A New Direction: How FHA Surpluses Can Solve America’s Housing Crisis

by Randy Shaw and Gale Cincotta
San Francisco, California
June 2000

Demand Safe & Affordable Housing for America’s Children

Problem
American working families are facing an unprecedented affordable housing crisis:

• 5.3 million families pay more than 50% of their income on rent, live in substandard housing, or both, which severely impacts their children’s well-being and future: 
  • Unstable housing contributes to student transience, a leading barrier to academic success;
  • The disproportionate amount of income paid for rent forces many families to choose between adequate nutrition and housing; 
  • Substandard housing has contributed to the rise of hospitalizations due to childhood asthma over the last decade.
• In the last decade, funding for the Department of Housing and Urban Development (HUD), the main source of funds for alleviating the housing crisis, has been cut by 61%, more than any other domestic budget in the same period. 
  • Only one-third of the 12 million low-income families eligible for assistance receive federal housing subsidies.
  • The Administration’s proposed $28.5 billion budget would need to be nearly tripled in order to meet the growing affordable housing needs of American families.

Solution
Make your voice heard in the halls of Congress, demanding that children and their families have access to affordable housing. Write a letter to your member of Congress. Write a letter to the editor of your local newspaper. Duplicate this request and post it in newsletters, on web sites, to email listserves.

Ask that your Senator or Congressmember do the following:

• Fund the entirety, at the very least, of the Administration’s $28.5 billion HUD budget request.
• Reinstate the $100 million requested by HUD to preserve at-risk subsidized housing but eliminated by OMB. 
• Increase the Low Income Tax Credit and specifically target the credit to those with lower incomes.
• Support HR 425 (Reps. Vento & Ramstad) to institute federal matching funds for preserving existing federally subsidized housing at risk of market-rate conversion or deterioration (for Representatives only).

For a sample letter to Congress, visit http://www.igc.org/housingamerica/
For contact information for your member of Congress, visit http://thomas.loc.gov/
For more information, contact Kate Alexander, National Field Coordinator, at 212/986-2966 x252

General Recommendations
In order for children to grow and thrive, achieve in the classroom, and contribute to the prosperity of our nation, our nation must first provide them with the basic needs to grow up healthy and safe. In addition to nourishment, the most fundamental need for children to grow is safe and adequate housing. Therefore, we offer the following recommendations to ensure that all children, regardless of family income, are provided this most basic of needs:

• Affordable and adequate housing provided through federally supported housing programs, such as tenant-based certificates or vouchers, public housing units, or other federally assisted units should be guaranteed to poor children and their families. Federal policies to provide tenant-based assistance, and to preserve and improve public and assisted housing units, should be adequately funded and strengthened.
• Federal programs to produce new affordable housing units, especially the Section 8 voucher program, should be significantly expanded to allow parents to find safe and affordable housing for their families. Federal housing resources, especially Section 8 vouchers, should be targeted to the poorest families, who have the most to lose from inadequate housing and the most to gain from improvements in their living environment.
• Proposed changes in housing policies, programs, and developments should be evaluated in part based upon their likely effects on children’s health. Contracts should consider not just cost but the implications of building materials and design for asthma, injuries, and lead poisoning.
• Tenants should have full access to legal aid to be able to obtain what is their legal right — housing that is free of lead, free of infestation, and free of causes of severe asthma and allergies. Federal, state and local governments should fund legal aid programs to help parents fight for their right to a safe and healthy home for their children. 
• Public and assisted housing developments should take the lead by assessing the health needs of their families around such areas as asthma prevention, injuries and lead poisoning.
• Public and assisted housing providers, including agencies providing tenant-based assistance, should be more responsive to meeting the needs of children whose health is compromised by poor housing — ensuring a “fast track” approach to qualifying for federal housing assistance. Each housing provider should have a medical review board to prioritize qualified families.

