Introduction
Housing Trust Funds are distinct accounts that receive fund allocation from the public kitty so as to facilitate provision of affordable housing. Ideally, these funds are created through legislation or ordinance which creates the fund itself, regulatory requirements for expenditure of the funds, structure of administration of funds for overseeing funds operation and facilitates dedication of the identified sources of funds.
Generally, trust funds provide funds to a wide range of activities such as; education, construction of new houses, rental assistance and offering shelter to homeless residents.
Growth in housing trust funds
The first housing trust fund came into being in the late 1970,s. However, due to certain constraints, their widespread growth didn’t take place until1990’s when depletion of federal funds for affordable housing occurred.
Although there has been a slow absolute growth of housing funds, there remains a stable upsurge of these funds every year. At any given time, a large number of jurisdictions find the need to develop housing trust funds so as address housing needs (Illinois Housing Development Authority.).
A survey conducted in the year 2000 comprising of seventy existing housing trust funds showed that, of the trust funds which had a dedicated source of public revenue, 84% of them increased their revenue allocation to the trust funds from 1996 to 2001 (Iglesias and Lento).
On the other hand, of the trust funds without a dedicated source of public revenue, 41% of them increased their revenue allocation to the trust funds from 1996 to 2001. From this data, a conclusion can be made that, trust funds have more than twice the chance of increasing their revenue base by having a dedicated source of public revenue.
Although the housing trust fund movement is only three decades old, the number of housing trust funds has significantly increased. The need for affordable housing has forced states to look for alternative ways of offering housing services (MacDonald et al.).
Housing trust funds are established at three levels; at the state, county or city level. Housing trust funds are established by the elected government bodies with the sole purpose of providing affordable housing. In US Housing trust funds have significant impact in more than forty -three states.
In general, there are about six hundred housing trust funds in US with a yearly revenue generation of more than $1.6 billion which are used in addressing critical housing needs.
Characteristics of housing trust funds
The major characteristics of housing trust funds include:
Administration
Administration of housing trust funds is done through quasi-public or public agency. Housing trust funds generally establish an oversight board comprising of representatives of the housing community so as to oversee the operations of the trust funds.
The representation of the board is usually large enough to serve the interests of various stakeholders. The oversight board has an advisory role and has delegated authority to make specific decisions such as determination of the projects to be funded from trust funds.
Programs
The enabling legislation or ordinance establishes a broad set of rules to govern the use and operation of the trust funds. In addition, the enabling legislation or ordinance also specifies the type of activities to be funded through housing trust funds. These activities may include; acquisition of houses, construction of new houses, rental assistance, repairs and rehabilitation of homes.
Revenue Sources
Ideally, Cities, counties and states have access to different types of revenues. States housing trust funds receive approximately $437 per year. These funds are sourced from various sources.
Real estate transfer tax is considered as the most common revenue source for state housing trust funds. Housing trust funds also receive revenue from other sources such as; document recording fees and transfer taxes. However, nine of these trust funds receive funds from more than one source.
On the other hand, city housing trust funds mostly receive their revenue from linkage fees. These are fees imposed on non-residential developers so as to offset their development on the market.
County housing trust funds mostly receive document recording fees. By the year 2002, there were already forty-two city housing trust funds established in twenty-two states and other 142 established in New Jersey (Florida. Affordable Housing Study Commission.).
City housing trust funds are quite diverse and hence attract new sources of funding more than any other type of trust funds. Administration of housing trust funds is mostly done by a community and housing development or the equivalent division or department within the city.
A majority of city housing trust funds advocate use of available trust funds to cater for specific needs using set-asides and preferences methods. Under set-aside method, a portion of available funds is set aside and used then to fund projects that address specific needs.
On the other hand, preference method involves identifying preferences for projects that lead to achievement of certain objectives. A small number of city housing trust funds set aside funds for serving households with disability or first time homeowners.
County housing trust funds
These types of trust funds represent a relatively smaller part of the overall housing trust fund plan. However, they help in addressing housing needs in ways that are not comprehensively covered by cities or states. County housing trust funds are specifically designed to offer affordable housing opportunities in rural areas.
As at December 2005, there were 250 housing trust funds in US and the total revenue collection was $303 million. These funds financed a wide range of activities including; low-interest loans, moderate-income and low-income housing development. In the year 2005, alone revenue collection amounted to $40,849,689 and a big portion of these funds financed affordable housing activities.
