Housing trust funds are established sources of funding for affordable housing construction and other related purposes created by governments in the United States (U.S.). Housing Trust Funds (HTF) began as a way of funding affordable housing in the late 1970s. Since then, elected government officials from all levels of government (national, state, county and local) in the U.S. have established housing trust funds to support the construction, acquisition, and preservation of affordable housing and related services to meet the housing needs of low-income households. Ideally, HTFs are funded through dedicated revenues like real estate transfer taxes or document recording fees to ensure a steady stream of funding rather than being dependent on regular budget processes. As of 2016, 400 state, local and county trust funds existed across the U.S.
Funding Trust Funds are typically funded with a dedicated source of revenue, though they can be funded through general budget allocations. They may also be funded through capital dollars backed by government bonds. The size of revenues also varies from fund to fund. A survey of 145 trust funds showed that 1/5th received more than $10 million per year, but the large majority (82%) received less than $5 million or no funding at all. The following is a non-exhaustive list of funding sources for various types of Housing Trust Funds in the United States.
Sources of funding for State Housing Trust Funds include:
Unclaimed Property or Lottery Funds Interest on Broker, Title or other Real Estate Escrow Accounts Document Recording Fees (fees placed on documents recorded with government agencies) General Funds Government General Obligation (GO) Bond Revenues Real Estate Conveyance or Transfer Taxes State Income Taxes Unspent Temporary Assistance for Needy Families Reserves Section 8 Reserves Fees from Mobile Home Park Owners Interest from Budget Stabilization or Surplus Funds Interest from Tenant Security Deposits Eviction Court Fees Penalties On Late Real Estate Excise Taxes (taxes on the purchase price of real estate) Origination Fees
Sources of funding for County Housing Trust Funds include:
Impact Fees Inclusionary Zoning In-Lieu Fees (fees paid in-lieu of providing affordable housing in a development) General Funds Private or Foundation Contributions Restaurant Taxes Government General Obligation (GO) Bond Revenues Real Estate Transfer Taxes Condominium Conversion Fees Sales Of County Surplus Land (land purchased by the county that is no longer needed) Document Recording Fees Sales Taxes Developer Proffers (fees paid to make a development more appealing for government approval)
Sources of funding for Local Housing Trust Funds include:
General Funds Capital Improvement Project Funds Tax Increment Financing (TIF) Funds Impact Fees Tobacco Settlement Funds Hotel Occupancy Taxes Public Benefit Funds Government General Obligation (GO) Bond Revenues Condominium Conversion Fees Real Estate Transfer Taxes Sales Taxes Property Taxes, including dedicated levies Housing Excise Taxes Inclusionary Zoning In-Lieu Fees Disposal Waste Fees State Funding Allocations Sales of City Surplus Land (land purchased by the city that is no longer needed) Parking Garage Proceeds (revenue from city-owned parking garage operation) Developer Proffers (fees paid to make a development more appealing for government approval) Permit Fees
Funding Priorities Each trust fund has different objectives and goals based on the needs of the local population and political preferences, and each jurisdiction is responsible for determining how housing trust fund dollars may be used and who is eligible for funding. Funded activities may include new construction, acquisition, or rehabilitation activities. Funds may also support transitional housing, assistance for low- and moderate income home buyers, such as down payment assistance, education, or counseling, emergency repairs, loans for design costs of housing developers, or rental subsidies. Trust Funds typically target households earning 80% or less of the area median income (AMI), though some may only fund projects for homeless individuals or families or lower income targets. And, typically funded projects are required to remain affordable for a set period of years. These requirements and preferences may be established by the authorizing legislation or by the administrative body. This may determine which projects are more likely to be funded and who will benefit the most from the trust fund. Over time, housing needs of the population may change, and a Fund's regulations can change to accommodate new goals and objectives.
Administration or Governance Administration or governance rules are established by the authorizing legislation for the trust fund. Typically, they are administered by government agencies often with the oversight of a Board of directors consisting of membership by any of the following: lenders, community members, housing developers, low-income housing advocates, labor unions, or affordable housing residents. The oversight board may have true governing responsibilities or act purely as advisers. The governance strategy is primarily important for determining which projects get funding from the Trust Fund, particularly in a highly competitive jurisdiction. Administering agencies vary for each jurisdiction.