Recommended Actions

• Fund the entirety of the Administration’s $28 billion HUD budget request.
• Reinstate the $ 100 million requested by HUD to preserve at-risk subsidized housing.
• Increase the Low Income Tax Credit, which should be targeted to aid those with lower incomes. 
• Grant HUD the flexibility to raise its fair market rent levels in communities facing sudden and steep increases in rental housing costs. 
• Provide additional funding to schools with high levels of student transiency. 
• Ensure subsidized housing for all families with acute housing needs whose children suffer from asthma, viral infection, and/or chronic disease.
• Increase food stamps for low-income families lacking subsidized housing.
• Create opportunities for region-wide portability of Section 8 certificates. 
• Ensure that Housing Opportunities for People with AIDS (HOPWA) certificates have the same portability as Section 8 certificates.

Allocating the current $5 billion FHA surplus for rental housing production, maintenance, and preservation would represent a 500% increase in HOME’s rental housing budget.

The $5 Billion FHA Surplus

The Federal Housing Administration (FHA) was created in 1934 to promote homeownership among moderate-income families who could not otherwise afford a home. By providing below-market down payments and other assistance, the FHA approves mortgages for families otherwise unable to obtain private lending.

Several factors impact FHA revenue streams. These include mortgage interest rates, appreciation in house values, the unemployment rate, and overall household income growth. Economic prosperity increases FHA revenue by reducing foreclosures and other claims on FHA funds.

On March 6, 2000, HUD released the most recent independent actuarial analysis of the FHA’s Mutual Mortgage Insurance (MMI) Fund. The results showed that the total value of the Fund in Fiscal Year 1999 was $5 billion above the total value reported for Fiscal Year 1998.

Currently, FHA surpluses are not legally earmarked for affordable housing. However, on March 7, 2000, President Clinton directed both the Office of Management and Budget and HUD to make recommendations within 160 days on how the $5 billion could be used to enhance affordable housing opportunities.

FHA revenue offers a solution for eliminating the ever-widening gap between the increasing demand for affordable housing and the shrinking supply of low-cost units. Since FHA revenue has increased due to the economic prosperity that has contributed to the affordable housing shortage, it is only appropriate to use FHA funds to mitigate and even reverse such impacts. No other revenue source exists with such a systemic connection to the nation’s housing crisis.

FHA surpluses should become a dedicated funding source for a Federal Housing Trust Fund. Since the Trust Fund does not yet exist, the FHA revenue should be allocated to the HOME program and earmarked to house families at 30% of median or less in mixed-income buildings.

The HOME Program

Created in 1990, the HOME Investment Partnership program (HOME) is the federal government’s chief vehicle for new rental housing construction. The program’s $1.6 billion budget also funds renovation and new home ownership opportunities, leaving less than $1 billion for addressing the nation’s rental housing shortage. Pending the creation of a Federal Housing Trust Fund, directing FHA revenue to HOME in the interim is the best strategy for increasing our affordable housing supply.

HOME currently requires state and local matches of $3 million and $500,000, respectively. Rental units funded by HOME must remain affordable for at least twenty years. HOME is controlled by state housing agencies rather than by HUD.

The $5 billion FHA surplus should be directed to HOME and earmarked for assisting low-income families earning 30% of the area’s median income or less the category of families on waiting lists for Section 8 vouchers and who increasingly suffer from worst-case housing needs and whose children are suffering injury, disease, and adverse health due to inadequate housing. Currently, housing built under HOME is not required to serve families earning less than 50% of the median. Families benefiting from FHA-derived HOME funds would live in mixed-income housing, avoiding the concentration of low-income families in a single building.

HOME offers a ready-to-go, non-bureaucratic strategy for using the current FHA surplus to add over 200,000 units to the nation’s affordable housing supply next year. By maintaining existing state and local match requirements, the FHA funds will increase the amount of federal dollars leveraged and create additional incentive for participation by local governments.

Using FHA Surpluses To Create A Federal Housing Trust Fund

Over 100 cities and 35 states across America have enacted laws dedicating annual funding to the creation of affordable housing. By setting aside housing allocations in independent Trust Funds, local and state governments are striving to provide the economic security that private and nonprofit developers need to fulfill their plans. But localities and states lack the resources to adequately finance affordable housing construction, as their efforts to create low-cost housing have been hampered by the lack of federal dollars. Housing Trust Funds at the state and local level would leverage far more housing if joined with a dedicated federal funding source. The creation of a Federal Housing Trust Fund would create the federal-state-local partnership that is essential for solving America’s housing crisis.

