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November 10, 2016 MEMORANDUM. NCSHA Members. NCSHA Policy and Government Affairs Team. NCSHA s 2016 Election Analysis.

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National Council of State Housing Agencies November 10, 2016 MEMORANDUM TO: FR: RE: NCSHA Members NCSHA Policy and Government Affairs Team NCSHA s 2016 Election Analysis Executive Summary Donald Trump
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National Council of State Housing Agencies November 10, 2016 MEMORANDUM TO: FR: RE: NCSHA Members NCSHA Policy and Government Affairs Team NCSHA s 2016 Election Analysis Executive Summary Donald Trump was elected president on Tuesday, winning slim majorities in several states won by Barack Obama in 2008 and While Trump has not detailed housing policy specifics during his presidential campaign, he has stressed the importance of homeownership and expressed concerns about over-regulation of the housing industry, including builders and lenders. Trump has also criticized the current tax code and promoted his plan to eliminate deductions and exemptions and reduce federal tax rates. Republicans maintained control of the Senate and House, with smaller majorities in both. Despite these smaller majorities, they will still be in a strong position to support the new president s agenda. With a smaller Senate majority that is even further short of the 60-member majority necessary to overcome filibusters and other minority opposition to Senate action, Republicans may find it difficult to overcome gridlock and pass legislation that does not accommodate Senate Democrats priorities. In gubernatorial election outcomes, Republicans slightly increased their majority of state administrations under GOP control and seven new governors were elected. The attached analysis provides more details on election-related news available at this point. We will continue to provide updates and additional analysis as events warrant. Trump s Housing Policies Affordable Housing and Community Development. Though Trump has not specifically addressed affordable housing and community development policy proposals in his official policy proposals, Trump did say during a speech to the National Association of Home Builders in August that he wants to increase the homeownership rate, reduce regulations, and expand access to mortgage credit. Trump has not stated any position on housing finance reform or the future of Fannie Mae and Freddie Mac. Federal Spending. Trump s penny plan would help offset his proposed tax cuts by reducing total funding for non-defense discretionary programs by 1 percent below the previous year s total each year. In ten years under this plan, non-defense appropriations would be about 29 percent below current levels, after accounting for inflation. This means that non-defense discretionary spending, already constrained by spending caps under the Budget Control Act of 2011, would be 37 percent less than its 2010 level, adjusted for inflation, by Financial Regulation. Trump has called for repeal of or significant changes to the Dodd-Frank Wall Street Reform Act, stating several times that he believes Dodd-Frank is holding back economic recovery. Trump has also called for a moratorium on all federal financial regulations. In addition, Trump promised last month that his Administration would repeal two federal regulations for every new regulation it implements. Trump s Tax Policies Corporate Tax Reform. Trump has pledged to lower the corporate tax rate from 35 percent to 15 percent and eliminate most corporate tax credits. The only current tax credit Trump has explicitly said he would maintain is the Research and Development Credit. Trump s tax plan does not mention the Low Income Housing Tax Credit. These proposals are in line with the House Republican s Better Way tax reform blueprint released earlier this year. Trump s plan does not specify how he would handle the tax-exempt status of municipal bonds, including private activity bonds; however, tax reforms he has proposed would make taxexempt bonds less desirable for high-worth individuals, who would see their tax rate drop. Specifically, Trump would collapse the current seven individual tax brackets into three: those earning less than $75,000 would pay a tax rate of 12 percent; those earning between $75,000 and $225,000 would pay a tax rate of 25 percent; and those earning more than $225,000 would pay a tax rate of 33 percent. Currently, taxpayers in the highest tax bracket pay a top rate of 39.6 percent. 