The National Housing Trust Fund and reform of the mortgage interest deduction (MID) were topics of discussion at two hearings on housing held in the U.S. House of Representatives last week (see articles elsewhere in Memo).
During the October 21 hearing in the Housing and Insurance Subcommittee of the House Financial Services Committee, Representative Keith Ellison (D-MN) shared a chart from a December 2013 CBPP report that showed how federal housing expenditures poorly correlate with housing needs. “High income households get four times more housing benefits than low income households do,” Mr. Ellison said. Mr. Ellison is the lead sponsor of H.R. 1662, the “Common Sense Housing Investment Act.” This bill would modify the country’s largest housing expenditure, the mortgage interest deduction, and shift resulting resources into affordable housing programs including the National Housing Trust Fund.
At the full Committee hearing on October 22, Xavier de Sousa Briggs of the Ford Foundation pointed out that, through the mortgage interest deduction, most federal housing aid is targeted to the middle class and affluent, “rather than the very low-income households who face the most daunting housing costs and consequences.” Representative Ellison stated that the US spends over $270 billion on housing, but that most of that money does not go to poor families. “The bulk of the investment benefits the most financially well-off. Because of all of the tax benefits for homeownership, [including] the mortgage interest deduction, in general, upper income homeowners receive the greater benefit than do the low income renters. And why is all this focus on trying to shrink the small pie we already have for low income people trying to find a leg up in this system?” Mr. Ellison asked. Renee Glover of Habitat for Humanity agreed that resources between homeownership and renting need to be rebalanced through tax reform.
In responding to a question on the significance of the National Housing Trust Fund (NHTF) in federal housing policy, Mr. Briggs stated, “[The NHTF] is extremely important for two reasons. One, the source of revenue, namely Fannie Mae and Freddie Mac; in other words it looks beyond the appropriations envelope, which has been insufficient for years and years to meet these needs. And two, because of the targeting dimension. Without federal capital to help financing work [to develop housing for extremely low income households], they do not pencil out, they will not happen.”
Representative Ed Royce (R-CA) thinks that the Federal Housing Finance Agency’s decision in 2014 to require Fannie and Freddie to begin allocating money to the NHTF will lead the companies to become financially unstable again. Mr. Royce is the sponsor of H.R. H.R. 574, the “Pay Back the Taxpayers Act of 2015,” which would prohibit Fannie Mae and Freddie Mac from contributing to the NHTF and the Capital Magnet Fund while in conservatorship or receivership, and would require any payments that have already been set aside to instead be used to reduce the federal budget deficit.