Filed under Urban Affairs & Development

Housing Trust Funds

Nearly every state, including Virginia, has at least one housing trust fund. There are 471 city-based housing trust funds (2 in Virginia) and 57 county based funds (3 in Virginia). The National Housing Trust Fund, established in 2008, is still awaiting funding. The Virginia General Assembly established the Virginia Housing Trust Fund last year, allocating 7 million dollars from the the general fund to the housing trust fund. This spring, the Virginia Department of Housing and Community Development (DHCD) and the Virginia Housing Development Authority (VHDA) will accept the initial round of applications for funding through the Virginia Housing Trust Fund. They will be looking for shovel-ready demonstration projects to make the case for future contributions to the Fund. With the state’s initial funding round imminent and more Virginia municipalities considering local housing trust funds as a tool for dedicating money to affordable housing, I have been reading the scholarly analysis of housing trust fund mechanics.

Unfortunately, the scholarly analysis of housing trust funds is sparse. Since the 80’s fewer than a dozen scholars have published studies regarding the establishment, operations and outcomes of housing trust funds. Mary Brooks, director of the Housing Trust Fund Project at the Center for Community Change is certainly the leading authority. Brooks and her team keep tabs on each housing trust fund established in the US and offer a catalog of resources for communities that may want to establish their own housing trust funds. Brooks has also published general information on housing trust funds in scholarly journals (1995, Affordable Housing and Community Development), but her work does not explicitly analyze or evaluate the effectiveness of housing trust funds.

A number of authors have evaluated state housing trust funds, especially as these funds are established as part of an effort to augment decreased federal fund for affordable housing initiatives. Publications by Corianne Payton Scally, and one by Kristin Larson make up the most recent and relevant scholarly literature available. Here’s a summary of their conclusions:

  • housing trust funds, which are typically funded through real estate transaction fees, are easier to fund in places with high rates of development (Scally 2012, Housing Studies; Larson 1993 Housing Studies)
  • favorable political climate and a recognized community need for affordable housing help the process along (Scally 2012, Housing Studies; Basolo and Scally 2008, Housing Policy Debate)

So, why so little research regarding housing trust funds? A housing trust fund is not much more than an account were funds for affordable housing are protected from being reverted back to a general fund or “raided” for purposes unrelated to the development or preservation of affordable housing. The policy that raises the money that goes into the fund and the policy that governs how the money is spent is what’s interesting. The thing is, those affordable housing policies can exist and have existed without at housing trust fund. More than anything else, a housing trust fund it a formal way for a community to say they are planning to raise or dedicate money to develop and preserve affordable housing.

The most popular ways to raise money for housing trust funds seem to be developer fees, impact fees, linkage fees, and in-lieu [of developing affordable housing required by inculsionary zoning] fees.  Other ways include redevelopment taxes, transient occupancy taxes, property taxes, document recording fees, demolition taxes etc.  Many funds combine sources.

The most important consideration for any community should be to determine the most efficient and justifiable way to raise and transfer funds to affordable housing. That is, communities should raise revenues based on evidence of negative impacts on housing affordability or they are likely to encounter well reasoned political and legal opposition. Check out this example in California. Once a policy is in place to raise revenues, communities should make every effort allocate that money as efficiently as possible. Easier said than done, right?

The nuances of policy efficiency are the subject of extensive economic theorizing and testing. I’m planning to devote much of my future reading (and blogging) to the economics of affordable housings policy. Although the best solutions are likely to be unique and creatively tailored to the communities where they are adopted, I ought be be able to identify some economic mantras to keep us focused. In the mean time, the Vermont Housing and Conservation Trust Fund offers lots of food for thought.