Housing Trust Fund at Risk Due to Tax Reform

NLIHC Urges FHFA Director Mel Watt to Reconsider FHFA Policy and Contributions to Housing Trust Fund (HTF)

Due to unintended impacts from the “Tax Cuts and Jobs Act” signed into law in December 2017, Fannie Mae and Freddie Mac (the Enterprises) have announced they will likely need an advance from the U.S. Treasury which could put the Housing Trust Fund at risk.

This move, under current Federal Housing Finance Agency (FHFA) policy, risks a suspension of the Enterprises’ statutorily required funding for the national Housing Trust Fund. The FHFA is the Enterprises’ conservator and regulator. This is one of several threats to the housing trust fund.

On January 5, 2018, the National Low Income Housing Coalition (NLIHC) delivered a letter to FHFA Director Mel Watt urging him to reconsider FHFA policy and to continue the Enterprises’ contributions to the HTF.

By significantly lowering the corporate tax rate from 35% to 21%, the tax bill reduced the value of tax-deferred assets owned by the Enterprises.

As a result, the Enterprises are now expected to need an advance from Treasury as early as in the first quarter of 2018.

NLIHC expressed to Mr. Watt that these unique circumstances should not trigger the suspension of payments to the HTF under FHFA’s current policy, which was established without the impact of tax reform in mind. Congress created the HTF, and FHFA developed its policy regarding HTF contributions, well before any significant discussion of tax reform legislation and its possible impacts.

Moreover, FHFA’s policy is aimed at ensuring the financial stability of the Enterprises – which is not at issue under this unique circumstance. The Enterprises are financially stable.

Fannie Mae and Freddie Mac received $187 billion in government funds during the financial crisis but have made more than $279 billion in payments to the Treasury since that time, during which the Enterprises were not allowed to maintain any of their profits.

Since FHFA’s decision to lift the suspension of Enterprise contributions to the HTF in 2016, nearly $400 million have been allocated to the states to help them address the housing needs of people with the greatest needs, including seniors, people with disabilities, families with children, and people experiencing homelessness, among others. This allocation was an important first step for the HTF.

Given the tremendous need for more affordable housing in America, NLIHC is working to increase funding to the HTF – through housing finance reform and other legislative avenues. NLIHC is working to help the HTF serve more of the lowest income people in need of affordable, accessible homes. Suspending contributions to the HTF could make it more difficult to expand the program.

NLIHC Letter to FHFA

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