Obama expected to announce program that could further limit affordable housing assistance

President Barack Obama is expected to announce in the coming days that more than 200 hotel chains and other companies have agreed to divest millions of dollars in stock investments that have made funds…

Obama expected to announce program that could further limit affordable housing assistance

President Barack Obama is expected to announce in the coming days that more than 200 hotel chains and other companies have agreed to divest millions of dollars in stock investments that have made funds used to fund affordable housing vulnerable to the volatility of the stock market.

These funds are two provisions of the Hope VI initiative, first enacted in 2004 and expanded in 2009 as part of the $47 billion American Recovery and Reinvestment Act.

Hope VI funds, a common byproduct of Fannie Mae’s “foreclosure mitigation” for borrowers, go into the money used to finance construction of new affordable housing, and they are invested in companies at which the government can obtain a higher return on a savings account. The Hope VI provisions have been credited with saving thousands of homes across the country from foreclosure as well as rehiring tens of thousands of construction workers and lower-wage retail workers.

But, like all other sectors of the market, asset prices and share prices fluctuate daily, thus dragging down those funds that are reliant on a steady, sustained return. Many of the companies backing Hope VI act now own hotel stocks, a risk factor as the stock market has risen in recent months. With lower-income families likely to see rents go up as vacancies drop, the trend is expected to lead to more families, who also need the affordable housing funds, forgoing rental housing.

“If you sell half of the Hope VI fund, that means you are reducing the amount of money available to do anything,” said John Magaziner, director of the White House Council on Economic Advisers.

The nation’s 76,000 affordable housing units supported by Hope VI money remain largely unbuilt, given that the program began with an initial $500 million that had to be repaid by lenders at a time when the housing market had crashed.

Backers of Hope VI have tried for many years to find a way to keep the program financed. When the crisis struck, Congress expanded Hope VI funding to $4 billion, bringing the total it has obligated to the $7 billion it has made available. During the next few months, Congress will be discussing the Obama administration’s budget request to use a portion of Hope VI funds that would add another $1 billion to the stock of housing funds, and whether to allow that money to be targeted by region, in a process described as “federally coordinated metropolitan investments.”

“We’ve seen how the funding under Hope VI has percolated down to communities for the development of new affordable housing, and also supported important programs like homeownership counseling that offer residents the training they need to make the next step to homeownership,” said Margaret Forouzan, head of the nonprofit National Low Income Housing Coalition. “When Hope VI was first rolled out, one goal was to give more of these programs the financial resources needed to make them a reality, particularly in the midst of the foreclosure crisis.”

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