA program, or there is not space available to deploy MHUs).203 To accomplish this, Congress may consider requiring FEMA to collaborate with disaster housing partners to identify and outline emergency, short-term, interim, and long-term disaster housing solutions. Additional y, this may require an update to the National Disaster Housing Strategy204 to reflect the findings of FEMA’s evaluation. An update to the National Disaster Housing Strategy may also present the opportunity to update the roles and responsibilities of housing partners, disaster housing practices, and solutions for meeting the housing needs of disaster survivors across al phases of disaster recovery. Congress may also consider pursuing legislative solutions, including by consolidating, eliminating, or revising existing authorities and programs; or creating new programs that address congressional y identified unmet needs. 198 GAO, U.S. Virgin Islands Recovery, p. 33. 199 GAO, U.S. Virgin Islands Recovery, p. 36. 200 GAO, U.S. Virgin Islands Recovery, p. 44. 201 GAO, U.S. Virgin Islands Recovery: Additional Actions Could Strengthen FEMA’s Key Disaster Recovery Efforts, GAO-20-54, November 2019, “ Recommendations for Executive Action,” https://www.gao.gov/products/GAO-20-54?mobile_opt_out=1#summary_recommend (hereinafter GAO, U.S. Virgin Islands Recovery: Additional Actions, “Recommendations for Executive Action”). See Recommendation 1 “Status” and “Comments.” T his involved “review[ing] a range of existing documentation, including findings from after action reports conducted following prior disasters and the agency’s Continuous Improvement Program.” 202 GAO, U.S. Virgin Islands Recovery: Additional Actions, “Recommendations for Executive Action.” See Recommendation 1 “Status” and “Comments.” 203 GAO, U.S. Virgin Islands Recovery, p. 35. 204 T he National Disaster Housing Strategy describes how disaster housing is provided, but it was last published in 2009. T he strategy and appendices are available on FEMA’s website. FEMA, “ T he National Disaster Housing Strategy,” last updated May 1, 2014, https://www.fema.gov/media-library/assets/documents/20294. Congressional Research Service 46 Housing Issues in the 116th Congress Community Development Block Grants-Disaster Recovery (CDBG-DR) HUD provides CDBG-DR grants to states and localities to assist their recovery efforts following a presidential y declared disaster. General y, grantees must use at least half of these funds for activities that principal y benefit low- and moderate-income persons or areas. The program is designed to help communities and neighborhoods that otherwise might not recover due to limited resources.205 CDBG-DR is not available for al major disasters because it is general y subject to Congress passing CDBG supplemental appropriations. In the 116th Congress, CDBG-DR has been provided $2.4 bil ion to aid disaster-affected communities with long-term recovery, including the restoration of housing, infrastructure, and economic activity.206 This follows the provision of $37 bil ion for CDBG-DR in the 115th Congress.207 While CDBG-DR has had a significant role in funding recovery efforts from past disasters, and continues to play a major role in the recovery from the 2017 hurricanes, it is not a formal y authorized program, meaning the rules that govern the funding use and oversight vary with HUD guidance accompanying each al ocation. Some Members of Congress have expressed interest in formal y authorizing CDBG-DR, in part in response to concerns about HUD’s oversight of CDBG-DR funding. In July 2019, the House Financial Services Committee ordered to be reported H.R. 3702, the Reforming Disaster Recovery Act of 2019, which would authorize CDBG-DR and includes a number of provisions to codify financial controls over program funds. The House passed the bil in November 2019. For more information on CDBG-DR, see CRS Report R46475, The Community Development Block Grant’s Disaster Recovery (CDBG-DR) Component: Background and Issues. Housing-Related Tax Extenders In the past, Congress has regularly extended a number of temporary tax provisions that address a variety of policy issues, including certain provisions related to housing. This set of temporary provisions is commonly referred to as “tax extenders.” Two housing-related provisions that have been included in tax extenders packages recently are (1) the exclusion for canceled mortgage debt, and (2) the deduction for mortgage insurance premiums, each of which is discussed further below. The most recently enacted tax extenders legislation was included in the Further Consolidation Appropriations Act, 2020 (P.L. 116-94) in the 116th Congress. That law extended the exclusion for canceled mortgage debt and the ability to deduct mortgage insurance premiums through the end of 2020 (each had previously expired at the end of 2017). For more information on tax extenders, see CRS Report R46243, Individual Tax Provisions (“Tax Extenders”) Expiring in 2020: In Brief . 205 U.S. Department of Housing and Urban Development, Community Development Block Grant Disaster Recovery Program , HUD Exchange, 2014, https://www.hudexchange.info/programs/cdbg-dr/. 