Senator Warren Introduces Expansive Affordable Housing Bill; Would Authorize New Money for Housing

Senate Banking Committee member Elizabeth Warren (D-MA) introduced legislation, the American Housing and Economic Mobility Act, to authorize $500 billion for affordable housing programs over the next 10 years. The legislation increases funding for a number of affordable housing programs, including the Housing Trust Fund and Capital Magnet Fund. It also establishes a new HFA-administered program to support affordable housing for middle-class families.

Warren’s summary of the bill explains that it authorizes $445 billion for the Housing Trust Fund, spread out evenly over fiscal years 2019–2028. Thirty-nine state HFAs currently administer the Housing Trust Fund in their states. An independent analysis of the legislation written by economist Mark Zandi of Moody’s Analytics suggests the Housing Trust Fund money would support an additional 2.1 million affordable housing units.

In addition, the bill would increase funding for the Capital Magnet Fund by $25 billion over the next 10 years. The Capital Magnet Fund provides funding to state HFAs, nonprofits, and Community Development Financial Institutions to support affordable housing opportunities. Five HFAs were awarded Capital Magnet Fund grants for FY 2017 to finance affordable multifamily and homeownership projects.

The legislation also authorizes $2 billion in funding for the Indian Housing Block Grant program and $523 million for rural housing programs administered by the U.S. Department of Agriculture, including $180 million for Section 515 Rural Rental Housing Loans.

Further, the legislation establishes the Middle-Class Housing Emergency Fund, through which HUD would award $4 billion in grants to state HFAs on a competitive basis to support the construction of rental units affordable to middle-income individuals and families (those earning less than 120 percent of area median income). To be eligible to receive such grants, HFAs would have to demonstrate that there is a shortage of affordable housing available in their states and that housing costs in their states have increased more than income in the last three years.

This bill also would create a new HUD program to help homeowners who owe more than their home is currently worth. Specifically, HUD would distribute $2 billion to states through a formula grant program to offer borrowers with negative equity the chance to refinance their mortgages, purchase and rehabilitate vacant properties in distressed communities, and help underwater borrowers pay for maintenance on their homes. It is not clear which entity from each state would administer this program. Additionally, the bill would establish a program through which HUD would provide down payment assistance to help borrowers purchase homes in neighborhoods that historically were ineligible for Federal Housing Administration loans, typically due to "redlining policies" that served to discriminate against racial minorities.

Other provisions in the bill would:

  • Subject most federally-chartered credit unions and non-bank mortgage originators to the requirements of the Community Reinvestment Act (CRA);
  • Increase penalties for CRA non-compliance;
  • Award $10 billion in grants for infrastructure development to local governments that amend their land use rules to allow for the development of more affordable housing;
  • Amend federal fair housing law to ban discrimination against potential renters or home buyers on the basis of gender identity, sexuality, marital status, and source of income; and
  • Modify the guidelines for the Housing Choice Voucher program to make it easier for recipients to use their vouchers to secure housing in neighborhoods with good schools.

Zandi estimates the legislation would help finance the development of up to 3.2 million new affordable housing units, lower rents by 10 percent, and create up to 1.5 million jobs.

To offset the costs of these affordable housing investments, the legislation would roll back exemptions to the federal estate tax to their 2009 levels. Zandi estimates this would pay for $400 billion of the legislation’s $500 billion in spending and the additional $100 billion would be offset from tax revenues generated by increased home-building activity and other investments catalyzed by the legislation.

The bill will likely be referred to the Senate Banking Committee, but it is unlikely that the Committee or the Senate will act on it this year.

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