How can you spend the money?
This seems like the fun part of creating a housing trust fund. But adequately identifying the requirements and objectives to include in a housing trust fund requires more thought than almost any other aspect of creating the fund, and determining which programs to support often takes much more consensus-building than people expect.
The point is to consider carefully which objectives will help the trust fund address your community’s most critical housing needs. There will be pressure to meet other needs, such as to attract moderate-income families back into the city, expand home ownership opportunities, or replace other funded programs. Be steadfast in the reasons that prompted you to create a housing trust fund in the first place. But be careful not to incorporate so many requirements that the program becomes too burdensome for applicants. Include only those conditions you feel are most critical.
The objectives that the trust fund should promote through its requirements can be challenging to frame. Here, you are determining which projects are more likely to be funded and who will benefit the most from the trust fund. Once again, the objectives you do not want to compromise should be part of the enabling legislation. However, other objectives that may shift as housing needs and opportunities change can be part of the trust fund’s regulations, usually drafted by staff.
Every community has its objectives it wants to promote through the housing trust fund. Typically, these include:
- Targeting the households that will ultimately benefit from the trust funds.
- Targeting populations who deserve special treatment (elderly, special populations, large families, migrant farmworkers, homeless, welfare-to-work participants, etc.).
- Supporting projects that achieve certain objectives (mixed-income projects, mixed-use projects, homeownership, rehabilitation of existing units, preservation of federally assisted projects, etc).
- Encouraging projects that reflect certain conditions (projects that help retain the affordability of the units over the long-term, projects that incorporate tenant services, and projects with favorable design characteristics, green housing principles, etc).
- Supporting innovative projects such as community land trusts and cooperative housing, as well as projects incorporating tenant services, preserve assisted housing, and help people move from public housing to other housing opportunities.
Some overriding conditions will also determine what your housing trust fund can reasonably accomplish. While it is good to dream and be creative, these boundaries include:
- The estimated revenue. The amount of money your trust fund expects to generate annually will influence what you can do with that money. Modest revenues may be sufficient only for shallow subsidies, technical assistance, capacity building, small grants, short-term predevelopment loans, or other activities where funds are heavily leveraged. Larger revenues can support gap financing for rehabilitation or new construction projects, rental housing assistance, long-term operating costs, and housing support services, among other activities.
- The targeted beneficiaries of the fund. Providing housing for those with very low or no income requires intentionality to ensure that funding can be used to serve that population. For example, serving the homeless or special populations may require certain services tied to adequate, affordable housing. Housing Trust Fund revenue must be able to pay for those services if the goal is to assist folks experiencing homelessness. In some rural areas, infrastructure needs must be addressed before any housing production can occur.
- The existing capacity to use available funds. Communities vary widely in their capacity to use funds to provide needed housing. Some communities have an experienced nonprofit housing sector eager for more funds to support their planned projects. Elsewhere, it isn't easy to locate someone interested in providing housing to lower-income households. Many housing trust funds have developed capacity-building programs to help potential developers create good projects, use available funds, find needed partners, secure commitments, and more.
- The challenges and opportunities that exist locally. Every community has its unique set of problems as well as potential opportunities that can help address existing housing needs. Vacant, boarded-up homes, city-owned property, federally-assisted units with expiring use restrictions, financial institutions seeking ways to use Community Reinvestment Act (CRA) obligations, a rapidly growing local housing market, and the need to find matching funds to take advantage of state or federal programs, are but a few challenges that are also opportunities.
Imposing Requirements and Objectives
Requirements are the conditions every applicant must meet in order to be eligible for and receive funding. They reflect the housing trust fund’s objectives and include all the local, state, and federal laws and regulations with which projects must comply. Objectives reflect the broader goals for the housing trust fund, and projects can be accorded a preference in the evaluation process based on how they match the housing trust fund’s objectives.
There are three levels of “preference” that can be prescribed for each element:
- required by the statute (including specific set-asides)
- accorded preference for funding in the statute
- accorded preference for funding in the project application and evaluation process (e.g., NOFA or RFP)
Set Asides: Many trust funds set aside a portion of each year’s available funds to achieve various objectives. Common objectives include projects that serve very low-income households, projects sponsored by nonprofit developers, projects serving special populations, projects located in rural areas, and funds to support capacity-building in community-based non-profits. The set-aside guarantees that these projects do not need to compete with other projects. In some instances, set-aside funds that are not used within a certain time period become available for general housing trust fund use. Set-asides are typically included in the enabling legislation.
Priorities: Several trust funds place a higher priority on some types of projects than others. Priority projects must still meet all funding requirements, and because they meet some additional special criteria, are more likely to receive funding. Priority projects often demonstrate a strong ability to leverage other public and private funds, serve the lowest-income households, or make the project affordable for a long time.
In addition to the set-asides and priorities that may be outlined in the enabling statute, trust funds typically also define funding preferences in the actual application materials. Layered on top of the statutory requirements and priorities, these tend to be more flexible and responsive to the current housing climate. For example, a jurisdiction facing many affordable housing projects with expiring use restrictions in a given year may establish a preference for funding preservation projects during that funding cycle. These preferences are consistent with the objectives for the housing trust fund, but are changeable over time.
Homeless Trust Funds
There is growing interest in creating homeless trust funds, particularly locally. These funds bring the opportunity to design programs specifically targeted to the needs and opportunities of working with the homeless population. Some existing homeless trust funds provide primarily grants to service organizations, with less emphasis on creating new housing opportunities. Other homeless trust funds emphasize providing affordable housing, but do so in combination with services and other initiatives directed to the homeless population.
