Why It Matters

A persistent shortage of affordable rental housing for the nation's poorest households is the central tension underlying a Congressional Research Service report on the Housing Trust Fund, a federal program that channels mandatory contributions from mortgage giants Fannie Mae and Freddie Mac into housing for extremely low-income renters.

The disparity is stark. In 2023, only 38 housing units were affordable and available for every 100 extremely low-income renter households, according to HUD's Worst Case Housing Needs report.

For Congress and the Trump administration, the stakes involve whether a fund operating outside the traditional appropriations process can meaningfully expand housing for renters earning less than 30 percent of area median income and whether the ongoing conservatorship of Fannie Mae and Freddie Mac will continue to support it.

The Big Picture

Established by the Housing and Economic Recovery Act of 2008, the Housing Trust Fund was designed to operate through a funding mechanism separate from the annual appropriations process. Fannie Mae and Freddie Mac must set aside 4.2 basis points, or 0.042 percent, of the unpaid principal balance of their new business purchases annually, with 65 percent going to the Housing Trust Fund and 35 percent to the Capital Magnet Fund. The first contributions arrived in 2016, with HUD making initial allocations to states that year. Funding has proven volatile, peaking at $748.9 million in fiscal 2022 before dropping to $214.1 million in fiscal 2024, reflecting changes in the mortgage market. For fiscal 2026, HUD allocated $255.5 million to grantees.

The program has produced tangible results despite its modest scale. Through December 2024, $650 million in Housing Trust Fund contributions supported 4,716 newly constructed rental units and 2,775 rehabilitated units, with more than 99 percent occupied by renters earning less than 30 percent of area median income. For every $1 in Housing Trust Fund money, projects leveraged $9.81 from other sources.

Regulatory uncertainty remains. A 2015 interim rule governing the fund remains in effect, and a 2021 request for public comment has not resulted in a final rule. The fund is subject to sequestration of 5.7 percent through fiscal 2031, and the Federal Housing Finance Agency can suspend Fannie Mae and Freddie Mac contributions if it determines they are contributing or would contribute to financial instability or cause an enterprise to be classified as undercapitalized.

The Bottom Line

The Housing Trust Fund provides a source of federal affordable housing financing outside the annual appropriations process, but its impact remains constrained by fluctuations in Fannie Mae and Freddie Mac business activity, regulatory uncertainty and an affordable housing shortage that far exceeds the program's current scale.

Congress could consider proposals to expand the fund through direct appropriations or other funding changes, alter its targeting requirements or maintain its existing structure as lawmakers weigh how to address the shortage of affordable rental housing for extremely low-income households.

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