housing trust funds: overview

What are Housing Trust Funds?

Housing trust funds are separate funds established by states or localities to provide a stable source of revenue reserved solely for affordable homes. Because they are created at the state or local level, program activities and eligibility requirements vary from place to place in response to local needs and priorities.

Housing trust funds can be funded in a variety of different ways. Those associated with a dedicated funding source - i.e., a stable source of revenue that will continue to provide resources on an ongoing basis without the need for annual appropriations are known as dedicated housing trust funds. Such funds represent a stable and effective way of ensuring consistent long term financing for affordable housing needs in a community. However, even these funds are subject to instability as many are tied to real estate taxes, fees and revenues from other economic activity.  An economic downturn may reduce these revenues and thus the funding of the dedicated housing trust funds. The funds may also be subject to having their funds diverted for non-housing purposes through the political process.

Housing trust funds can also be funded through direct appropriations or other sources of revenue that are not dedicated on an ongoing basis.  These funds are obviously less stable than dedicated housing trust funds and are often subject to the annual appropriations process, which is affected by the overall economic conditions of the community. While these programs do not benefit from the reliable funding conferred by a dedicated source, they still play an important role in addressing local housing needs.

What problems do housing trust funds solve?

Housing trust funds help solve three major problems. First, they provide a dependable source of revenue for the production, preservation, or rehabilitation of rental and owned homes, as well as related support services and infrastructure needs. Second, they come without federal restrictions and can be tailored to efficiently meet particular local needs, some of which may be ineligible for funding through other programs or in need of additional resources. Third, they can be used to leverage other funds to help close the gap between the cost of production and available funds to support affordable housing. 

Where are these policies most applicable?

Housing trust funds can be used successfully in more or less any community because states or localities can control exactly how the funds are spent and they do not come with federal restrictions.  
Housing trust funds are most productive when funding sources are tailored to reflect local conditions. Areas with an active real estate market, for example, may consider funding a housing trust fund through real estate transfer taxes or a modest document recording fee that generates a small amount of income with each home sale.  Areas with weaker housing markets but robust tourism may consider hotel/motel taxes as a revenue source.

During an economic downturn, funding sources tied to economic activity or real estate development may generate less revenue. In response, many communities have turned to alternative sources like document recording fees collected from birth certificates, deeds of trust, and marriage licenses, general obligation bonds, or public purpose charges linked to utility fees to support housing trust funds. (These small amounts can add up!) 
Solutions in Action
Photo credit: Greig Cranna, courtesy of MassHousing

Treehouse at Easthampton Meadow, in Easthampton, Massachusetts, was financed in part by a $1 million award from the Massachusetts Affordable Housing Trust Fund. This 46-acre development provides a unique intergenerational environment for both seniors and families with children.

Visit the Gallery to learn more about Treehouse at Easthampton Meadow and other developments made possible through housing trust funds.

A benefit of housing trust funds is that they can be a reliable funding mechanism to meet community affordable housing needs when other sources of public funding for affordable housing may be limited, such as during an economic downturn.  A survey of state housing trust funds reported that between 2007-2009, at least 18 states maintained stable funding for their trust fund; between 2008-2009, 24 state trust funds experienced consistent or increased funding revenues, and at least 10 states took steps to increase funding for their HTFs. [1]  For example, the State of Oregon passed the Housing Opportunity Bill in 2009 to establish a dedicated funding source for their housing trust fund which was achieved by increasing the document recording fee on real estate related documents by $15. [2]

The impetus for housing trust funds varies. In many communities, the creation of housing trust funds result from persistent advocacy campaigns by low-income housing advocates and practitioners who seek to target funds to the lowest income families with the most severe housing cost burdens. In other communities, such as the state of Florida, housing trust funds are advanced by a broader coalition of interest groups, including low-income advocates, realtors and homebuilders.

Communities interested in developing comprehensive and effective housing strategies should consider how a housing trust fund fits into the overall array of housing programs and policies available in the community.  

Oleson WoodsLearn more about dedicated housing trust funds

Tsigo BugehGo back to learn about other policies that help generate capital

[1] 2009 Survey: State Housing Trust Funds. [PDF]. Mary Brooks.  Washington, DC: Center for Community Change, 2009.

[2] 2009-2010 Assets & Oppportunity Score Card.  Resource Guide: Housing Trust Funds.  Washington, DC: CFED

The Center for Housing Policy gratefully acknowledges the input and feedback provided for this policy section by the follwing reviewers: Danielle Arigoni, U.S. Environmental Protection Agency; Mary Brooks, Center for Community Change; Isaac Salazar, Enterprise Community Partners. Please note, however, that the views and opinions expressed on HousingPolicy.org are those of the Center for Housing Policy alone.