The Ground Floor: Squeezing out affordable housing

Prospects for affordable housing development over the next few years are glum.

Earlier this month, the Ground Floor blog reported on several ways in which the affordable housing industry is being closed down.

Key in the downturn has been the reduction in 20 percent reduction in the price of low income housing tax credits due to accounting scandals at Fannie Mae and Freddie Mac, resulting in new mortgage purchase restrictions and making new deals largely unworkable.

This has had several effects:

* Major banks, once buyers of credits, have been struggling with losses and have largely avoided the affordable housing game.
* Developers are less able to finance their projects, and lenders aren't jumping in to make deals.
* The drop in housing revenues has curtailed local governments' ability to finance projects' soft costs.
* The Fannie Mae Foundation and American Communites Fund, which were created to invest in inner-city, low income neighborhoods, are now defunct.
* Fannie Mae is increasingly purchasing mortgages on $400,000-$700,000 homes, which will never become affordable

The Ground Floor blog, which is produced by the Urban Land Institute, says that even with a new Congress coming up we probably shouldn't expect any new affordable housing legislation to hit the streets until at least 2010.