We need this affordable housing program now more than ever

This week, the Treasury Department announced the fourth round of one of the most successful government programs for building affordable housing. Since it was launched in 2010, the Capital Magnet Fund (CMF) has successfully housed thousands of low-income Americans at no cost to the taxpayer.

Despite this solid record of success, the Trump administration is considering ending the program. In the face of a mounting affordable housing crisis in America, where 22.5 percent of millennials still live at home despite the best job market in generations, killing the CMF would be a terrible mistake. In fact, the program should be expanded, not ended. 

{mosads}The National Housing Conference has reached out to Comptroller of the Currency Joseph Otting, who is also acting director of the Federal Housing Finance Agency (FHFA) to urge him to support this year’s allocation. Other national housing organizations are weighing in as well.

We hope that his review of the CMF and the national Housing Trust Fund (HTF), which were created in the 2008 Housing and Economic Development Act, will result in his positive affirmation of its effective track record and extraordinarily low cost. 

In his Senate confirmation hearing Thursday, President Trump’s nominee to lead FHFA, Mark Calabria, said that suspending funding “is only going to happen if the GSEs are essentially failing — and my primary responsibilities, if confirmed as FHFA director, is to make sure that doesn’t happen.” That is reassuring but only if the funds aren’t suspended before he is confirmed.

The Capital Magnet Fund provides essential equity capital that non-profit 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 total, four rounds of funding have awarded a total of $434 million, which has or will help to attract $13.5 billion in other capital into these projects. CMF awards are supporting the creation of over 64,000 rental units and over 8,700 single-family homes in 47 states, the District of Columbia and Puerto Rico.

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 national 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. 

Fannie Mae and Freddie Mac have been setting aside 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 U.S. debt.

Fannie and Freddie were profitable in fiscal year 2018 and gave back billions to the Treasury and will pay another $4.7 billion by the end of March. Using less than half a percent to build affordable housing is the very least we can do. 

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 Fannie and Freddie 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. 

There are few housing programs that have been as effective and efficient as the Capital Magnet Fund. It’s track record speaks for itself. The new leadership at FHFA should embrace the program as a model of how Fannie Mae and Freddie Mac can contribute to the creation of much needed affordable housing.

David Dworkin is president and CEO of the National Housing Conference and a former congressional staffer and who has served in a variety of capacities in the administrations of Presidents George H. W. Bush, Barack Obama and Donald Trump.