While some housing trust funds permit funds to be spent to address the needs of the homeless population, seven jurisdictions have created specific homeless trust funds.
Most homeless trust funds provide grants to organizations that provide housing and essential services for individuals and families striving to end their state of homelessness and become self-sufficient and permanently housed. Funds also support emergency shelters and transitional housing facilities, as well as the coordination of existing community services, and often incorporate available federal funds. Washington’s program supports counties’ Ten-Year Plans to End Homelessness and enables each county to retain a portion of the dedicated revenue. Kalamazoo County, Michigan, has used funds to support a housing voucher program and limited housing development to enable the community’s homeless to access available housing.
Washington
The Washington State Legislature has authorized two subsequent surcharges on the state’s document recording fee to help eliminate homelessness. Estimates are that this will raise about $20 million annually.
The Department of Community, Trade and Economic Development is charged with creating a homeless housing program to develop and coordinate a statewide strategic plan to house homeless persons. The Department is also charged with conducting an annual census of the homeless in the state. In consultation with the Interagency Council on Homelessness and the Affordable Housing Advisory Board, the Department will report annually on the state’s performance in furthering the goals of the state's ten-year homeless housing strategic plan and the performance of each participating local government.
Each County charges the document recording surcharge. Revenues are shared between the counties and the state, with allowance for administrative costs. The state fund will make awards to local governments through the homeless housing grant program. These funds may be used to assist homeless individuals and families in gaining access to adequate housing, prevent at-risk individuals from becoming homeless, address the root causes of homelessness, track and report on homeless-related data, and facilitate the movement of homeless or formerly homeless individuals along the housing continuum toward more stable and independent housing.
Participating counties—now every county in the state—must meet certain conditions to be eligible to retain their share of the revenues. Revenues generally address each county’s Ten-Year Plan to End Homelessness.
Georgia
The mission of the State Housing Trust Fund for the Homeless is to support the efforts of organizations that provide housing and essential services for individuals and families striving to end their state of homelessness. The Georgia Department of Community Affairs develops an annual Continuum of Care Plan, which serves as the state’s blueprint for providing comprehensive and progressive resources to homeless individuals and families so that they become self-sufficient and permanently housed.
Funds have continued to support homeless assistance programs operated by local governments and nonprofit organizations throughout the state to help them stabilize families, to house or provide services to homeless persons and persons affected by HIV/AIDS, and to assist with emergency shelters and transitional housing facilities. The Fund receives approximately $3 million a year from the Legislature and coordinates federal sources of funding. The Trust Fund also provides ongoing training on innovative strategies; initiates agency collaboration throughout the state; and supports communication strategies to exchange information and coordinate programs.
Wisconsin
The State of Wisconsin has committed to assisting homeless individuals and families since 1985. Among these efforts is the Interest Bearing Real Estate Trust Account Program (the state’s housing trust fund). Since 1993, a state law has required real estate brokers to establish interest-bearing real estate trust accounts to deposit all down payments, earnest money, and other trust funds received by the broker and related to the conveyance of real estate. This amounts to approximately $300,000 annually. The proceeds are used to make grants to organizations that provide shelter or services to homeless individuals or families. The Division of Community Development augments the existing emergency and transitional homeless programs with these funds.
Nebraska
The State of Nebraska created the Homeless Assistance Program (one of its two housing trust funds) and committed $0.25 of every $1,000 of the value of real estate sold in the state, collected via the documentary tax stamp on real estate sales. The fund receives approximately $2 million annually to support client services, operations, homeless prevention, and rehabilitation. The Department of Health and Human Services allocates funds throughout the state based on a formula to ensure that all regions receive funding. These grants provide emergency shelter and temporary housing, address the needs of homeless migrant farm workers, link housing assistance with programs to promote self-sufficiency, and prevent homelessness. Funds include federal ESGP.
Missouri
Missouri passed legislation enabling its three most populous counties to increase their document recording fees, if approved by a public vote, to support activities in the county serving the homeless population. All three counties approved these initiatives. St. Louis County has received awards for its innovative computer-based tracking system developed to coordinate needs and resources throughout the county. The Housing Resource Center operates the Homeless Hotline. The program receives approximately $1 million a year and makes grants in four categories: emergency shelter and transitional housing, prevention of homelessness, projects to encourage self-sufficiency, and coordination of existing community services.
New Jersey
Created by the New Jersey legislature in 2008, Public Law 2009 Chapter 123 permits a county to impose a surcharge of $3 on each document recorded and deposit these funds into a county homelessness trust fund. Funds can be used solely for operating a homeless housing grant program, with five percent allowed annually for costs related to the fund's administration. To date, eight counties throughout the state have adopted and begun implementation of these homeless trust funds, including Bergen, Camden, Hudson, Mercer, Middlesex, Passaic, Somerset, and Union.
Dade County, Florida
Created in 1993, this fund receives proceeds from a one-percent food and beverage tax, which generates about $11 million a year. Funds are coordinated with federal, state, and private funds. The Trust implements the local continuum of care plan, serves in an advisory capacity on issues involving homelessness, and supports and monitors the provision of housing and services for homeless persons throughout the County. The program has partnered with the Community Partnership for Homeless, involved in constructing and operating Homeless Assistance Centers.
Kalamazoo City and County, Michigan
The County Public Housing Commission administers the Local Housing Assistance Fund and has received $1 million in funds from the City and County and another $500,000 in the state. The Fund supports a housing voucher program and limited housing development to enable the community’s homeless to access available housing.
HTF project case studies on three models of trust funds that address homelessness:
Miami-Dade County Homeless Trust