THE BLOG
12/16/2014 09:48 am ET Updated Feb 15, 2015

New Help for Low-Income Renters: Housing Trust Fund Gets Funding

Low-income Americans in search of rental housing they can afford got an early Christmas present Dec. 11 when it was announced that the National Housing Trust Fund will soon open for business.

The federal agency that controls America's two biggest mortgage companies announced that it was opening the spigot on a vast new source of capital for construction of rental housing affordable to low- and moderate-income Americans.

This is money that will not get caught up in the political gridlock of Congress because it is not subject to the annual budget and appropriations process.

The funds will come from the profits of Fannie Mae and Freddie Mac, the institutions that buy the majority of home loans in America from loan originators, which generates a huge amount of cash yearly. A percentage of their revenue must go into the National Housing Trust Fund each year, and it cannot be used for anything other than housing, and mostly for rental homes for very low-income people.

The law creating the trust fund was enacted in 2008 and signed by President George W. Bush. The idea was to create a permanent program that could be used in conjunction with Low-income Housing Tax Credits to bring rents down on newly constructed and renovated apartments to a level affordable to very low-income people. The tax credit alone does not provide a deep enough subsidy to do that.

The program did not get very far after passage of the law, however. Its funding was to come from the profits of Fannie and Freddie. It was a great idea, since the two organizations were making money hand over fist right up until the law was passed.

But, after the foreclosure crisis hit, Fannie and Freddie slipped into serious financial trouble. The Federal Housing Finance Agency took over both companies and suspended the requirement that they capitalize the trust fund.

That all changed Dec 11, when President Obama's appointee to head the FHFA, former Congressman Mel Watt, reinstated the affordable housing funding obligation. The good news came in a very simple two-paragraph statement from the Federal Housing Finance Administration.

Watt's decision also opens the flow of funds from Fannie and Freddie for the Capital Magnet Fund, which finances affordable housing and related economic development activities in low income communities.

Advocates estimate the contributions by Fannie Mae and Freddie Mac will generate anywhere between $300-$500 million annually starting January 1, 2015, which will be split by formula between the National Housing Trust Fund and Capital Magnet Fund.

The effort to create a trust fund for housing began many years ago under the leadership of the National Low-Income Housing Coalition (NLIHC). The prime mover in that effort was Sheila Crowley, the organization's executive director. Read more about the trust fund.

On October 29, 2010 HUD published its proposed regulations for implementing the NHTF in the Federal Register. The regulations will be finalized now that there's money to operate the program.