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
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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
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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