On December 11, the Federal Housing Finance Administration (FHFA) announced that it will direct Fannie Mae and Freddie Mac to make annual payments into the National Housing Trust Fund (NHTF) and the Capital Magnet Fund (CMF). FHFA Director Mel Watt sent letters notifying both entities of his agency’s decision to lift the temporary suspension of mandatory payments to the funds. This should eventually result in Minnesota receive $5 million annually for affordable housing.
"We celebrate the culmination of years of work by people across Minnesota and the entire nation in advocating for the working people, children, and grandparents who need safe housing they can afford," Chip Halbach, Executive director of MHP, said. The NHTF is important now as federal housing budgets continue to shrink. This month, Congress will likely pass a budget that further cuts other housing program budgets. Many are at risk of homelessness as a result.
The NHTF and CMF are meant to address the housing needs of lowest-income families.
For the more than 150,000 Minnesota renter households that earn less than $20,000 and pay more than 30 percent of their income on rent, the FHFA’s decision is a big deal. Three out of four of these families are eligible for housing assistance but, due to budget restraints, receive no help. For families making minimum wage or seniors and disabled people living on fixed incomes, housing in Minnesota is not affordable. They are at risk of experiencing homelessness and sacrificing other basic needs as a result.
Starting in January 2015, Fannie and Freddie will start investing a portion of their revenue into the NHTF and CMF. The Enterprise Community estimates that Fannie and Freddie will direct about $500 million each year to the funds. Approximately $310 million will go to the NHTF and $190 million will go to the CMF. Minnesota Housing should receive around $5 million each year from NHTF allocations.
The Work Continues
Thank you to all of the advocates who worked tirelessly to secure funding for the NHTF. For many low-income families, this funding will alleviate the pain caused by the lack of affordable housing. But, unfortunately, our work is not over. “We'll get back to work, because the actual need far outweighs the resources we'll have," Chip Halbach said. This funding will help many families but, unfortunately, the needs of more families will continue to go unmet, especially with congress making further cuts to housing program budgets.
Uses of the NHTF & CMF
The NHTF is a block grant to states, administered by the Department of Housing and Urban Development (HUD). According to HUD’s proposed rules, Minnesota will receive $77.5 million for every $5 billion invested into the NHTF. 80 percent of the funds must be used for the construction, preservation, rehabilitation and administration of rental housing and 10 percent can be used for single-family homeownership activities. At least 75 percent of the funds must support the housing needs of extremely low-income households and all of the funds must benefit very low-income households. In Minnesota, households earning less than $18,000 qualify as extremely low-income and those earning less than $30,000 meet the definition of very low-income.
The CMF awards competitive grants to community development financial institutions Fund (CDFI) and qualified nonprofit housing organizations. CMF awards can finance affordable housing activities, related economic development activities, and community service facilities with the purpose of stabilizing low-income areas or underserved rural areas.
The Housing and Economic Recovery Act of 2008 (HERA) established both the NHTF and CMF. Congress created these funds during the height of the housing and economic crisis because it recognized that the housing needs of too many low-income families were unmet. The deliberate act of designating Fannie and Freddie as the dedicated sources of funding for the NHTF and CMF was to create programs that would not compete for funding in the annual appropriations process.
When the federal government took control of Fannie and Freddie in 2008, the entities were temporarily relieved of their duty to make payments to the fund. As the two entities resumed profitability, the suspension of payments was hard to justify. Housing advocates, including MHP and members of Congress led by Rep. Keith Ellison, urged the FHFA to instruct Fannie and Freddie to release funds. Last year, the National Low Income Housing Coalition (NLIHC) sued the FHFA. The NLIHC argued that the continued suspension of payments violated HERA failed in court. A federal judge threw out the case on procedural grounds.
In his announcement, director Watt wrote that the financial situation warranting withholding of the funds had changed and that the FHFA was compelled to, with Congress’ 2008 directive, to fund NHTF and CMF.