Congress is returning from its Memorial Day recess and state and district work period to face work on a range of affordable housing policy issues. The following is an overview of the prospects for action on legislation that readers have followed in previous editions of Memo.
President Obama’s FY13 budget request included $1 billion in mandatory funding for the National Housing Trust Fund (NHTF) without identifying a specific offset. Because Members of Congress are hesitant to vote for funding programs without offsets, they must search for ones with which to fund the NHTF. One proposed offset has been offered by Senator Jack Reed (D-RI) and Representative Elijah Cummings (D-MD). The Preserving Homes and Communities Act of 2011, S. 489, and its companion bill, H.R. 1477, would provide $1 billion for the NHTF from profits made on the sale of “warrants.” The bills do not have Republican co-sponsors, making it unlikely that they will advance during the 112th Congress.
Congress must decide how to address several “must pass” tax policies that expire in December 2012. If it seeks to pass a package of tax-related bills following the election, the NHTF campaign will work to have funding for the NHTF included. In December 2010 and 2011, Members considered including NHTF in their end-of-the-year packages, but ultimately decided not to include spending for additional programs.
A dedicated source of revenue for the NHTF continues to be part of the Administration’s plan for legislation on federal housing finance reform, i.e., what comes after Fannie and Freddie. But no action is expected on GSE reform in the 112th Congress, so this will be taken up in the new Congress.
Mortgage Interest Deduction (MID) reform continues to be the avenue for fully funding the NHTF. Representative Keith Ellison (D-MN) is working on legislation to fund NHTF with savings to be gained from MID reform, a position endorsed by the NHTF campaign. The NHTF campaign supports a proposal to reduce the size of a mortgage eligible for a tax break from $1 million to $500,000, and to convert the deduction to a non-refundable tax credit set at 15%. This would generate approximately $30 billion in annual savings for the NHTF. Mr. Ellison’s draft proposal is similar to the NHTF campaign’s position, and would provide for a five-year phase-in period.