House and Senate Pass Housing Bill that Includes Housing Trust Fund


National Housing Trust Fund
Memo to Members: Vol 13, No. 30, July 25, 2008

After months of negotiations among Senate Democrats, Senate Republicans, House Democrats, House Republicans and the Bush Administration, the House of Representatives on July 23 passed H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008, on July 23 by a vote of 272-152. The Senate approved the House-passed bill on July 26 by a vote of 72-13. President Bush has stated that he will sign the bill. Among the bill’s numerous provisions (see article below) is the establishment of a Housing Trust Fund. This is a major victory for low income housing advocates and the lowest income people in our country with the most serious needs.

The Housing Trust Fund’s most important features are:

This is the first new federal housing production program since the HOME program was created in 1990 and the first new production program specifically targeted to extremely low income households since the Section 8 program was created in 1974.

Funds for the Housing Trust Fund will come from annual contributions made by Fannie Mae and Freddie Mac. The amount will be based on a percentage of each company’s annual new business. Using the formula in the bill, the amount in 2007 would have been $557 million. Because their new business is increasing, the amount in 2008 is expected to be higher. However, 25% of the funds each year must first go to a reserve fund at the Treasury to offset scoring problems.

The remaining 75% of the funds will be divided between the Housing Trust Fund, which gets 65%, and a new Capital Magnet Fund that gets 35%. For the first three years, a percentage of the funds (100% in FY09, 50% in FY10, and 25% in FY11) will be diverted to a reserve fund to cover losses that the FHA might incur refinancing troubled mortgages through the new HOPE for Homeowners program (see article below). Based on the projected amount the formula will produce in calendar year 2008, approximately $300 million would have been available for the housing trust fund this year had it been in place with no diversions for the HOPE for Homeowners reserve fund. Funds not needed to cover FHA losses eventually will revert to the Housing Trust Fund and the Capital Magnet Fund.

Given the recent instability of Fannie Mae and Freddie Mac, concerns have been raised about whether any funds will be available for new programs. The new regulator has the authority to suspend contributions under certain circumstances related the fiscal distress of the GSEs. However, no money will be available for the Housing Trust Fund until FY10, by which time Freddie Mac’s and Fannie Mae’s fiscal conditions are expected to be much improved.

Now that it has achieved this important and long-sought milestone, the National Housing Trust Fund Campaign will turn its attention to the next two steps towards achieving its goal of 1.5 million homes in 10 years. The first is implementation of the program—working with HUD to create an effective and timely fund distribution system. The second is to identify and advocate for additional sources of dedicated revenue. The bill specifically provides that Congress may “transfer, appropriate, or credit” other funds to the Housing Trust Fund.

The following are a section-by-section analysis of the Housing Trust Fund and Capital Magnet Fund provisions.

Housing Trust Fund

 

 

 

the ratio of extremely low income renter households in the state living with either incomplete kitchens or plumbing facilities, more than one person per room, or paying more than 50% of their income for housing costs to the aggregate number of extremely low income renter households living with either incomplete kitchens or plumbing facilities, more than one person per room, or paying more than 50% of income for housing costs in all the states;

 

the ratio of very low income renter households in the state paying more than 50% of income on rent compared to the aggregate number of very low income renter households paying more than 50% of income on rent in all the states.

 

The sum of those factors will be multiplied by the approximate cost of construction in the state to determine the final amount of funding allocated to each state. However, the minimum state allocation will be at least $3 million annually.