How the National Housing Trust Fund will operate in your state and community

Elayne Weiss

National Low Income Housing Coalition

February 19, 2015

What is the National Housing Trust Fund?

• Became law on July 30, 2008 as part of HERA (Housing and Economic Recovery Act).

• Program for collecting and distributing “dedicated” funds – money not at risk of Congressional appropriations cuts “to increase and preserve the supply of decent, safe, sanitary, and affordable housing, with primary attention to rental housing for extremely low-income and very low-income households, including homeless families.”

• Block grant to states.

The NHTF focuses on renters

• Law creating NHTF requires at least 80% of a state’s NHTF money be used to produce, preserve, rehabilitate, or operate rental housing.

• Up to 10% may be used for homeowner activities. • Up to 10% may be used for grantee’s administrative

and planning costs (relates to overall NHTF program management and monitoring). • Examples:

• Preparing reports for HUD and ensuring projects comply with regulations.

• Providing information to residents participating in planning and carrying out NHTF projects.

• Carrying out activities to affirmatively further fair housing.

The NHTF focuses on extremely low income renters

• An extremely low income (ELI) household is one that earns less than 30% of the area median income (AMI).

• Law requires at least 75% of a state’s NHTF used for rental housing benefit ELI households, or households with income below poverty level (whichever is greater).

• Interim rule requires that in any fiscal year in which the amount of funds allocated to the NHTF is less than $1 billion, 100% of NHTF grants must be used for the benefit of ELI families.

The NHTF also serves very low income renters

• Law limits to 25%, the amount of a state’s NHTF used for rental housing to benefit very low income households (VLI).

• Generally, a VLI household is one that earns between 30% to 50% of AMI.

So how is the NHTF actually funded?

• Source of funding designated in the statute is as an annual assessment of 4.2 basis points of the volume of business of Freddie Mac and Fannie Mae, 65% of which is to go to the NHTF. • When Fannie and Freddie were taken into conservatorship by

the Federal Housing Finance Administration (FHFA) in September 2008, their obligation to fund the NHTF was suspended.

• Statute says that NHTF can be funded by other sources of revenue, such as any “appropriations, transfers, or credits that Congress may designate in the future.”

Finally, Funding!

• FHFA lifted the suspension on December 11, 2014 and directed Fannie and Freddie to begin setting aside the funds in 2015 and make them available by March 1, 2016.

•HUD estimates that money will be allocated to states by summer of 2016.

How will NHTF grants be distributed to states?

• NHTF law requires money to be distributed to states by formula based on: • Number of ELI renter households paying 50% or more of their

incomes on rent and utilities or living in overcrowded housing/housing without complete plumbing or kitchen facilities.

• Shortage of rental properties affordable and available to ELI households.

• Number of VLI renter households paying 50% or more on rent and utilities.

• Shortage of rental properties affordable and available to VLI households.

• Allocation formula gives a combined weight of 75% to the two factors that address the needs of ELI renter households.

How will NHTF grants be distributed to states?

• NHTF statute says that each state and DC must receive a minimum of $3 million.

• Rule: If NHTF does not have sufficient funds to provide $3 million to each state and DC, HUD will publish notice in the Federal Register describing an alternative method of distribution and seek comments.

HUD’s Interim Rule

• HUD published proposed regulations to administer the NHTF on October 29, 2010.

• HUD finally published an interim rule on January 30, 2015. • Rule is at 24 CFR part 93. • It is HUD’s intention to open this interim rule up

for public comment once funding is available and states gain experience administering the NHTF program.

• Modeled on HOME regulations.

How Will NHTF funds be awarded within states?

Governor or state legislature chooses a state agency States must choose a state agency, such as housing finance agency or housing department to receive NHTF money and administer its program.

Tip for Advocates

• Learn whether your state has decided which agency will run the NHTF program.

• If an agency is not selected yet, advocate for the agency you think will best serve ELI households.

How Will NHTF funds be awarded within states?

Subgrantees:

• NHTF formula does not distribute money directly to cities and counties.

• Interim rule allows states to allocate NHTF funds to “subgrantees,” which can include local governments or state public agencies such as state housing trust fund.

• Subgrantees would administer all or part of state’s NHTF program.

How Will NHTF funds be awarded within states?

NHTF Allocation Plan

• NHTF law requires states to prepare an Allocation Plan every year that explains how the state will distribute funds in the upcoming year according to the state’s assessment of priority housing needs as identified in state’s Consolidated Plan (ConPlan). • Interim rule requires state’s NHTF Allocation Plan be

integrated into its Consolidated Plan.

