This section examines what administering a trust fund involves, who should do it, how to pay for it, how the trust fund should be coordinated with other money available for housing, and how the trust should be overseen.
Administering a trust fund usually includes four major components. Any one can become as complex as the housing trust fund permits or requires, but many trust funds strive for ease and simplicity in their administration. The components include:
- Establishing the housing trust fund’s programs. While the law establishing the trust fund generally describes the broad outlines within which the fund operates, there are additional program documents developed after the law is passed that guide day-to-day operations. The staff administering the trust fund is usually responsible for preparing these documents, which typically include at least administrative guidelines, program guidelines and requests for proposals. These materials collectively contain the details necessary to make the housing trust fund work: they establish the mechanisms by which eligible applicants access the funds and spell out all legal requirements that must be met. While the documents guide the work necessary to get the fund up and running, they may also be refined later as the fund gains some experience.
- Funding projects. Administering the housing trust fund also includes funding projects. Reviewing applications, making awards, providing technical assistance, monitoring funded projects and reporting on expenditures and accomplishments are all part of the funding process.
- Taking fiscal responsibility for the trust fund. Administration also involves holding, investing and administering the fund itself. If the fund is administered by a government entity, then it is customary for the government’s fiscal agent to take fiscal responsibility. If the trust fund is administered by an outside entity, then a fiscal agent will have to be established or appointed.
- Overseeing housing trust fund operations. If the fund is a government program, then the state legislature, county commissioners or city council will probably have ultimate authority. There may also be an advisory board or board of trustees responsible for ensuring that the trust fund meets its obligations. If the trust fund is not run by government, it will typically have an independent board with similar responsibilities.
The Housing Trust Fund Administrator
Housing trust funds are either essentially government programs or they are not.
- The Government Agency Model. Here the trust fund is established as a program of the jurisdiction within which it is operating. The fund is typically housed in the agency or department with the most experience operating housing programs, such as the HOME program or the Community Development Block Grant (CDBG) program. Other options include a quasi-public body such as a housing or redevelopment authority or a state housing finance agency.If public funds are committed to the fund, it is unlikely that a non-government entity will be allowed to administer these funds. The vast majority of housing trust funds follow the government model. This model often includes an oversight board. Such housing trust funds may or may not be incorporated.
- The Non-Governmental Model. A few trust funds have been established through government action but are administered by an outside nonprofit entity such as a community foundation or a nonprofit corporation. They may create a distinct board to oversee the fund’s operations and will usually hire staff to run it.
Other administrative options include hybrids of these three models. Regional housing trust funds may be a possibility, but they may require a new oversight or administering entity. Another possible structure is similar to a housing partnership, with a nonprofit administering the funds while maintaining ties to the government.
Often there is little choice as to who will administer the fund. But if your situation allows for choice, your best option might be an entity that:
- Has experience operating a program that grants and/or lends funds to housing developers.
- Has worked with and respects nonprofit development organizations and other housing organizations in your community.
- Understands and is committed to providing housing for your target population.
- Can entertain and support innovative ways to provide decent, affordable housing.
- Can work well with all the partners and industries involved in housing, including HUD, other government agencies, banks and other financial institutions, private developers and planning and zoning commissions.
- Is committed to addressing urgent housing needs and demonstrates a willingness and ability to search for solutions.
The single most important factor in a housing trust fund’s success is its staff’s quality and commitment. Think carefully about staffing as you evaluate alternatives.
How will administrative costs be paid?
Administrative costs include funding necessary to pay for administering the trust fund program. The costs of administering the trust fund are either covered in the budget of the agency or other entity operating the trust fund, or they are covered through revenues committed to the trust fund. For housing trust funds administered by a government agency, often the trust fund’s administration is part of that agency’s administrative budget. Some funds administered by outside entities contract with the unit of government that established the fund to carry out the administrative responsibilities.
If housing trust fund revenues are used to administer the fund, the enabling legislation usually specifies a cap on administrative costs. The cap is usually a percentage of the total revenue collected within a given year, or a specific annual dollar amount. Two other ways to support administrative costs include charging fees for various administrative tasks, or using the interest from trust fund revenues.