The Federal Housing Finance Agency (FHFA) announced on February 28 that the national Housing Trust Fund (HTF) and the Capital Magnet Fund (CMF) will receive a total of $545 million for affordable housing from Fannie Mae and Freddie Mac (the Enterprises) in 2023. Of this amount, the HTF will receive $354 million.
“Ensuring adequate funding for the national Housing Trust Fund is one of NLIHC’s top priorities,” said NLIHC President and CEO Diane Yentel. “The funding allocated by the Enterprises for the HTF will help produce, preserve, and operate homes affordable to people with the lowest incomes, including families, seniors, people with disabilities, and others.”
Created through the “Housing and Economic Recovery Act of 2008” (HERA) and overseen by HUD’s Office of Affordable Housing Programs (OAHP) within the Office of Community Planning and Development (CPD), the HTF allocates funding annually to states to build, preserve, rehabilitate, and operate rental housing for extremely low-income households (ELI) – those with income less than 30% of the area median income (AMI) or with income less than the federal poverty line. In 2022, there was a national shortage of approximately 7 million rental homes affordable and available to people with the lowest incomes.
HERA stipulated that the initial dedicated source of revenue for the HTF and the CMF was to derive from an annual set-aside of 4.2 basis points (0.042%) for each dollar of the unpaid principal on the Enterprises’ new business purchases, which consist of single-family and multifamily mortgage loans purchased during the year, and single-family and multifamily mortgage loans underlying mortgage-backed securities issued during the year. The 4.2 basis point assessment is collected during the Enterprises’ calendar year (in this case, 2022) and then transferred to HUD to be allocated in the following calendar year (in this case, 2023).
Funds from the HTF are awarded as block grants to states and distributed by a statutory formula based on four factors that consider renter household needs only. Seventy-five percent of the value of the formula goes to two factors that reflect the needs of ELI renters. The other two factors relate to the renter needs of very low-income households – households with income between 31% and 50% of AMI. A state may choose to award up to 10% of its annual HTF allocation to homeowner activities, though to date no state has done so.
When it was established in 2008, the HTF was the first new housing resource since 1974 targeted to building, preserving, rehabilitating, and operating rental housing for extremely low-income people. Starting in 2000, NLIHC, its members, and other stakeholders advocated for the creation of the fund, and NLIHC and its members continue to advocate for increases to annual HTF funding. Since 2016, when the first $174 million of HTF dollars were allocated to states, HTF allocations have grown from $219 million (in 2017), $267 million (in 2018), and $248 million (in 2019) to $323 million (in 2020), $690 million (in 2021), and a record $740 million in 2022. For 2023, Fannie Mae’s 10-K filing with the Securities and Exchange Commission indicates that the 2022 HTF assessment from Fannie Mae is $186 million for 2023, while Freddie Mac’s 10-K filing indicates that its assessment is $168 million for 2023. Fannie Mae’s 10-K filing states that its significant drop in assessed funds for the HTF from 2022 is due to the decrease in its single-family business purchases compared to 2021. NLIHC assumes the dramatic drop in single-family business purchases is due to the Federal Reserve Board’s decision to increase interest rates in 2022 to fight inflation.
The FHFA announcement is available at: https://bit.ly/41AFj1O
HUD’s HTF website is available at: https://www.hudexchange.info/programs/htf