Housing Trust Fund Progress Report 2007
The impact of housing trust funds can be felt throughout the country.
Nearly 600 housing trust funds in cities, counties and states generate more than $1.6 billion a year to support critical housing needs, underscoring the integral role these funds play in the world of affordable housing. They exist because community organizers, housing advocates and elected officials alike have agreed that a permanent stream of revenues for affordable housing – including permanent supportive housing – should be a public priority.
Housing trust funds are established by elected government bodies—at the city, county or state level—when a source or sources of public revenue are dedicated, by ordinance or law, to a distinct fund with the express and limited purpose of providing affordable housing. Ideally the funds are transferred automatically each and every year into the housing trust fund account providing a continuous stream of funding, without going through an appropriation or budgeting process.
Ideally, the funds can be used only in accordance with the enabling legislation or ordinance establishing the fund, targeted to serve those housing needs that are most critical. But these ideals are not possible in every situation, legally or politically. The housing trust fund model is just that—a model that defines a new objective for funding affordable housing, enabling the support of needed housing to be a fundamental part of what government does.
How Funds Are Used
The objective of flexibility is reflected in the wide range of eligible activities for most state housing trust funds. New construction, rehabilitation/preservation, acquisition, serving special populations, and permanently supportive housing were listed as eligible activities by a vast majority of the state housing trust funds. Transitional housing, matching funds for federal or state programs, downpayment assistance, predevelopment activities, emergency rental assistance, weatherization, and green housing were also very common. Other activities listed were: education and counseling, tenant based rental assistance, homeless services, housing-related services, and project based rental assistance. Twenty state housing trust funds reported funds could be used to support specific activities to build the capacity of nonprofit development organizations.
Revenue Sources
Identifying public revenue sources that can be committed to a local housing trust fund is what makes creating housing trust funds challenging. Different revenue sources are available to cities or counties or states, because each controls different taxes and fees. Every state imposes its own statutory limitations and opportunities for local taxing authorities.
The most common revenue source for a state housing trust fund is the real estate transfer tax. But states have committed nearly two dozen revenue sources to housing trust funds. Other options include the interest from state held funds (unnamed unclaimed property funds and budget stabilization funds, among others); interest from real estate escrow or mortgage escrow accounts; and document recording fees.
The most common revenue sources for a city housing trust fund are developer fees, including: impact fees placed on non-residential developers, inclusionary zoning in-lieu fees, condominium conversion fees, and others. Other cities have committed other developer fees, property taxes, real estate excise taxes, and hotel/motel taxes.
The most common revenue source for a county housing trust fund is the document recording fee. This is not only the best source for a county housing trust fund, it is one of few revenue sources that most counties can commit. Other sources used by counties, however, include sales taxes, developer fees, or real estate excise taxes.
There is a nearly three decade history and experience with housing trust funds. Their success and sustainability has withstood the test of time. Housing trust funds are integral to the future of affordable housing in this country.
Source: Housing Trust Fund Progress Report 2007
