We shouldn’t have to sue to get Fannie Mae and Freddie Mac to follow their congressional mandate and put some of the billions they are generating into affordable housing for the millions of families who need it. But that’s what is has come to for housing advocates, who are frustrated that the Federal Housing Finance Agency (FHFA) is still refusing to fund the National Housing Trust Fund.
In 2008, before the housing market collapsed, a bipartisan promise was made to millions of working families, when President George W. Bush signed the National Housing Trust Fund into law. The fund, capitalized from the operating profits of Fannie Mae and Freddie Mac, was to be a downpayment on affordable apartments, which are desperately needed by the millions of Americans who rent.
Yet when Fannie Mae and Freddie Mac crashed along with house prices, and were put into conservatorship, the Federal Housing Finance Agency decided to delay funding the Housing Trust until the mortgage giants got back on their feet. For nearly five years, the promise Congress made to America’s renters has remained unfulfilled.
Today, however, Fannie and Freddie are in the black. They are sending Treasury a combined $66 billion for the past year, applied to deficit reduction, while they are generating record net income on a pace to top $50 billion for 2013 alone.
With this dramatic reversal of fortune, and Fannie and Freddie’s new books of business far stronger than before, housing advocates argue that the Federal Housing Finance Agency is now violating the law by failing to fund the Housing Trust. The National Low Income Housing Coalition, a leading advocate for payment, in April gave FHFA’s director a detailed brief arguing this. When they got no response, the organization filed suit.
Members of the House Financial Services Committee recently asked FHFA acting director, Edward DeMarco, to reconsider his decision to suspend funding in light of Fannie and Freddie’s vastly improved financial condition. They are still waiting for his reply.
It is only fair that some of Fannie and Freddie’s income should finally make its way toward helping the families and communities hit hardest by the housing downturn. Low-income renters are struggling today largely because the complex Wall Street mortgage products devised for higher income homeowners pushed the economy into recession. Now, while homeowners are seeing their home values stabilize and even rise, renters have only seen their situation get worse in the last five years, particularly for those at the lower end of the income ladder.
Incomes for average working families have stalled out. Roughly half the nation’s renters now pay more than 30 percent of their income for rent, and a quarter of renters pay more than 50 percent — both steep increases in the last decade.
This problem is projected to only get worse. Average rents will increase nationally by 4.6 percent in 2013, according to National Association of Realtors estimates, and continue to increase by at least 4 percent per year in 2014 and 2015.
The amount promised to the Housing Trust by law is small relative to the money that the companies are making — but it can make a huge difference for families who desperately seeking affordable housing. A well-capitalized Housing Trust will help stem this tide of rising rents by funding the production, preservation, rehabilitation and operation of affordable rental units. Not only will the most vulnerable Americans have more housing options, more rental units help push down rates for all renters.
President Barack Obama recently announced the nomination of Representative Mel Watt (D-N.C.) to replace the current FHFA acting director — who despite controlling entities that influence over 20 percent of the economy — was neither appointed by the president nor confirmed by Congress. While this change could eventually lead to funding the Trust Fund, the confirmation process remains uncertain, and action is long overdue.
A judgment call from five years ago, under vastly different circumstances, should no longer prevent help for our most vulnerable renters. It’s time to do what Congress intended — and fulfill the promise made to so many American families.
PHOTO (Top): A rental sign at an apartment building in Los Angeles, March 19, 2008. REUTERS/Fred Prouse
PHOTO (Insert): Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of mortgage finance firms Fannie Mae and Freddie Mac on Capitol Hill in Washington, June 27, 2013. REUTERS/Yuri Gripas