Reed Housing Trust Fund & Capital Magnet Fund Law delivers over $1.1 Billion in housing assistance

WASHINGTON, DC – Amidst a shortage of housing nationwide that is contributing to rising home prices and rents, U.S. Senator Jack Reed (D-RI), a senior member of the Banking Committee, today asked Federal Reserve Chair Pro Tempore Jerome Powell about affordable housing policy, the role of institutional landlords, and plans to fight housing inflation.

Reed, the lead Senate architect of the 2008 law establishing the Housing Trust Fund and the Capital Magnet Fund, also noted that the Federal Housing Finance Agency (FHFA) will make a total of $1.138 billion available to communities this year for initiatives that will increase and enhance the supply of affordable housing.  These affordable housing funds are financed by a small percentage of profits from two government-sponsored housing agencies, Fannie Mae and Freddie Mac.

This year, the Housing Trust Fund will receive $740 million (a $29 million increase over 2021) and the Capital Magnet Fund will receive $398 million (a roughly $15 million increase over the previous year.  This is the largest amount that Fannie and Freddie have ever provided.  The funds will support community development financial institutions and non-profit housing developers that increase investment in affordable housing and economic development activities or community service facilities, such as daycare centers or workforce development centers. 

The Housing Trust Fund is overseen by the U.S. Department of Housing and Urban Development and provides grants to states and other state-designated entities to promote the production and preservation of affordable housing.

The Capital Magnet Fund is overseen by the Treasury Department and awards its money in grants to community-develop financial institutions and nonprofit developers.

“Too many Americans are being priced out of their neighborhoods and that issue has been exacerbated by Wall Street buying up properties on a massive scale and using these units as investments.  American families have an exceedingly difficult time trying to compete with institutional buyers jumping in and restricting housing supply in this environment.  My message to Chair Powell today is that policymakers need to act to help working families and we can start by identifying the steps the Fed can take to address rising rents and home prices,” said Senator Reed.

Video of Senator Reed’s exchange on housing is available here, transcript follows:

REED: Thank you, Mr. Chairman. Thank you, Chairman Powell, for your great work. Senator Cortez Masto raised the issue of housing and for families all across the country, particularly my home state of Rhode Island, this is one of the biggest forms of inflation they're seeing. It's been reported the housing prices year over year have gone up 20%. Rent nationwide in January rose 14% in 2021 -- the last numbers we have. I had school principals in yesterday and they were commenting about some of their families have to leave, the working-class community of Rhode Island, because they can't afford the housing, and this isn’t luxury housing -- to go into the poorer neighborhoods just to have some shelter. And I'm afraid there's another factor that will really exacerbate what's going on and that is private equity and Wall Street have decided they're going to buy up as many homes as they can. And that disrupts what we assume is the typical housing market for both rental, i.e., relatively small owners have rental properties in the state. They have a relationship with their tenants. When it comes to homes, you buy a starter house and you move up and you sell it, and these are families through a realtor selling it. Now we have the big machines that are just buying up houses, throwing people out, and I think that's essentially going to sneak up on us like a lot of other crises in the past. What you're going to do in your authority is address the demand side of the economy. This is really a supply side issue, I would assume you would agree.

POWELL: Yes.

REED: But if we do not address it, we will see continued inflation in housing and continued problems, and that's contributing significantly to the overall inflation rate. Is that accurate?

POWELL: I think in housing you've got -- it's land, labor, lots, materials, and very strong demand. All of those are scarce and it's very strong demand hitting and so that's why you're seeing prices go up.

REED: Will the interest rate increases, do you think, affect demand for housing?

POWELL: I expect they will, yes. It's a very interest-sensitive sector.

REED: Home ownership, in terms of rental housing, that typically because of the supply shortage, will be passed on to the renter, I would assume.

POWELL: Yes.

REED: We have a problem that affects families all through this country, and one of the consequences of what you're going to do raising prices slightly, but we have to deal with it and that's on the supply side. I know that's not your bailiwick. We're talking in general terms about inflation, and if we don't get a handle on housing inflation, the American people will still be -- and particularly the lower income working families will be hammered by this. I hope we can come together on the fiscal side and do something that's appropriate.