In what may be one of the longest tests of perseverance and intestinal fortitude in the history of legislative advocacy for affordable housing, supporters of the National Housing Trust Fund (NHTF) finally saw their proposal come to fruition late last week. On December 11, the Federal Housing Finance Agency (FHFA) formally directed Fannie Mae and Freddie Mac to begin setting aside and allocating funds for the NHTF and the Capital Magnet Fund (CMF). While both programs were authorized by the Housing and Economic Recovery Act of 2008, the FHFA suspended the set-aside to allow the enterprises to recover during their conservatorship period. While the GSEs are still in conservatorship, the FHFA has determined that they are financially stable enough to withstand the .042 percent set aside which will finance both funds. The Fannie and Freddie must begin putting monies for the programs in January 2015. The coalition of housing advocates, led by the National Low Income Housing Coalition, have tried multiple strategies for implementing NHTF and getting it funded, including several versions of legislation that would have provide funding from the GSEs and, more recently, a bill sponsored by Rep. Keith Ellison (D-MN) which would have generated funds through revisions to the mortgage interest deduction.
Comparable to the HOME Investments Partnership program, the NHTF is a need-based allocation that will provide grants to state and local governments for the acquisition, new construction, reconstruction, and/or rehabilitation of affordable housing. It will be administered by the U.S. Department of Housing and Urban Development (HUD) under regulations which were originally proposed back in 2010, but not yet finalized. It is targeted largely at rental housing for extremely low income households (0-30% of AMI). CMF, administered by the U.S. Department of Treasury, directs grants to Community Development Financial Institutions and others sponsors of local economic and community development projects. Although it only received appropriations once in 2009, the Fund has a proven track record—the initial award distributed in 2010 leveraged $1 billion of private capital for high poverty neighborhoods and preserved 6,800 units of affordable housing.
Some have called the FHFA’s announcement strategically timed to correspond with the House’s approval of the continuing-resolution omnibus spending bill, which has established the fiscal year 2015 funding levels for corresponding HUD programs, including HOME. There has always been concern among housing advocates that once there was a dedicated stream of funds outside of the Federal budget process for affordable housing that Congress would stop providing for the HOME program which has been subject to substantial cuts in the last few years. The FHFA announcement has also produced varied reactions from the Hill, with Republicans questioning the GSE’s ability to maintain profitability with an added set-aside, and Democrats praising the funds as a boon for both low-income families and the American economy at large.
It is expected that the funds for both NHTF and CMF will be available beginning in early 2016. We will continue to keep you updated as HUD finalizes the program rule for NHTF.
For more, visit the FHFA website to review the letters to Fannie Mae and Freddie Mac as well as the FHFA official statement.
