On September 1, the Biden Administration rolled out a series of programmatic announcements to increase the supply of affordable housing. The White House Council of Economic Advisers released a detailed analysis of the affordability problem alongside the policy announcements demonstrating that the affordable housing supply challenge dates back more than four decades.
The Administration has a goal of increasing the supply of affordable housing by 100,000 units for both renters and homeowners over the next three years and to ultimately support the construction of more than two million affordable units with the adoption of their full economic and infrastructure plans.
Several areas of the announcement touch on programs relevant to CDFIs:
CDFI Fund Opens Largest Ever Capital Magnet Fund Round
As previously announced, the Biden Administration has confirmed the upcoming round for the Capital Magnet Fund (CMF) will be the largest round ever, with $383 million available. This is more than double the $175 million that was available through the previous round. The CDFI Fund’s Notice of Funding Availability (NOFA) was released on September 9 and is open until November 9. This increase in funding will help support the impactful housing and economic development projects funded through CMF. The Biden Administration had proposed increasing funding for CMF to $12 billion over the next five years as a part of their infrastructure plan, and the House Financial Services Committee has proposed $9.64 billion for a new Housing Investment Fund based on the CMF model.
Low-Income Housing Tax Credit Investment Expanded
The Administration also announced that the Federal Housing Finance Agency (FHFA) is raising the equity cap for Fannie Mae’s and Freddie Mac’s investments into the Low-Income Housing Tax Credit (LIHTC). The total cap will now be $1.7 billion ($850 million for each entity), an increase of $700 million from the existing cap. In addition, FHFA is increasing the Duty to Serve rural/targeting investment requirement to 50 percent of each Enterprises’ LIHTC investment. This will require each Enterprise to invest up to $425 million in targeted investments and $425 million in unrestricted investments. Both the increase in the cap and the increase of the targeted investments are aimed at increasing the availability of low-income housing in the areas with the highest need.
FHFA Proposes New Equitable Housing Finance Plans and GSE Housing Goals
Separate from the Administration’s other announcements, the FHFA announced their Housing Goals for 2022-2024 for Fannie Mae and Freddie Mac. 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. The proposed goals are currently available for public comment through October 25. The full explanation of the proposed goals can be found here.
FHFA also announced that Fannie Mae and Freddie Mac will now be required to submit equitable housing finance plans to identify and address barriers to housing opportunity by the end of this year. These plans must include an action plan to advance housing finance equity over the next three years. FHFA is requiring the plans to include goals and meaningful action to reduce the racial and ethnic homeownership gap and reduce underinvestment in formerly redlined or otherwise underserved and undervalued areas. These will be the first equitable housing plans developed and they will require both an annual report and update. FHFA is accepting public comments on the development of these plans through October 25, and there will be a public listening session on September 28.
Risk Sharing Program for State Housing Finance Agencies Relaunched
The Department of Treasury’s Federal Financing Bank (FFB) and the Department of Housing and Urban Development (HUD) also announced they have relaunched their Risk Sharing Program. This HUD-Treasury partnership began in 2015 after a pilot partnership to fund the rebuilding of affordable housing property damaged by Superstorm Sandy. The partnership helped finance $2.4 billion for affordable rental units since its creation, before being suspended by the Trump Administration at the end of 2018.
The risk sharing program will enable eligible state and local housing finance agencies (HFAs) to provide low-cost capital for affordable housing development. Under the partnership, state and local HFAs make affordable multifamily mortgages, which Federal Housing Administration (FHA) insures. The FFB then provides 30-40 year, fixed-rate funding to cover Treasury’s cost of funds. HFAs then use the funds to make low-rate loans for affordable properties. This helps keep rents low and allows the HFAs to stretch and leverage other housing programs and subsidies. Under the partnership, HFA lenders agree to share the risk and cover 50 percent of any loss if a mortgage fails. The re-established program is open only to HFAs, and CDFIs are not eligible participants in this round.