FundingStrategiesforDevelopingandOperating
ExtremelyLowIncomeHousing
ThenationalHousingTrustFund(HTF)isdesignedtoexpandthesupplyofrentalhousingaffordableto
extremelylowincome(ELI)households,thoseearninglessthan30%oftheareamedianincome(AMI).
Atleast80%ofHTFfundsmustsupportrentalhousing,andatleast75%ofthefundsusedforrental
housingmustserveELIhouseholds.Upto33%ofHTFfundscanbeusedtocoveroperatingcostsand/or
operatingcostreserves.
TherentsthatELIhouseholdscanaffordtopayoftendonotcovertheoperatingcostsofaproject.Two
recentstudiesbytheTechnicalAssistanceCollaborative(TAC)andtheNationalLowIncomeHousing
Coalition(NLIHC)identifyinnovativestrategiesadoptedatthestateandlocallevelstoaddressthisissue.
StatescanadaptthesestrategieswhenconsideringhowtoutilizeHTFfunds.
CrossSubsidization
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Mixed-incomeprojectsthatblendELIunitswithunitsaffordabletohigherincomehouseholds
canprovideopportunitiesforthecrosssubsidizationofrents.Revenuefromhigherincome
householdscanhelpoffsetthelowerrentsfromELIhouseholdstomeettheoperatingcostsof
thehousingproject.(NLIHCReport)
RentalassistancesubsidiessuchasHousingChoiceVouchers(HCV)utilizedinLowIncome
HousingTaxCredit(LIHTC)unitscanofferhigherpaymentstandardsthanLIHTCrents.These
higherrentscanbeusedtocrosssubsidizerentsforotherELIhouseholdswhodonothave
rentalassistance.(NLIHCReport)
CapitalizingOperatingReserves
Anoperatingreserveismoneysetasideupfronttosupporttheoperatingcostsofaproject.Thereserve
canbedrawndownovertimetomakeupthedifferencebetweentherentanELIhouseholdcanafford
topayandthecostofoperatingthatELIhousehold’sunit.
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Pennsylvania'sHousingFinanceAgencyhasimplementedamodeltosubsidizeoperatingcosts
forLIHTCprojectsthatincludeset-asidesofELIunits.Theprogramallowsuptoa5%increaseto
thedeveloper’sfeeifthat5%incrementisusedtocapitalizeaRentSubsidyFundforELIunitsin
participatingLIHTCprojects.TheRentSubsidyFundiscreatedandadministeredattheproject
levelandusedtosubsidizethedifferencebetweentherentELIhouseholdscanaffordtopay
andoperatingcosts.(TACReport;NLIHCprovidesanotherexampleoftheuseofincreased
developerfeesforoperatingreserves.)
RelationtoHTF:StateentitiesdesignatedtoadministerHTFfundscouldelecttosetasideupto
33%oftheirHTFallocationstocapitalizeoperatingreservefundsforHTF-assistedunits
administeredattheprojectlevel.
RentSubsidyorOperatingAssistance
Rentalsubsidiesoroperatingassistancefundscoverthedifferencebetweentherent(revenue)needed
tocoveroperatingexpensesandtherentELIhouseholdscanaffordtopay.Rentalsubsidiesoroperating
assistanceareadministeredonanongoingbasistosupportdeficitsinoperatingincomeneededtocover
expenses.
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NorthCarolina’sKeyProgramisfundedthroughstateappropriationsandprovidesprojectbasedrentalassistancetoELIunitsrequiredasaset-asideinallLIHTCprojects.Thesubsidiesfor
theunitscomefromafundthatismanagedatthestatelevelratherthantheprojectlevel.The
programisfundedthroughannualappropriations,butthestatemanagesthesefunds
strategicallytotrytomaintain10yearsoffundingforcurrentandprojectedunitsintheKey
Program.(TACreport)
RelationtoHTF:StateentitiesdesignatedtoadministerHTFfundscouldelecttouseupto33%
oftheirHTFallocationstoprovideoperatingassistancetoHTFassistedunitsadministeredatthe
Statelevelorthroughanotherentity.
ReducingMortgageDebt
Reducingoreliminatingmortgagedebtlowersthecostofdebtserviceoverthelifespanofaproject,
allowingformoredeeplytargetedrents.
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Somemunicipalitiesprovidebelowmarket(ordonated)landorpropertyforaproject,thereby
significantlyreducingcapitalcostsandmortgagedebt.(NLIHCreport)
Privatephilanthropicorganizationsprovidefinancialresourcestoreducedebtinorderto
supportELItargetedrentsoveranestablishedterm.(NLIHCandTACreports)
RelationtoHTF:HTFfundscanbeapplieddirectlytocapitalcostsinaprojecttoreduceor
eliminatemortgagedebttoachieveELItargeting.
LayeredFundingStreams
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MostprojectswithELIunitsutilizemultiplefundingstreamsinordertoachievedeepincome
targeting.(NLIHCandTACreports)
HTFfundscouldbelayeredwithhousingproductionsubsidiestargetedathigherincome
households,suchasLIHTCorHOME,todevelopunitstargetedtoELIhouseholds.
FurtherReading
Bolton,M.,Bravve,E.,&Crowley,S.(2014).Aligningfederallowincomehousingprogramswithhousing
need.Washington,D.C.:NationalLowIncomeHousingCoalition.Retrievedfromhttp://bit.ly/24qsFBW
Dastur,N.,Anderson,M.,Brooks,M.(2011).ModelApproachestoProvidingHomestoExtremelyLow
IncomeHouseholds.FrazierPark,CA:HousingTrustFundProject.Retrievedfromhttp://bit.ly/1SYqE7v
TechnicalAssistanceCollaborative.(2015).Creatingnewintegratedpermanentsupportivehousing
opportunitiesforELIhouseholds:AvisionforthefutureoftheNationalHousingTrustFund.Boston,MA:
Author.Retrievedfromhttp://bit.ly/1TKELgY
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