2 Infrastructure Tax Credit. In an effort to address the nation s infrastructure needs, Trump supports the creation of a new corporate tax credit equal to 82 percent of the equity amount invested in eligible infrastructure projects. Trump maintains that such a credit would be revenue neutral when factoring in the tax revenues resulting from the wage income associated with the infrastructure projects and the tax revenues from additional contractor profits. The plan does not specify the types of infrastructure projects that would be eligible for the credit and whether housing would be considered infrastructure for purposes of the credit. Trump s infrastructure plan recognizes that historically, America has financed infrastructure through the issuance of tax-exempt bonds. While it does not call for the elimination of taxexempt bond finance, it maintains that bond financing has limitations, as some infrastructure projects need an equity component, construction costs tend to be higher when projects are built by the government rather than the private sector, and not all projects meet bond financing s complex eligibility rules. Trump s plan states that the infrastructure tax credit would serve as a critical supplement to existing financing programs, public-private partnerships, Build America Bonds, and other prudent funding opportunities. Republican Party Platform Approved at the Republican National Convention in July 18, the Republican platform includes several statements related to federal housing policy that will likely inform the new Administration s and Congress plans for housing-related activity. The platform strongly supports homeownership and recommends reducing the federal government s role in housing finance, focusing Federal Housing Administration (FHA) singlefamily mortgage insurance on low- and moderate-income families, promoting responsible borrower and lender behavior, establishing clear and prudent underwriting standards and guidelines on predatory lending and acceptable lending practices, reforming anti-poverty programs, limiting fair housing and fair lending regulations, and abolishing the Consumer Financial Protection Bureau (CFPB). The platform also calls for a comprehensive review of federal regulations, especially those dealing with the environment, that make it harder and more costly for Americans to rent, buy, or sell homes. The platform calls for the federal government to scale back its involvement in the housing finance system, including Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). It also states that the next Administration should reconsider the utility of Fannie Mae and Freddie Mac. The platform states that the Republican party will end the government mandates that required Fannie Mae, Freddie Mac, and federally insured banks to satisfy 3 lending quotas to specific groups, and that a Republican administration will clear away the jumble of subsidies and controls that complicate and distort home-buying. The platform argues that the current Administration is trying to seize control of the zoning process through its Affirmatively Furthering Fair Housing regulation, which threatens to undermine zoning laws in order to socially engineer every community in the country. The platform says that the federal government has a legitimate role in enforcing nondiscrimination laws, but that the AFFH regulation has nothing to do with proven or alleged discrimination and everything to do with hostility to the self-government of citizens. The platform also says the party will end the government s use of disparate impact theory in enforcing anti-discrimination laws with regard to lending. On taxes, the platform promotes tax reform that eliminates special interest provisions and lowers the corporate tax rate. The platform says that tax rates that penalize thrift or discourage investment must be lowered and whatever current tax provisions are disincentives for economic growth must be changed. It says Republicans will eliminate as many special interest provisions and loopholes as possible and curb corporate welfare, especially where their erosion of the tax base has created pressure for higher rates. However, the platform proposes to maintain the charitable contributions deduction because of the vital role of religious organizations, charities, and fraternal benevolent societies in fostering generosity and patriotism. Republicans Maintain Senate Majority Senate Republicans retained their majority with an expected net loss of two seats, taking their majority to 52-48, including the two Independent senators who caucus with the Democrats. Seven Democratic senators won reelection. Three won seats occupied by retiring Democrats: California Attorney General Kamala Harris (CA) replaces Barbara Boxer, House Budget Committee Chairman and long-time Ways and Means Committee member Chris Van Hollen (MD) replaces Barbara Mikulski, and former Nevada Attorney General Catherine Cortez Masto (NV) replaces Harry Reid. Two Democrats won seats from incumbent Republicans. In Illinois, U.S. House Representative Tammy Duckworth replaces Senate Appropriations and Banking Committee member Mark Kirk and in New Hampshire, former Governor Maggie Hassan replaces Kelly Ayotte. 