Housing savings account

July 28, 2005

TUCKED WITHIN a wide-ranging piece of legislation aimed at reforming and strengthening regulatory oversight of government-sponsored housing finance agencies Fannie Mae and Freddie Mac is a timely and welcome requirement that would force the two mortgage giants to set aside 5 percent of their after-tax profits for affordable housing.

The proposed legislation in the U.S. House of Representatives has cleared a key committee with wide bipartisan support. It could pump as much as $3 billion over the next five years into the production, preservation and rehabilitation of affordable rental housing and toward assisting first-time homebuyers.

Some Republican lawmakers opposed to the set-aside dismiss it as a "slush fund" for the housing industry. A Senate version of the legislation scheduled to be debated today excludes the fund outright. Senate Democrats have indicated they will oppose the measure sponsored by Alabama Republican Richard C. Shelby. Maryland Sen. Paul S. Sarbanes' office said he will introduce a substitute version that includes the fund.

The fund would favor projects that benefit families with very low incomes and would pay for the building or rehabilitating of about 4,000 housing units a year. It would help poor and working-class people who have seen decent and affordable housing move increasingly beyond their reach.

Given the increasing rates of homelessness in this country and that about a third of Americans are spending 30 percent or more of their income on housing, the housing fund would be a good step toward meeting the needs of people with severe housing cost burdens. The private housing market clearly is not meeting this need.

The fund would not require annual appropriations from the federal government, nor would it burden taxpayers.

The Bush administration, which touts its efforts to expand homeownership, should be backing the measure. Instead, it seems swayed by arguments that the housing fund distracts from the legislation's larger reform goals. But there is no reason why the legislation cannot both reform and assist.

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