206 P.L. 116-20. 207 For the allocation of these funds, see https://www.hudexchange.info/programs/cdbg-dr/cdbg-dr-grantee-contact-information/#all-disasters. Congressional Research Service 47 Housing Issues in the 116th Congress Exclusion for Canceled Mortgage Debt Historical y, when al or part of a taxpayer’s mortgage debt has been forgiven, the forgiven amount has been included in the taxpayer’s gross income for tax purposes.208 This income is typical y referred to as canceled mortgage debt income. During the housing market turmoil of the late 2000s, some efforts to help troubled borrowers avoid foreclosure resulted in canceled mortgage debt.209 The Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142), signed into law in December 2007, temporarily excluded qualified canceled mortgage debt income associated with a primary residence from taxation. The provision was original y effective for debt discharged before January 1, 2010, and was subsequently extended several times. Rationales put forth when the provision was original y enacted included minimizing hardship for distressed households, lessening the risk that nontax homeownership retention efforts would be thwarted by tax policy, and assisting in the recoveries of the housing market and overal economy. Arguments against the exclusion at the time included concerns that it makes debt forgiveness more attractive for homeowners, which could encourage homeowners to be less responsible about fulfil ing debt obligations, and concerns about fairness given that the ability to realize the benefits depends on a variety of factors.210 More recently, because the economy, housing market, and foreclosure rates have improved significantly since the height of the housing and mortgage market turmoil (at least prior to the onset of the COVID-19 pandemic), the exclusion may no longer be warranted. For more information on the exclusion for canceled mortgage debt, see CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income. Deductibility of Mortgage Insurance Premiums Traditional y, homeowners have been able to deduct the interest paid on their mortgage, as wel as property taxes they pay, as long as they itemize their tax deductions.211 Beginning in 2007, homeowners could also deduct qualifying mortgage insurance premiums as a result of the Tax Relief and Health Care Act of 2006 (P.L. 109-432).212 Specifical y, homeowners could effectively treat qualifying mortgage insurance premiums as mortgage interest, thus making the premiums deductible if homeowners itemized and their adjusted gross incomes were below a specified threshold ($55,000 for single, $110,000 for married filing jointly). Original y, the deduction was to be available only for 2007, but it was subsequently extended several times. 208 Generally, any type of canceled debt is to be included in a taxpayer’s gross income. Several permanent exceptions to this general tax treatment of canceled debt exist. T hey are discussed in CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Incom e. 209 For example, canceled mortgage debt is common in a “short sale,” when the lender allows the borrower to sell the home for less than the remaining amount owed on the mortgage and may forgive the remaining debt. 210 For example, being able to take advantage of the exclusion depends on whether or not a homeowner is able to negotiate a debt cancelation, the income tax bracket of the taxpayer, and whether or not the taxpayer retains ownership of the house following the debt cancellation. 211 P.L. 115-97, often referred to as “T he T ax Cuts and Jobs Act,” temporarily changed how homeowners treat mortgage interest and property taxes for tax years 201 8 through 2025. The deductions are still available but may be limited for some homeowners. 212 In general, lenders require mortgage insurance for mortgages where the borrower makes a down payment of less than 20%. Mortgage insurance protects the lender in t he event that the borrower defaults on the mortgage. Mortgage insurance fees, or premiums, are usually paid by the borrower. Congressional Research Service 48 Housing Issues in the 116th Congress Two possible rationales for al owing the deduction of mortgage insurance premiums are that it assisted in the recovery of the housing market, and that it promotes homeownership. The housing market, however, has largely recovered from the market turmoil of the late 2000s, and it is not clear that the deduction has an effect on the homeownership rate. To the degree that owner-occupied housing is over subsidized, extending the deduction could lead to a greater misal ocation of the resources that are directed toward the housing industry. Author Information Katie Jones, Coordinator Libby Perl Analyst in Housing Policy Specialist in Housing Policy Darryl E. Getter Elizabeth M. Webster Specialist in Financial Economics Analyst in Emergency Management and Disaster Recovery Mark P. Keightley Lida R. Weinstock Specialist in Economics Analyst in Macroeconomic Policy Maggie McCarty Specialist in Housing Policy Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. Congressional Research Service R43792 · VERSION 19 · UPDATED 49