New Developments: Affordable Housing Finance As It Is and As It Could Be
By Thom Amdur
4 min read
It will shock nobody when I assert that the affordable housing finance system is deeply entwined and enmeshed with the actions and activities of federal government activities. The backbone of our financial system depends on entities like the Federal Reserve System and the role it plays in setting monetary policy and benchmark interest rates through its open markets committee or, during the great recession, creating liquidity with policies, such as quantitative easing. The government sponsored enterprises (GSEs) and Department of Housing and Urban Development (HUD) also play a key role in providing liquidity to the mortgage markets through their various guarantees, mortgage insurance and securitizations. House and Senate appropriators supplement these activities with additional funds for rental assistance contracts and various grants and programs to fill affordable housing project gaps. This is all business as usual during ordinary times.
Of course, we are living through extraordinary times. With a little luck and a decade’s worth of hard-earned advocacy, our affordable housing finance system is poised for potential transformative change.
For example, in a not-unexpected decision, on June 23 the Supreme Court ruled that the Federal Housing Finance Agency’s (FHFA) structure was unconstitutional, because it restricts the president’s power to remove officers who disobey commands, are negligent, have different views on policy or come from a competing political party who are against their agenda. In short order, President Joe Biden removed Mark Calabria from his role as FHFA chair. This change in leadership matters. Under a Biden administration, the FHFA is likely to slow efforts to recapitalize the GSEs and expand their efforts around affordable housing investment and lending. Specifically, we can probably expect a review of the GSEs’ annual lending caps (currently set at $70 billion apiece), increased Low Income Housing Tax Credit investment and probably new debt products with features meant to support affordable housing construction, preservation and sustainability.
Speaking of Biden, on July 7 he made a major speech where he directly connected affordable housing as critical infrastructure stating, “We need to deal with the shortage of affordable housing in America. Over 10 million renters in this country pay more than half their income for the rent on their apartment, and the lack of affordable housing prevents people from moving to communities where there are more opportunities. So, we’re going to make historic investment in affordable housing, increasing and improving the housing supply by building and rehabilitating more than 2 million homes, especially in places that need more housing.” With this level of engagement from the administration, there has never been a better chance for some of the most ambitious housing legislation in a generation to be enacted into law. Our hopes have never been higher for Congress to adopt key features from the Affordable Housing Credit Improvement Act (AHCIA) in infrastructure legislation, and that could just be the beginning.
For example, you may have missed that the Senate Democrats’ $3.5 billion budget resolution included the creation of the Clean Energy Accelerator, a major step forward toward the creation of a national green bank. This would be a major new resource to facilitate sustainability, resiliency and energy-related investments in affordable housing properties and underserved communities. Likewise, on July 15, House Financial Services Committee Chairwoman Maxine Waters (D-CA) observed, “The reconciliation bill provides us with a once-in-a-generation opportunity to provide the housing resources that our country so desperately needs.” As such, she is pushing an ambitious package too “in equitable, affordable and accessible housing infrastructure.” The package would create a major new “infrastructure bank” called the National Investment Authority (NIA) that would support infrastructure and social impact projects through new debt issuances and serving as secondary market maker for municipal issuers investing in public goods and projects.
Chairwoman Waters’ package would also fund an additional 3.5 million housing vouchers, as well as provide hundreds of billions of new funding for the National Housing Trust Fund, HOME, Section 811, Section 202 and the Capital Magnet Fund. And that’s not all. If enacted, it would also establish a new $75 billion grant program for owners of federally-assisted housing and naturally occurring affordable housing to make energy efficiency, resiliency and other upgrades, a separate $5 billion preservation grant fund for Section 8 properties and another $5 billion for the capital needs backlogs for Section 515 and 514 properties.
Any one of these initiatives would be consequential. Taken together, they could transform the affordable housing finance and delivery system, expanding production and bringing major new players to the ecosystem. Of course, there are no guarantees in politics, but the next few months will be telling and potentially revolutionary for the work we do.
