CQ TODAY ONLINE NEWS
Feb. 7, 2012 – 10:47 p.m.
Rental Housing Trust Fund to Get New Push
By Ben Weyl, CQ Staff
President Obama is renewing his push to expand rental housing for low-income Americans, but Republican opposition and the government’s fiscal straits may spoil his plans.
As part of his fiscal 2013 budget proposal to be released next week, Obama will call for $1 billion to capitalize a federal trust fund to build, preserve and rehabilitate rental housing for those with the lowest incomes.
To the delight of liberals and housing activists who have campaigned for the fund for more than a decade, he signaled his intentions as part of a broad housing recovery plan last week.
“We think it’s a very important statement — a good step forward — and we’re going to work closely with the administration to try to get it through this year,” said Sheila Crowley, president of the National Low Income Housing Coalition.
In addition to its main purpose of helping people with limited income to be able to afford apartments, advocates say that the trust fund would create thousands of construction jobs and bolster the broader economy, which continues to be weighed down by the housing crisis that began four years ago.
Rep.
“We must prevent the practice of mortgage loans being made to people who should not have received them, both for the sake of those people, and in the interests of the country as a whole,” Frank said. “One of the most important ways to alleviate the pressure for imprudent mortgage lending is to provide decent affordable rental housing for people of limited income.”
Frank also said that increased support for renting would help draw down the large inventory of vacant properties that continues to depress home prices across the country and also is slowing down recovery.
Unfunded Trust Fund
The trust fund was created in July 2008 as part of a law (PL 110-289) designed to rescue the crumbling housing market. That measure also included a government lifeline for the mortgage financing giants Fannie Mae and Freddie Mac, a share of whose business would have served as the financing source for the trust fund. But that revenue stream evaporated with Fannie and Freddie’s near-collapse and government takeover in September 2008.
Obama has requested $1 billion for the trust fund in each of his budget proposals, but Congress has not gone along with him. Under the president’s proposal, the program would be administered by the Department of Housing and Urban Development, which would distribute grants to states under a formula based on their shortage of affordable rental housing.
The trust fund’s backers previously have come close to securing capital. Money was included as part of a broad tax-extenders bill that Congress considered in 2010, but the package eventually collapsed in the Senate.
Advocates are considering an array of legislative vehicles this year, chief among them a tax-extenders measure that lawmakers possibly will consider in the next few months.
Rental Housing Trust Fund to Get New Push
In the longer-term, money could be provided through an overhaul of the broader housing finance system. The Obama administration highlighted the trust fund as a key component of housing finance in a proposal last February to wind down Fannie and Freddie. That overhaul, however, is unlikely to become a reality this year.
Sen.
Crowley suggested that Congress might consider capitalizing the trust fund through legislation to revise the home mortgage interest tax deduction, a controversial and much-discussed undertaking.
And with lawmakers concerned about rising deficits, any measure to capitalize the trust fund almost surely would have to be fully offset with spending cuts or tax increases, a challenge that is increasingly difficult in this polarized Congress.
“The big obstacle is the fact that there’s a shortage of money,” Crowley said.
GOP Resistance
Strong opposition also exists among House Republicans who are pushing legislation (
The House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises approved the repeal bill on a party-line, 18-14 vote last July.
“Given our current fiscal situation, given the dozens upon dozens of programs currently funded to address housing and rental affordability, and given that many of the organizations eligible for funding have a very scattered track record, we should eliminate this fund and put our efforts in those other programs,” bill sponsor
GOP opposition is also likely to sink the centerpiece of Obama’s new housing plan: a mortgage-refinancing program that would allow homeowners who are current on their payments to save roughly $3,000 a year by refinancing at historically low interest rates.
Senate Majority Leader
“Red tape should no longer keep responsible homeowners from refinancing their loans and restoring their futures,” Reid said. “There are some who advocate a do-nothing policy. They say there’s nothing we can do to help. They couldn’t be more wrong.”
Reid, whose home state is among the hardest hit by the foreclosure crisis, told reporters last week that Obama’s housing proposal is “high on our priority list,” but he did not indicate when the Senate might take up legislation.
Rental Housing Trust Fund to Get New Push
He said he would need cooperation from Republicans, many of whom have criticized the plan as an example of government overreach.