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Home , Housing trust fund

State and Local Housing Trust Funds

By Michael Anderson, Director, assistance. Housing Trust Fund Project, Center for Community Change ISSUE SUMMARY There are three key elements to any state or local tate and local housing trust funds advance housing trust fund: the way this country supports by guaranteeing that revenues are 1. Administration and oversight: Most housing Savailable each year to support critical affordable trust funds are administered by a public or housing needs. Established by legislation, quasi-public agency. Housing advocates are ordinance, or popular vote, housing trust funds not always comfortable with the performance direct public revenue to meet specifically of local agencies or departments and may not identified local housing needs. , , find this an easy condition to accept. Although and states have developed models that work, there are alternatives, such as a nonprofit supported innovative approaches to all aspects of or Community Development Financial addressing affordable housing and , Institution administering the fund, there are and demonstrated that state and very few examples of such models. In the can provide decent affordable homes for everyone long-run, it is desirable for elected officials if communities are willing to commit the resources to accept ownership and responsibility to do so. Creating a state or local housing trust for addressing critical housing needs and fund is a proactive step that housing advocates designate the housing trust fund as one way can take to make systemic change in the housing in which they intend to do this. A best practice world. administrative characteristic of housing trust funds is the creation of an appointed oversight HISTORY AND PURPOSE or advisory board. Most housing trust funds Since the 1980s, state and local housing trust have such boards. They are typically broadly funds have employed the model of committing representative of the housing community, public funds to address communities’ most including banks, realtors, developers, critical affordable housing needs. With more than nonprofit development organizations, housing 800 housing trust funds in cities, counties, and advocates, labor, service providers, and states, those funds have become core elements low-income residents. These boards can be in housing policy throughout the . advisory, but it is preferable to delegate some In 2020, state and local housing trust funds authority to them, including at least advising, generated more than $2.6 billion for affordable if not determining, which projects receive homes. The popularity and proliferation of funding from the trust fund; overseeing housing trust funds is due to their flexibility, policies; and evaluating and reporting on sustainability, and success in addressing critical the performance of the fund. An oversight housing needs. Forty-seven states and the District board provides considerable expertise to the of Columbia have created fifty-eight housing operation of the trust fund, and maintains a trust funds. Eight states, Connecticut, Illinois, connection and avenue for accountability to , Nebraska, Nevada, , the community. Oregon, and , have created more 2. Programs: The basic programmatic issues than one state housing trust fund, reflecting a for housing trust funds should be defined in recognized value in committing public revenues the ordinance or legislation that establishes to accomplish precise objectives, such as the fund. Definition ensures that the key addressing homelessness or providing rental operating components of the trust fund

NATIONAL LOW INCOME HOUSING COALITION 5–39 are not subject to the whims of changing incomes. Some housing trust funds provide Administrations. Staff and board members rental assistance. There are a few state and local will need to develop an application cycle, housing trust funds that specifically serve the program requirements, and administrative needs of people experiencing homelessness and rules. define their activities accordingly. 3. Funding: What defines a housing trust fund Among the most important decisions to be made is securing a dedicated revenue source. regarding implementation of the trust fund are This means that the source of funding is defining the specific requirements proposals committed by law to generate funds for the must meet to be eligible for funding. Chief housing trust fund. Thus, by resolution, among these is the income level of those who ordinance or legislation, a certain percentage benefit from the housing provided. Most housing or amount of public funds are automatically trust funds serve populations earning no more deposited in the housing trust fund each than 80% of the area median income (AMI), but year. Securing a dedicated revenue source many serve lower-income households either for a housing trust fund is a significant entirely or in part by setting aside a portion of the advance over the way low-income housing funds to serve those populations in particular. has historically been funded. With a dedicated Without setting aside funds to serve very low- revenue source, advocates no longer have to income (50% of AMI) and extremely low-income argue for scarce resources with council households (30% of AMI), these most critical members, commissioners, or state needs are unlikely to be met, given that it is legislators during the annual budget process. easier and less expensive to create a development They will no longer have to compete with proposal serving higher incomes. It is important other worthy causes in a budget process that to give serious consideration to set-asides and is generally neither fair nor generous towards other programmatic issues that enable funding low-income housing. The dedicated revenue for those with the most critical housing needs. source guarantees a regular, but possibly Another key decision are requirements for fluctuating, source of funds. long-term affordability. Many state and local Key Decisions to Make housing trust funds require that the homes and apartments supported through the trust fund In order to ensure that a trust fund succeeds, remain affordable to the targeted population for a several decisions must be made about its defined amount of time, or in perpetuity. Housing implementation, including identifying eligible advocates may identify other requirements to applicants, eligible activities, and requirements incorporate, including accessibility for people that must be met to receive funding. Eligible with disabilities, mixed income, green housing applicants typically include nonprofit developers, and energy-efficiency principles, transit-oriented for-profit developers, government entities, Native housing, rural housing, and housing-related American tribes, and public housing agencies. services requirements. Eligible activities are usually broadly defined, including new construction, rehabilitation, Revenue Sources acquisition, emergency repairs, accessibility, Identifying public revenue sources for a housing first time homeownership, operating and trust fund is always a significant challenge. maintenance costs, and many others. Most Different revenue sources are available to housing trust funds provide loans and grants different types of jurisdictions, because each through a competitive application process, jurisdiction controls specific taxes and fees. although some establish distinct programs and Research must be done to identify appropriate make awards through these initiatives. Grants are funding sources. important to ensure that housing can be provided to meet the needs of those with the lowest The most common revenue source for a city

