Legislation Introduced for National Affordable Housing Trust Fund
Last week, the House introduced H.R. 2895 for the creation of a National Affordable Housing Trust Fund ("Trust Fund"). The idea of creating a trust fund is interesting enough in its own right, but this legislation contains some restrictions and aspirations that deserve some discussion.
First, the formula for allocating Trust Fund money is nuanced. Trust Fund money would be allocated among the states, not on a per capita basis (as the Low-Income Housing Tax Credit (LIHTC) is allocated), but instead on the basis of a formula that accounts for the age of housing stock, the percentage of citizens spending 50% or more of their income on housing, the percentage of citizens in sub-standard housing, vacancy rates, and the percentage of citizens living below the poverty line. It remains a question whether the formula, to be developed by HUD using the aforementioned factors, would result in a sensible allocation among the states.
Second, in order for states or localities to use the funds, matching contributions would be required if federal-source funds (including Federal Home Loan Bank funds) were used to provide the match than if private or state-controlled resources were used.
Third, nonprofits can apply for allocations from the Trust Fund alongside states and localities. Would this create beneficial competition between governmental entities and nonprofits, or would it prevent state governments from forming consistent and effective allocation plans for their states?
Finally, the Trust Fund is designed to be used in "mixed-income settings" and to "promote low-density owner-occupied housing," among other goals. Urban planners have long espoused the benefits of mixed-income developments, but states nonetheless continue to allocate LIHTCs to projects that concentrate low-income residents into single projects. Will there be teeth to the aspirational language contained in this Trust Fund legislation? Audit and recapture requirements are currently written into the bill, so it is a possibility.
If the Trust Fund becomes law, it will create new opportunities for our large lender and investor clients. Private equity and debt would be sought for Trust Fund projects to meet the matching funds requirement. Investors and lenders who partner with nonprofit developers and localities would be in the best position to take advantage of this new funding source. The full text of the bill is available at http://www.house.gov/apps/list/press/financialsvcs_dem/hr2895.pdf
If you would like to learn more about the Trust Fund and the investment and lending opportunities it may present, please contact Peter Duffley .
First, the formula for allocating Trust Fund money is nuanced. Trust Fund money would be allocated among the states, not on a per capita basis (as the Low-Income Housing Tax Credit (LIHTC) is allocated), but instead on the basis of a formula that accounts for the age of housing stock, the percentage of citizens spending 50% or more of their income on housing, the percentage of citizens in sub-standard housing, vacancy rates, and the percentage of citizens living below the poverty line. It remains a question whether the formula, to be developed by HUD using the aforementioned factors, would result in a sensible allocation among the states.
Second, in order for states or localities to use the funds, matching contributions would be required if federal-source funds (including Federal Home Loan Bank funds) were used to provide the match than if private or state-controlled resources were used.
Third, nonprofits can apply for allocations from the Trust Fund alongside states and localities. Would this create beneficial competition between governmental entities and nonprofits, or would it prevent state governments from forming consistent and effective allocation plans for their states?
Finally, the Trust Fund is designed to be used in "mixed-income settings" and to "promote low-density owner-occupied housing," among other goals. Urban planners have long espoused the benefits of mixed-income developments, but states nonetheless continue to allocate LIHTCs to projects that concentrate low-income residents into single projects. Will there be teeth to the aspirational language contained in this Trust Fund legislation? Audit and recapture requirements are currently written into the bill, so it is a possibility.
If the Trust Fund becomes law, it will create new opportunities for our large lender and investor clients. Private equity and debt would be sought for Trust Fund projects to meet the matching funds requirement. Investors and lenders who partner with nonprofit developers and localities would be in the best position to take advantage of this new funding source. The full text of the bill is available at http://www.house.gov/apps/list/press/financialsvcs_dem/hr2895.pdf
If you would like to learn more about the Trust Fund and the investment and lending opportunities it may present, please contact Peter Duffley .
posted by Angela Towns at 12:51 PM
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