Every funding source has a story. Affordable housing construction is often synonymous with big players such as HUD programs such as Low Income Housing Tax Credits (LIHTC), HOME Investment Partnerships Program, Community Development Block Grant programs; and USDA’s Rural Development program. In 2008, Congress authorized two additional funding streams for affordable housing and related investments as part of the Housing and Economic Recovery Act: the Capital Magnet Fund (CMF) and the Housing Trust Fund (HTF). These funds, administered by Treasury (though the CDFI Fund) and HUD, respectively, were supposed to be replenished by contributions from Fannie Mae and Freddie Mac: a small amount of the revenue generated through new government mortgages would be siphoned off and allocated to the Funds. These funds would then be distributed to housing organizations through a competitive process for the purpose of building affordable housing.
The Capital Magnet Fund was designed to give capable housing organizations an incentive to continue building affordable housing through a funding mechanism that required limited federal investment. There are significant leveraging requirements for CMF projects: every dollar of a CMF grant must be matched at least 10:1 with other sources of capital. The income limits for the program are also aggressive; all units financed must be affordable for households with income below 120% of area median income (AMI), and at least 51% of project costs must be used for households with income below 80% of AMI. The purpose of these requirements is to “magnetize” capital specifically for affordable housing.
So why haven’t you heard of the Capital Magnet Fund yet? In 2010, when Fannie and Freddie came under conservatorship due to the mortgage crisis, both CMF and HTF got cut off before any money could be allocated. But successful lobbying by housing advocacy groups and CDFIs steered Congress to approve a one-time package of $80 million to the Capital Magnet Fund. This financing was allocated to 23 CDFIs and nonprofit housing agencies (pdf), and we now have access to the locations and project details that resulted from this spending.
To date, CMF grantees have:
- generated over 1 billion dollars in housing activities by leveraging the initial $80 million (an overall 12:1 match)
- financed 6,803 affordable homes (502 owner-occupied, 6,301 affordable rental homes)
- financed 189 development and preservation projects
- created or maintained 315 full-time jobs
- created 5,456 construction jobs
The tentative success of the projects on the map may have something to do with the Federal Housing Finance Agency’s recent decision to authorize Fannie and Freddie to begin allocating funds again, beginning in 2015. Treasury expects CMF to be replenished to $1.2 billion over the next five years, and for funding to be disbursed beginning in 2016. Find current Capital Magnet Fund projects on PolicyMap in the Housing tab, and be sure to look for many more dots on this map sometime in 2018.