LegiStorm

Summary:

On July 30, 2008, President George W. Bush signed into law the Housing and Economic Recovery Act of 2008 (P.L. 110-289), which included a wide variety of housing-related provisions. Among other things, it created a national Housing Trust Fund. In general, affordable housing trust funds provide dedicated, permanent sources of funding for affordable housing that do not require annual appropriations. Many states and localities across the United States have their own affordable housing trust funds, and for years affordable housing advocates had worked to get such a fund created on a national level. Opponents of a national affordable housing trust fund argued that it would be duplicative of other affordable housing programs. The Housing Trust Fund created by P.L. 110-289 would provide formula-based grants to states to use for affordable housing activities. By statute, most of the funding would have to be used for rental housing; states could use up to 10% of their grants for homeownership activities. Furthermore, all of the funds would have to benefit very low- or extremely low-income households, with at least 75% of the funding for rental housing being used exclusively for the benefit of extremely low-income households. P.L. 110-289 established that the dedicated funding source for the Housing Trust Fund would be contributions from Fannie Mae and Freddie Mac. These two entities were to annually set aside .042 cents for each dollar of the unpaid principal balance of their new business purchases to be allocated to the Housing Trust Fund and another new housing fund established by P.L. 110-289, the Capital Magnet Fund. However, the law also gave the director of the Federal Housing Finance Agency (FHFA), Fannie's and Freddie's regulator, the authority to suspend those contributions if he determined that they were contributing to financial trouble at the agencies. On September 7, 2008, Fannie Mae and Freddie Mac were placed in conservatorship, and in November 2008, the director of FHFA suspended their contributions to the Housing Trust Fund. The Fund had not yet received any funding at the time the contributions were suspended. In the years after the contributions to the funds were suspended, affordable housing advocates searched for a new source of funds for the program, as well as arguing that Fannie Mae's and Freddie Mac's contributions to the Housing Trust Fund should be reinstated as those entities returned to profitability. At the same time, policy makers who oppose the Housing Trust Fund have made efforts to repeal it or to prevent Fannie Mae and Freddie Mac from contributing to it while they remain in conservatorship. In recent Congresses, legislation has been introduced to fund the Housing Trust Fund through alternate sources, as well as to eliminate the Housing Trust Fund entirely. The Housing Trust Fund has also been debated in the context of housing finance reform, which is largely concerned with proposals for how to reform, eliminate, or replace Fannie Mae and Freddie Mac. However, no legislation to either fund the Housing Trust Fund through a different source or eliminate the Housing Trust Fund entirely has been enacted to date. On December 11, 2014, FHFA announced that it was directing Fannie and Freddie to begin contributions to the Housing Trust Fund and the Capital Magnet Fund starting in 2015. The first funds would be transferred to the Housing Trust Fund and the Capital Magnet Fund in early 2016.