Housing Trust Fund bill conveys threat to affordable housing
Even though a bill negatively affecting the Housing Trust Fund and being considered this week by the House Financial Services Committee may not pass as written — or at all, it is more proof that threats face affordable housing, according to LeadingAge Vice President for Housing Policy, Congressional Affairs and Housing Linda Couch.
H.R. 4560, also known as the GSE Jumpstart Reauthorization Act of 2017, would “suspend contributions by Fannie Mae and Freddie Mac to the Housing Trust Fund during any period that the full required dividend payments under the Senior Preferred Stock Purchase Agreements for such enterprises are not made, and for other purposes,” according to a discussion draft of the proposed legislation posted on the committee's website in advance of the Tuesday morning full committee meeting at which it is expected to be discussed.
Put another way, the bill, if enacted, would stop funding for the Housing Trust Fund (which comes from a 0.42% fee on Fannie Mae and Freddie Mac activity) until investors in Fannie Mae and Freddie Mac received dividend payments. Such payments only can occur, however, when Congress enacts legislation to reform Fannie Mae and Freddie Mac, which have been in government conservatorship for nearly a decade.
The bill was introduced Wednesday in the House by Rep. French Hill (R-AR), a member of the committee. It has no co-sponsors.
“I feel pretty strongly that the Trust Fund will remain,” Couch told McKnight's Senior Living. “I think that the Senate will moderate Mr. Hill's bill.”
Her short-term optimism on this issue is bolstered, she added, because even though Financial Services Committee Chairman Jeb Hensarling (R-TX) “is not the biggest supporter” and has expressed a desire to overhaul Fannie Mae and Freddie Mac, he also recently said that federal housing financing, even after reform, will have an affordable housing component.
“There has been an effort over the years, since the Trust Fund was established, to eliminate it, and this is just another effort,” Couch said. “There has always been a couple members in the House intent on painting the Trust Fund in a negative light, as something either we don't need, or that is wasteful or could be done better or in a different way. But the truth is, [the Department of Housing and Urban Development] doesn't have any other program that is producing housing at this scale.”
Bills such as this one, however, still are threats to LeadingAge, banks and other organizations supporting seniors and others who need affordable housing, she said.
“It's disruptive, and it really takes away our focus from expanding resources when we constantly have to defend resources that are currently out there helping people,” Couch said.
It was just in June that HUD allocated $219 million for affordable housing via the Trust Fund for fiscal year 2017. States disperse the monies locally, and because the program is administered as a block grant, states have some flexibility in how the funds are used.
The affordable housing program was authorized by the Housing and Economic Recovery Act of 2008 but hadn't been capitalized until 2016, when a total of $174 million was allocated to states. The fund is exclusively targeted to help build, preserve and rehabilitate housing for households with “extremely low incomes,” defined as being at or below 30% of area median income, or less than the federal poverty guideline.
“The Housing Trust Fund is a really important source of financing to produce and preserve housing for the lowest-income seniors,” Couch added. “It would be a real tragedy to lose the Trust Fund as a resource.”
The National Low Income Housing Coalition said it “strongly opposes” Hill's bill.
“We agree that bipartisan housing finance reform is long overdue, but holding the Housing Trust Fund hostage, at a time when our country is experiencing a severe shortage of affordable rental housing for people with the greatest needs, is unnecessary, cruel and counterproductive,” NLIHC President and CEO Diane Yentel said in a statement.
Beyond the Trust Fund
In addition to issues related to the Trust Fund, affordable housing also will be affected by the ongoing tax reform efforts contained in House and Senate bills that currently are being reconciled, Couch said. The industry is keeping an eye on the effort's potential effects on private activity bonds and the Low-Income Housing Tax Credit.
The potential government shutdown, however, isn't a threat to affordable housing — right now, anyway, she said.
“It's our sense that most communities, at least in the Section 202 world and the Section 8 world, will probably be fine with the [continuing resolution] that goes through maybe January,” Couch said. “It's after January we'll start to get really nervous about HUD's financial capacity to renew contracts. So getting a new top-line number that's sufficient to undergird successful appropriations bills is going to be really important really soon.”
Looming, however, is the fiscal year 2019 budget request from HUD, the first such request to reveal the desires of HUD Secretary Ben Carson and Director of the Office of Management and Budget Mick Mulvaney, she said.
“All signs point to more dramatic policy recommendations and even budget cut recommendations,” Couch added.