The statement that investing in affordable housing is good fiscal policy is one of the most powerful arguments used to support creating housing trust funds. It is well worth incorporating into any housing trust fund campaign, at any time. This is true regardless of whatever current economic conditions may forecast, and, often because of them. At one level it takes the discussion away from the overwhelming and critical housing needs that exist, which can often be a stumbling block just because of the enormity of the situation. At another level, it can provide just enough rationale to enable an elected official or others to support making an investment in a housing trust fund, when all other arguments have failed.
How To Make The Case—Quantifying the Output
The objective here is to quantify the economic output produced by a specific number of housing units (or a specific dollar investment), including creation of jobs, increased tax revenues, and secondary (or ripple) benefits to related businesses. In addition, a clear relationship can be demonstrated between the production of housing and stimulating the workforce: attracting new businesses and employees, revitalizing neighborhoods, and support for smart growth.
Documenting Economic Impact
There are input-output economic models that can be employed to quantify, probably as precisely as possible, what the true economic benefits are from investing in housing. Most states have such a model that they use, as does the federal government.
For instance, this kind of model can be purchased from the U.S. Department of Commerce, Bureau of Economic Analysis. The Regional Input-Output Modeling System (RIMS II) was used to estimate the effect a national housing trust fund would have on national and state economies. More information about RIMS II can be found here. Check out how it was used in the report, “Home Sweet Home: Why America Needs a National Housing Trust Fund.”
Most states have very similar models. The Tennessee Housing Development Agency conducted a study for the state using the IMPLANpro input-output model: “Economic Impact of Tennessee HOUSE grants,” to support increased revenues for their state housing trust fund.
Housing coalitions have also conducted their own studies or contracted to have such studies completed as part of the campaign. Different strategies are used to collect and present this information, from extensive reports like those in Arizona or Vermont documenting the economic impacts that have resulted from their housing trust funds, to one-page arguments or simple graphics (Milwaukee and Connecticut). It is completely valid to take data from another source, including studies conducted for other cities or states, and apply the conclusions or draw assumptions about the most likely outcome for your state or jurisdiction. The National Association of Home Builders also compiles such data on a regular basis. In 2011, the Center for Housing Policy released a literature review entitled “The Role of Affordable Housing in Creating Jobs and Stimulating the Local Economic Development”.
Click here for example documents, reports and studies from other campaigns.
Affordable Housing Investments Leverage Additional Funds
Typically, developers amass several revenue sources to finance housing construction. Those in addition to the housing trust fund support are referred to as “leverage.” Funds may come from banks, other state or federal funding, foundations, equity, other investments, etc. Without the stimulus provided by the housing trust fund, these funds would go elsewhere. Thus, you can create a strong argument for attracting and using additional funds because of the investment made in a housing trust fund.
In our 2016 Housing Trust Fund Survey Report, we report on the leverage that housing trust funds report to us from the survey. For state housing trust funds, they report an average of $7.00 leverage for every $1.00 committed by the housing trust fund; for city housing trust funds, the average is $6.00; and for county housing trust funds, it is $8.50. While it is true that different kinds of housing activities leverage more than others, it is prudent to use an average, unless your trust fund intends to support only very specific activities.
Alternatively, you can ask local nonprofit housing developers to identify funding sources for a typical affordable housing development and work out a leverage estimate, based on their actual experiences.