• For a local government subgrantee to get NHTF funds from its state, subgrantee must have its own NHTF Allocation Plan in its local ConPlan.

How Will NHTF funds be awarded within states?

Allocation Plan and Public Participation

• When preparing an Allocation Plan, law requires states to: • Notify the public that the Allocation Plan will be drafted. • Provide for and consider public comment. • Make the final Allocation Plan available.

• NHTF law requires compliance with Consolidated Plan public participation requirements.

Tips for Advocates • Action around the Allocation Plan begins at the state level and

could flow to the local level if the state decides to allocate most or all NHTF funds to local subgrantees.

• Advocates used to ConPlan advocacy only at local level need to learn how to advocate at state ConPlan level.

• State ConPlan agency might be different than the NHTF agency.

How Will NHTF funds be awarded within states?

Recipients States and/or subgrantees allocate NHTF to recipients to carry out specific projects. Allocation Plan must describe requirements recipients must meet when applying for money.

• Recipients may be nonprofit, for-profit, or public entity, including public housing authorities.

• Recipient must have relevant experience and financial capacity.

How Will NHTF funds be awarded within states?

Allocation Plan must give priority to projects based on: 1. Geographic diversity, as reflected in ConPlan.

2. Extent rents are affordable, especially for ELI households.

3. Length of time apartments will remain affordable.

4. “Merit” of a project. HUD gives a few examples: a) Serving people with special needs.

b) Accessible to transit or employment centers.

c) Energy saving and non-polluting features.

5. Applicant’s ability to obligate money and carry out project in timely way.

6. Extent project will use non-federal funds.

How can the money be used?

NHTF funds may be used for:

• The production, preservation and, rehabilitation of affordable rental housing and affordable housing for first-time homebuyers through the acquisition, new construction, reconstruction, or rehabilitation of nonluxury housing (includes both hard and soft costs);

• Operating cost assistance and operating cost assistance reserves for rental housing– however no more than one third of each annual grant may be used;

• Helping first-time homebuyers with down payment and closing cost assistance.

How can the money be used?

Forms of Assistance • States and any local subgrantees may decide the terms

of assistance. NHTF assistance may be: ‒ Loans, including no-interest loans and deferred payment

loans ‒ Grants ‒ Interest subsidies ‒ Equity investments ‒ Other forms

• NHTF law requires money to be “committed” within two years.

• Interim rule adds NHTF funds must be spent in five years.

Transitional and Public Housing

• Transitional housing projects are not eligible to receive NHTF funds.

• The interim rule allows NHTF funds to be used for two categories of public housing: • Rehabilitation of existing public housing units that are

converted under the Rental Assistance Demonstration (RAD) to project-based rental assistance.

• Rehabilitation or construction of new public housing as part of the Choice Neighborhoods Initiative (CNI) or rehabilitation or construction of new public housing units that have been allocated and will receive Low Income Housing Tax Credit assistance.

Will the rent be affordable?

• A basic housing policy is the “Brooke rule” which considers housing “affordable” only if households use no more than 30% of their income for rent and utilities.

• Neither NHTF law nor HUD’s interim rule cap resident rent and utility payments at 30% of their income.

• Interim rule sets maximum rent (including utilities) a household pays at a fixed amount equal to 30% of 30% AMI or 30% of poverty level, whichever is greater.

Tip for Advocates Advocates should convince their state or local government to require “Brooke rule.”

How long will rental homes be affordable?

• Interim rule would require both rental and homeowner housing be affordable for at least 30 years.

• States and any local governments may have longer affordability periods.

Tip for Advocates

Advocates should convince their state or local government to set an affordability period of at least 50 years

Learn more about the NHTF

Learn more about the National Housing Trust Fund at www.nhtf.org

• Frequently Asked Questions: http://nlihc.org/sites/default/files/FAQ_0115.pdf

• Summary of interim rule: http://nlihc.org/article/hud-publishes-nhtf-interim-rule-nlihc-schedules-webinar

United for Homes

• United for Homes is the campaign to fund the National Housing Trust Fund with revenue raised from modifications to the mortgage interest deduction.

• Learn more about our proposal at www.unitedforhomes.org

• Join thousands of advocates by endorsing the campaign at www.unitedforhomes.org/support

Contact Me

Elayne Weiss National Low Income Housing Coalition

eweiss@nlihc.org www.nhtf.org

202.662.1530 x 243