Affordable Housing Trust Fund Brings Hope to Millions
Groundwork for the establishment of a national affordable housing trust fund was laid last fall, when the House of Representatives passed legislation (H.R. 2895) that House Financial Services Committee Chairman, Rep. Barney Frank, D-Mass., had introduced, and when Sen. Jack Reed, D-R.I., introduced a companion bill in the Senate (S.2523), which was almost identical to the House bill. The Senate bill has already been referred to the Senate Banking Committee, which is chaired by Sen. Chris Dodd, D-Conn.
“The purpose of the National Affordable Housing Trust Fund Act is to establish a dedicated source of revenue to build, rehabilitate, and preserve housing for low- to extremely low-income households,” says Phyllis Gilberti, director of field mobilization at the National Alliance to End Homelessness, a Washington, D.C.-based nonprofit. “A major goal of the legislation is to construct, rehabilitate, and preserve 1.5 million units of affordable housing nationwide over the next 10 years,” she adds.
Affordable Housing Crisis
Experts agree that today there is a nationwide shortage of about 2.8 million affordable rental units for extremely low-income households. According to HUD regulations, “Extremely low-income” is defined as households making 30 percent or less of the area median gross income (AMGI).
A study done in 2006 by the National Multi Housing Council, a Washington, D.C.-based nonprofit housing advocacy group, shows that, nationally, 71 percent of households earning 30 percent or less of AMGI are spending more than half their incomes on housing. Furthermore, many of those households face poor alternatives: to live in severely substandard housing conditions or face homelessness.
Trust Fund Tackles Homelessness
The plan of the bill is to use national affordable housing trust fund monies to target households with the lowest level of income—that is, people whose average monthly income is approximately $400. According to provisions in the legislation, at least 75 percent of trust fund monies must go to households earning less than 30 percent of AMGI. Households living on an income level that qualifies them for Supplemental Social Security Income (which is the majority of homeless persons) will be entitled to about 30 percent of trust fund monies.
Where Will Money Come From?
The bill identifies two main sources of money for the affordable housing trust fund: first, a to-be-determined percentage of the profits realized by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac; second, surplus revenue generated by the Federal Housing Administration (FHA).
The bill envisions the trust fund as an ongoing, permanent, and dedicated means of promoting affordable housing nationally, based on these solid sources of funding. In addition, legislators would like it to be a separate pool of funds that does not rely or impinge upon other federal housing programs, such as HUD, which rely on regular, annual congressional appropriations and are already overburdened.
Allocation of Funds, Annual Reports
Trust fund monies would be allocated in the following way: 60 percent to the states, and 40 percent to insular areas and Indian tribes. Once the monies reach state level, they would be distributed through a competitive grant program to eligible applicants. All applicants having the ability to realize the trust fund's mission, including nonprofits, for-profits, and “faith-based” organizations, may apply to it for money.
Selection of a government regulator for the fund has not yet been finalized, although HUD has been mentioned as the most likely choice. The legislation requires that states report annually to the chosen regulator regarding how allocated funds are being used.
Targeting Homeownership or Unit Rentals
The legislation anticipates that trust fund monies will be used primarily for rental housing. The legislation states that funds will be available for the “construction, rehabilitation, acquisition, and preservation” of affordable housing. In addition, funds can be used for up to one year of project-based rental assistance.
However, trust fund monies could also be used to pay closing costs for first-time homebuyers. Monies can also be used for subsidizing a site's operating costs. But they must go directly to housing expenses, and cannot be used to cover administrative costs, political activity, advocacy, and support services.
Anticipated Impact on Jobs
By encouraging the creation of permanent affordable housing, the trust fund will eliminate many people's burden of having to pay a disproportionate amount of their income on rent. The fund's strategy of creating permanent housing for the homeless and for those at risk of becoming homeless is linked to the concept of providing supportive services.
Having a stable living place combined with steady employment is a proven strategy for ending the cycle of poverty in which many Americans remained trapped, Gilberti says.
According to the book Why America Needs a National Housing Trust Fund (Brooks, 2001), experts anticipate that the initial impact of the trust fund would be to generate 184,300 units and $5 billion in wages nationally. “Developing additional units of affordable housing is a proven strategy for bringing more money and jobs into neighborhoods,” Gilberti says.
Phyllis Gilberti: Director of Field Mobilization, National Alliance to End Homelessness; 1518 K Street NW, Ste. 410, Washington, DC 20005; (202) 638-1526; firstname.lastname@example.org.