Housing Trust Funds

Why invest in an affordable housing trust fund?

There is a shortage of 7.3 million affordable rentals in the U.S. to meet the needs of 10.8 millionextremely low-income households. Ongoing supply shortages due to skyrocketing production costs, expensive land, and an overall lack of government support continue to drive housing costs up. Wages are not keeping pace with the cost of living, either – there is no state, county, or metropolitan area where a full-time worker making the minimum or prevailing wage can afford a two-bedroom rental at fair market rent. 

About half of U.S. renter households are considered cost-burdened, spending more than a third of their incomes on rent. Extremely low-income households are the most burdened, with 70% spending more than half their income on rent. Due to historical discrimination and dispossession preventing the accumulation of generational wealth, people of color are more likely to be low-income renters. Individuals with disabilities also face severe affordability challenges due to the limits on Supplemental Security Income (SSI). Housing instability exacerbates intergenerational poverty, limits economic mobility, and can negatively impact individuals’ physical and mental well-being. However, the impact of the housing crisis expands beyond individual households – research estimates that “the shortage of affordable housing costs the American economy about $2 trillion a year in lower wages and productivity.”

What are the potential benefits?

While HTFs are often a smaller source of funding for affordable housing projects, they are a beneficial, flexible source based on their lack of strict federal requirements. Carol Ditmore, the former manager of Arizona’s Housing Trust Fund and now the Director of the Department of Housing, reflected on 30 years of the HTF in 2019, noting, “I can say, without a doubt, the HTF has been one of the most important resources available to the Department. It has not been our largest resource, but it has been one of the most useful in addressing critical needs.”

The benefits of HTFs to a community are many. The preservation and production of safe, decent, affordable housing, bolstered by HTFs, improves stability for families – in turn, this can improve public health outcomes, increase educational opportunities and attainment, and improve the spatial mismatch for the location of low-wage workers’ housing relative to the location of their jobs. HTFs can also act as an anti-displacement tool. Sarah Smith of Missoula, Montana, lost her rental apartment but was able to purchase a modular home through an HTF program, establishing a legacy of home ownership and stability for her children. With a focus on the most vulnerable communities, HTFs can also prioritize dedicated units for individuals who have faced challenges in avoiding homelessness and for those with disabilities, as seen in recent projects by the Washington State Housing Trust Fund.

How to design an equitable housing trust fund?

HTF design can look different at city, county, and state levels but has many common principles, including assessing need, determining program administration, defining eligibility, getting fund approval, and securing a revenue source. We recommend the following practices to design an HTF that focuses on maximizing equity in affordable housing preservation and development:

• Set aside funds for extremely low-income households. Community housing needs are often what inspire the establishment of an HTF. Commonly accessible data like income, housing deficit estimates, and cost of living calculations can help identify unmet needs and target the types of projects that the HTF should prioritize. Community needs are unique from place to place and may change over time, and because HTFs use public funds, HTFs should shift in response. HTFs most often set specific guidelines for the percentage of funds that benefit projects for low- and extremely-low income households (those that earn 30% or less of the area median income).

• Ensure long term affordability. HTFs can be an important tool to ensure long-term affordability and promote equitable housing investments. To be effective at these aims, HTFs should establish a timeframe for affordability, monitoring mechanisms for sales and ownership, and policies for determining affordable pricing. Establishing an affordability timeframe is an important tool for preventing displacement so residents can remain in their homes even as local markets change. According to the Lincoln Institute, in addition to establishing an affordability timeframe (ex., 30 years), jurisdictions should also set guidelines around 1) the sale prices of affordable units based on a percentage of the area median income, 2) the minimum requirements for the number of affordable housing units in a project, and 3) the parameters for maximum sales prices, methods of selecting buyers, and forms of control around resale.

• Consider preservation and protection in addition to production. In conjunction with the production of affordable housing and housing stability policies, preserving existing subsidized or older market-rate units ensures that these naturally occurring affordable housing units don’t exit the local housing stock. In addition, assistance programs for first-time homebuyers looking to purchase in their neighborhood or for homeowners at risk of foreclosure can mitigate displacement of residents in areas under pressure of rising housing costs.

