WASHINGTON — The federal government on Thursday unveiled one of the most ambitious programs ever to house moderate- and low-income families, announcing $488 billion in funding that could turn tens of millions of families into new homeowners and renters in the next decade.
More than $34 billion will be spent in the five-county Los Angeles area, helping more than 360,000 families in the region, which has seen home prices and rents soar in the last year as the economy continues to create more jobs than housing. One study last year found Los Angeles and Orange counties to have the nation's widest gap in affordable housing.
California will get $84 billion of the pot.
Housing and Urban Development Secretary Andrew Cuomo said Thursday that he will require the two biggest housing finance companies under his influence, Freddie Mac and Fannie Mae, to boost the number of mortgages made available to low- and moderate-income families over the next decade by more than 20%, or nearly a half-trillion dollars.
Los Angeles County would receive the lion's share of funding in the Southland, $17.6 billion, the third-largest percentage increase nationwide, behind Washington and Chicago. As a result, the shortage of affordable housing will be eased, and the huge homeownership gap between whites and minorities, and between suburbs and cities will be reduced, Cuomo said.
Under the plan, known as Affordable Housing Goals, the two companies would raise the number of mortgages used for buying homes and constructing apartment buildings for low- and moderate-income families from 42% of its portfolio, to 50%.
A portion of the money will be available to developers for multifamily housing. Overall, $2.4 trillion in financing would be provided, up from a previously committed $1.9 trillion, helping an estimated 7 million more families nationwide obtain housing.
While HUD doesn't issue loans, an agency spokesman said the government will encourage lenders to be more flexible in their lending terms. Individuals would obtain the loans through regular banks and lending agencies.
The additional money for the program would come from funds raised in the financial markets by Fannie Mae and Freddie Mac, formerly known as the Federal National Mortgage Assn. and the Federal Home Loan Mortgage Corp., respectively. The two are quasi-governmental agencies that buy mortgages of up to $240,000 from traditional lenders and package and sell them to the so-called secondary markets. The two agencies set lending guidelines to which banks strictly adhere.
"This action will transform the lives of millions of families across our country by giving them new opportunities to buy homes or move into apartments with rents they can afford," he said. "Even though we've made great, great strides, there is still an obvious distance to go," Cuomo said.
Housing advocates for low-income people were more reserved in their assessment of the announcement. While the new loans will help low- and moderate-income families, they will not reach those who live in the most strained circumstances--the roughly 6 million people who are in minimum-wage jobs or are moving from welfare to work.
"Strengthened affordable housing goals are not enough to help poor and near-poor households, including working families," said Jeffrey Lubell, a housing analyst for the Center on Budget and Policy Priorities, a Washington-based organization that studies policies that affect low-income and poor people. "HUD's most recent report to Congress shows there are 5.3 million very low-income households that cannot afford their rent or live in substandard housing."
Others said that additional mortgage money only addresses half the equation.
"It will have a positive effect, but it won't drive the numbers up alone," said Eric Belsky, director of the Joint Center for Housing Studies at Harvard University. "What drives significant homeownership has more to do with the strength of the economy."
Other analysts said that an important gauge for assessing the program will be how much rental housing will be created in the Southland, where rental rate hikes have left the poor with few options.
"What's going to be key here is how much rental housing development there will be, not just single-family housing," said Sally Richman, policy and planning manager for the city of Los Angeles Housing Department.
Too few rentals exist in Los Angeles, even for middle-class wage earners, as community groups bitterly oppose new development, Richman said. With fewer apartments being built, families have a harder time finding housing that allows them to save enough money for a detached home, she said.
Moreover, low-income families far outnumber available funds. More than 150,000 households signed up last year for 43,000 vouchers that would enable them to find subsidized housing.