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How can you spend the money? This seems like the fun part of creating a housing trust fund.  But adequately identifying the requirements and objectives to include in a housing trust fund requires more thought than almost any other aspect of creating the fund, and determining which programs to support often takes much more consensus building than people expect.

The point is to think carefully about which objectives will most help the trust fund address your community’s most critical housing needs.  There will be pressure to meet other needs, such as to attract moderate income families back into the city, expand home ownership opportunities or replace other funded programs.  Be steadfast in the reasons that prompted you to create a housing trust fund in the first place.  But be careful not to incorporate so many requirements that the program becomes too burdensome for applicants. Include only those conditions you feel are most critical.

The objectives that the trust fund should promote through its requirements can be challenging to frame. Here, you are determining which projects are more likely to be funded and, therefore, who will benefit the most from the trust fund. Once again, the objectives you do not want compromised in any way should be part of the enabling legislation. However, other objectives that may shift over time as housing needs and opportunities change can be part of the trust fund’s regulations, usually drafted by staff.

Every community has its own objectives goals it wants to promote through the housing trust fund. Typically, these include:

  • Targeting the households who will ultimately benefit from the trust funds.
  • Targeting populations who deserve special treatment (elderly, special populations, large families, migrant farmworkers, homeless, welfare to work participants, etc.).
  • Supporting projects that achieve certain objectives (mixed income projects, mixed use projects, homeownership, rehabilitation of existing units, preservation of federally assisted projects, etc).
  • Encouraging projects that reflect certain conditions (projects that help retain the affordability of the units over the long-term, projects that incorporate tenant services, and projects with favorable design characteristics, green housing principles, etc).
  • Supporting innovative projects such as community land trusts and cooperative housing, as well as projects that incorporate tenant services, preserve assisted housing and help people move from public housing to other housing opportunities.

There are some overriding conditions that will also determine what your housing trust fund can reasonably accomplish.  While it is good to dream and be creative, these boundaries include:

  • The estimated revenue. The amount of money your trust fund expects to generate annually will influence what you can do with that money. Modest revenues may be sufficient only for shallow subsidies, technical assistance, capacity building, small grants, short-term loans for predevelopment, or for other activities where funds are heavily leveraged. Larger revenues can support gap financing for rehabilitation or new construction projects, rental housing assistance, long-term operating costs and housing support services, among other activities.
  • The targeted beneficiaries of the fund. Providing housing for those with very low or no income requires one kind of assistance. Enabling moderate income households to purchase their first home requires something else. Serving the homeless or special populations may require certain services tied to adequate, affordable housing. In some rural areas, infrastructure needs must be addressed before any housing production can occur.
  • The existing capacity to use available funds. Communities vary widely in their capacity to use funds to provide needed housing. Some communities have an experienced nonprofit housing sector eager for more funds to support their planned projects. Elsewhere, it is difficult to locate someone interested in providing housing to lower income households. Many housing trust funds have developed capacity-building programs to help potential developers create good projects, use available funds, find needed partners, secure commitments and more.
  • The challenges and opportunities that exist locally. Every community has its unique set of problems as well as potential opportunities that can help address existing housing needs. Vacant, boarded-up homes, city-owned property, federally-assisted units with expiring use restrictions, financial institutions seeking ways to use Community Reinvestment Act (CRA) obligations, a rapidly growing local housing market, and the need to find matching funds to take advantage of state or federal programs, are but a few challenges that are also opportunities.

Imposing Requirements and Objectives

Requirements are the conditions every applicant must meet in order to be eligible for and receive funding.  They reflect the housing trust fund’s objectives and include all the local, state, and federal laws and regulations with which projects must comply.  Objectives reflect the broader goals for the housing trust fund, and projects can be accorded a preference in the evaluation process based on how they match the housing trust fund’s objectives.

There are three levels of “preference” that can be prescribed for each element:

  1. required by the statute (including specific set-asides)
  2. accorded preference for funding in the statute
  3. accorded preference for funding in the project application and evaluation process (e.g. NOFA or RFP)

Set Asides: Many trust funds set aside a protion of each year’s available funds to achieve various objectives.  Common objectives include projects that serve very low income households, projects sponsored by nonprofit developers, projects serving special populations, projects located in rural areas, and funds to support capacity-building in community-based non-profits.  The set-aside guarantees that these projects need not compete with other types of projects.  In some instances, set aside funds that are not used within a certain time period become available for general housing trust fund use.  Set asides are typically included in the enabling legislation.

Priorities: Several trust funds place a higher priority on some types of projects than others.  Priority projects must still meet all funding requirements, and because they meet some additional special criteria, are more likely to receive funding.  Priority projects are often those that demonstrate a strong ability to leverage other public and private funds, serve the lowest income households, or make the project affordable for a long time.

In addition to the set-asides and priorities that may be outlined in the enabling statute,  trust funds typically also define funding preferences in the actual application materials.  Layered on top of the statutory requirements and priorities, these tend to be more flexible and responsive to the current housing climate.  For example, a jurisdiction facing a large number of affordable housing projects with expiring use restrictions in a given year may establish a preference for funding preservation projects during that funding cycle. These preferences are consistent with the objectives for the housing trust fund, but changeable over time.