Eighty-four organizations, agencies, and individuals submitted comments regarding the proposed rule implementing the National Housing Trust Fund (NHTF). The top four concerns expressed by the National Housing Trust Fund Campaign are summarized here. Additional campaign concerns as well as other comments will be presented in subsequent issues of Memo to Members.

Income targeting. The NHTF statute requires that at least 75% of each state grant used for rental housing benefit extremely low income (ELI) households (those with incomes at or below 30% of area median income or AMI), or households with incomes below the poverty line. The statute limits the amount of NHTF money used for homeowner activities to 10%.

The proposed rule adopts the 75% ELI/poverty requirement for rental housing and adds the 75% ELI/poverty level targeting requirement to homeownership activities. The proposed rule also requires that for the first year, 100% of a grantee’s rental and homeowner funds benefit ELI/poverty households. In addition, the proposed rule indicates that in subsequent years HUD will advise states whether the ELI target amount must be greater than 75%.

The National Housing Trust Fund Campaign commended HUD for the 100% ELI targeting in the first year, as well as the department’s introduction of an option to apply a percentage greater than 75% in future years. Six other comments out of a total of 34 agreed. Fourteen wrote in opposition to 100% targeting in the first year; an additional five only opposed 100% ELI targeting for homeowner activities. Three objected to HUD’s plan to decide from year to year whether to require an ELI benefit greater than 75%.

NLIHC supported the proposed rule’s basic requirement that, after the first year, 75% of any homeowner activities benefit ELI households. Three comments suggested that HUD instead follow the statute, allowing NHTF-assisted homeowner activities to benefit households with incomes up to 50% AMI (very low income households or VLI), fearing that many ELI households might suffer foreclosure in future years.

Rent paid by beneficiaries. The statute is silent regarding the maximum rents NHTF-assisted households should pay. In November 2008, the NHTF Campaign recommended to HUD that the regulations use the Brooke rule to establish rents such that households would not pay more than 30% of their income for rent and utilities.   

Instead of the income-based Brooke rule, the proposed regulation would establish a fixed maximum rent at 30% of 30% of AMI, or 30% of the poverty level, whichever is greater.

Out of 30 comments, 17 urged the final regulation adopt the Brooke rule, while 11 endorsed the proposed rule. The Housing Trust Fund Project of the Center for Community Change noted that many state and local Housing Trust Funds apply the Brooke rule and work with developers to determine how to establish projects that are financially and operationally feasible. Several disability advocacy organizations supported Brooke, but given the shortage of vouchers to help support Brooke rents, suggested that when vouchers are not available the rule require projects to set aside 10% of Brooke rent-units for people with disabilities who have SSI-level incomes.

Period of affordability. The statute does not prescribe how long NHTF-assisted units must remain affordable. In November 2008, the NHTF Campaign urged HUD to set a 50-year affordability period and to provide preferences for projects with affordability periods greater than 50 years. The proposed regulation would require both rental and homeowner units to be affordable for at least 30 years, allowing states and any sub-grantees to establish longer affordability periods. 

Out of 25 comments, 11 suggested 50 years and three recommended more than 50 years, one of which stated that the rule should give preference to projects in community land trusts providing permanent affordability. Three suggested periods ranging from 40 to 45 years. One commenter recommended that when Low Income Housing Tax Credits are in a project, the NHTF period of affordability should conform to the state’s Qualified Allocation Plan. Another commenter wrote that long-term affordability ought to be contingent upon the availability of rental assistance and, in future years, financing for normal repairs.

One commenter endorsed a 30-year affordability period, while six suggested shorter affordability periods, primarily the HOME program periods, which range from five to 20 years, depending on the amount of assistance per unit.

Twenty percent cap on operating assistance. The statute makes operating cost assistance an eligible use of NHTF resources, but only in conjunction with NHTF-assisted rental housing.

The proposed rule caps at 20% the amount of a grantee’s annual NHTF allocation that can be used for operating cost assistance. The NHTF Campaign recommended a 20% limit, but also suggested limiting the use of operating cost assistance to ELI units; the proposed rule merely limits use to any NHTF-assisted units. The proposed rule also limits operating cost assistance to a project during a single year’s grant to two years, but does allow renewal throughout the entire affordability period. In addition, an operating cost assistance reserve can be created to cover up to a five-year period of inadequate rental income in order to ensure a project’s financial feasibility.

HUD received thirty-six comments on this topic. Ten objected to any cap, six thought a cap of 25% or 30% would be reasonable, and eight suggested a cap higher than 20% without specifying how much higher (two of these would allow a higher cap only if tied to a unit assisting a disabled person with SSI-level income).

Nine urged removing the two-year limit, and another four commented that it hindered the ability to assist ELI households. One commenter wrote that over time the accumulation of obligations to renew operating assistance provided to projects would reach and exceed the 20% cap, eliminating the potential to provide operating assistance to new projects while also reducing the viability of existing affordable projects over the long term.

Five respondents specifically mentioned eliminating the five-year reserve cap. Eight letters suggested that along with removing the two-year cap, the final rule should permit one time capitalization of an operating reserve for individual projects based on the estimated operating assistance needed during the affordability period.

One national association objected to linking operating assistance to a NHTF-assisted unit, while four other comments suggested allowing the operating assistance to be used with other state or federally subsidized units not receiving NHTF dollars.

The comments submitted by the National Housing Trust Fund Campaign are available at http://www.nlihc.org/doc/NHTF_Comments_NHTF_Regs_12_28.pdf

The comments submitted by NLIHC are available at http://www.nlihc.org/doc/NLIHC_Comments_NHTF_Proposed_Rule.pdf

Copies of all comments are available at www.regulations.gov. The docket number is HUD-2010-0101.