The proposed Duty to Serve rule holds a lot of promise for expanding Fannie Mae’s and Freddie Mac’s financing of affordable housing. But how the rule proposes to get to the expansion is as important as the extent of the affordable housing work. By pushing Fannie and Freddie to make their own plans, set goals and measure the results, the rule has a chance at stimulating real innovation to reach places currently lacking good access to capital for affordable housing. For Duty to Serve to succeed, people inside and outside of government need to take up the affordable housing mission along with their day-to-day responsibilities.
Duty to Serve would direct Fannie and Freddie to look for specific ways to reach underserved markets, set their own goals and then measure their performance with an eye toward improvement over time. (Barry Zigas, a member of NHC’s Board of Governors, has a great summary with more detail.) Congress specifically directed that the rule not set numerical goals, exerting not-so-gentle pressure toward a qualitative approach.
That could make a big difference. Purely numerical goals can result in “pay the piper” behavior that doesn’t create new ways to finance affordable housing. Meeting the numerical goals becomes just a cost of doing business. A qualitative approach, however, has at least the potential to identify new ways to finance affordable housing that other entities could replicate without the urging of regulators. Fruitless wheel-spinning is certainly possible, too, but the upside of success is worth aiming for, and if we work together, we have a chance of realizing it.
For Duty to Serve to succeed, it will take dedicated people working at Fannie and Freddie, at FHFA and at the affordable housing lenders and developers who use the financing tools, to innovate successfully. Each of them must take up the affordable housing mission along with their day-to-day responsibilities. We cannot focus only on how to close the next loan or start the next concrete pour. We must also think about how to make loans and pour concrete in places we aren’t reaching now. The work of NHC and its members offer clear precedent for this approach. In NHC’s 85 years of history, blending mission and innovation with public-private partnership has been a theme from the very beginning. The theme starts in the 1930s with the deliberations that gave rise to the Federal Home Loan Bank System, Fannie Mae, public housing and the Federal Housing Administration. It continues to today’s policy debates on housing policy to empower community revitalization, create healthier living spaces and build household wealth.
NHC will certainly have comments on how to improve the proposed Duty to Serve rule, and we welcome your input. If you want to get involved, reach out to me at email@example.com. Policy innovation happens through all sorts of conversations, and NHC aims to create space for the constructive engagement affordable housing needs.