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HUD Letter to HTF Grantees Addresses Geographic Diversity, Fair Housing, and Affordability

Principle Deputy Secretary for Community Planning and Development Harriet Tregoning sent a letter to state agencies responsible for administering the national Housing Trust Fund (HTF), offering several next steps for them to take.  The letter covers topics related to HTF public participation, geographic diversity, affirmatively furthering fair housing (AFFH) and affordability.

In her May 17 letter, Ms. Tregoning suggests that states begin the public participation process for developing their HTF Allocation Plan if they have not already included the HTF in the Consolidated Plan (ConPlan) public participation process. She also noted that HTF Allocation Plans must be submitted before August 16.

The statute creating the HTF requires states to give priority in awarding funds to projects based on six factors, one of which is geographic diversity. The interim regulations clarify that geographic diversity is as defined in the state ConPlan. The HUD letter stresses the importance of providing funding based on geographic diversity, adding that distribution priorities must be consistent with the obligation to affirmatively further fair housing. The letter reminds states that the regulations’ site and neighborhood standards must be followed. NLIHC interprets HUD’s intention to be that states should consider AFFH when evaluating the location of HTF-assisted projects in 2016.  However, the letter might be misconstrued given the regulations’ direction to consider geographic diversity as defined in their ConPlan; some states have expressed concern about how to comply with state-wide geographic diversity with such small HTF allocations in 2016. 

Addressing affordability, Ms. Tregoning states, “I strongly urge you to take all available steps to ensure the affordability of HTF units to extremely low income households as you are selecting projects for HTF funding and setting rent levels for these units.” The letter continues by citing a second statutory priority factor, the extent to which rents will be affordable, especially to extremely low income households. HUD’s regulations and the letter narrow the statutory language by phrasing this priority factor as “the extent to which the project has federal, state, or local project-based rental assistance that will make HTF units affordable to extremely low income households.” If project-based rental assistance is not available, the letter encourages states to use other mechanisms, such as locating HTF units in market-rate housing projects that can generate internal subsidies for HTF units, often referred to as cross-subsidization.

NLIHC appreciates the emphasis on ensuring affordability to extremely low income renters. The letter falls short, however, in addressing a problem NLIHC has asked HUD to rectify for more than a year. The interim rule says that to qualify as “affordable,” rents shall not exceed 30% of 30% of the area median income (AMI) or 30% of the federal poverty level, whichever is greater. There is no basis in the statute for setting rents at 30% of the poverty level. In 83% of the fair market rent (FMR) areas in the nation where 72% of all people live, 30% of AMI is lower than the federal poverty line. Consequently if rents are set at 30% of the poverty level in these areas, HTF-assisted households are much more likely to be cost-burdened, spending more than 30% of their income for rent and utilities.  NLIHC strongly encourages states to establish rents at 30% of a household’s income or at levels below 30% of 30% of AMI, so that ELI households are not cost-burdened.

The HUD letter is at http://bit.ly/23Yw1GV