The lackluster performance of the Federal Home Loan Banks' economic development could be improved by following the model of their own Affordable Housing Program, writes Carol Wayman.
"Many housing developers are familiar with the FHLBanks' Affordable Housing Program (AHP), which requires each of the 12, independent, regional banks to set aside 10 percent of annual profits to invest in local affordable housing initiatives," writes Wayman, federal policy director of the Corporation for Enterprise Development (CFED). "The results have been incredibly positive, with more than $4.2 billion in grants administered since 1990, creating more than 700,000 units. The program has been the 'crown jewel' of the system as it brings strong housing development proposals together with appropriate financing. AHP is the largest source of private funds available for affordable housing in the nation."
While there are examples of good economic development financing from FHLBanks-a community space in Washington, DC's Shaw neighborhood; a permanent, year-round farmers' market for low-income farmers and entrepreneurs in Nevada; the redevelopment of vacant commercial property into mixed-use development in Worcester, Mass.; a series of loans given to small businesses in Wisconsin - but for a GSE that gets benefits from its semi-public status, the amounts are disappointingly low.
"The best way to increase investment in community economic development is to mandate it," writes Wayman, "using the AHP model - setting aside a percentage of FHLBanks' annual profits for investment in community economic development projects identified by member financial institutions.
"In this time of overwhelming budget cuts, high levels of unemployment and global economic change, a long-term, significant funding source that brings together community development organizations, local governments, and the financial sector could play a crucial role to building a stronger, more inclusive economy."
Thanks to Matthew Brian Hersh
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