A National Housing Trust Fund
February 2003
The National Housing Trust Fund was the Cinderella legislation of the last Congress as it moved quickly, though controversially, through the House of Representatives. The Fund, like the existing trust funds in some 150 state and municipal governments, would serve as a source of revenue for the production of new housing, and the preservation or rehabilitation of existing housing that is affordable for low income people. The initial goal of the National Housing Trust Fund is to produce, rehabilitate, and preserve 1,500,000 units of housing by 2010. Only the withdrawal of the omnibus housing bill itself from consideration in the full House stopped a version of the bill from becoming law.
There is bi-partisan support in Congress for housing production and preservation in the form of a National Housing Trust Fund with 199 cosponsors in the House of Representatives and 28 in the Senate. New bills have yet to be introduced in Congress.
Catholic Social Teaching has long recognized housing as a basic human right. The Catholic community--through its parishes, diocesan structures, and Catholic Charities agencies--is one of the largest providers of shelter in the nation. Since the late 1960's, the federal government through the Department of Housing and Urban Development has solicited, encouraged, and funded a variety of Church sponsored housing--particularly senior housing, transitional housing, homeless shelters, and some family units.
At the January 2002 meeting of the Domestic Policy Committee of the USCCB, following a discussion by HUD Secretary Martinez, the Committee voted to support a National Housing Trust Fund. In April, Cardinal McCarrick wrote to Members in both the House and Senate urging support for the legislation. "This National Housing Trust Fund presents Congress with a genuine opportunity to let the American people know that the shelter needs of low-income families are a national priority. I urge you to support [NHFT] as one way to demonstrate how vitally important housing is to the well-being of families and our communities."
Contact your Representative and Senators and urge them to co-sponsor The National Housing Trust Fund. Members of Congress need to hear from people in local communities about the need to provide every family with access to affordable housing.
Thom Shellabarger at the USCCB, 202 541 3189 or tshellabarger@usccb.org
Visit the National Housing Trust Fund Campaign at www.nhtf.org
or www.usccb.org/sdwp or www.catholiccharitiesusa.org
- What are the Goals and Objectives of a National Housing Trust Fund?
A National Housing Trust Fund should be established to serve as a source of revenue for the production of new housing, and the preservation or rehabilitation of existing housing that is affordable for low income people. The goal of the National Housing Trust Fund should be to produce, rehabilitate, and preserve 1,500,000 units of housing by 2010.
- Where should the money for the Trust Fund come from?
The Trust Fund should be capitalized with ongoing, permanent, dedicated and sufficient sources of revenue to meet the goal of 1,500,000 housing units by 2010. The initial sources should be excess FHA and Ginnie Mae revenue, above what is necessary to maintain the soundness of the FHA and Ginnie Mae programs. Other sources of funding that can be dedicated to the Trust Fund should be identified and included in National Housing Trust Fund legislation. Appropriations should also be made to meet the goal.
- What types of housing should the Trust Fund be used for?
The Trust Fund should be used for the production of new housing, preservation of existing federally assisted housing, and rehabilitation of existing private market affordable housing. The Trust Fund should be primarily used for rental housing. We support allowing up to 25% of funds to be used for homeownership activities, so long as low income people are served. Cooperatives are eligible uses in all cases as long as income targeting requirements are met.
- Who should receive the housing created by the Trust Fund?
At least 45% of the Trust Fund dollars should be used for housing that is affordable for extremely low income households, that is, those with incomes under 30% of the higher of state or area median. In addition, 30% of total Trust Fund dollars should be used for housing that is affordable to households with income at the equivalent of full time prevailing minimum wage earnings or less. The remaining 25% of Trust Fund dollars can be used for low income households with incomes up to 80% of the higher of state or area median provided these funds are restricted to housing production, preservation, or rehabilitation in low income neighborhoods. In all cases, no one should pay more than 30% of their income for housing.
- Would the housing always remain available to low-income people?
Housing funded through the Trust Fund should be required to remain affordable for 50 years.
- Should the Trust Fund be used for operating subsidies?
Projects funded through the Trust Fund should assure that any operating subsidy needed to make the housing affordable for a range of extremely low income people is provided. That could be by using Trust Fund assistance to underwrite the operating subsidy for new or rehabilitated units for one year, after which the operating subsidy could be Thrifty Vouchers funded and renewed through the Housing Certificate Fund. Thrifty Vouchers would provide a rent subsidy based on actual operating expenses (rather than prevailing market rents) and would cost less than standard Housing Choice Vouchers. The applicant could also project-base regular vouchers funded and renewed through the Housing Certificate Fund or devise another operating subsidy mechanism (which may be able to be applied to the match requirement). Projects that keep costs lower by employing energy efficiency standards will be preferred applicants for Trust Fund dollars.