Administering agencies include: State, County, or City Housing Authorities State, County, or City Executive's Offices State Departments of Housing, Community Development, Community Services, Economic Development, or Commerce City Departments of Housing, Planning, Human Services, Neighborhood, Community Services, or Economic Development County Housing and Community Development Departments State Housing Finance Agencies, Corporations, Authorities, or Commissions State Community Development Corporations County or City Housing Commissions State Boards of Housing and/or Conservation City Housing Resources Boards City Housing and Redevelopment Agencies City Offices of Housing Community Foundations
Types of Housing Trust Funds in the United States
National Housing Trust Fund In 2008, Congress authorized a National Housing Trust Fund as part of the Housing and Economic Recovery Act (HERA), signed into law by President George W. Bush. The Trust Fund is intended to complement existing federal funding sources for affordable housing. By law 90% of fund are to support activities that build, preserve, repair, and operate rental housing for low-and very-low income households. Up to 10% of funds can support homeownership services for first-time home buyers like down payment and closing cost assistance and funding to reduce interest rates. Funds from surplus revenues generated by Fannie Mae and Freddie Mac were expected to fund the program. However, these payments have been suspended since the federal government placed them under conservatorship. On April 4, 2016, Julián Castro, Secretary of the United States Department of Housing and Urban Development (HUD), announced that nearly $174 million would be made available through the first ever allocation of the National Housing Trust Fund. President Obama's FY 2011 budget called for $1 billion to capitalize a national housing trust fund, but this request was not approved. Advocates hope to establish a dedicated source of revenue so that allocations are not subject to the annual budget process.
On March 27, 2014, U.S. Representative Maxine Waters from California's 43rd congressional district, introduced a discussion draft of the Housing Opportunities Move the Economy Forward Act of 2014 known as the HOME Forward Act of 2014. A key provision of the bill includes the collection of 10 basis points for “every dollar outstanding mortgages collateralizing covered securities” estimated to be approximately $5 billion a year. These funds would be directed to three funds that support affordable housing initiatives, with 75% going to the National Housing trust fund. It is proposed that the National Housing Trust Fund will then provide block grants to states to be used primarily to build, preserve, rehabilitate, and operate rental housing that is affordable to the lowest income households, and groups including seniors, disabled persons and low income workers. Rep. Waters' proposal could be a source of funding for the National Housing Trust.
The U.S. Housing and Urban Development (HUD) Department is responsible for administering the National Housing Trust Fund. When funded, states or their designated entities (for example, Housing Finance Commissions) are eligible to receive funding through formula grants based on population and need. States will then distribute funding to project applicants through grants and/or loans. All funded units must maintain affordability for 30 years.
State Housing Trust Funds Statewide Housing Trust Funds are a significant source of financing for affordable housing nationwide, with 20% receiving more than $25 million per year in funding and some reaching more than $100 million. Currently, 47 of 50 states in the U.S. have at least one Housing Trust Fund. The most common revenue source is the real estate transfer tax, although many other options exist depending on state laws and political restrictions. That said, five states currently receive no funding even though trust funds exist in statute; Alabama, Arkansas, California, Idaho, and Rhode Island. On average, state trust funds leverage $7.00 in external public and private funding for every dollar of funding. The following are examples of State Housing Trust Funds:
California State Housing Trust Fund
In 1985, California established one of the first state housing trust funds in the nation. The trust fund was meant to capture revenue from offshore oil drilling. But while advocates thought it would bring in $20 million per year, it only resulted in one-tenth of that amount. Therefore, in 2002, voters passed Proposition 46, the Housing and Emergency Shelter Trust Fund Act, which authorized the state to sell $2.1 billion in general obligation bonds to benefit affordable housing. These bonds resulted in approximately $400 million in revenue per year between 2002 and 2005. However, these revenues were entirely expended by 2007.
In response, California voters passed Proposition 1C in 2006, the Emergency Shelter Trust Fund Act of 2006. This initiative authorized the state to sell an additional $2.85 billion in capital bonds to fund several types of housing-related programs, including: local infrastructure like sewers, parks, and transportation, homeownership assistance for downpayment support and low-interest loans or grants, low-interest loans for multifamily housing construction or rehabilitation, and loans and grants for homeless shelters and farmworker housing.
Delaware State Housing Development Fund
Established in 1986, Delaware's trust fund is administered by the State Housing Authority. Every $1 spent by the trust fund, generates $7 in general economic activity. Typically, the fund receives allocations from document recording fees and state general funds. However, in 2011, Delaware allocated $10 million from the state capital budget specifically to a Housing Preservation Fund within the Development Fund. The state has prioritized preservation of affordable housing since losing 9,460 units of affordable rental housing between 2000 and 2008.
Vermont State Housing & Conservation Trust Fund