5–40 2021 ADVOCATES’ GUIDE housing trust fund is a developer , fund. sometimes implemented in conjunction with a Each state is unique in its treatment of taxes and zoning ordinance. These impact fees are most fees. Research into what the state constitution often placed on non-residential developers and statutes permit regarding dedicating to offset the impact that the development’s public revenues to a specific purpose must be employees may have on the housing supply. conducted. Research should determine what, if Along with linkage fees, many jurisdictions also any, limitations are placed on specific revenue use in-lieu fees. The second options, including any caps imposed on tax or most common revenue source for city housing fee rates, any limitations on the uses to which the trust funds is a voter approved property tax. revenue may be applied, and any commitments Other cities have committed various fees, such already imposed on the revenues collected, as conversion fees or demolition among other questions. It pays to be creative in fees, along with taxes, including property taxes, searching for potential public revenue sources. real estate excise taxes, and hotel and motel taxes Although an increase in a tax or fee is the most (including AirBnB). Revenues from tax increment common way to create a housing trust fund, it is districts are an increasingly popular revenue also possible to dedicate the growth in revenue source for housing trust funds. from a tax or fee or dedicate a portion of the The most common revenue source for a county existing revenue without imposing an increase. housing trust fund is a document recording fee, It is extremely important to identify a dollar goal a fee paid upon filing various types of official for revenue sought each year for the housing documents with a state or local government. trust fund. This can be based on actual need, Other sources used by counties include sales a realistic assessment of what can be secured, taxes, developer fees, real estate transfer taxes, or an evaluation of the capacity to use new and real estate excise taxes. funds. This goal will be the measure by which State housing trust funds are most commonly each potential revenue source will be judged as funded by real estate transfer taxes, followed by sufficient. A combination of revenue sources may document recording fees. However, states have be necessary to reach the goal. committed nearly two dozen different revenue It is critical to keep the focus on dedicated sources to housing trust funds. Other options sources of public funding that will provide an include revenue from state-held funds (such as ongoing stream of revenue for the housing trust unclaimed property funds), interest from real fund. Other alternatives will be proposed, such estate escrow or mortgage escrow accounts, and as a one-time appropriation, bond revenues, or general obligation bonds. private sources, but advocates must keep their Often, housing advocates study alternative sights on establishing an ordinance or legislation revenue sources themselves and propose the that will dedicate public funds over time. Several best options. These are not difficult studies, trust funds have been created with one-time but do take time and some diligence to obtain initial funding, which can be used to demonstrate the necessary information. Relying on elected the impact of the trust fund to build support for officials to identify a potential revenue source is on-going dedicated public revenues. not typically a productive strategy. Suggesting Reporting alternatives for their consideration is a strategy with a much greater track-record of success. Once a housing trust fund is established and Some housing trust funds were created becomes operational, it is critically important through specially designated task forces with and beneficial for the administering agency, responsibility for doing the background research the oversight board, and/or housing and and making recommendations on how best to homeless advocates to report annually on fund and implement the proposed housing trust the accomplishments of the fund. This helps

