National Affordable Housing Trust Fund

January 24, 2008

Real Estate Finance Committee
Housing Opportunity Committee
Federal Issues Committee

The following is for study only and has NOT been approved by the Real Estate Finance Committee or the Board of Directors.

Issue: Should C.A.R., in conjunction with NAR, support the development and preservation of affordable housing through the creation of a National Affordable Housing Trust Fund that does not take money away from other federal, state and local housing programs; and oppose any Trust Fund whose sources of funding negatively impact housing prices, transaction fees or loan costs?

Action: Action is requested by the committee at this time as Congress may address multiple bills that would create and fund a National Affordable Housing Trust Fund.

Options:
1. Take a “Support” position
2. Take an “Oppose” position
3. Take a “Neutral” position
4. Take a “Not Real Estate Related” position
5. Take no action

Background: As home prices increased across the country prior to the recent downturn, Congressman Barney Frank (D-MA), Chair of the House Financial Services Committee, began pushing for the creation of a National Affordable Housing Trust Fund (NAHTF).  Originally passed through the House in 2005 as part of the GSE reform bill, the NAHTF would draw its funding from a percentage of the GSE profits.  In 2007, Congressman Frank created funding mechanisms for the NAHTF from both the GSE and FHA.

Summary: California representatives Maxine Waters and Gary Miller have co-introduced, along with Chairman Barney Frank (D-MA), H.R. 2895, the National Affordable Housing Trust Fund Act. The bill, which was introduced in June 2007, and reported out of Committee in July, would establish the NAHTF to issue grants for the purpose of construction, rehabilitation, and preservation of affordable housing.  The NAHTF would be funded by a portion of the profits generated by the GSE Reform bill (HR 1427), the FHA Reform bill (HR 1852) and any other sources subsequently identified.  The money will be given out to states and local governments to be utilized and further dispersed.  All NAHTF money must be used for low-income families (below 80% of state or local-median income) and 75% will go to extremely low-income families (below 30% of median income or national poverty level). Eligible recipients will be any “organization, agency, or other entity, including for-profits, nonprofits, and faith-based organizations, that have demonstrated the experience and the capacity tocarry out the proposed Trust Fund Activity.” State, local and private recipients of NAHTF grants will have to match $1 for every $2 received.  Unless they utilize federal money to match the NAHTF grant, then it is $1 for $1. Outlook:  H.R. 2895 was passed by the House on October 10, by a vote of 264 – 148.  The bill has now been referred to the Senate Committee on Banking, Housing, and Urban Affairs.

Cons:  Opponents state that by taking profits from Fannie Mae and Freddie Mac you are in fact taxing the companies.  Because these companies have to answer to share holders, Fannie and Freddie may be forced to pass the cost onto home buyers in the form of higher interest rates.

Additionally, many GOP see the NAHTF as a potential slush fund for Democratic candidates.  Because the money would be utilized by non-profit and private organizations to help homebuyers, many of these would be located in lower socioeconomic communities with democratic leaning constituents.  These organizations may utilize the money for voter registration, voter turn out, or issue advocacy. 

NAR Policy: At the November 2007, business meetings NAR took the following position:

That NAR support the development and preservation of affordable housing.  NAR supports the creation of a National Affordable Housing Trust Fund that does not take money away from other federal, state and local housing programs.  Further, NAR opposes any Trust Fund whose sources of funding negatively impact housing prices, transaction fees or loan costs.

Rational:  The House has passed legislation creating a National Affordable Housing TrustFund.  This fund would be used to construct, rehabilitate and preserve affordable housing.  It could also be used for homeownership assistance including down payment and closing costs.  NAR supports affordable housing opportunities for low-income Americans.  Currently, the House-approved legislation authorizes the use of a percentage of GSE profits (over a given level) and excess revenue from the FHA reverse mortgage program as the source of funds for the Trust Fund.  The Committee was concerned that using other funding sources could create unintended consequences that could increase the costs of housing.  Therefore, the Committee recommended language opposing a Trust Fund where funding would adversely impact the cost of housing.

C.A.R. Position: C.A.R. has historically supported affordable housing efforts.  Due to the contentious nature of the provision within theGSE and FHA bill, C.A.R. has supported the concept of an affordable housing fund when asked by members of Congress or their staff; however, increasing the loan limits and other provisions in the bill have taken a priority position over the fund and are the target of staff and memberships’ lobbying efforts.

Should C.A.R., in conjunction with NAR, support the development and preservation of affordable housing through the creation of a National Affordable Housing Trust Fund that does not take money away from other federal, state and local housing programs; and oppose any Trust Fund whose sources of funding negativelyimpact housing prices, transaction fees or loan costs?