Work to Fund the NHTF Begins Anew in 113th Congress

Significant funding for the National Housing Trust Fund (NHTF), enough to end homelessness in the United States at the very least, is the National Low Income Housing Coalition’s single most important policy objective for the 113th Congress. NLIHC is dedicating new resources to achieving this goal. The objective of the NHTF Campaign remains the expansion of affordable housing options for extremely low income households by 3.5 million units over ten years. The NHTF Campaign will pursue every possible dedicated revenue source, but will focus major attention on two funding avenues. The first is funding the NHTF with savings achieved from modifications to the mortgage interest deduction. NLIHC proposes to lower the cap to $500,000 on the size of mortgages for which interest can be deducted and convert the deduction to a non-refundable tax credit. At a 20% credit, the number of homeowners who would receive a tax benefit would increase by 18 million, 92% of whom have incomes of $100,000 or less. These changes would produce between $20 and $30 billion a year that could be directed to the NHTF.Representative Keith Ellison (D-MN) introduced H.R. 6677, the Common Sense Housing Investment Act, on December 18, shortly before the end of the 112th Congress (see Memo, 1/2). The legislation would convert the mortgage interest deduction to a flat-rate 20% tax credit, cap the maximum mortgage to receive a tax break at $500,000 and direct the majority of the savings gained from these modifications to the NHTF. The campaign will work with Mr. Ellison on the reintroduction of his bill as soon as possible.NLIHC has garnered over 700 organizational endorsements of its proposal to fund the NHTF with savings achieved from housing tax reform. These endorsements come from all 50 states, the District of Columbia and Puerto Rico. NLIHC continues to urge organizations to sign on in support of this proposal.The second funding source remains contributions from the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. The NHTF is statutorily tied to the GSEs, as they were designated as its initial source of funding. The GSEs have never made a contribution to the NHTF, however, as they were placed into conservatorship shortly after the NHTF was authorized and all payments were temporarily suspended. While comprehensive GSE reform legislation was not enacted in the 112th Congress, the Senate held several hearings on the topic, and the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity advanced a package of bills that would begin to dismantle the GSEs. Included in this package was H.R. 2441, legislation sponsored by Representative Ed Royce (R-CA) to eliminate the NHTF. The measure was voted out of the subcommittee on July 6, 2011, by a vote of 18-14 (see Memo, 7/15/11). The bill was not considered by the full Committee on Financial Services, and as such ultimately failed with the end of the 112th Congress. The Obama Administration released a white paper in February 2011 that reflected the Administration’s position that the federal government should play a more limited role in the general mortgage market, but continue to have a duty to help lower income households. In particular, the paper highlights the importance of rental housing and the need to expand its supply for the lowest income households. The Administration proposes a dedicated revenue source to pay for several programs that the market would not provide on its own. It uses the NHTF as an example of the kind of program that could be funded through this dedicated revenue source. Numerous Administration officials have affirmed this position in the ensuing months. The estimated annual amount to the NHTF is between $1 billion and $5 billion.Democrats in the Congress support providing funding for the NHTF in the final reform package. Some Republicans want to do away with a federal role in housing finance altogether, while others recognize that for the mortgage market to work, there must be some sort of federal guarantee. Therefore, a compromise will have to be reached between Democrats and Republicans who favor reform, not elimination, of the GSEs. The NHTF Campaign will work to make sure that funding for the NHTF is part of that compromise.Another effort to fund the NHTF did not move forward in the 112th Congress. Companion bills offered by Senator Jack Reed (D-RI) and Representative Elijah Cummings (D-MD),  S. 489 and H.R. 1477, “The Preserving Homes and Communities Act of 2011,” would provide $1 billion for the NHTF from the profits made on the sale of “warrants.”  Senator Reed requested warrants be included in the Emergency Economic Stability Act of 2008, which established the Troubled Asset Relief Program (TARP). In exchange for federal TARP funds that kept banks from failing, banks gave the Treasury warrants. A warrant is the right to purchase one share of stock at a specified price. The sale of these warrants had yielded over $9 billion by the fall of 2012. As of October 2012, 18 Senate and 50 House Democrats had cosponsored the bills. However, no Republicans ever co-sponsored and the bills were never taken up. Finally, President Barack Obama included $1 billion for the NHTF in both budgets he proposed to the 112th Congress, as he did in the 111th Congress. Each was proposed as part of HUD’s budget, but on the mandatory side, requiring an offset. No offsets were identified by the Administration and the provisions were never taken up.  To learn more about NLIHC’s housing tax reform proposal at www.housingtaxreform.org.Click here to see the list of endorsing organizations. Click here to add your organization to the list of endorsers.