Administration
The administration of a majority of county housing trust funds is done by a government agency or a department.
Programs
County housing trust funds are flexible in the manner in which they spend their funds. However, because of their limited funds, they spend their funds in addressing only specific housing needs. This means that, they only work to make an impact on specific part of the entire housing plan.
Oversight boards
Majority of the county housing trust funds rely on the appointed board to oversee the use and operations of the trust fund. The board appointment is done by County Commissioners and has a broad representation from various stakeholders. This helps in ensuring efficient use of the trust funds and avoids financial malpractices (Pivar, Anderson and Otto).
Funds allocation
County trust funds finance a wide range of activities such as construction of new homes, acquisition of new homes, and rehabilitation of old homes. About one third of the county housing trust funds are used to finance activities such as predevelopment, homeless services, and transitional housing.
Some activities which receive minimal funding include; education, counseling, emergency repairs, and weatherization (Chicago Assembly., Joseph and University of Chicago. Center for Urban Research and Policy.).
State housing trust funds
As at December 2005, there were thirty-eight state housing trust funds and seventeen of them were created in 1990. Fifteen other state housing funds were created before 1995 and another six created after 1995.Thereafter, three trust funds collapsed due to technical issues in some states such as California.
Administration
Administration of seventeen state housing trust funds is done by development commissions and state housing finance agencies. These agencies usually administer federal low income tax credits and also have authority to issue bonds to interested parties. Another seventeen state housing trust funds are administered by state agencies such as; housing community services, community affairs, housing and community development.
Some state housing trust funds such as Massachusetts have developed administrative structures that encompass several entities. The Massachusetts Affordable Housing Trust Fund which is housed in the Department of Housing and Community Development (DHCD) is managed by Massachusetts Housing (MHFA).
State housing trust funds have oversight boards which are appointed by the Governors. These boards have a broad representation from all stakeholders such as bakers, developers, housing advocates, service providers and realtors (Brown-Graham and University of North Carolina at Chapel Hill. School of Government.).
Programs
Generally, the enabling legislation that establishes the state housing trust fund provides clear guidelines on the use of these funds.
Fund allocation
Most state housing trust funds distribute their funds based on application criteria. Usually the trust funds issue requests for proposal to distribute funds and then interested parties make application for the funds. The trust funds then honor applications depending on availability of funds (Brassil).
State housing trust funds finance a wide range of activities such as; transitional housing, down payment assistance, homeless services, weatherization, emergency repairs, education and counseling services, and tenant based rental assistance.
Conclusion
Housing Trust Funds enjoy great flexibility because they operate without federal intervention and this makes them the most popular source of funding housing activities.
In order to ensure proper administration and avoid mismanagement of these funds, stringent laws should be established at various levels of administration. Due to the tremendous increase in housing needs government should consider increasing funds allocation to housing trust funds so as to enhance capacity for financing a wider range of activities.
Work Cited
Brassil, Margaret M. The Creation of a Federal Partnership : The Role of the States in Affordable Housing. Suny Series in Urban Public Policy. New York 2010Print.
Brown-Graham, Anita R., and University of North Carolina at Chapel Hill. School of Government. Affordable Housing and North Carolina Local Governments. Chapel Hill, N.C.: UNC School of Government, the University of North Hill, 2006. Print.
Chicago Assembly., Lawrence B. Joseph, and University of Chicago. Center for Urban Research and Policy. Affordable Housing and Metropolitan Chicago. Chicago, ILChampaign, IL: Center for Urban University of Illinois Press, 1993. Print.
Florida. Affordable Housing Study Commission. The Affordable Housing Study Commission : Final Report, 2002. Tallahassee (2555 Shumard Oak Blvd., Tallahassee 32399-2100): The Commission, 2002. Print.
Iglesias, Tim, and Rochelle E. Lento. The Legal Guide to Affordable Housing Development. Chicago, Ill.: Section of State and Bar Association, 2005. Print.
Illinois Housing Development Authority. “Illinois’… Annual Comprehensive Housing Plan.” Chicago, Ill.: Illinois Housing Development Authority, 2007. v. Print.
MacDonald, Heather, et al. Affordable Housing in Iowa : Meeting New Challenges. Des Moines, Iowa: Iowa Finance Authority, 2007. Print.
Pivar, William H., Lowell Anderson, and Daniel S. Otto. California Real Estate Practice. 7th ed. Chicago: Dearborn Real Estate Education, 2010. Print.