Record levels of refinancing activity due to low mortgage rates last year is making more funds available to states for affordable housing.
On Tuesday, the U.S. Department of Housing and Urban Development (HUD) announced it was allocating $689.6 million to help states produce more affordable housing for extremely low- and very low-income households. The funds come from the nation’s Housing Trust Fund, which is not funded by the federal government but rather through 65 percent of a 0.042 percent fee on Freddie Mac and Fannie Mae activity. The government-sponsored enterprises both saw increases in net income in 2020, in large part due to heightened refinancing activity.
The Housing Trust Fund was launched in 2008 in order to increase and preserve the supply of decent, safe and sanitary affordable housing for low- and extremely low-income households, including families experiencing homelessness, HUD said in a press release. The amount of funding going to the HTF more than doubled this year from last year’s allocation of $322.6 million.
“This past year has reminded us just how important it is to have access to safe and stable housing,” HUD Secretary Marcia Fudge said in a statement.
“But too many Americans are struggling to keep or find an affordable home. We are excited to announce this historic funding allocation, which will enable states to expand and preserve affordable housing for our neighbors who need our support the most.”
HUD annually allocates the HTF funds to states by formula. This year, California will receive the most funds by far: $126.6 million, followed by New York ($73.4 million), Texas ($41.8 million) and Florida ($35.1 million). States must use at least 80 percent of each annual grant for rental housing; up to 10 percent for homeownership; and up to 10 percent for the grantee’s reasonable administrative and planning costs, HUD said.
The fund can be used for the production or preservation of affordable housing through the acquisition, new construction, reconstruction, or rehabilitation of non-luxury housing, HUD added.
“All HTF-assisted rental housing must meet a 30-year affordability period,” the agency said in a fact sheet. “All HTF-assisted homeownership housing must meet the minimum affordability period of 10, 20 or 30 years based on the amount of HTF investment in the unit.”
HUD said that the HTF had supported the construction or rehabilitation of 775 rental units nationally since 2017 with another 480 projects under construction. The agency expects this year’s funding to produce more than 5,400 additional affordable units.
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