FHFA will not require fundamental reform of FHLBanks

The Federal Housing Finance Agency (FHFA) released its highly anticipated final report “FHLBank System at 100: Focusing on the Future” that presents findings from FHFA’s comprehensive review of the Federal Home Loan Bank System (FHLBank System) and recommendations for the System to effectively clarify and fulfill its mission. While the report is clear in its message that the banks should be doing more to return to their core mission of boosting the housing market, it does not call for any fundamental regulatory reform of the FHLBank System.

The year-long review included a series of events to engage the public, including listening sessions, roundtables, and opportunities for written comment since it was announced in August 2022. FHFA explained when announcing the project that it intends to ensure the FHLBanks remain well positioned to serve the needs of their members and communities in advance of the System’s 100th anniversary in 2032. The report recommends that Congress double the statutory minimum contribution for the banks’ Affordable Housing Programs, from 10% of their net income to 20%, and that the banks engage more meaningfully with credit unions and Community Development Financial Institutions (CDFIs) while supporting more niche market needs. FHFA also notes it intends to clarify the mission of the FHLBanks, ramp up public reporting requirements for increased transparency, and create more incentive programs for members to engage in more housing and community development work.

The report findings specifically aim to expand the FHLBanks’ focus on housing and community development in three key ways: by requiring the banks to establish mission-oriented collateral programs to better support housing finance and community development products that lack a reliable secondary market outlet, increasing FHLBank engagement with mission-oriented members like CDFIs, and re-evaluating the definition of long-term advances required by statute to fund residential housing finance.

“Over the 90 years of the System’s existence, its membership base, the types of collateral that can be pledged for advances, and the FHLBanks’ product offerings have expanded. As these shifts have occurred, the connection of the FHLBank System to housing and community development has become less direct,” the report states. “While the FHLBanks play a critical role as providers of liquidity, the System must also appropriately support housing and community development.”

Executive Council for Housing Affordability urges Congress to act on supply

The Executive Council for Housing Affordability at the J. Ronald Terwilliger Center for Housing Policy sent a letter to Congressional leaders urging them to work together to pass comprehensive, bipartisan legislation to address the housing affordability crisis and its root cause, lack of supply. The Council represents corporations that seek to elevate housing policy as a national priority, including Airbnb, Amazon, Matrix Rental Solutions, Pretium, USAA, Weyerhaeuser, and Zillow. In their letter, the groups emphasize how the supply-demand mismatch has impacted communities across the country, leading to a shortage of 4.3 million units and severe increases in housing costs. It further cites a poll from the Bipartisan Policy Center and Morning Consult that found three out of four adults said the lack of an adequate supply of affordable homes is a problem in the United States, and 75% of adults think passing bipartisan legislation to increase the supply of affordable homes and help address high housing costs should be a priority for Congress this year.

The letter was sent to Senator Sherrod Brown (D-Ohio), Chairman of the Committee on Banking, Housing, and Urban Affairs; Senator Tim Scott (R-S.C.), Ranking Member of the Committee on Banking, Housing, and Urban Affairs; Representative Patrick McHenry (R-N.C.), Chairman of the House Financial Services Committee; and Representative Maxine Waters (D-Calif.), Ranking Member of the House Financial Services Committee.

“In 1949, members of both political parties came together to pass the Housing Act, setting forth a clear national objective to provide ‘a decent home and a suitable living environment for every American family.’ It is time for Congress to act once again in the best interest of millions of families and deliver on that aspirational goal,” the groups state in the letter. “We encourage Congress to take steps to increase the supply of affordable homes, preserve our existing stock of low- and moderate-income housing, and support those struggling with high housing costs. These actions can improve the quality of life for all Americans and at the same time strengthen our nation’s economy.”

Legislation introduced to make PRICE permanent

A group of Democratic lawmakers introduced new legislation in the Senate and House of Representatives that aims to revitalize and preserve manufactured home communities by making the Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program permanent. PRICE is a new program that dedicates $225 million in competitive grant funding to preserve and revitalize manufactured housing and eligible manufactured home communities, which are increasingly being recognized as part of the solution to meeting affordable housing supply needs. Senators Catherine Cortez Masto (D-Nev.), Jeanne Shaheen (D-N.H.) and Tina Smith (D-Minn.) introduced the bill in the Senate, and Rep. Suzanne Bonamici (D-Ore.) introduced the House version of the legislation.

“Manufactured homes are often more affordable than other housing, but many manufactured housing communities do not have funds to upgrade and repair basic infrastructure such as water and sewer systems, and they typically do not own the land beneath their homes,” said Rep. Bonamici.