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A Toll that Keeps on Taking: Sequestration Hits Housing Trust Fund, Capital Magnet Fund

Published by Peter Lawrence on Thursday, March 17, 2016 - 12:00AM

As previously noted in this space, the Housing Trust Fund (HTF)–created by the Housing and Economic Recovery Act of 2008–will be funded by contributions based on 4.2 basis points of Fannie Mae’s and Freddie Mac’s annual new business purchases. The U. S. Department of Housing and Urban Development (HUD) plans to distribute HTF allocations to states by summer 2016. Each state is expected to draft and approve an HTF allocation plan, similar to the low income housing tax credit (LIHTC) qualified allocation plan (QAP), which will determine how HTF funding will be distributed to particular developments in the second half of 2016.

In anticipation of these developments, Notes from Novogradac estimated in December 2015 how much funding could be expected for the HTF, Capital Magnet Fund and HOPE reserve fund, as well as how much HTF funding might be allocated to each state. Those estimates did not take into account the effect of a 6.9 percent sequestration cut, to which both the HTF and Capital Magnet Fund are subject.

After accounting for sequestration, the U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund recently announcedthat the CMF would receive $93,472,163. HUD has yet to make a similar announcement for the HTF. Accounting for the 2015 Fannie Mae and Freddie Mac filings released last month and sequestration, Novogradac’s estimates are updated as follows:

Blog Chart Updated Top Level Estimates for HTF, CMF and HOPE Reserve Fund

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It’s important to note that the largest states are most affected by the reductions caused by sequestration, as illustrated in the following map and table.

Blog Graph Housing Trust Fund Update: State-Level HTC Allocations

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For example, before factoring in the effects of sequestration (and using older filings from Fannie Mae and Freddie Mac), California was projected to receive between $12 and $14.4 million in HTF dollars. After accounting for the reduction and using the most recent filings, it is estimated California will receive approximately $8.97 million.

Blog Chart Housing Trust Fund Update: Estimated State Allocations

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