Fannie & Freddie’s Duty to Serve

Alan Cleaver

The Federal Housing Finance Agency had issued a request for comments on a proposed rulemaking back in December about Enterprise Duty to Serve Underserved Markets. Comments were due yesterday. I drafted a short comment letter on one of the many topics raised by the rulemaking. The abstract reads,

The FHFA has requested input on its proposed rule that would provide a Duty to Serve credit to Fannie Mae and Freddie Mac (The Enterprises) for eligible activities that facilitate a secondary mortgage market for mortgages related to preserving the affordability of housing for homebuyers, among other things.  I write to comment regarding the preservation of affordable homeownership through shared equity homeownership programs.

The Proposed Rule requires that each Objective of an Underserved Markets Plan be measurable in order to determine whether it has been achieved by the Enterprise.  The Proposed Rule requires that these programs “promote successful homeownership.” § 1282.34(d)(4)(iii).  While the Proposed Rule addresses ways that ensure that housing remains affordable for future owners after resale, it does not offer a way to measure successful or sustainable homeownership for participants while they are in a shared equity program.

The FHFA should require that the Enterprises measure the tenure of homeowners participating in shared equity programs and disallow Duty to Serve credit if participants fail to maintain their housing for reasonable length of time.  While this comment is being made in the context of shared equity programs, it applies with equal force to all homeownership programs that are counted for Duty to Serve purposes.

Equitable Transit-Oriented Development

Forest Hills RR Station

Enterprise Community Partners has issued a white paper, Promoting Opportunity Through Equitable Transit-Oriented Development (eTOD): Making the Case. The Executive Summary opens,

Investments in transportation infrastructure can catalyze regional growth and improve mobility. Given limited public funds, public officials and transportation planners have increasingly recognized the benefit of coordinating transportation investments with land use, housing and economic development investments and policies. In particular, there has been a specific emphasis on facilitating transit-oriented development (TOD) – a growth model characterized by compact development, a mix of land uses, and multi-modal transportation connectivity. When properly planned, such development can support transit ridership and revenues, boost property values and enhance economic competitiveness.

While TOD can take many forms, for a variety of reasons there has been increased demand for transit-oriented neighborhoods with a critical mass of population, neighborhood-serving retail establishments, employment opportunities and/or economic activity. Some prefer these transit-oriented, amenity-rich neighborhoods based on lifestyle preferences. However, for others – particularly people with lower incomes or for whom driving is difficult or impossible – the accessibility that TOD offers is crucial to reaching jobs and life’s other necessities in an efficient and economical manner.

Unfortunately, a number of factors – most notably the prevalence of zoning codes that separate residential from commercial and retail uses – have limited the number of compact, mixed-use, multi-modal neighborhoods. To the extent that demand for housing in such neighborhoods – as a result of either choice and/or necessity – remains strong, scarcity of housing in these neighborhoods can increase property values. Significant price increases can lead to additional cost burdens, potential displacement and/or barriers to entry for low- and moderateincome households. If these households are displaced it can also reduce likely riders’ access to transit and limit employees’ and customers’ access to businesses.

One solution to these challenges is equitable TOD (eTOD), which is well-planned and implemented development near transit that accounts for the needs of low and moderate-income people, largely through the preservation and creation of affordable housing. eTOD can expand mobility options, lower commuting expenses and enhance access to employment, child care, schools, stores and critical services. This development model also conveys ancillary benefits to the broader community, the economy, the environment and the transportation system. (5-6)

This is all to the good, but the report does not struggle with a fundamental problem: local governments do not want to build housing for low- and moderate-income households because they tend to be a net drain on municipal budgets a opposed to the typical household living in a single-family home. Even local politicians who are sympathetic to eTOD will face many roadblocks from their constituents if they try to make it happen. Enterprise promises a second report that will address barriers to eTOD. Hopefully, it will address this issue head on.

Thursday’s Advocacy & Think Tank Round-Up