Weekly update from the National Housing Conference

Dear Friend,

This week, NHC has contacted Joseph Otting, acting director of the Federal Housing Finance Agency and the Treasury Department’s Counselor Craig Phillips to urge them to support this year’s allocation of funds for the Capital Magnet Fund (CMF) and national Housing Trust Fund (HTF). As you know better than most, the United States is facing a growing affordable housing shortage of historic proportion. The CMF and HTF are effective tools in creating affordable housing supply and are funded by a de minimis fee on new business, currently 4.2 basis points and not through federal appropriations. These programs have broad bipartisan support and failure to continue to fund them is likely to result in an even greater need for government spending to address the shortage of affordable housing in the future.

Fannie Mae and Freddie Mac have been accruing CMF and HTF dollars on a quarterly basis during 2018 and any suspension of the distribution will result in the dollars being “swept” by the U.S. Department of the Treasury, where it will never be spent for housing – or anything other than making a miniscule interest payment on the deficit. The GSEs were profitable in FY 2018 and leaving the CMF and HTF dollars to be allocated as intended by Congress will have no impact on their financial condition. Furthermore, the fees imposed on the GSEs are designed to ensure that they make a contribution to segments of the market that are underserved since they often struggle to reach these communities through their normal business. 

The CMF was created in the Housing and Economic Recovery Act of 2008 and is funded through a small annual assessment on new business purchases by Fannie Mae and Freddie Mac. It’s a competitive program administered by the U.S. Department of the Treasury open to community development financial institutions and nonprofit housing organizations to develop, preserve, rehabilitate, or purchase affordable housing, as well as related economic development activities such as day care centers, community health clinics and workforce development centers. CMF recipients are required to attract at least $10 of outside capital for each dollar awarded, although in practice they have attracted in excess of $27 for every dollar awarded. 

The CMF provides funding that nonprofit developers and lenders often cannot find elsewhere—funding to do pre-development work, create revolving loan funds, establish loan loss reserves, and provide loan guarantees—all critical pieces of affordable housing and community development. In all, three rounds of funding have gone out for a total of $291 million, which has or will help to attract over $8 billion in other capital into these projects. CMF awards are supporting the creation of over 41,000 rental units and over 6,000 single- family homes in 47 states, the District of Columbia and Puerto Rico. Projects supported by the CMF in the 2010 and 2016 rounds have created nearly 33,000 jobs. In every award round, more than 20 percent of recipients are investing the majority of their funds in rural areas.

In the first three years of the HTF, $659.8 million has been allocated to states. Because the HTF is administered as a block grant, each state has the flexibility to decide how to best use HTF resources to address its most pressing housing needs. Most states have chosen to use their HTF investment to build and preserve affordable rental housing for extremely low income veterans, seniors, people with disabilities or special needs, and people experiencing homelessness. 

If you would like to sign onto a formal letter on behalf of these funds, please contact me asap at [email protected].

I also want to take a moment to remember one of the great American leaders of the 20 ^th  century, former House Energy and Commerce Committee Chairman John D. Dingell, Jr., who passed away last week. NHC shares our sincere condolences with Rep. Debbie Dingell (D-Mich.) and the entire Dingell family. "Mr. D," as many of us knew him, was the last of the Old Bulls of the House, who led the Energy and Commerce Committee for a generation. Wise and witty in private, he was a force to be reckoned with anytime he had a gavel in his hand. His leadership style was brutally effective. Under his leadership, Congress created landmark legislation on nearly every major domestic policy issue including the passage of Medicaid, Medicare, the Endangered Species Act and the Clean Air Act. As the Chairman used to say, “if it moves, it’s energy, if it doesn’t, it’s commerce.” 

Perhaps none in Congress knew him as well as his Republican counterpart, Rep. Fred Upton (R-Mich.), who also served as Chairman and Ranking Minority Member of the Energy and Commerce Committee. “John was enormous in stature, integrity, and accomplishments. When he put his hand on your shoulder and spoke, you listened. With John you always knew where you stood. If you disagreed, you better have a damn good reason why. Simply reverting to rhetoric or the party line would not fly because he knew the issues ‘inside and out’ and always did his homework. John would outthink, outwork and outfox nearly everyone.”

His memory will be a blessing to all who knew and loved him, but his legacy will continue to impact the lives of millions more he never met but faithfully served.

Sincerely,

David M. Dworkin

President and CEO

National Housing Conference

National Association of REALTORS® release vision for GSE reform

Last week, on the heels of Senate Banking Chairman Mike Crapo’s newly released plan to reform the housing finance system, the National Association of REALTORS® unveiled its proposal to overhaul Fannie Mae and Freddie Mac at a NAR conference on housing finance policy. Under the proposal, the two GSEs would become federally-chartered, private utilities with an enhanced regulatory structure to ensure they adhere to their original mission. As NAR President John Smaby remarked, "ultimately, ensuring the GSEs continue providing liquidity and stability in the mortgage market remains NAR's priority during these discussions.” The conference also featured several other stakeholders, including bank industry leaders and elected officials, who spoke about the need for GSE reform.

New ULI report on the impact of climate change on real estate

A new report from the Urban Land Institute (ULI) and Heitman LLC warns that climate change poses enormous risks for the real estate industry, including increased environmental catastrophes and regulatory changes. In fact, our perpetual struggle to deal with the National Flood Insurance Program would be moot, but for the dramatic increase in climate-related natural disasters over the past 10 years. Climate change is no longer a debate about cause, it is an imperative to deal with effect. As the ULI report makes clear, more than 24 percent of the National Council of Real Estate Investment Fiduciaries Property Index value in the United States is in metropolitan areas whose central cities are among the 10 percent of cities that are most exposed to sea-level rise, which the report estimates are valued at more than $130 billion. A 2015 study published by the Royal Institution of Chartered Surveyors modeled the potential for increased costs of running a building in eight European Union countries if commercial buildings there are not retrofitted to address climate risks. The potential cost by 2050 – nearly $600 billion. This is why one of the five subject areas of NHC’s initiative to create a national housing policy for the 21st century will include Disaster Relief.

If you are interested in becoming involved in this subject area, please contact Nathan Park to become a part of the Disaster Relief Working Group.