- How should the money in the Trust Fund be distributed?
Trust Fund assistance should be distributed by formula allocation. The formula should be developed by HUD, using criteria that assure distribution in proportion to the need for eligible housing, with 60% of Trust Fund assistance allocated to localities and 40% of Trust Fund assistance allocated to states. The distribution of funds should ensure that every type of community – urban, rural and suburban – has access to funds and should encourage regional consortia. If an eligible grantee declines to apply for Trust Fund assistance, an alternative application process should be established so that other entities in the jurisdiction can receive and distribute the Trust Fund dollars. If eligible entities in the jurisdiction do not qualify to receive all the Trust Fund dollars allocated to the jurisdiction that are unclaimed, the unclaimed funds should be used to provide bonus payments to jurisdictions that succeed in expediting development of Trust Fund units or reducing development costs through state or local laws, policies or procedures. Grantees will distribute the funds to eligible entities prepared to conduct activities that are eligible for Trust Fund support.
- What will be required of State and local governments or non-profit organizations that want to access the Trust Fund?
States, localities, or non-profit organizations receiving Trust Fund assistance should match the federal funds in the following manner. If the entity uses state, local, or private revenue for the match, it will receive two federal Trust Fund dollars for every dollar it provides. If an entity uses locally controlled federal dollars (HOME, CDBG, LIHTC, private activity bonds, TANF funds, project-based vouchers) for the match, it will receive one Trust Fund dollar for every dollar of match it provides. This match requirement may be waived for jurisdictions that demonstrate fiscal distress. Revenue committed by a jurisdiction to a Trust Fund-assisted project to provide services to residents should qualify as matching funds in the same manner as revenue committed to meet the acquisition, development or operating cots of a property. Additional payments made by a jurisdiction to a locality that will incur additional local education costs as a result of the siting of Trust Fund-assisted units should be considered state or local revenue for the purposes of the match requirement. Jurisdictions that succeed in siting Trust Fund-assisted units in areas of relatively high job growth, that are undergoing gentrification or where a zoning variance or other waiver of regulatory barriers was required should, in the following year, be eligible to receive Trust Fund assistance with a reduced match.
- What"s to keep the Trust Fund from building more "slums?"
New housing production and financing should be done in a way that assures that extremely low income households are not segregated from other income groups, and that units are located in proximity to public transportation, services, economic opportunities, or contribute to comprehensive community revitalization. Thus, Trust Fund dollars should be utilized in conjunction with other funds to complete the financing for a new multifamily housing development, with the Trust Fund dollars supporting the construction of housing for extremely low income households. Units for extremely low income households should comprise no more than a minority of the total units in a project. Trust Fund applicants that propose small projects in low-poverty neighborhoods, rural communities, or that serve special populations may be able to assure economic integration with Trust Fund dollars alone.
- Will the Trust Fund be compatible with other housing programs and federal guidelines?
The use of Trust Fund funds should be flexible to ensure its compatibility with Low Income Housing Tax Credits, private activity bonds, CDBG, HOME, Section 8, public housing, USDA rural housing programs, and other forms of assistance.
All Trust Fund dollars must be allocated and all housing funded with Trust Fund dollars must be built and operated in a manner that is consistent with other federal provisions including, but not limited to: tenant protections and tenant rights to participate in decision making about their homes; required public participation mechanisms such as the Consolidated Plan, the Qualified Allocation Plan and the Public Housing Agency Plan; Section 286 of the Cranston-Gonzalez National Affordable Housing Act (Davis-Bacon); and all fair housing laws and existing laws regarding accessibility in federally-assisted housing. In addition, units not required to be accessible should meet basic visitability standards.
In addition to establishing a National Housing Trust Fund, we recommend additional investment in affordable housing with substantial increases in HOME, CDBG and USDA Rural Housing programs, as well as an examination of ways to reform the Low Income Housing Tax Credit program to improve access to the program by a wider range of non-profit, community-based housing developers. Substantial increases in the housing voucher program will also be necessary to assure affordability for the lowest income households.
Prepared by the National Housing Trust Fund Campaign
January 22, 2003