To build a home, even the most skilled and experienced carpenter needs the proper tools to complete the job. The same is true for local officials looking to have more affordable housing built in their cities; they need effective financial and planning tools to make it happen. One of those tools, the housing trust, is gaining in popularity with communities throughout California.
Non-profit housing developers can utilize an array of funding sources to build affordable housing. But for private developers, it isnít financially feasible to build affordable units without some type of low-interest loan or grant. The local housing trust fund is one way to help bridge that gap.
The term "local housing trust" is not tightly defined and can mean a variety of things in different communities. Common revenue sources include linkage fees on commercial development, in-lieu fees from an inclusionary housing ordinance, and redevelopment tax increment revenues that state law requires be set aside for affordable housing. Trust funds can also provide a place to direct periodic grants or other sources of funding that are dedicated to affordable housing.
Housing trust funds provide grants and low-income loans to encourage the development and purchase of affordable housing. The funds provide a way for local communities to leverage their own investments to attract other private, non-profit, and government funds, drawing $7.50 for every $1 invested, according to the Center for Community Change.
In addition to leveraging resources, housing trusts are very flexible and can be tailored to fit a range of needs. They can supply gap financing to make projects feasible, train and educate new homeowners, grant low interest loans, offer support services for groups with special needs, and provide long-term rental assistance.
As an added benefit, many jurisdictions have found that their housing trust fund provides an opportunity to coordinate housing activities in new ways. They make better use of available funds by spending them where they are most needed and can do the most good. Coordination also encourages long-range planning and evaluation, keeping the fundís programs up to date and efficient Ė because just like a carpenter, local officials need to keep their best tools for building affordable housing clean in good repair.
Editorís Note: To help communities make the most of this effective and flexible tool, the Institute of Local Government is developing a guide to creating and implementing an affordable housing trust fund that it plans to publish before the end of the year. Thanks to League of California Cities Legislative Representative Bill Higgins for his help in providing initial text for this article.
Steve Sanders is an urban planner and policy consultant with extensive experience in local and state government, the Legislature and the non-profit sector. He is also the Interim Director of the Land Use and Housing Program at the Institute for Local Government.