4 Twenty Republican senators won reelection, and Indiana Representative and House Ways and Means Committee member Todd Young (R) won his race to replace retiring Senate Finance Committee member Dan Coats (R-IN). In Louisiana, Republican State Treasurer John Kennedy is expected to prevail in his December 10 runoff election to fill the seat being vacated by retiring Banking Committee member David Vitter. Republicans Preserve House Majority, Democrats Pick Up Additional Seats Republicans retained their controlling majority in the House of Representatives with at least 239 seats, down from 247 currently. Democrats will have at least 193 seats in the legislative body, up from 188 currently. Four races have not been decided; two in California and two in Louisiana. The two races in Louisiana will be decided by runoff elections to be held on December 10, based on state laws requiring a candidate to win more than 50 percent of the vote to be elected in the general election. In Louisiana s 3 rd District, the runoff election is between two Republicans, so this seat is included in the Republican total above. According to the current results, Democrats have increased their representation in the House by seven seats and are projected to win one of the four races still undecided. If current projections hold true, the final breakdown of the House of Representatives would be 241 Republicans to 194 Democrats. Senate and House Leadership Senate. The Senate must replace retiring Minority Leader Senator Harry Reid (D-NV). Senator Chuck Schumer (D-NY) carries endorsements from the current leadership and is expected to take the role. Senator Dick Durbin (D-IL) will seek to remain the Minority Whip and may face a challenge from Patty Murray (D-WA). Senate Majority Leader Mitch McConnell (R-KY) and Majority Whip Senator John Cornyn (R- TX) are expected to retain their leadership positions. House. House Speaker Paul Ryan (R-WI) has announced his intention to run for another term as Speaker of the House. Majority Leader Kevin McCarthy (R-CA), Majority Whip Steve Scalise (R-LA), and Conference Chair Cathy McMorris Rodgers (R-WA) are all expected to seek reelection to their leadership positions. Minority Leader Nancy Pelosi (D-CA), Minority Whip Steny Hoyer (D-MD), and Assistant Minority James Clyburn (D-SC) are all expected to retain their leadership positions. 5 Key Senate Committees Appropriations. Senate Appropriations Committee Chairman Thad Cochran (R-MS) was not up for reelection and is expected to remain in his Committee leadership role in the new Congress. Senate Appropriations Ranking Member Barbara Mikulski (D-MD) is retiring at the end of this year, opening the door for a new top Democrat on the panel. Senator Patty Murray (D-WA), member of the HUD Subcommittee, is a likely contender to take over for Mikulski, but this will depend on whether she is willing to leave her current role as Ranking Member of the Senate Committee on Health, Education, Labor and Pensions. Senator Dick Durbin (D-IL) is also considered a potential successor for Mikulski. HUD Subcommittee Chair Susan Collins (R-ME) and Ranking Member Jack Reed (D-RI) were not up for reelection and are expected to continue in their leadership roles. Senator Mark Kirk (R-IL) lost his reelection, opening up a Republican spot on the Subcommittee, if Committee and Subcommittee member totals and party ratios remain the same in the new Senate. Banking. Senator Mike Crapo (R-ID) is expected to succeed Richard Shelby (R-AL) as Chairman of the Banking Committee. Shelby can no longer serve as Chair because of Republican caucus term limits. Sherrod Brown (D-OH) is expected to remain the Committee s Ranking Member. With Crapo, who served as Ranking Member in 2013 and 2014, as the new Chairman, the Committee could take a new look at addressing housing finance reform, Dodd-Frank changes, and regulatory relief for financial institutions. It is not yet known who will lead the Housing, Transportation, and Community Development (Housing) Subcommittee. Tim Scott (R-SC) currently chairs the Housing Subcommittee and Bob Menendez (D-NJ) currently serves as Ranking Member. Scott was reelected and Menendez was not up for reelection. Committee members Mark Kirk (R-IL) and David Vitter (R-LA), both of whom voted in favor of the Johnson-Crapo housing finance reform bill, are not returning to Congress. It is not yet known who will take their place on the Committee. Finance. Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) will retain their positions. The Finance Committee will have at least one 6 opening in the next Congress due to the retirement of Senator Dan Coats (R-IN). All other Finance Committee members up for reelection, including Senators Richard Burr (R-NC) and Pat Toomey (R-PA), who both faced competitive races, will return to the Senate and presumably the Finance Committee next year. Senator Chuck Schumer (D-NY) is expected to become Minority Leader in the next Congress, and it is not clear whether he will continue with committee assignments in that new role. Key House Committees Appropriations. House Appropriations Committee Chairman Hal Rogers (R-KY) is termlimited. The new panel chairman will likely be Rodney Frelinghuysen (R-NJ), though there is a possibility Robert Aderholt (R-AL) will seek the position. Ranking Member Nita Lowey (D-NY) is expected to remain in her position. HUD Subcommittee Chairman Mario Diaz-Balart (R-FL) and Ranking Member David Price (D- NC) both won reelection and are