• Design effective program administration. Jurisdictions should specify the organization or agency that will administer the HTF – holding, investing, and managing the fund. Municipalities often manage the fund through an internal department with experience operating housing programs. Alternatively, a public body like a housing authority or redevelopment agency can also help manage the fund. To ensure equitable administration, establish a community advisory body to maintain a connection with local needs and priorities, advocate for low-income renters, and provide diverse local insights. This body should include members with low-income housing experience, such as nonprofit and for-profit developers, low-income renters and owners, housing advocates, labor representatives, service providers, banks, and realtors. The advisory body can determine which projects receive funding, influence and shape policies, and evaluate fund performance. Additionally, eligibility criteria for program implementers and program beneficiaries can help ensure that an HTF serves its target populations. Eligible applicants for funding typically include nonprofit developers, government entities, Native American tribes, and public housing agencies. Most funds’ housing projects serve households earning no more than 80% of the area median income, and some will specifically set aside funds to serve very low-income and extremely low-income households.

• Secure reliable program revenue sources. The key to a successful HTF is a dedicated revenue source - one that does not compete with other municipal allocations during a budget process and is committed to generating funds by law. Overall, the most successful and well-resourced HTFs do not require an annual appropriation process and have multiple ongoing funding sources. The Housing Trust Fund Project outlines a process for identifying and evaluating city, county, and state revenue sources. Table 1 displays the most common revenue streams for HTFs, including:

  • Developer impact fees usually charged to non-residential developers (to prevent disincentivizing housing development) are the most common revenue source for HTFs at the local level. Local policies like inclusionary housing or waiving fees for affordable housing development and an overall increase in housing supply can offset the potential adverse effects of impact fees.
  • Cities may also use a one-time investment from their general fund to establish a HTF, then work to secure other sources of ongoing funding. 
  • A voter-approved property tax is another common and effective revenue source for HTFs. A local vote has been the origin for many HTFs like the Kalamazoo County Local Housing Assistance Fund or Bellingham Home Fund which was approved by 66 percent of voters to expand a property tax levy for the fund. Although securing voter approval can be challenging, effective community-led campaigns can help convince voters of the benefits.

Common Revenue Streams for Housing Trust Funds

Where is it happening?

HTFs have been successfully established at state and local levels nationwide, with more than 850 HTFs identified throughout the country in recent years. As evidenced by the diverse initiatives in Solano County, Savannah, Louisville, and Milwaukee, these funds provide essential support for developing, preserving, and rehabbing affordable housing units. Local affordable housing efforts, bolstered by ARPA dollars, have effectively worked in various jurisdictions to address housing shortages and support low-income communities:

Solano County Housing Trust Fund 

In June 2022, Solano County, California, dedicated $3 million in ARPA funds to seeding a HTF to support affordable housing projects, and the board of supervisors passed an ordinance establishing the fund in August 2023. The fund will receive $200,000 in annual funding from the Community Investment Program which goes toward meeting human services needs. The fund will support the development and preservation of affordable housing units, some pre-construction activities, and adaptive land reuse projects to address the County’s housing stock and homeless program needs, prioritizing projects in unincorporated areas. The housing projects will be for very low- to moderate-income households. The Solano County HTF has an advisory board with members from development companies, public agencies, and nonprofits who examine each specific housing project and award money to fund the below-market-rate units.

Savannah Affordable Housing Fund

Established by resolution of the Mayor and Alderman of the City of Savannah, the Savannah Affordable Housing Fund (SAHF) has been around since 2012. Prior to receiving $7 million in ARPA dollars, initial funding was allocated by the City to help establish the SAHF. A major advocate for the fund was the local non-profit StepUp Savannah, which supports workforce development, wealth building for low and moderate-income families, and advocacy and policy. Additionally, the Housing Savannah Taskforce, which works to assess housing needs and develop recommendations, led the development of the Housing Savannah Action Plan in 2021, laying out a blueprint for city investment in the fund. With the new ARPA funds, the SAHF aims to create and preserve 150,000 affordable housing units for low-income households by 2032. See our case study.

