There were several notable policy developments that favored affordable housing over last year. One notable event was lifting the temporary suspension of the National Housing Trust Fund (NHTF) by the Federal Housing Finance Agency (FHFA). The trust was initiated by the Economic Recovery Act of 2008 and designed to be funded by Fannie Mae and Freddie Mac once the health of the economy was restored. However, as both agencies were in financial turmoil, the FHFA found little justification to fund the trust. Since then, both agencies have recovered and are performing incredibly well, prompting FHFA commissioner Mel Watt lifted the suspension in late 2014.
In 2016, the trust will be funded by allocations set aside by both agencies based on a percentage of business volume. At a high level, these funds will be allocated to various state and local housing authorities as block grants under the purview of Housing and Urban Development (HUD). The NHTF requires at least 75% of the funds to benefit rental housing for extremely low income households as defined by HUD. The Low Income Housing Coalition estimates the NHTF will reach approximately $200 million and are expected to be first available this month.
Affordable Funding in 2016
Taking a look at the 2016 federal budget, many housing and community programs will benefit from increases in funding, based on funding requests and allocations reported by the Office of Management and Budget and HUD. These include tenant-based rental assistance programs, project-based rental assistance programs and the HOME Investment Partnership Program, the largest federal grant to create affordable housing that was almost stripped of most of its funding last year.
Separately, Congress passed a massive $11 billion tax and spending bill in December 2015. With respect to housing tax credits, the bill permanently extended the 9% low-income housing tax credit (or the 70% subsidy) for new construction of affordable units and renovation of existing rental product. That said, the bill did not set a minimum tax floor for the 4% tax credit (30% subsidy) for acquisition-oriented projects. Looking ahead, advocates for the low-income housing tax credit (LIHTC) will continue to seek commitment from Congress to establish a floor for the 4% tax credit. Expanding the supply and access of tax credit for projects should incentivize development or rehabilitation of affordable units. Rehabilitation and redevelopment is considered a pragmatic, economically-viable approach to addressing the affordable supply shortage.
Looking Ahead to 2017
Looking ahead to fiscal year 2017, the Office of Management and Budget recently released budget requests for major housing programs under HUD and other federal agencies. Once again, most programs will benefit from funding increases, with the exception of the Community Development Fund, which primarily funds the Community Development Block Grant (CDBG). This program is aimed at developing “viable urban and rural communities, expanding economic opportunities and improving quality of life, principally for persons of low- and moderate-income,” according to HUD. Another program receiving less funding is the Public Housing Capital Fund, which HUD calls the “principal source of federal funds to preserve public housing and promote opportunity” and “awards grants to more than 3,100 public housing authorities”. According to the Center on Budget and Policy Priorities, these proposals still need to move forward in both houses of Congress and are unlikely to be finalized until after the elections this fall.