NATIONAL LOW INCOME HOUSING COALITION 5–41 ensure sustained, if not increased, funding, and state and local governments will legitimately be improves the understanding and support for facing budget shortfalls and potential cuts, the effective affordable housing programs. These urgency to invest public revenue to make sure reports typically not only show how the trust fund the most economically vulnerable have a home made advances in specific affordable housing is greater than ever before. Today, there are at or homeless objectives, but also highlight the least 30 housing trust fund campaigns underway impact these expenditures have in creating jobs, in cities, counties, and states across the country. adding to the tax base, and extending economic Many are focused on creating new housing trust benefits. Many such reports have included stories funds, while others are working to increase sharing the impact of a safe affordable home on resources for existing housing trust funds. individual families. Trust funds have been created in most states Relationship Between State and Local Housing and many small cities, rural counties, and Trust Funds large metropolitan areas. The most common denominator is the commitment on the part of One of the most innovative advances in the advocates. Housing trust funds are the result of housing trust fund field is state legislation that strong affordable housing/homeless organzing enables local jurisdictions to create housing and advocacy. Campaigns have been waged by trust funds. There are several models in place. faith-based organizations, coalitions of nonprofit States can enact legislation that opens a door for developers, statewide housing advocacy groups, local housing trust funds by providing matching and combinations of these and many others. The funds to encourage and support local housing experiences of the campaigns are as unique as trust fund efforts, enabling cities or counties to they are uplifting, and full of promise. utilize a specific revenue source for local housing trust funds, sharing a new public revenue source The following are among the state and local with local jurisdictions, or establishing a process housing trust fund victories celebrated by whereby local jurisdictions can decide to commit housing and homeless advocates in 2020 (in specific funds to a local housing trust fund. alphabetical order by state): Close to 75% of the funds that exist in the United • In , the Fort Myers City Council States are in states where enabling legislation establish a housing trust fund with an initial has encouraged cities and/or counties to investment of $1.5 million in general funds. advance local housing trust funds. These include communities in Massachusetts responding to • In Kentucky, the Lexington City Council the “Community Preservation Act” and localities maintained full funding for the Affordable in New Jersey complying with the “Fair Housing Housing Trust Fund after initially considering Act.” Washington and have cutting 90% of the revenue. legislation enabling counties to use document • In Michigan, the City Council voted to move recording fee revenues for local funds. ’s the ordiance establishing the Affordable state housing trust fund providing matching Housing Development and Preservation Fund funds locally has generated funds in 27 locations within the city charter, increasing the ability throughout the state. Fourteen states have passed of the City Council to dedicated additional legislation to encourage local housing trust funds. revenue to the AHDPF. FORECAST FOR 2021 • In Michigan, 51% of voters in Kalamazoo County approved a housing millage that will The impact of COVID-19 and the subsequent provide $6.2 million annually for 8 years to economic and crises have laid bare what the Local Housing Assistance Fund. This was housing organizers and advocates have know for a renewal campaign from the 2015 “Vote YES years: home is essential for people to thrive, and for Kids” campaign in 2015. The renewal the foundatiuon of a healthy community. So while expanded the millage from .1 mil to .75 mil,

5–42 2021 ADVOCATES’ GUIDE and will produce 6.2 million annually for 8 the economy in several direct and indirect ways. years ($49.6 million in total) Housing has a direct relationship to education, health, the environment, and neighborhood • In Minnesota, the Crow Wing County board quality. Personal stories and connections to real established a countywide housing trust fund, family experiences have given the issue a face and committed $500,000 annually from a that is far more powerful than statistics reflect. property tax levy that will provide housing Campaigns have created effective communication affordable to moderate, low income and very strategies based on the value frame that everyone low income households. deserves a place to call home. • In North Carolina, 77% of voters in Charlotte, Housing trust fund campaigns have found NC approved a $50 million bond that will numerous ways to boast about what housing provide funding for the city housing trust fund programs can accomplish, pointing to thousands for two years. of remarkable and outstanding examples of good, • In North Carolina, 72% of voters in Raleigh, well-managed, integrated affordable housing. NC approved $80 million housing bond that There is no reason to be bashful about this. will be used to acquire and secure land, Housing advocates have an obligation to educate funding for homeless service organizations, the public and elected officials about the new ‘gap financing’ for new development of rental face of affordable housing. Rarely have housing housing, programs for first time homeowners, trust funds been created without public pressure and owner-occupied rehabilitation. applied by a campaign. Housing advocates have • In Oregon, 58% of voters in the Portland Metro succeeded in making the point that providing Region passed and income and business decent, safe, affordable homes is no longer tax measure that will provide $248 million an arbitrary decision to which we can simply annually for ten years to fund services and choose to devote resources or not. Rather, it is an housing programs for people experiencing ongoing, essential part of every community that homelessness. is no less important than streets, sewers, health centers, police and fire protection, schools, and • In Washington state, the City Council other basic components of a viable community. passed the “JumpStart Seattle” tax will raise more than $214 million annually for housing Although housing trust funds are numerous, and homeless services. The payroll tax is securing adequate resources to build and on the city’s biggest businesses and highest maintain affordable homes can be a challenge. earners, using a tiered system of taxation. Fortunately, there are many creative and successful examples of effective campaign TIPS FOR LOCAL SUCCESS strategies, ranging from coalition building to cultivating allies in sectors related to housing Although it is relatively easy for the public at such as education, health, and economic large, and elected officials in particular, to nod development; to organizing people impacted by toward the need to provide more affordable the lack of affordable homes. homes, committing precious resources to make it happen requires an active campaign. Advocates face the challenge of making affordable housing FOR MORE INFORMATION enough of a priority that elected officials can Housing Trust Fund Project of Community make the right decision. Housing trust fund Change, https://housingtrustfundproject.org/. campaigns have made important contributions in reframing affordable housing as a policy priority that is integral to the success of every community. Not only is there an obvious connection between jobs and housing, but building housing also fuels

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