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How Can We Fund Affordable Housing in this Budget Environment?
April 24, 2014
Today's blog post was written by Sham Manglik, Senior Policy Analyst, National Low Income Housing Coalition, with Alliance Communications Associate Emanuel Cavallaro.
Did you know that the lowest paid workers in America must often work multiple jobs to pay for housing, and many face severe housing cost burdens that put them at risk of homelessness? The latest data show that this income group, which is often made up of households headed by a single parent, persons with disabilities, and seniors, faces a shortage of 7 million affordable housing units. If you think Congress should do something about this, you might be surprised to learn that it already has. Sort of.
Way back in 2008, Congress created the National Housing Trust Fund as part of the Housing and Economic Recovery Act. It was meant to expand the supply of rental housing affordable to extremely low income households.
Fully funded, the National Housing Trust Fund would close the gap between the number of extremely low income renter households and the number of affordable units of housing available to them. That would mean more poor people would be able to afford housing, and fewer poor people would be at risk of becoming homeless. However, it has never been funded. What’s going on?
The fund’s initial financing was supposed to come from the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but, when the financial crisis hit, contributions from Fannie and Freddie were “temporarily” suspended. Nevertheless, there is cause for hope: the chances for underwriting the fund are the best they have been in years. Here’s the quick rundown of how this could happen:
- Current Profits from GSEs: Now that the financial crisis is over, and the economy is in recovery, Fannie and Freddie are once again turning a profit. Federal Housing Finance Agency (FHFA) Director Mel Watt could direct Fannie and Freddie to start contributing funding. If Fannie and Freddie contributed, starting retroactively from the first quarter of 2012 (the point when they started making profits) $760 million would flow to the fund.
- Housing Finance Reform: Both the House and Senate have put forward proposals to wind down Fannie and Freddie and put a new system in its place. It is crucial that the fund be included in any new system, as its authorization is tied to the GSEs. A draft bill offered by Senate Banking Committee Chair Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) would provide an estimated $3.75 billion a year to the fund—the biggest investment in affordable housing for low income households in 40 years! We’re excited about this opportunity and more than 700 organizations across the country agree! The bill is being marked up on April 29, and it’s up to advocates like you to make sure the bill maintains this level of funding as it advances.
- Tax Reform (aka the Big Money): So, there is no doubt that the fund must be financed through the current and any future housing finance system. Still, we will need more revenue to close the affordable rental housing gap. We can achieve this through changes to the mortgage interest deduction proposed by the United for Homes campaign and included in a bill introduced by Representative Keith Ellison (D-MN). The changes made in these proposals would generate nearly $200 billion over 10 years that would be dedicated to affordable housing!
This year could be a turning point for expanding the supply of affordable housing! Please stay tuned on how you can get involved at this crucial and historic time. Learn more about the National Housing Trust Fund at www.nhtf.org.