In December 2014 Mel Watt, Director of the Federal Housing Finance Agency, decided to lift the suspension on Fannie Mae and Freddie Mac’s obligation to fund the National Housing Trust Fund (NHTF) and the Capital Magnet Fund. With this decision, the National Housing Trust Fund will have resources to begin expanding the housing supply for the lowest income and most vulnerable people in our country, providing a major boost to efforts to end homelessness and housing poverty in the United States.
“After eight years of advocacy to get the National Housing Trust Fund established and another six years to secure a sustainable funding source, we are thrilled that states will begin receiving critical new resources to expand the supply of rental housing for people with extremely low incomes,” said Sheila Crowley, President and CEO of NLIHC. “The decision by Mr. Watt that will result in the first funds for the National Housing Trust Fund is a great victory for the people we strive to serve.”
The NHTF is a federal program for collecting dedicated funds, which is money that is not at risk to cuts each year due to Congressional appropriations. The NHTF was established in July 2008 as part of the Housing and Economic Recovery Act of 2008 (HERA). This law required that Fannie Mae and Freddie Mac pay 4.2 basis points of their annual volume of business to the two funds. The NHTF was to receive 65% and the remaining 35% was to go to the Capital Magnet Fund (CMF). Unfortunately, the requirement that Fannie Mae and Freddie Mac contribute to the two funds was suspended when the companies were taken into conservatorship in September 2008 at the height of the housing crisis. With the lifting of the suspension now, the first funds are expected to be allocated by HUD in early 2016.
The Trust Fund will provide block grants based on a formula to the states, at least 90% of which must be used for the production, preservation, rehabilitation, or operation of rental housing. No less than 75% of the funds for rental housing will benefit extremely low income households with the rest benefiting those with very low incomes. Up to 10% of Trust Fund resources may be used for homeownership activities for people with very low incomes.
NHTF dollars will be going to states based on a formula, with a requirement that the minimum amount for any state is $3 million. Each state must choose a state agency to administer the funds. According to the NHTF statute, a state may designate a housing finance agency, housing and community development entity, tribally designated housing entity, or other another qualified entity of the state to administer the funds. To find out whether your state has selected a NHTF state agency, you can go here.
It is important for advocates to start to working with the state agency as soon as one is designated (many states have already designated an agency) to insure that the dollars reach the populations that need them the most by influencing the required Allocation Plan. Advocates should weigh in on how their state Allocation Plan will distribute NHTF dollars throughout the state, and advocates should shape the criteria states will use to award NHTF dollars to specific projects.
With the new Congress, there is some movement to rescind Director Watt’s decision. Advocates can follow the progress of legislation, get action alerts and weigh-in with their Congress person by following action alerts of the National Low-Income Housing Coalition at www.nlihc.org.