Earlier this week, a legislative draft of the Johnson-Crapo Housing Finance Reform Bill was released in Washington D.C. and holds significant promise for low income families across the nation who are struggling to secure affordable rental housing. There is a current shortage of 7 million homes in the U.S. that are affordable to extremely low income households.
If passed, Johnson-Crapo would:
- Wind down Fannie Mae and Freddie Mac
- Create the new Federal Mortgage Insurance Corporation (FMIC)
- Assess 10 basis points (10 cents for each $100 of principal) on each FMIC covered security to fund affordable housing activities
- 75% of proceeds would go to the National Housing Trust Fund (created in 2008)
- 15% of proceeds would go to the Capital Magnet Fund (created in 2008)
- 10% of proceeds would go to the Market Access Fund (new)
Both the National Housing Trust Fund and the Capital Magnet Fund were never operationalized because funding relied on allocations from Fannie Mae and Freddie Mac, which were taken over by the federal government in late 2008. The Johnson-Crapo draft legislation renews the federal commitment to these Funds, which we applaud as a renewed commitment to helping extremely low income families stabilize their lives.
The National Housing Trust Fund was established as a permanent trust fund in the Housing and Economic Recovery Act of 2008. It is a block grant to states, administered by HUD, with the purpose of building, preserving, rehabilitating, and operating rental housing affordable to extremely low income families (30% of the area median or less). According to the National Low Income Housing Coalition, the Johnson-Crapo proposal would make two changes to the existing National Housing Trust Fund. It creates a new tribal set-aside, directing 2% or at least $20 million to federally recognized tribes or a tribally designated housing entity to be used for eligible affordable housing activities under section 202 of the Native American Housing Assistance and Self-Determination Act of 1996. The bill also increases the small-state minimum from $3 million to $5 million.
The Capital Magnet Fund was established as a permanent trust fund in the Housing and Economic Recovery Act of 2008. Its purpose is to award competitive grants to Community Development Financial Institutions (CDFIs), primarily to develop affordable housing. It also funds complementary activities and facilities, such as day care centers, workforce development centers, and health care clinics.
The Market Access Fund is a new fund that would provide grants and credit enhancement to promote innovation and experimentation in the housing finance market. The purpose is for the private sector to be able to safely serve the widest market possible. Learn more about this new fund on this Center for American Progress blog.
Take Action! The National Low Income Housing Coalition has prepared a thank you letter to send to Senators Johnson and Crapo to let them know how much housing advocates appreciate their leadership in supporting the National Housing Trust Fund, in particular. Click here to read the letter. Click here to sign the letter. The deadline to sign the letter is March 27.
The committee is expected to take up the bill prior to the April congressional recess.