New Housing Loan - affordable

New housing law helps low-income renters

By David Handelman, Medill News Service Last update: 7:12 p.m. EDT Aug. 5, 2008WASHINGTON (Medill News Service) -- A $550 million trust fund, created under the nation's new housing law, is the first concentrated effort to establish affordable housing for renters in the lowest income brackets since the formation of Section 8 housing in 1974, experts say. "This is the first real bricks and mortar type of program since Section 8," said Greg White, a policy analyst with the National Low Income Housing Coalition. "It's really targeting a group that has been neglected."

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Section 8 is a federal housing program that subsidizes housing costs for low income renters. Under the new trust, at least 75% of the money will go to extremely low-income families, those that live below 30% of the median income of a state or below the national poverty line. According to the housing coalition at least 90% of the funds must be used to create, preserve, rehabilitate and operate rental housing units. The other 10% will be available for first-time homeowner activities, including assistance with down payments and closing costs. The trust will be financed through annual payments made by Fannie Mae and Freddie Mac, based on a percentage of their new business. Using the formula in the bill, the housing coalition estimates that Fannie and Freddie contributions would have meant over a half a billion dollars last year. Money for the trust fund will not be available until 2010. Peter Tatian, senior research associate for the Urban Institute, said that the demand for affordable housing has never wavered, even if Congress hasn't kept pace with the need. "The housing crisis has shed light on this problem," Tatian said. "The need has always been there and this is coming at a time when we need more affordable rental housing." Under the new law, each state is to receive a minimum of $3 million dollars annually. The formula for divvying up the money among states has yet to be decided, but it will be disbursed to agencies that are equipped to handle the creation of affordable housing units. To assure stability, funding for the trust does not have to go through Congress' annual appropriations process. "This is going to create a permanent stream of funding for that targeted group," said Peter Lawrence, senior policy director for Enterprise, an affordable housing agency. Counting on Fannie and Freddie The method of financing for the trust fund is not without controversy. Some experts worry that this is exactly the type of law that is contributing to the growing shadow of a recession. "If Congress thinks it's a good idea, make appropriations for it, instead of taxing someone (lenders) that they just had to bail out," said Gerald O'Driscoll, senior fellow at the Cato Institute. O'Driscoll said creation of the trust fund is public policy that everyone can appreciate, but the source of its funding is a major concern. Assuaging this doubt, the nonprofit housing coalition thinks that by 2010 Freddie and Fannie will be in better shape financially. Although there have been other housing programs aimed at low-income renters, Jeremy Rosen, executive director for the National Policy and Advocacy Council on Homelessness, said that the trust fund will allow greater focus on the truly needy. "This will allow us to serve people that you can't always serve," Rosen said. "It really allows units to be reserved for the poorest of the poor." U.S. Rep. Barney Frank, D-Mass., said that the creation of the trust fund, which he has been working on for years, means a great deal. "Section 8 added to the demand for affordable housing not the supply," Frank said. "We need to get back in the business of building affordable housing."

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