The Housing Trust Fund was established by the Housing and Economic Recovery Act of 2008, which was signed into law on July 30, 2008. The authorizing statute provided funding for the HTF through annual assessments of the government-sponsored entities Fannie Mae and Freddie Mac; however, the assessments were suspended due to the entities’ financial problems. The U.S. Department of Housing and Urban Development is issuing proposed regulations for the HTF in anticipation of funding through other sources.
President Barack Obama’s FY 2011 budget allocates $1 billion to the HTF to finance the development, rehabilitation, and preservation of affordable housing; however, neither the House nor the Senate appropriations bill for FY 2011 includes funding for the HTF.
HUD proposes to codify the HTF regulations in new subpart N of 24 CFR part 92. Part 92 contains the regulations for HUD’s HOME Investment Partnership Program (HOME), many of which apply to the HTF. The HTF will operate in substantially the same way as the HOME program, through formula allocations for rental housing production and homeownership.
Distribution of Funds
A state may choose to be the HTF grantee to receive and administer its grant or may choose a qualified entity as grantee. Permissible state-designated entities include a state housing finance agency or any other qualified instrumentality of the state. Each grantee is responsible for distributing HTF funds throughout the state in accordance with the state’s assessment of priority housing needs and as identified in the state’s approved consolidated plan.
An HTF grantee may choose to directly fund projects of eligible recipients or indirectly fund projects through subgrantees. Recipients include organizations, agencies, or other entities, including for-profits and nonprofits, that have demonstrated experience and capacity to:
- own, manage, construct, rehabilitate, or operate multifamily affordable housing;
- design, construct, rehabilitate, or market affordable housing for homeownership;
- provide assistance, such as down payments, closing costs, or interest rate buy-downs;
- undertake, comply, and manage affordable housing; and
- comply with the requirements of any other state, local, or federal program that will be used in conjunction with the HTF grant.
Subgrantees may be a state agency or a unit of general local government that has submitted a consolidated plan.
To receive HTF funds, grantees and subgrantees must submit an HTF allocation plan that describes the distribution of the grant based upon housing priority needs and includes performance goals. States have the flexibility to include incentives and priorities in their allocation plans that address the needs of the community where the housing will be located.
Housing authorities meet the criteria as recipients and, therefore, are eligible to receive HTF funds through application as a recipient.
Income Targeting and Affordability Requirements
All HTF funds must be used to assist households with incomes not greater than 50 percent of area median income (AMI). At least 75 percent of funds must be used to assist households with incomes not greater than 30 percent of AMI. For the first year of HTF funding, 100 percent of the funds must be used for rental and homeownership housing for households with incomes not greater than 30 percent of AMI.
Homeownership activities cannot exceed 10 percent of the total annual HTF grant; administrative costs cannot exceed 10 percent of the annual grant; and 80 percent of the grant must be used to support the production and/or preservation of rental housing.
Operating-cost assistance cannot exceed 20 percent of an annual HTF grant.
HUD recognizes that HTF-assisted rental units will need operating subsidies. To this end, HUD requires state allocation plans to give priority to projects that have federal, state, or local project-based rental assistance. If additional project-based vouchers are provided through appropriations, HTF grantees will allocate the vouchers concurrently with HTF funds to specific projects.
The proposed rule establishes an affordability period of not less than 30 years for both rental and homeownership housing.
The maximum rent, including utilities, for HTF-assisted units is 30 percent of the annual income of a family whose income equals 30 percent of AMI or 30 percent of the poverty line, whichever is greater.
HTF funds are not eligible to be used in the production of public housing units, including units that are developed under Section 24 of the U.S. Housing Act (HOPE VI). HTF-assisted units may not receive public housing operating assistance under Section 9 of the U.S. Housing Act. HTF funds may be used for affordable housing in a project that also contains public housing units
Eligible Project Costs
Eligible project costs include development hard costs, refinancing costs in conjunction with rehabilitations, acquisition of standard projects, development-related soft costs, architectural and engineering fees, project audit costs, staff overhead related to the development of the unit, settlement costs, impact fees, the cost to address and meet environmental and historic preservation property standards, operating costs, relocation costs, repayment of construction or other loans, and certain types of costs for construction undertaken before HTF funds were committed to the project.
The HTF regulations require energy and water efficiency features in all HTF-assisted units. The federal regulation requires, at a minimum, that all new construction and gut-rehab units be certified that they meet guidelines for ENERGY STAR Qualified New Homes or exceed, by 20 percent, the energy efficiency requirements of the American Society of Heating, Refrigerating, and Air-Conditioning Engineers. A Home Energy Rater must inspect the units to certify ENERGY STAR rating.