A quarter of a century ago, Congress put into place one of the nation's most successful funding sources for affordable housing. As part of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, lawmakers created the Federal Home Loan Banks' Affordable Housing Program to provide grants for low- and moderate-income housing initiatives. To fund AHP using no taxpayer dollars, the law mandated that the FHLBanks make annual commitments that would gradually increase, reaching 10% of each bank's earnings. The program fit well with the FHLBanks' overall mission to serve as reliable sources of liquidity for member institutions in support of housing finance and community investment. The new AHP regulation represented a watershed moment for housing professionals that had entered a new era when it would become more and more difficult to assemble financing.
Today the AHP, and the affordable housing community that relies on it, are once again at another important turning point. The first grants were announced 25 years ago this week. Much has since changed in the affordable housing arena. Likewise, change is needed to the AHP itself.
AHP grants are made to local nonprofits, government entities and developers through member banks and credit unions. What we've heard from housing professionals and nonprofit groups boils down to this: the program needs to be more user-friendly, more flexible and in synch with how affordable housing works today.
Some local partners have expressed a reluctance to participate in AHP due to what they perceive as burdensome program requirements disproportionate to the level of investment. Some qualified grantees have said they have opted out of applying for AHP funds because the effort required is over and above what is normally needed to access gap financing.
Many are concerned that program rules are redundant or incompatible with the requirements of other funders also who are needed for the same affordable housing projects. They would like to see more simplified administrative requirements, more consistent application of standards and increased transparency with respect to monitoring and determining need for subsidy. If changes such as these are made, they say that funding will be more accessible, especially to smaller project sponsors and those in rural areas.
That said, the success of the program speaks for itself. The most recent numbers from the Federal Housing Finance Agency show that the FHLBanks have contributed well over $4.4 billion to assist in the purchase, construction or rehabilitation of more than 724,000 units of affordable housing over two and a half decades. The AHP has become the largest single private source of funds for affordable housing. Because the FHLBanks are regional and cooperatively owned by their members in communities across the country, AHP grants can be tailored to meet local needs unlike many other programs.
There has never been a time when it has been more important to sharpen every tool we have for affordable housing. One in four of the 42 million U.S. renter households spend more than half their income on rent, which means that some families may have to choose between paying their rent and paying for groceries, medicine, childcare and other essentials, according to the national affordable housing nonprofit Enterprise Community Partners. When renters make difficult tradeoffs to pay their bills, it impacts their long-term health, education and economic mobility.
The good news is federal regulators are working with affordable housing advocates to bring the AHP into the 21st century. Federal Housing Finance Agency director Melvin Watt has publicly stated that one of his top priorities for the FHLBanks is to update the regulations that shape how the program works. The FHFA has begun seeking input from advisory councils, housing nonprofits, national groups, as well as from the FHLBanks themselves.
We applaud these efforts. Change is needed to create programs adapted to the low- and moderate-income housing challenges the nation now faces. When the AHP is appropriately modernized, it will equip the FHLBanks and their members to better collaborate with local housing partners and together continue creating more affordable housing for all Americans.
Steven Rosenbaum is chairman of the Council of Federal Home Loan Banks and chairman, president and CEO of Prospect Federal Savings Bank in Worth, Ill.