Louisville Affordable Housing Trust Fund

Since its formation, the Louisville Affordable Housing Trust Fund (LAHTF) has provided grants and loans for affordable housing activities, including homeownership and rental housing acquisition, rehabilitation, emergency repair, technical assistance for low-income housing developers, and support services for housing stability. The hard work of advocates culminated in the Louisville Metro Council establishing the LAHTF in 2008 with an initial $1 million investment based on a 2006 windfall tax. Following this preliminary funding, CLOUT (Citizens of Louisville Organized and United Together) worked closely with Mayor Greg Fischer and the Metro Council to secure a dedicated revenue source for the HTF with the goal of $10 million. Since then, the LAHTF has not identified a dedicated, annual public revenue source, but through allocations and partnerships has garnered millions of dollars for the production and preservation of over 5,000 units. In 2024, the Metro Council allocated $15 million of its general funds to the LAHTF and approved those funds to be used for seven LAHTF projects, totaling almost 300 units for households at or below 30% of the area median income – a much-needed step forward in addressing the estimated 30,000 affordable housing unit shortage in Louisville.

City of Milwaukee Housing Trust Fund

The City of Milwaukee HTF is a long-established fund providing $7,907,521 million in grants and loans, leveraging more than $250 million in additional funding sources, and generating 1,264 affordable housing units since the fund’s creation in 2006. The Milwaukee HTF primarily focuses on supportive housing for the city’s unhoused residents, including veterans. While the fund is supported through property tax levies through the city budget, in 2022, the City Council allocated $10 million in ARPA funds to the HTF. The funding guidelines for projects required at least 25% of HTF funds used for housing or services for people experiencing homelessness, at least 35% used for developing or rehabbing rental housing, and at least 25% used for homeownership opportunities. The remaining 15% was recognized as flexible funding for any other needs identified by the advisory board. The HTF guidelines also prioritize low-income households making less than 65% of the area median income per year.

What are complementary policies?

Addressing the complex crisis of affordable housing shortages necessitates a multifaceted  approach that combines various housing and land-use strategies. Policies that leverage public assets, prevent displacement, and empower community control are essential to enhance the impact of HTFs. These upstream initiatives provide a supportive framework for the preservation and production of affordable housing and ensure that funds are used effectively to meet housing needs. 

Local governments can pursue additional policies to integrate with HTFs for affordable housing production, preservation, and community:

• Public Land Disposition Policies: Many cities hold surplus land parcels that they can dedicate to housing in various ways. HTFs often require access to affordable land to develop new housing units. By leveraging surplus public land, HTFs can tap into the steady supply of affordable sites.

  • Establishing a publicly accessible inventory of surplus properties for community organizations or Community Land Trusts (CLTs) to reference.
  • Prioritizing lasting affordability in the disposition of publicly owned land.
  • Discounting land prices when selling to entities that ensure that housing on the land remains affordable in perpetuity, such as CLTs.

• Tenant/Community Opportunity to Purchase: Tenant Opportunity to Purchase is an opportunity for local jurisdictions to mandate that landlords offer to sell their property to tenants first to prevent real estate speculation and displacement. Washington, D.C., was one of the first jurisdictions to implement the policy. San Francisco went further and created a Community Opportunity to Purchase Act (COPA), where the government buys the land.

• Community Land Trusts (CLTs): CLT’s and HTFs both aim to create and maintain affordable housing. A CLT is a nonprofit or community-based organization “whose mission is to provide affordable housing in perpetuity by owning land and leasing it to those who live in houses built on that land.” The ground lease model keeps land stable and affordable under community control and stewardship, allowing both new developments and preservation of existing developments to remain accessible for future generations.

Acknowledgments

This brief was initially researched and drafted by Sasha Ragland and Leah Hubbard of Estolano Advisors, with contributions to the final draft by Ashley Thomas of the Institute on Race, Power and Political Economy. We thank Michael Anderson, Director of the Housing Trust Fund Project at Community Change for his thoughtful review and feedback.