HUD Secretary Julián Castro announced on Monday at the National Low-Income Housing Coalition meeting in Washington that the Department would soon make available $174 million through the first allocations to the National Housing Trust Fund.
The Housing Trust Fund is an affordable housing program to complement existing federal, state, and local initiatives to increase and preserve the supply of safe, affordable housing for low- and extremely-low income households. Contributions by Fannie Mae and Freddie Mac will capitalize the fund, and HUD will administer the FUND.
HUD said it expects to make individual allocations to states later in the spring, and that the states will be likely be able to draw from those funds in the summer.
Three weeks ago, the GSEs announced their first contribution to the NHTF after more than a seven-year suspension. The contributions which were originally intended to start when the NHTF was created in 2008 but suspended when the Fannie Mae and Freddie Mac were taken into conservatorship by the Federal Housing Finance Agency (FHFA). FHFA Director Mel Watt announced in December 2014 that he was lifting the temporary suspension of GSE contributions to the Housing Trust Fund.
“This is an exciting new tool to help states across the country to produce more critically needed affordable housing,” Castro said. “The National Housing Trust Fund will play an important role in creating new opportunities for those who are most in need to secure a safe, decent and affordable home they can call their own.”
“This is an exciting new tool to help states across the country to produce more critically needed affordable housing.”
HUD Secretary Julián Castro
Since the GSEs remain in conservatorship of the FHFA, the move by the GSEs three weeks ago to make the first contribution to the NHTF drew criticism from Republican lawmakers because of the risk it poses to taxpayers, notably from U.S. Rep. Ed Royce (R-California), who said, “We must stop the egregious siphoning of money from the GSEs to this housing slush fund.”
Royce, a senior member of the House Financial Services Committee, introduced the Pay Back the Taxpayers Act of 2015 (H.R. 574) in January 2015, which states that no funds from the GSEs can be used to fund the national Housing Trust Fund while the they are in conservatorship or receivership.
Even leaders of civil rights groups who applauded the GSEs’ first contribution to the Housing Trust fund were cautious about the risk it poses to taxpayers, especially in light of FHFA Director Mel Watt’s remarks in February that there were risks that were “certain to escalate” the longer the conservatorships continue—particularly the requirement of Fannie Mae and Freddie Mac to have zero capital by January 1, 2018.
“We remain concerned about continued inaction on housing reform. Director Watt’s comments that the unending conservatorship of Fannie Mae and Freddie Mac poses a danger to the taxpayer—which should have served as a wake-up call for our leaders—are a positive step in encouraging a change to the status quo,” said Wade Henderson, President and CEO of The Leadership Conference on Civil and Human Rights. “The current arrangement, which will reduce Fannie Mae and Freddie Mac’s capital to zero at the end of 2017, will ultimately leave taxpayers on the hook for another bailout should the GSEs falter again. Building a capital buffer is the next logical step in rectifying a situation that has long been ignored, to the detriment of the American people.”