Would The Housing Trust Fund Be Better Spent On Direct Assistance?

Next up in our review of federal housing programs: the Housing Trust Fund (HTF) and the HOME Investment Partnerships Program (HOME). These large programs allocate money for housing and housing programs through state level Housing Finance Agencies (HFAs). We’ll take a look first at the HTF, a program that was created but not yet funded at the time former Congressman Paul Ryan reviewed federal poverty programs as part of his critique of federal poverty programs and the War On Poverty. Then we’ll consider the formula-driven HOME program. Together, the two programs add hundreds of millions of dollars annually to the total federal expenditure on (mostly) new construction projects.

The Housing Trust Fund

The HTF can be found in Section 1337 of The Housing and Economic Recovery Act of 2008 (HERA) and was, according to the Federal Register, “enacted to reform and improve the regulation of the [Government Sponsored Entities] Fannie MaeFNMA
and Freddie Mac, strengthen neighborhoods hardest hit by the foreclosure crisis, enhance mortgage protection and disclosures, and maintain the availability of affordable home loans.” The concept was to require the GSEs to contribute to the HTF according to a statutory formula; the HTF, in turn, would then distribute those funds to the states through the HFAs. Again, according to the Register, “The total set-aside amount is equal to 4.2 basis points (.042 percent) of the GSEs’ new mortgage purchases, a portion of which is directed to the HTF.” However, in 2008, with the GSEs placed in conservatorship, no contributions were made until 2016.

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Starting that year, states began receiving HTF allocations targeted by law at “Extremely Low Income” (ELI) households. The purpose: to build more subsidized rental housing for families earning 30% of Area Median Income (AMI) or at the federal poverty line, or very low-income households defined as earning 30% to 50% of area median income. Between 2016 and 2022 this category of funding increased from $173.6 million to $739.6 million. Whenever funds generated for the HTF are less than $1 billion they must be allocated to households earning less than 30% of AMI, Extremely Low Income as defined by HERA. This chart is from HUD’s National Production Report.

According to the Federal Register, “The primary benefits of the HTF program are expected to be similar to the Housing Choice Voucher program.” The register suggests that this will mean “the reduction of the number of homeless families and individuals, as well as the number of families paying a disproportionate share of their income for housing in relatively tight housing markets.”

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But the performance of this program since 2016 suggests otherwise. According to the Department of Housing and Urban Development (HUD), 3,522 units have been built using money from the HTF at a total cost of $389,007,470 to the trust, or about $110,450 per unit. But a look at the “leveraging” figures tells a different story. For each dollar of HTF money spent, there were 9.5 “other dollars.” That means those 3,522 units cost $4,180,451,732, which means the price tag for each individual unit is a staggering $1,049,281.93. This chart is also from the National Production Report.

Considering that most families struggling to pay rent have shortfalls in the hundreds of dollars, all this money could have been more efficiently spent to bridge those gaps without buying land, building, and operating housing. Remember, the federal government realized the complexity and cost of that solution. Reducing cost burden for these 3,522 households would be far more efficient and compassionate.

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All this makes clear the scale of the amount of money being spent to eliminate such a small part of the problem. If, hypothetically, this capital was distributed across the housing economy to households struggling to pay housing costs in cash, it would be a faster and far more efficient way to eliminate cost burden. The argument that it wouldn’t be “a permanent” solution is cold comfort to many thousands of families marooned on multi-year wait lists and paying huge percentages of their income in housing costs. The HTF receives hundreds of millions a year by formula; those dollars should go directly to needy families in the form of rent payments.