Housing America
As a new century begins, over four million American children live in housing that endangers their health, academic future and even their lives. The reason is no mystery. The past two decades have seen a precipitous decline in the number of housing units that families with children can afford.

The solution to the nation’s affordable housing crisis is clear: dramatically increased federal funding to preserve and greatly expand the nation’s low-cost housing stock. The private sector simply cannot provide affordable housing to millions of families with children without government subsidies. Federal assistance is essential to ensure that our nation’s children have the safe and stable housing they deserve.

Housing America is a national, grassroots field campaign committed to ensuring safe and affordable housing for America’s families. With offices in San Francisco and New York, Housing America focuses on bringing such new and diverse constituencies as pediatricians, educators, and emergency food providers into the struggle for increased federal housing funds. The goal is to build sufficient grassroots pressure in key districts and states to motivate federal officeholders to provide decent and affordable housing for their constituents.

Housing America Staff

Randy Shaw, Director
Randy Shaw is the Director of Housing America and the Executive Director and Supervising Attorney of the Tenderloin Housing Clinic in San Francisco. During the past two decades, Mr. Shaw has assisted thousands of low-income tenants and has authored several laws to preserve and improve affordable housing. Ms. Shaw has also designed and implemented programs that have provided housing for thousands of homeless single adults. He is the author of The Activist’s Handbook: A Primer for the 1990s and Beyond (University of California Press, 1996) and Reclaiming America: Nike, Clean Air, and the New National Activism (University of California Press, 1999).

Kate Alexander, National Field Coordinator
Based in New York City, Kate Alexander serves as the Primary Organizer for Housing America’s national field campaign. She was formerly the national organizer for “In All Things Charity,” a grassroots campaign of 2,000 clergy and laity committed to changing the United Methodist Church’s official position on homosexuality. She began her organizing career as the local field organizer for Green Corps, the field school for grassroots environmental organizing, in Chicago and Sacramento after graduating from Cornell University in 1996.

Communication Works
Press in Attendance at Housing America Press Conferences
April 7, 1999 

Washington, DC Press Conference 

• Associated Press photographer 
• ABC Radio
• National Public Radio (two reporters) 
• Minneapolis Star Tribune 
• Detroit News

St Louis, MO Press Conference 

• St. Louis Post Dispatch
• St. Louis American (weekly will come out next Thurs)
• KMOX ran multiple blurbs on it all day. CBS, CNN, O&O
• KWMU FM(NPR) 
• WIL FM Radio, NBC
• KTRS AM Radio, ABC 
• KPLR TB Channel 7 WB Network 
• KTVI TV Channel 2 FOX
• KMOV TV Channel 4 CBS

San Francisco, CA Press Conference 

• KGO TV, Channel 7 used b-roll and shot at Hamilton shelter 
• KDTV TV Channel 14 Univision
• KCBS AM Radio CBS 
• KPFA FM Radio Pacifica 
• KQED FM Radio NPR
• China Press 
• Sing Tao Daily 

Syracuse, NY Press Conference 

• Syracuse Post-Standard 
• WRVO Radio 
• WAER FM Radio NPR 
• WSYR AM Radio ABC 
• WIXT TV Channel 9

Columbus, OH Press Conference 

• Columbus Dispatch 
• Columbus Post 
• WBNS Channel 10 News CBS 
• WCMH Channel 4 News NBC (lead story on 6 p.m. edition)
• WOSU Ohio Public TV 
• WBNS AM Radio CBS
• WOSU – AM Radio NPR 
• WTVN 610 AM Radio ABC 
• Hannah News Service 
• Dix News Service

2017 Mission Street, Suite 304, San Francisco, California 94110 415.255.1946 • fax 415.255.1947. www.communicationworks.org e.mail works@igc.org