expected to remain in their roles. HUD Subcommittee member David Jolly (R-FL) lost his reelection, thus opening one Republican spot on the Subcommittee, provided the House retains the same number of Republicans and Democrats on each Committee and Subcommittee. There is a possibility these numbers may change to reflect the new House party ratios. Financial Services. Jeb Hensarling (R-TX) is likely to remain Chairman of the House Financial Services Committee. Maxine Waters (D-CA) is expected to remain as the Committee s Ranking Member. Scott Garrett (R-NJ), a key Hensarling ally and current Chairman of the Capital Markets and Government Sponsored Enterprises Subcommittee, was defeated and will not be returning to Congress. As Chair of the Subcommittee, Garett was a strong critic of Fannie Mae and Freddie Mac and supported privatizing the housing finance system. It not yet known who will take over for Garret as Chairman. Carolyn Maloney (D-NY) is expected to remain as the Subcommittee s Ranking Member. Blaine Luetkemeyer (R-MO) is expected to remain Chairman of the Housing and Insurance Subcommittee, although he may seek to chair the Capital Markets Subcommittee or another position. Emanuel Cleaver (D-MO) is expected to remain as Ranking Member of the Housing Subcommittee. The Committee will experience substantial turnover on the Republican side next Congress. In addition to Garrett, current Republican Committee members Randy Neugebauer (R-TX), 7 Michael Fitzpatrick (R-PA), Lynn Westmoreland (R-GA), Robert Hurt (R-VA), Stephen Fincher (R-TN), Marlin Stutzman (R-IN), and Frank Guinta (R-NH) will all be leaving Congress. On the Democratic side, Patrick Murphy of Florida will also not be returning to Congress. Ways and Means. The House Ways and Means Committee also retains its current leadership, with Representatives Kevin Brady (R-TX) and Sander Levin (D-MI) continuing to serve as Chairman and Ranking Member, respectively. One Ways and Means Committee member, Representative Robert Dold (R-IL), lost his race. Another, Charles Boustany (R-LA), lost his bid to be elected governor. Representative Todd Young (R-IN) won his race for the Senate and therefore also leaves the Committee. Two Committee Democrats, former Chairman Charles Rangel (D-NY) and Representative Jim McDermott (D-WA), are retiring at the end of this Congress. Federal Departments and Regulatory Agencies While there is not much news about potential Cabinet appointments in a Trump Administration or likely changes at regulatory agencies, there is some preliminary news to share. Treasury. Media reports have indicated that Trump is seriously considering investment banker Steven Mnuchin as his nominee for Treasury Secretary. Mnuchin previously worked at Goldman Sachs for 17 years and then founded and chaired OneWest Bank Group before it was sold. He also founded Dune Real Estate Partners, which specializes in distressed commercial and residential real estate investments. Federal Housing Finance Agency (FHFA). Current law states that the president can only replace the FHFA director for due cause. Consequently, current Director Mel Watt, who was nominated by President Obama, may continue in his role during the beginning of the Trump Administration if he chooses to do so. Watt s contract expires in Consumer Financial Protection Bureau (CFPB). Current CFPB Director Richard Cordray is serving a five-year term that expires in Under current law, the president can only remove the CFPB director for due cause, meaning that Cordray will likely be able to finish out his term. However, a recent decision from the U.S. Court of Appeals for the District of Columbia removed the for cause provision, potentially giving Trump the latitude to remove Cordray and appoint his own director (CFPB is currently appealing the decision). It is not known at this time if Trump intends to nominate a CFPB director and, if so, who he might nominate. Trump has called for a repeal of the Dodd-Frank Wall Street Reform Act and elimination of CFPB, which it created. 8 Governors In the 12 state gubernatorial elections, current projections estimate that Republicans will gain two or three seats, depending on the outcome in North Carolina, where incumbent Republican Pat McCrory (R) is trailing Roy Cooper (D) by less than 5,000 votes with all precincts reporting. If Roy Cooper maintains his lead and is elected governor, there will be 33 Republicans, 16 Democrats, and one Independent governor in Three governors will switch from Democrat to Republican. Chris Sununu will replace New Hampshire s current governor, Maggie Hassan, who ran against Senator Kelly Ayotte. Eric Greitens was elected governor of Missouri, where the incumbent did not run for reelection because of term limits. The current lieutenant governor of Vermont, Phil Scott, won election to replace retiring Governor Peter Shumlin. Republicans retained control in Indiana, as Eric Holcomb will replace Vice President-Elect Mike Pence, and in North Dakota, as Doug Burgum will replace Jack Dalrymple. Democrats re
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