The Housing Trust Fund Project of the Center for Community Change issued a report highlighting approaches state and local housing trust funds support housing occupied by extremely low income (ELI) people, those with incomes below 30% of area median income (AMI). The report, “Model Approaches to Providing Homes for Extremely Low Income Households,” focuses on three well-defined strategies that align with eligible uses of the National Housing Trust Fund.
Even when a combination of housing trust fund money and other loan and grant programs is used to build or rehabilitate apartments for ELI households, rents that they can afford by paying no more than 30% of their income are not typically sufficient to keep their housing development financially and physically sound over a long period of time. Some additional subsidy is necessary.
After reviewing state and local housing trust funds and talking with housing trust fund advocates and administrators, the authors identified three key approaches to providing the additional subsidy needed to ensure that ELI rental housing can be created and operated over the long term by housing trust funds:
1. Cross-subsidization. This approach uses rents from higher income housing in a development to subsidize the ELI housing.
2. Provision of ongoing operating and maintenance costs to sustain ELI housing.
3. Provision of project-based or tenant-based rental assistance to subsidize ELI apartments.
Cross-subsidization is a strategy used to develop housing that is affordable across a range of incomes, typically 80%, 60%, and 30% of AMI. The more units in a project, the easier it is to support a greater percentage of ELI homes. In weaker rental markets, the percentage of ELI housing that can be sustained is often lower than in strong markets. Oregon and Ohio use cross-subsidization, where a typical project with 50 units might produce five to seven ELI homes, with most of the remainder of the homes affordable to those at 80% AMI.
Although both the Oregon and Ohio housing trust funds have set aside requirements only targeted to households at 50% of AMI, each have preferences for ELI households. Oregon gives preference to projects serving the hardest to house and people who are homeless. Ohio awards preference to projects serving households at 35% of AMI, and one component of the housing trust fund that supplements the Low Income Housing Tax Credit program requires 10% of a project to be dedicated to ELI households. Neither Oregon nor Ohio have specific requirements limiting the amount of rent paid by an ELI household to 30% of income.
The second approach to supporting ELI housing provides support for ongoing operating and maintenance costs. Both the State of Washington and the City of Seattle devote a portion of their housing trust funds to help fill the gap between rental income and operating expenses for housing trust fund homes occupied by ELI households. Seattle provides up to $2,500 per home per year for up to 20 years. Washington provides up to $50,000 per project per year for up to 20 years. The Seattle program requires that residents pay no more than 30% of income for rent, but the Washington program does not.
In 2009, Seattle set aside $14.4 million out of a $145 million housing trust fund to cover operating and maintenance for seven years. About 220 households will be served during a 20-year commitment period. Currently, 63 projects are under contract. Since 1986, 749 apartments have been subsidized. According to a May 2010 report, Washington has used $16 million to support 1,993 homes.
The third approach entails providing project-based or tenant-based rental assistance. Chicago’s housing trust fund must use at least half of its resources for households with incomes less than 15% of AMI, with the balance targeted to those up to 30% of AMI. In order to achieve such targeting, some of the housing trust fund is used to support a rental subsidy program, which in 2009 was tied to 2,912 apartments. In North Carolina, a separate, state-funded program provides rental subsidies to housing trust fund homes occupied by people with disabilities who have Supplemental Security Income (SSI)-level incomes. The North Carolina program requires that residents pay no more than 30% of income for rent, but the Chicago program does not.
The report closes by stating, “We know from more than twenty years of achievements at the state and local level that the housing trust fund model can help meet the challenges of preserving and producing affordable housing for ELI households…. But in order to make a significant difference in the lives of low income people in need of housing, we need to secure revenue for the National Housing Trust Fund.”
“Model Approaches to Providing Homes for Extremely Low Income Households” can be found at: http://nlihc.org/doc/Models_for_Providing_ELI_Housing_HTF_Project.pdf
For more information, contact Nina Dastur, Housing Trust Fund Project, Center for Community Change, firstname.lastname@example.org, or go to http://www.communitychange.org/page/housing-trust-fund.