FHFA, White House, Treasury, and HUD Promote Affordable Housing
FHFA, White House, Treasury, and HUD Announce Additional Measures to Promote Affordable Housing.
The Federal Housing Finance Agency (FHFA) announced it will be increasing the annual low-income housing tax credit (LIHTC) equity investment limits for Fannie Mae and Freddie Mac to a total of $1.7 billion, effective immediately. This is a $350mm increase for each GSE toward affordable housing.
The new $850 million cap means that the GSEs would have an estimated 7.5% market share, based on a projected $22.5 billion LIHTC equity investment market for 2021 (Lawrence). It’s worth noting that this is below the 35% market share in 2008 (Lawrence).
What does this mean? Long and short, these measures will increase and improve thousands of affordable multi-family rental housing units in the nation’s most underserved areas. The additional funding aims to target transactions that either support housing in Duty to Serve-designated rural areas, preserve affordable housing, support mixed-income housing, and provide supportive housing to help alleviate the shortage of affordable units across the country and to meet the needs for quality affordable housing for our nation’s renters.
What About Affordable Homeownership?
Since 2016, Fannie Mae and Freddie Mac have been required to address the needs of traditionally underserved markets. In May, FHFA proposed a new DTS Underserved Markets Plan for 2022-2024 for both agencies. These DTS goals are mandated by the Housing and Economic Recovery Act of 2008 and require that the GSEs serve very low-, low- and moderate-income families in three underserved markets: manufactured housing; affordable housing preservation; and rural housing with the objective of increasing the liquidity of mortgages in underserved markets and creating a more resilient housing finance system.
Following May’s DTS proposal, FHA proposed new housing goals on August 18 for the GSEs for 2022-2024. FHFA proposed to raise the goal for single-family home purchases by low-income families from 24% to 28% and the goal for very low-income families from 6% to 7%. The agency proposed to raise the goal for refinances by low-income families from 21% to 26%. Additionally, FHFA proposed two subgoals: one new subgoal targets minority communities; the other continues to target low-income neighborhoods. The proposed housing goals are designed to ensure the Enterprises responsibly promote equitable access to affordable housing that reaches low- and moderate-income families, minority communities, rural areas, and other underserved populations.
In April 2021, FHFA announced it will implement a new refinance option for low-income borrowers (below 80% AMI) with Enterprise-backed single-family mortgages. Eligible borrowers will benefit from a reduced interest rate, lowering monthly payments.
What does this mean? The recent FHFA goals and proposed changes create more affordable financing options and support for ownership and renovations and create safe, decent housing options in rural areas and for manufactured housing. Preserving the nation’s existing affordable housing stock is crucial for creating homeownership opportunities for low- and moderate-income people.
Conclusion
Combined, the new rules and goals announced by FHFA, the White House, and HUD mean better opportunities for safe, decent, and affordable rental units for very-low and low-income individuals and families. The multi-family industry plays a critical role in addressing the nation’s shortfall of available quality rental inventory and creates a path to self-sufficiency.
For most Americans homeownership is the key path to building wealth. But access to homeownership is limited and too many people have been locked out of its benefits. The recent updates to homeownership policies will advance fair housing and lending enforcement while also removing barriers to homeownership for many people–especially people of color. In this way, we can begin to address the racial wealth gap and create a more equitable nation.
For more on the gap in homeownership click here and here.
Works Cited:
Lawrence, Peter. “FHFA Increases Gses’ Annual LIHTC Equity Investment Cap to $850 Million Each, White HOUSE, Treasury and HUD Announce Additional Measures to PROMOTE Affordable Housing.” Novogradac & Company LLP, 1 Sept. 2021, 12:00am, www.novoco.com/notes-from-novogradac/fhfa-increases-gses-annual-lihtc-equity-investment-cap-850-million-each-white-house-treasury-and-hud.