The United States is facing a profound affordable housing crisis, with skyrocketing rents, limited home availability, and far too many families struggling to find decent housing.
Senator Elizabeth Warren has turned her attention to the Federal Home Loan Bank (FHLB) system, a once-promising initiative that has strayed from its original mission in recent decades.
Through a series of bold proposals and legislative actions, Warren is spearheading a movement to realign the FHLB system with its core purpose of supporting housing and community development.
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Established in 1932 during the Great Depression, the FHLB system was envisioned as a critical component of the nation's housing finance infrastructure. Providing liquidity and support to member institutions, the FHLBs were intended to facilitate mortgage lending and foster affordable housing opportunities across the country.
However, over time, the FHLBs have drifted away from their original mandate. Instead of channeling their resources towards addressing the housing needs of American families, the banks have increasingly prioritized the interests of their members - many of whom are not even active mortgage lenders. This shift has led to a concerning imbalance, with the FHLBs showering their members with substantial dividends while allocating a mere fraction of their funds to Affordable Housing Programs (AHP).
In March 2024, the Congressional Budget Office (CBO) released a groundbreaking report that shed light on the true nature of the FHLB system's operations. The report estimated that the FHLBs will receive a staggering $7.3 billion in public subsidies this year alone - subsidies that were intended to support housing and community development, but have largely benefited bank executives and shareholders instead.
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“While these subsidies were meant to address our nation’s housing needs, they mostly supported bank executives and shareholders instead,” wrote Senator Warren. “Last year, the FHLBs paid $3.4 billion to their members in dividends and only $395 million to Affordable Housing Programs (AHP)—a staggering 8.5 to 1 ratio.”
In a strongly worded letter to the FHFA, Senator Warren has outlined a clear path forward for reforming the FHLB system and realigning it with its core mission. Specifically, she has urged the agency to take two crucial steps:
Warren has called on the FHFA to issue a rule that clearly defines the FHLB's mission as "(i) providing stable and reliable liquidity to their members, and (ii) supporting housing and community development." This step would help ensure that the banks prioritize their housing-related responsibilities over merely propping up their member institutions.
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She has also pushed the FHFA to use its regulatory authority to change the FHLB membership requirements. Currently, a significant portion of FHLB members have not originated a single mortgage, undermining the system's intended purpose. By redefining the eligibility criteria, the Senator aims to ensure that the FHLBs are serving their intended beneficiaries - active mortgage lenders committed to affordable housing.
In May 2024, Senator Warren reintroduced the Public Housing Emergency Response Act, a bill that would provide a one-time, $70 billion appropriation to address the massive backlog of maintenance and repairs in the nation's public housing units.
Warren has continued to champion the American Housing and Economic Mobility Act, a comprehensive legislation aimed at reducing housing costs, leveling the playing field for working families.
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