Given the climate on Capitol Hill, it’s rare to find a program with all of the elements that traditionally engender bipartisan support: a program that spurs economic development and creates jobs, attracts private capital, quickly delivers impact in dozens of states, and makes housing more affordable for families, seniors and veterans.
So why is that Federal Housing Finance Agency Director Mel Watt is being called before the House Financial Services Committee where he is likely to be taken to task for resurrecting the Capital Magnet Fund (CMF)?
The Housing and Economic Recovery Act (HERA) of 2008 created CMF and NHTF to increase the availability of affordable housing for low-income families, seniors, veterans, people with disabilities and others in need—and to spur economic development. CMF, in particular, was created to attract private capital investment. Though only funded once, it has proven to be a true “bang for the buck.”
In 2010, Congress appropriated $80 million to CMF, which was disbursed to 23 organizations in 14 states. Those groups attracted 12 times that amount from investors, for a total of more than $1 billion, creating nearly 7,000 affordable homes and 5,700 jobs across 28 states, Washington, DC, and Puerto Rico in urban and rural communities.
These funds worked to address one of today’s most persistent challenges—the high cost of housing. According to a recent Zillow report, since 2000, rents are up 52 percent nationally, while renters’ incomes have only increased 25 percent. Finding affordable housing is even more daunting for low- to moderate-income households. More than half of households earning less than $30,000 a year spend more than 50 percent of their income on rent, leaving little for other necessities such as food, medical care, transportation, or savings.
Last August, the U.S. Conference of Mayors formally adopted a resolution urging Congress to fully fund CMF as part of comprehensive housing finance reform legislation. And last January, more than 30 U.S. Senators asked Director Watt to restart CMF and NHTF funding, noting Fannie Mae and Freddie Mac recovery and the fact that affordable housing for extremely low-income renters had decreased by more than a million units since passage of HERA in 2008.
They wrote, “We are all committed to reforming the mortgage finance system and do not believe Fannie Mae and Freddie Mac should be returned to their previous form. However, directing much needed funding for affordable rental housing should not wait until Congress and the President are able to agree on a new system.”
CMF funds high-capacity nonprofit housing developers and Community Development Financial Institutions, such as Capital Impact Partners, IFF, the Low Income Investment Fund (LIIF), The Reinvestment Fund (TRF), and others. These organizations have stellar track records and enjoy bi-partisan support for their work at the local, state, and federal levels. Investing in top-tier organizations protects taxpayers and yields results; CMF awardees used just 2.5 percent of their awards for their own costs in administering their grants.
CMF has attracted substantial private investment. The $80 million allocated has led to more than $1 billion invested and the revolving nature of the fund keeps this money working: funds deployed from the 2010 round are already being repaid and reinvested.
Also, private-public partnerships created through CMF have spurred economic development and created jobs.
LIIF received $6 million that was invested in projects in Arizona, California, Colorado, and Texas and leveraged more than $130 million to support 1,500 units of affordable housing and more than 200 jobs. In Dallas, LIIF’s CMF investments helped preserve 280 units of affordable housing and provide after-school and summer programs for youth and teens, along with health and nutrition classes. This one project created 56 local jobs for Dallas residents.
Similarly, TRF received $5 million that was invested in projects in New Jersey, Pennsylvania, Delaware, Maryland, and Washington, DC, which will support at least $75 million in additional investment. In West Philadelphia, CMF funds are helping to build and renovate 45 different properties, creating 60 affordable homes and 15,728 square feet of commercial space that will spur economic development. CMF funds are also helping develop a complex of 150 new and rehabbed energy-efficient townhomes for rent and for-sale in East Baltimore.
CMF is not the only answer to the nation’s housing challenges and additional solutions are welcomed. But in the meantime, it has proven to be effective in attracting the private sector to invest in affordable housing. These are investments that work for the neediest families and American taxpayers and CMF and NHTF should be allowed to continue their good work while Congress works on larger reforms of the nation’s housing programs.
Andrews is president & CEO of the Low Income Investment Fund; Hinkle-Brown is president & CEO of The Reinvestment Fund; Neri is CEO of IFF; and Simonette is president & CEO of Capital Impact Partners.