Housing USA: The Seven Key Federal Agencies for Home Affordability

6 min read

This month, Tax Credit Advisor is doing a special “leadership” issue, profiling people and agencies who spearhead the affordable housing industry. These agencies exist at multiple levels of government, and are responsible for coordinating, funding, building and managing real estate projects. This includes the federal level, where at least seven primary institutions have a direct or indirect role in fixing the nation’s home shortage, which is now estimated at five million units. Here we profile the leaders in each, and some of the recent relevant actions they’ve taken.   

Department of Housing and Urban Development 
Marcia Fudge, Secretary of Housing and Urban Development 

The main federal agency tasked with affordable housing policy enforcement and implementation, the Department of Housing and Urban Development’s services include insuring mortgages, providing grants, issuing Section 8 vouchers, providing federal public housing funds and much more.  

HUD is undertaking several current projects to increase the affordable housing supply in the U.S. The WhiteHouse has authorized new “Unlocking Possibilities” grants that HUD will distribute with the goal of helping “states and localities eliminate needless barriers to affordable housing production, including permitting for manufactured housing communities.”  

HUD’s $10 billion in Housing Supply Fund grants will go towards cities that make progress in reforming their housing regulatory codes.  

The agency’s Our Way Home program seeks to encourage more construction of affordable housing, including through federal fund allocation and more cost-effective construction methods, as well as enhancing connectivity of affordable housing to transit. 

These and other HUD programs are part of a larger Biden Administration effort to build or rehabilitate 500,000 homes. 

Federal Housing Administration 
Julia Gordon, Assistant Secretary for the Office of Housing and the Federal Housing Commissioner 

A division of HUD, the Federal Housing Administration is responsible for providing insurance for home loans and covering mortgage defaults for clients. FHA-backed loans are “among the most solid mortgages in the market,” according to home.com. The agency provides coverage for mortgages for both single- and multifamily properties (although it very much favors the former), as well as residential care and hospital facilities. The agency has insured more than 40 million home loans since 1934.  

The FHA is active in financing multifamily purchases, providing equivalent financing requirements as those for single-family loans, with cheaper down payments and less burdensome credit requirements. The agency’s Section 202 program provides financing for affordable senior housing, through “interest-free capital advances to private, nonprofit sponsors.” 

United States Department of the Treasury (Internal Revenue Service) 
Charles Rettig, Commissioner of Internal Revenue 

The Internal Revenue Sservice is responsible for overseeing the Low Income Housing Tax Credit program, the nation’s primary means of affordable housing construction. The expectation for early 2022 was that rates for LIHTC would be stable, and that the total annual credit would be around $869 million across the U.S. During the COVID-19 pandemic, the IRS sought to relieve burdens on LIHTC holders by eschewing “income recertifications” for the April 1 to Dec. 31, 2020 period and extending relief available for various circumstances. The Treasury Department is also responsible for a grant program called the Capital Magnet Fund, which boasts the creation of 28,000 affordable units. 

Federal Housing Finance Agency 
Sandra L. Thompson, Acting Director 

Established in 2008, the Federal Housing Finance Agency’s duty is to oversee entities, such as Fannie Mae and Freddie Mac. Fannie and Freddie are of course best known for loan securitizations sold across the secondary mortgage market. But they also issue funds for affordable housing programs, including $1.1 billion this year to the Capital Magnet Fund and HUD’s Housing Trust Fund. FHFA is facilitating that deal.  

These government-sponsored enterprises have been directed to implement housing affordability goals issued by the FHFA. The FHFA has a variety of affordable housing obligations, including an affordable housing program that has led to “approximately $7 billion in funding, supporting approximately 994,000 housing units” since 1990. The institution is responsible for capping the available loans for Fannie and Freddie; for 2022, it increased the ceiling on available loans by $8 billion.  

Federal Deposit Insurance Corporation 
Martin J. Gruenberg, Director and Acting Chairman, Board of Directors  

While best known for its role in insuring deposits, preventing bank runs and enforcing financial regulations, the Federal Deposit Insurance Corporation is also involved in affordable housing. The agency provides information on affordable mortgage lending to community financial institutions. FDIC also participates directly in affordable housing, selling properties affordably either to housing agencies or tenants directly. The entity also plays a role in overseeing the Community Reinvestment Act, which requires banks doing business in “distressed neighborhoods” to lend in those neighborhoods. Accordingly, LIHTC investments have been used to meet CRA obligations. 

Office of the Comptroller of the Currency 
Michael J. Hsu, Acting Comptroller 

The Office of the Comptroller of the Currency also oversees the CRA. In 2020, however, the agency issued a policy change that Novoco argued reduced its involvement in affordable housing. The change revised the community development standards that banks must follow, implementing “a ratio of the combined dollar volume of a bank’s entire CRA activity relative to the bank’s domestic retail deposits, both nationwide and in its local market ‘assessment areas.’” The concern was that this disincentivizes affordable housing participation; “OCC has significantly expanded the range of eligible CD activities so there is no assurance that banks will maintain their current focus on affordable housing and economic development.” This year, however, the CRA was slated for a change that would, among other things, award banks for LIHTC contributions anywhere in the country. 

Federal Reserve Bank of the United States 
Jerome Powell, Chairman 

 We saved the best for last, since Chairman Powell has without a doubt the biggest influence on credit availability and housing affordability in the near future. The Federal Reserve Bank sets interest rates, a key component of mortgage costs and activity among prospective homebuyers. The Fed has already hiked the federal funds rate by 75 basis points this year, and more hikes are expected throughout the year. 

However, the Fed is also yet another agency that has an oversight role regarding the CRA, monitoring compliance to fair lending laws. The Fed also conducts research into the overall state of housing affordability, assigning different metrics by branch – for instance, the Atlanta Fed collects data to find “estimates of the location and share of renter households that pay unaffordable rent across the Southeast,” the Minneapolis Fed has conducted research on the effectiveness of different affordable housing strategies; and the St. Louis Fed tracks median home sales prices by year.  

This article featured additional reporting from Market Urbanism Report content manager Ethan Finlan.