HUD must preserve the federal financing bank and risk-sharing program

HUD must preserve the federal financing bank and risk-sharing program
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Ten years ago, failures in mortgage lending sent shockwaves through our financial system, ushering in a devastating economic recession.  Tens of thousands of Americans lost their homes, leaving families in dire financial straits and putting unprecedented pressure on the rental housing market.  While our economy today has largely recovered, there are millions of affected families still struggling to find an affordable place to live. 

That is why it is imperative that the U.S. Department of Treasury and the Department of Housing and Urban Development (HUD) extend the Federal Financing Bank and Risk-Sharing Program (FFB Risk Share), a reliable, flexible financing tool that dramatically lowers the cost of capital for cities and states seeking to finance affordable housing.


Introduced in the wake of the financial crisis, FFB Risk Share allows local Housing Finance Agencies (HFAs) across the country to access low-cost capital through the Treasury’s FFB in order to build and preserve affordable housing.  Since it was introduced,  cities and states have financed more than 20,000 homes affordable to Americans with modest means, all while posing little risk and no cost to the federal government. 

Despite this success, the program is set to expire at the end of this month unless the Trump administration chooses to extend it.  This is a program that creates affordable housing while reducing red tape, responsibly allocating risk to state agencies, and generating revenue for the federal government—it is a clear win-win and a model of public-private partnership.

First, FFB Risk Share allows local governments to make decisions about affordable housing investments, decentralizing the process. Housing Finance Agencies, which are in every state and many cities throughout the country, have a long track record of creating affordable housing. FFB Risk-Share allows these agencies to do more, with less funding and staff time from the federal government. 

Second, FFB Risk Share uses a public-private partnership model that leverages federal tools to bring in private investment and expertise from the private and non-profit sectors. This model saves taxpayer money and uses resources efficiently.

Third, it creates net revenue for HUD through the mortgage volume generated and reduces risk to taxpayers and the Federal Housing Administration by having Housing Finance Agencies take on half of the credit risk exposure. 

And last, it works.  Numerous cities and states are using FFB Risk Share, and many more are looking to use it, but have been held back by the uncertainty surrounding the program’s future.  Some may say this program has run its course and is no longer needed. But that couldn’t be farther from the truth.  While the bond market has improved since it was introduced, FFB Risk Share provides significantly lower rates, which is critical in financing low-income housing, which doesn’t generate significant operating revenues. 

There are no conventional financing options that will meet this need, and the program therefore offers a particularly powerful lifeline in rural areas and other hard-to-serve markets grappling with how to finance affordable housing.

Now more than ever, cities and states need every tool to provide affordable housing opportunities for hard-working families. The National Low Income Housing Coalition estimates that we face a shortage of more than 7 million homes affordable to the lowest income Americans. That is above and beyond the significant investment needed to maintain our country’s existing stock of public and affordable housing.  Already, cities and states are reeling from losses to other affordable housing financing tools from tax reform, and can’t afford another hit.

And neither can the millions of Americans searching for an affordable place to live.  Ultimately, that is what is at stake — the ability of our nation’s families, whether they are in Kentucky or upstate New York, to find or stay in a safe, quality home they can afford.  As representatives from very different places, we see the affordable housing crisis as a shared problem, one that requires innovative solutions at all levels of government.  FFB Risk Share is exactly that kind of solution — a smart, efficient investment in our nation’s future, one that Americans can’t afford to lose. 

Eric Enderlin is president of the New York City Housing Development Corporation, the largest municipal Housing Finance Agency in the country. 

Edwin King is the executive director and CEO of the Kentucky Housing Corporation, the Commonwealth’s Housing Finance Agency.