Establish a dedicated revenue source for affordable housing


Housing affordability has become a chronic problem for metropolitan areas. The lack of affordable housing can adversely affect regional economic competitiveness when companies are unable to attract workers because the cost of housing is too high. The private sector often will not produce affordable housing unless encouraged to do so by government. To address this challenge, local, regional and state governments need a coherent process for producing affordable housing. This can be done through directives from state housing finance agencies, and housing and mortgage finance agencies.


According to the Center for Community Change's 2007 Housing Trust Fund Progress Report, nearly 600 housing trust funds in cities, regions, and states generate more than $1.6 billion a year to meet housing needs. Thirty-eight states plus the District of Columbia have created 49 funds.

Most states base their housing trust fund financing on real estate or housing sources. Funding can come from real estate transfer taxes, document recording fees, excise taxes, developer impact fees, Tax Increment Financing, interest on various government-held accounts, loan repayments, and a whole slew of other taxes and fees. The revenue source will vary depending on whether the housing trust fund is established at the state or local government level.

The strong role of housing finance authorities in establishing rules gives them latitude to encourage smart growth. One looming problem is that many states are shifting their funding for affordable housing from grants to loan programs. This shift could reduce the efficacy of the program because many affordable housing developers cannot generate enough income from development to pay back even a small amount of interest on a loan.


Download This Section     Download Entire Guide