As a part of its proposal to reform the federal housing programs at Fannie Mae and Freddie Mac, the U.S. House of Representatives is considering legislation that would set up a fund for development of low-income housing.
Affordable housing advocates praise this movie as a huge step forward for low-income housing development. But opponents claim that these two government sponsored entities that promote homeownership would use the fund to leverage their influence on Capitol Hill.
The Affordable Housing Fund included in the 2005 Federal Housing Finance Reform Act would delegate 5 percent of the after-tax profits of Fannie Mae and Freddie Mac to a fund designed to promote an increase in available low-income housing.
As the fund is currently designed, 90% of the money would be designated for production, preservation, and rehabilitation of affordable rental housing while the remaining 10% would be used for “homeownership activities.”
Advocates contend that the money would benefit people with low and extremely low incomes, and that it would also help draw developers to poorer communities.
The House Financial Services Committee passed the bill on a 65-5 vote and the measure now awaits action on the House floor. Experts believe a vote will occur sometime before the summer recess, which starts August 1.
The National Low Income Housing Coalition (NLIHC) estimates the fund would generate between $400 million and $600 million in its first year and more than $1 billion a year in the future.
The money “would encourage developers to build low-income housing,” said Matt Achhammer, an organizer with NLIHC’s “Heat Up for Housing” campaign.
The funds would subsidize companies that construct low-income residences, because building such housing often is not economically feasible, he added.
Opponents of the affordable housing provision argue that the fund would be used to win favor with legislators by placing housing projects in certain congressional districts. Some in Congress also say the money could be used to support advocacy groups.
Supporters, however, insist that the bill does not offer Fannie Mae and Freddie Mac that kind of wiggle room.
“The way the legislation is currently written, it clearly outlines what the money can be used for,” says Achhamer.
Although an amendment to eliminate the fund failed in the House Financial Services Committee, opposition to the fund continues.
Led by Rep. Mike Pence (R-IN), a group of 34 House Republicans has lobbied party leaders to oppose the provision and has said it will attempt to defeat the broader bill if it includes a low-income housing fund.
In a letter to Majority Leader Tom DeLay (R-TX), pence and his colleagues agree there is a need to increase the availability of low-income housing. They claim, however, that the proposed fund is inherently averse to the basic capitalist philosophy.
“We believe creating additional regulations such as these… works against the free-market principles that have made our nation’s housing market one of the most accessible in the world,” they said.
Rep. Michael Oxley (R-OH), chairman of the Financial Services Committee, is hoping to reach a compromise. He is proposing stricter regulation of the money by not linking it directly to Fannie Mae and Freddie Mac profits.
Linda Couch, deputy director of NLIHC, said she supports Oxley’s initiative.
“Mr. Oxley is really trying to appease [the opposition] and we hope he makes some progress,” Couch said. “The people in the Senate and the House have said they want tighter accountability.”
Oxley and other bill supporters may need such changes to obtain Senate support Sen. Richard Shelby (R-AL) , chairman of the Banking Committee, said he will not support a fund based on the entities’ profits because that would encourage Fannie Mae to grow recklessly.
If the bill passes, supporters contend, it could benefit the area homeless community by providing more opportunities for those hoping to move out of shelters.
“To get out of transitional housing,” Achhamer said, “you need those low-income options available.”
The fund would be the first congressional action to promote low-income housing since 1990, the NLIHC’s Couch said.
The initiative is in response to a rental market that is “extremely saturated,” she added.
A 2003 survey found that 34.9 percent of Americans live in unaffordable or insufficient housing. The survey also showed that low-income individuals – those earning 50 percent or less of the area median income – represent 37.8 percent of the general population but 68.6 percent of those with housing difficulties.
Research published by NLIHC suggested that the amount of affordable housing for low-income renters has declined significantly in the last three decades.
Supporters of the fund hope for a vote soon and believe that if the House voted now the package would most likely pass.
