At long last, the National Housing Trust Fund (NHTF) is on its way to getting its first dollars.
The Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to begin setting aside and allocating funds to the NHTF as well as the Capital Magnet Fund.
The move comes six long years after the trust fund was established under the Housing and Economic Recovery Act of 2008, which was signed by President George W. Bush.
“It’s a great victory,” says Sheila Crowley, who’s been leading the fight for the housing trust fund. “It’s a big deal.”
President and CEO of the National Low Income Housing Coalition, Crowley and her organization began discussing the idea for a national housing fund in 2000 with the objective of directing new money toward housing for extremely low income households.
The NHTF achieves that goal by dedicating funds to build, preserve, and rehabilitate affordable housing. It was supposed to be capitalized with contributions from Fannie Mae and Freddie Mac, but the government-sponsored enterprises (GSEs) were placed into conservatorship by FHFA in September 2008 during the housing crisis and payments to the fund were suspended. As a result, the fund has existed in name only.
FHFA Director Mel Watt’s action changes that by lifting the suspensions and directing the GSEs to begin making contributions. The move comes as the companies have returned to profitability.
In separate Dec. 11 letters to Fannie Mae and Freddie Mac, Watt writes “circumstances have changed and the temporary suspension is no longer justified.”
Starting with fiscal 2015, both Fannie Mae and Freddie Mac are to set aside an amount equal to 4.2 basis points of each dollar of unpaid principal balance of their total new business purchases.
A Freddie Mac representative said the company will comply with Watt’s directions.
Approximately $500 million could be raised for both the NHTF and the Capital Magnet Fund in 2015, estimates Crowley. Those funds would then likely be allocated the following year.
The trust fund will provide block grants to the states, at least 90 percent of which must be used for the protection, preservation, rehabilitation, or operation of rental housing. No less than 75 percent of the funds for rental housing will benefit extremely low income households with the rest benefiting those with very low incomes. Up to 10 percent of the resources may be used for homeownership activities for people with very low incomes.
The Capital Magnet Fund would provide competitive grants to community development financial institutions and nonprofit housing developers for affordable housing as well as community facilities and other projects.
Crowley and other supporters plan to continue to look for ways to increase NHTF funding.
What’s important is that this is a dedicated source of revenue unlike appropriated funds which must go through the budget approval process year after year, explains Crowley.
Watt's landmark decision comes at a critical time, says Ali Solis, senior vice president and public policy and corporate affairs executive at Enterprise Community Partners.
"There are 20 million families suffering by having to pay more than half of the monthly incomes just to keep a roof over their heads," she says.
These new dollars will help serve these vulnerable households, according to Solis.
On the other side, there is still likely to be opposition. “I don’t have any doubt that there will be efforts to derail this, and we will have to be ever vigilant to fight them off,” Crowley says.
Rep. Ed Royce (R-Calif.) released a statement saying he is disappointed in today’s FHFA action.
"Contrary to what Fannie and Freddie apologists claim, the GSEs have yet to repay any of the taxpayer-funded bailout funds they received, which makes today's announcement by the FHFA outrageous,” he says. “Money coming in from the GSEs should go to the taxpayers instead of a slush fund for ideological housing groups to play around with.”
Noting there are many other leaders in Congress who support the NHTF, Crowley is undaunted. She’s used to fighting for the housing trust fund.
Connect with Donna Kimura, deputy editor of Affordable Housing Finance, on Twitter @DKimura_AHF.