Monday, July 30, 2007
Support in Congress appears to be growing for a National Affordable Housing Trust Fund, to be financed in part through forced contributions from the federal mortgage companies.
Under the current version of a House bill (introduced by Rep. Barney Frank (D.-Mass.) and others as H.R. 2895), the Trust Fund would issue grants to both local and state governments, which then must spend the money by passing it on to organizations for the construction of low-cost housing. All the money would have to be spent on housing for low-income families (defined as below 80% of the state or local median income) and 75 % would have to be spent on extremely low-income families (below 30% of the median income or the national poverty level). The goal is to build 1.5 million new housing units for low-income persons.
The Trust Fund plan shows how far American politics and the affordable housing issue have evolved. Gone are the days in which "public housing," built and maintained by public entities, seemed the best solutions for very low-income persons; we simply don't trust such a system any more. Also gone are the days when state and local governments successfully pushed for huge block grants, with few strings attached, from the federal treasury. We don't trust state and local governments to spend such grant money on the poor, instead of on the voting middle-class.
And also gone are the days when a major new program for low-income people would be funded by general federal tax revenue. Instead, most of the money would come from the federal mortgage institutions, Fannie Mae and Freddie Mac, with required matching contributions from the states. It seems difficult to argue that this is excessive government interference with the market; after all, the purpose of Fannie Mae and Freddie Mac is to channel the market towards the financing of home mortgages. These institutions have done a fine job of increasing home ownership, but not nearly as well with another of their other mandates -- to help housing affordability.
Housing advocates argue that this type of proposed grant system has proven to be successful at the state and local level. As a federal program, it remains to be seen whether local governments and the market will want to and succeed in getting built the right type of low-cost housing in the right places. The great barriers of zoning and local opposition to low-cost housing will stand in the way, as they always do. But the House bill seems, to me, to follow a sensible approach …