Housing and Economic Recovery Act of 2008 Creating Housing Trust Fund Becomes Law
Wednesday, July 30, 2008

Today, President George W. Bush signed the Housing and Economic Recovery Act of 2008 into law. Among the bill’s numerous provisions is the establishment of a national Housing Trust Fund. This is a major victory for low income housing advocates and the lowest income people in our country with the most serious needs.

The Housing Trust Fund is a permanent program with a dedicated source of funding not subject to the annual appropriations process. At least 90% of the funds must be used for the production, preservation, rehabilitation, or operation of rental housing. Up to 10% can be used for the following homeownership activities for first-time homebuyers: production, preservation, and rehabilitation; down payment assistance, closing cost assistance, and assistance for interest rate buy-downs.

At least 75% of the funds for rental housing must benefit extremely low income households and all funds must benefit very low income households.

This is the first new federal housing production program since the HOME program was created in 1990 and the first new production program specifically targeted to extremely low income households since the Section 8 program was created in 1974.

Funds for the Housing Trust Fund will come from annual contributions made by Fannie Mae and Freddie Mac. The amount will be based on a percentage of each company’s annual new business. Using the formula in the bill, the amount in 2007 would have been $557 million. Because their new business is increasing, the amount in 2008 is expected to be higher. However, 25% of the funds each year must first go to a reserve fund at the Treasury to offset scoring problems.

The remaining 75% of the funds will be divided between the Housing Trust Fund, which gets 65%, and a new Capital Magnet Fund that gets 35%. For the first three years, a percentage of the funds (100% in FY09, 50% in FY10, and 25% in FY11) will be diverted to a reserve fund to cover losses that the FHA might incur refinancing troubled mortgages through the new HOPE for Homeowners program (see article below). Based on the projected amount the formula will produce in calendar year 2008, approximately $300 million would have been available for the housing trust fund this year had it been in place with no diversions for the HOPE for Homeowners reserve fund. Funds not needed to cover FHA losses eventually will revert to the Housing Trust Fund and the Capital Magnet Fund.

Now that it has achieved this important and long-sought milestone, the National Housing Trust Fund Campaign will turn its attention to the next two steps towards achieving its goal of 1.5 million homes in 10 years. The first is implementation of the program—working with HUD to create an effective and timely fund distribution system. The second is to identify and advocate for additional sources of dedicated revenue. The bill specifically provides that Congress may “transfer, appropriate, or credit” other funds to the Housing Trust Fund.

More information is available at www.nhtf.org.

Housing Wage is $16.23 for Two-Bedroom Apartment in Illinois

According to a report released today, the Housing Wage for Illinois is $16.23 for a two-bedroom apartment. The Housing Wage is the hourly wage a family must earn—working 40 hours a week, 52 weeks a year—to afford a modest two-bedroom apartment renting for $844. The Housing Wage has increased 25.3% since 2000.

The report, Out of Reach 2007-2008, was jointly released by the National Low Income Housing Coalition (NLIHC), a Washington, DC-based housing advocacy group, and Housing Action Illinois.

Federal guidelines state that no one should spend more than 30% of their income on housing,including rent or mortgage payments, utilities, property taxes and insurance.

“As rents continue to rise across the state, Illinois workers are spending more and more of their income on their housing and have less money for food, clothing, transportation and other basic needs,” said Mimi Chedid, Policy Coordinator for Housing Action Illinois. “The persistent shortage of affordable rental housing combined with the current economic slowdown—largely caused by the mortgages foreclosure crisis—threatens the economic security of Illinois families.”

In Illinois, among metropolitan and non-metropolitan areas, the lowest Housing Wage for a two-bedroom apartment is $10.15 in the metro-east Bond County metropolitan area. The highest housing wage for a two-bedroom apartment is $18.15 in the Chicago metropolitan area.

In Illinois, a minimum wage worker earns an hourly wage of $7.50. In order to afford market rate rents for a two-bedroom apartment, a minimum wage earner must work 87 hours per week, 52 weeks per year. Or a household must include 2.2 minimum wage earners working 40 hours per week year-round in order to afford a two-bedroom apartment.

Housing Action Illinois’ mission is to increase and preserve the supply of decent, affordable, accessible housing in Illinois for low-and moderate-income households through advocacy, public education, and technical assistance to nonprofits.

Data for every state, metropolitan area and county in the country is available online, at www.nlihc.org/oor/oor2008.