Housing promise only partially built out
During the 2008 presidential campaign, Barack Obama promised to create an Affordable Housing Trust Fund to spur the development of affordable housing. After nearly eight years of false starts, the fund finally began operating in 2016, though the needs are so great that the fund won't get very far in ameliorating them.
As we've previously noted, Obama's idea was to pay for the new affordable housing by using a portion of the annual profits of two government-sponsored housing enterprises, Fannie Mae and Freddie Mac. President George W. Bush signed a law in July 2008 that would have done exactly that. However, the housing crash in 2008 and 2009 revealed large debts held by Fannie and Freddie. Profits disappeared, and both were forced into conservatorships.
Fannie Mae and Freddie Mac were finally allowed to provide dollars to the trust fund after Obama appointed Mel Watt to head the Federal Housing Finance Authority. In December 2014, Watt directed the two entities to begin setting aside the funds in 2015 and to make these funds available by March 2016.
In April 2016, Julián Castro, Obama's secretary of Housing and Urban Development, announced the first $174 million in allocations for the fund. A second portion of the fund, the Capital Magnet Fund, was given an additional $91.5 million.
These funds would be used for "creating new and permanently affordable housing for very-low-income and extremely-low-income residents—people who are at great risk of falling through the cracks," the website CityLab reported,
A 2015 HUD report to Congress estimated that the class of Americans in "worst-case" housing scenarios in 2013 included 2.8 million families with children, 1.5 million elderly households without children and 2.7 million other 'nonfamily' households."
That means that the money allotted won't go very far.
In the meantime, despite the long wait to set up the fund, its future is in doubt. Rep. Jeb Hensarling, R-Texas, and Rep. Ed Royce, R-Calif., tried but failed to prevent the trust fund from starting up in the first place in 2014, arguing that taxpayers should be fully repaid for Fannie and Freddie's losses before any proceeds are spent on other federal programs. Royce even called the trust fund a "slush fund."
With a new Republican administration, they or other critics would have an opportunity to target the fund again.
As for the other part of Obama's original promise -- to "restore cuts to public housing operating subsidies" -- the Obama administration has fared less well.
According to the National Low Income Housing Coalition, public housing operating subsidies have been cut from $4.78 billion in fiscal year 2010 to $4.5 billion in fiscal year 2016. The group says those cuts are a result of budget spending caps known as sequestration.
Ultimately, the Obama administration did start the flow of money into an affordable housing trust fund. However, the amount is smaller and it began arriving later than originally anticipated, Meanwhile, public housing operating subsidies have actually fallen rather than remained steady or increased. We rate this a Compromise.
CityLab, "How the Federal Government Plans to Stop the 'Worst-Case' Housing Crisis," April 4, 2016
Affordable Housing Finance, "CDFI Fund Awards $91.5 Million in Capital Magnet Funds," Sept. 22, 2016
DS News, "Fannie Mae and Freddie Mac Make First Contribution to Housing Trust Fund," March 14, 2014
Department of Housing and Urban Development, "Worst Case Housing Needs: 2015 Report to Congress," Feb. 3, 2015
Statement from the National Low Income Housing Coalition, Dec. 22, 2016
Email interview with Kriston Capps, staff writer at CityLab, Dec. 22, 2016
Obama's Affordable Housing Trust Fund received no money and created no homes
In 2008, Barack Obama campaigned on creating more affordable housing.
He pledged to create 56,000 affordable homes by 2012 through an Affordable Housing Trust Fund. To pay for the new housing, the U.S. Department of Housing and Urban Development, better known as HUD, would draw from annual profits at two government-sponsored housing enterprises, Fannie Mae and Freddie Mac.
The trust fund would be different from existing federal programs for low-income housing because it would be a direct grant to developers, not a loan or tax credit, and it was supposed to pay for especially inexpensive housing, affordable to households making less than 30 percent of the area median income -- or 50 percent in some cases. Most of the money would go to rental units, but some would help people own their own homes.
It almost happened.
President George W. Bush signed a law in July 2008 that would have done exactly what Obama had proposed. But the housing crash revealed large debts held by Fannie and Freddie, forcing both into conservatorships, where an independent agency has managed their assets and operations ever since. Neither agency has turned an annual profit since 2007, but even if they did, the conservatorships currently prevent money from going to the Affordable Housing Trust Fund.
The plight of Fannie and Freddie also became the plight of the Affordable Housing Trust Fund. About a month after the trust fund became part of federal law, its only source of revenue -- profits from Fannie and Freddie -- evaporated.
Obama and Congress have considered other ways of infusing the trust fund with other money. Despite several bills, budget proposals, white papers and stump speeches, the Affordable Housing Trust Fund is nothing more than a page on HUD's website. More importantly, all those low-cost rental units Obama wanted to create? They never made it to the market.
When we reached out to Sheila Crowley, who heads the National Coalition on Low Income Housing, she noted several obstacles outside Obama's control, including a down economy connected to the housing crisis, and tepid congressional support for solutions.
"Our view is that the administration has been publicly supportive of the housing trust fund and that there have been some attempts of getting it funded, but it certainly wasn't anything that drove the agenda,” Crowley said.
This last part -- about driving the agenda -- is an important caveat. Of course, it's impossible to know whether Obama could have secured new money for the Affordable Housing Trust Fund if it had been higher on his list of priorities. But we do know that in his first two years, Obama signed into law an economic stimulus package worth more than $700 billion, a comprehensive health reform law and an overhaul of financial regulations for Wall Street. His administration also pushed for new laws on climate change and immigration reform.
The housing trust fund received less attention than any of those broad-reaching initiatives.
We'll leave historians the task of judging whether Obama optimized the tradeoffs before him, making the most of finite political influence after his election. With the Obameter we measure outcomes. The Affordable Housing Trust Fund has no money and created zero homes for low-income households. We rate this a Promise Broken.
Interview with Sheila Crowley, president and CEO of the National Low Income Housing Coalition, Oct. 23, 2012
Interview with Amy Clark, communications director of the National Low Income Housing Coalition, Oct. 23, 2012
Federal Housing Finance Agency, 2008 Report to Congress, May 18, 2009
Federal Housing Finance Agency, 2011 Annual housing report, Oct. 31, 2011
Congressional Research Services, Fannie Mae's and Freddie Mac's Financial Status: Frequently Asked Questions, Sept. 27, 2012
U.S. Department of Housing and Urban Development, Housing Trust Fund (accessed Oct. 23, 2012)
National Low Income Housing Coalition, National Housing Trust Fund (accessed Oct. 23, 2012)
National Low Income Housing Coalition, Fact sheet: national housing trust fund (accessed Oct. 23, 2012)
BarackObama.com, Supporting urban prosperity (accessed Oct. 23, 2012)
Federal Housing Finance Agency (accessed on Oct. 24, 2012)
Housing trust fund appropriation pending in Congress
President Barack Obama pledged to support more affordable housing, and a bill pending in Congress would fund a new Affordable Housing Trust Fund with $1 billion.
Obama proposed the funding in his budget, and the money is now part of Jobs for Main Street Act that is awaiting action by Congress.
Other public housing programs received significant funding from the stimulus package -- the American Recovery and Reinvestment Act -- passed in early 2009. Funds for capital and management received close to $4 billion.
These additional funding sources prompt us to move this promise to In the Works.
Office of Budget and Management, 2010 Budget: Department of Housing and Urban Development, accessed Jan. 11, 2010
Thomas, HR 2847, accessed Jan. 11, 2010