Affordable housing advocates are gearing up to take advantage of a new source of funding, which they hope will be a long-term resource to help them build more housing for people with disabilities and extremely low incomes. But much work needs to be done by the agencies to prepare solid projects to be ready to go when funds become available, policy wonks warned today at a forum hosted by the Citizens Housing and Planning Association.
The federal Low Income Housing Trust Fund was created as part of the 2008 economic reforms; under the law, a small portion of the fees generated by the sale of Fannie Mae and Freddie Mac mortgages is to be put into the trust and distributed to each of the 50 states as a block grant. The creation of the trust fund was temporarily put on hold while Fannie and Freddie were getting back on their feet, but Mel Watt, director of the Federal Housing Finance Agency, authorized the launch of the program last year and the first grants are anticipated to be handed out next summer.
“My major message is, go buy a house with a conventional mortgage this year so you can up the funds available [from Fannie and Freddie] for the trust fund. You’ll be doing a service,” joked Shelia Crowley, president and CEO of the National Low Income Housing Coalition, a longtime advocate for the trust fund.
The vast majority of the funds are to be used to help create and operate rental housing for poor households and those with disabilities. Creating new housing for extremely low income households (those whose incomes are 20 percent or less of local median incomes) is an important priority for the agencies but had often proved a difficult goal to meet, since the gap between average rents in most area and what such households can afford is substantial. The Low Income Housing Trust Fund could be a crucial resource in meeting the goal, Crowley advised, since it is meant to be a permanent source of funds that won’t face the threat of cuts every year in the federal budget process, unlike most HUD programs.
“The process of getting federal funding for low-income housing is fundamentally broken because the appropriations process is broken. The best we’re going to do is prevent further loss,” said Crowley. “If we’re going to make any strides, we’re going to have to think outside the box.”
Crowley warned that having solid projects ready to go in the first year of the program will be crucial to ensuring its long-term success, since many in Congress are already skeptical of it. But, she said, the trust fund grants, especially in the beginning, will likely not be sufficient to fund large-scale projects on their own.
“We need to be thinking about how you all who know how to do housing development can come up with new and creative models to do this … the trust fund [should be] the flexible funds to bring those deals together,” she said.
Based on the coalition’s calculations, Massachusetts would be likely to receive about $13 million per year from the trust fund once the program is fully in gear. However, grants for the first year will almost certainly be less than half that. Final figures will not be available until early next year, since the amount of funding available will depend on the amount of fees generated by Fannie and Freddie in 2015.
States have wide latitude to use different programs to meet that goal. James Yates, senior associate at the Technical Assistance Collaborative, a nonprofit that analyzes housing policy, pointed to pilot programs in Pennsylvania, North Carolina, Maryland and Illinois as potential models for how to fund rental housing for extremely low income households and permanent supportive housing for people with disabilities. North Carolina, for example, established its own long-term capital fund to meet this goal, which was initially capitalized with about ten year’s worth of funding. This created a cushion to enable projects to go forward even if the state reduced that year’s funding, Yates said. Illinois and Maryland have worked in partnership with a private philanthropy, the Weinberg Foundation, to help create long-term capital funds of about $100,000 to $125,000 per unit, enabling the housing agencies to fund the subsidies necessary for the housing for 30 years.
But existing state programs can only provide limited guidance on how to use the trust fund money, Yates warned, since creating more such housing has proven so difficult relatively few attempts have been made. “The [extremely low income] challenge is pretty daunting for states. Vouchers can’t really meet that need,” Yates said. “Using trust dollars, using a variety of sources, to meet that need is something we encourage.”
In Massachusetts, the funds will be administered by the Department of Housing and Community Development (DHCD). Put on the spot by a question from the audience, Associate Director for the DHCD Kate Racer said that the agency had not yet come up with a formal plan for how it wants to allocate any trust funds it receives since the project has been held up so long with red tape.
“We’ve been talking about it a long time but have been waiting for it to get a lot more real,” she said, explaining that DHCD Director Crystal Kournegay will almost certainly invite various affordable housing groups to meet with the agency to offer their ideas for the funds, and the department also plans to consult with other states to see how they’re using the money. Many of DHCD’s existing programs would also be eligible to be supplemented with the funds, also. But Kournegay has made clear that she’s very much in favor of using some of the trust fund money for supportive housing.
