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Major Steps Advance Progress Toward a National Housing Trust Fund

Major progress was made this week toward the establishment of a National Housing Trust Fund. Financial Services Committee Chair Barney Frank (D-MA) successfully included an Affordable Housing Fund in a Government Sponsored Enterprises (GSEs) regulatory reform bill that was approved by the committee. The fund is expected to provide an estimated $500 million a year, with the funds targeted to the Gulf Coast in the first year. Included in the bill is a provision to reserve the use these funds for a future National Housing Trust Fund.

In addition, Mr. Frank and Housing and Community Opportunity Subcommittee Chair Maxine Waters (D-CA) introduced a Federal Housing Administration (FHA) modernization bill that includes another funding source reserved for the National Housing Trust Fund that would provide an estimated $300 million a year.

Finally, the House Budget Resolution passed this week includes the Affordable Housing Fund.

The National Housing Trust Fund campaign expects a National Housing Trust Fund bill to be introduced in early May and is now working on identifying bipartisan original co-sponsors.

The goal of the National Housing Trust Fund Campaign is enactment of a National Housing Trust Fund, a dedicated source of revenue to build and preserve 1.5 million homes primarily for extremely low income people over 10 years.

GSE Bill Including Money for Trust Fund Passes Committee

On March 29, the House Financial Services Committee approved H.R. 1427, the Federal Housing Financial Reform Act of 2007, by a vote of 45-19 with 13 Republicans supporting it. The bill includes an Affordable Housing Fund (see Memo, 3/16).

The bill, which would establish a new regulator for the GSEs, was introduced on March 9 with bipartisan support from Mr. Frank (D-MA) and cosponsors Representatives Mel Watt (D-NC), Richard Baker (R-LA) and Gary Miller (R-CA).

During the two-day committee markup, a major step was taken toward the establishment of a National Housing Trust Fund. Mr. Frank offered an amendment that would lay the financial groundwork for a National Housing Trust Fund and said he soon plans to introduce a bill to create the trust fund. Mr. Frank's amendment would allow the funds that the GSEs are required to provide to the Affordable Housing Fund to be transferred to any new legislation that only provides grants to provide affordable rental housing and affordable homeownership opportunities. Mr. Frank said the amendment was needed to preserve the committee's authority to use these funds when a National Housing Trust Fund bill is considered. An estimated $500 million per year would be available from the GSEs, with all of the money in the first year of the fund targeted to housing for very low and extremely low income families in the Gulf Coast communities devastated by Hurricane Katrina. The amendment was accepted by a vote of 45-19 with one Republican, Steve LaTourette (OH), voting in support.

The committee defeated several amendments to the Affordable Housing Fund. Ranking Member Spencer Bachus (R-AL) offered an amendment that would strike the fund from the bill, arguing that the fund was superfluous to a measure dealing with regulation of the GSEs. The amendment was defeated by a vote of 31-15 with three Republicans, Mr. LaTourette, Chris Shays (CT) and Jim Gerlach (PA), voting against it.

Mr. Bachus then offered an amendment that would move the administration of the funds from the states to the Federal Home Loan Banks. "I agree that there is a shortage of housing for extremely low income renter households, but when it comes to homeownership I don't believe there is a shortage," Mr. Bachus said. He spoke about the need for a fund using recent congressional testimony by NLIHC President Sheila Crowley (see Memo, 3/16), noting that 71% of extremely low income renters are paying more than 50% of their income for housing. The amendment was defeated by a vote of 36-16. Republicans voting against the amendment were Mr. Baker, Deborah Pryce (OH), Michael Castle (DE), Pete King (NY), Ed Royce (CA), Shelley Moore Capito (WV) and Mr. Gerlach.

Representative Judy Biggert (R-IL) offered an amendment to move the administration of the Affordable Housing Fund to HUD to be managed through the current HOME program. Mr. Frank argued against the measure saying that he soon plans to introduce the National Housing Trust Fund legislation and will hold, along with Housing and Community Opportunity Subcommittee Chair Maxine Waters (D-CA), several days of hearings when administrative options can be reviewed. Ms. Biggert's amendment was rejected by a vote of 35-20.

Representative Ruben Hinojosa (D-TX) successfully offered an amendment that would provide financial literacy and pre-purchase housing counseling to homebuyers who earn less than 50% of the median income prior to entering into a loan agreement. The amendment would not require any funding from the Affordable Housing Fund; current HUD funding and state run programs would carry out this requirement. The amendment was approved voice vote.

H.R. 1427 is expected to be considered by the full House in late April.

Additional Trust Fund Money in FHA Bill

On March 29, Mr. Frank and Ms. Waters introduced legislation titled Expanding Homeownership Act of 2007. The bill would modernize and update the Federal Housing Administration (FHA) programs in a variety of ways including down payment simplification, extension of mortgage terms and establishing mortgage premiums for zero and low down payment mortgages.

The bill also includes a provision that would produce another source of funding for the National Housing Trust Fund. The bill mandates that any savings resulting from a provision that permanently eliminates the current statutory volume cap on FHA reverse mortgage loans shall be used for grants to provide affordable rental housing and affordable homeownership. It is expected that $300 million would be available from this source for a National Housing Trust Fund.

Affordable Housing Fund in House Budget Resolution

In the House Budget Resolution passed on March 29 (see article elsewhere in Memo), a provision is included that would allow for a deficit-neutral Affordable Housing Fund for fiscal years 2007 to 2017, five years longer than the Senate budget resolution's affordable housing fund provision authorizes.