The need for the production of affordable rental units will be "a major thrust" of Millennial Housing Commission's report to Congress.

The housing commission, which is scheduled to present its findings in late May, also is expected to call for the creation of a secondary market for the financing builders need to acquire land, develop lots and erect houses.

And it is likely to recommend that the Federal Housing Administration become a "more nimble player" in the multi-family sector, and propose a "substantial expansion" of the Low-Income Housing Tax Credit program.

In total, says long-time housing consultant and commission member Cushing Dolbeare, the report would be one "the housing world can rally around," Dolbeare, who stressed that she was speaking as a private citizen rather than on behalf of the commission, made her remarks at a recent Mortgage Bankers Association's annual commercial real estate finance/multi-family housing conference. She was a panelist on a session on why multi-family housing gets little or no respect at any level of government.

With an "absolute lack of affordable housing, we can't even get it on the agenda," said moderator Shekar Narasimhan. "We pay tribute to fire fighters and policemen as the 'New American Heroes,' but we don't seem to give a damn where they live or how much they pay for it."

Dolbeare ventured that one reason no one seems to care about the multi-family sector is that America is the best housed country in the world. But, she added, the affordable housing crisis is looming so large, especially for very low and extremely low-income families, that it will soon be hard to ignore.

"There's an enormous need at the bottom that reverberates up the ladder," she said.

Lobbyist Doyle Bartlett agreed, saying the housing industry is a victim of its own success. "Whenever we talk to government officials, it centers around what we can do to get low-income families into homes of their own," he said.

Bartlett said one of the problems housing advocates face is that there is "no political base" among low-income tenants. "Renters are not perceived as voters, and even if they are, it's hard to quantify because they're unorganized and extremely mobile," he explained. "It's a huge issue."

Dolbeare said that while her fellow commission members are "still discussing the details," it is "fairly clear" the panel will call for a new production program run through state housing agencies rather than at the federal level.

So that the program can be better coordinated with other social endeavors, she said, Uncle Sam would "set the goals" but would not be involved in how the program is operated.

The FHA, she added, needs to be able to "move with the market" and not be forced to ask Congress every time it wants to change an existing program or start a new one.

Meanwhile, at a housing conference in Park City, Utah, another commission member, Kent Colton, a senior scholar at the Harvard Joint Center for Housing Studies, said the panel also plans to address the issue of production financing in an effort to protect builders and developers from running out of funding or paying dearly when money is scarce.

Nothing would make Dallas builder Kent Conine happier. While plenty of money is currently available to buy and develop land and build houses on it, Conine remembers when acquisition, development and construction funding wasn't so easy to come by.

"I've been through it twice, once in the late '80s and again in the mid-'90s, and I don't want to go through it again," said Conine, who believes the federal government in general and Fannie Mae and Freddie Mac in particular should provide greater support for housing production lending.

"Just as sustained access to capital for home ownership is necessary, so too is it essential that mechanisms be developed to improve the flow of capital for housing production," he said at the Midwinter Conference. "It just seems so logical; we've fixed the primary market and now its time to fix the market for housing production loans."

Conine, who, as first vice president of the National Association of Home Builders, is on the ladder to lead the 205,000-member group next year, said builders and developers are still at the mercy an ever-decreasing pool of specialized lenders who charge too much and tend to deal mostly with large, heavily collateralized players.

According to the NAHB officer, builders and developers, especially small and mid-size firms, are limited largely to commercial banks and thrifts as their main source of production funding. And as a result, commercial banks and thrifts account for more than 90% of residential AD&C lending, with commercial banks alone accounting for more than 80%.

Consolidation in the financial sector also has impacted availability, he said. "Waves of mergers and failures in the bank and thrift industries have resulted in the loss of locally-based loan outlets."

While rates on AD&C loans are generally tied to the prime rate plus 1 to 2 percent points, he said, lenders often earn a sizable spread over their costs of funds relative to the risk they incur.

"For the past 10 years, commercial banks have maintained a 300-basis point spread between the published prime rate and the federal funds rate," he said. Include "the substantial points and fees" lenders also charge, he added, and the spread can easily top 500 basis points.

"This is an extremely wide spread, especially on construction loans on pre-sold homes, which have shown risk characteristics almost as favorable as home mortgages," Conine said.

The NAHB is hoping the secondary mortgage market can bring to production lending some of the same efficiencies it has to the primary market, namely lower costs, standardization and a continuous flow of funds.

"We've worked for years developing the housing finance market into one that's the envy of the world," Conine said. "Now the challenge is to develop an efficient mechanism for financing residential development.

In particular, the association, whose members employ an estimated 8 million people, would like to see a delivery system that would facilitate the securitization of acquisition, development and construction loans and the development of securities structures for such loans.

"Access to capital market investors could increase market efficiency, lower borrowing costs and help the building industry better navigate future credit crunches," Conine said.

Short of that, it is seeking a legislation clarification to the charters of Fannie Mae and Freddie Mac that give the two government sponsored enterprises the authority to purchase and package production loans. And it backing the creation of an FHA program to insure AD&C loans.

At the very least, though, the influential trade group is pushing banking regulators to distinguish between residential and commercial real estate. As it is now, Conine said, loans to build houses are lumped in with loans on office buildings and shopping centers, even though the risk is far less.