HUD Announces Nearly $700 million in 2021 Housing Trust Fund Allocations, More Than Double the 2020 Amount

Published by Peter Lawrence on Monday, April 12, 2021 - 12:00am

The U.S. Department of Housing and Urban Development (HUD) announced April 6 the allocation of  nearly $700  million through the national Housing Trust Fund (HTF). This compares to $326.5 million in 2020 HTF funding, for a year-over-year increase of $367 million. This historic allocation through HTF for affordable housing will help states produce more affordable homes for extremely low-income (ELI) households.

Background

The purpose of the HTF is to finance affordable housing for ELI and very low-income households. As the CEO of National Low Income Housing Coalition (NLIHC) Diane Yentel said, “This year’s allocation to the National Housing Trust Fund will provide critically needed resources to help build and preserve homes affordable to people most severely impacted by America’s rental housing crisis. This funding is a vital step in the right direction, though far more is needed.” The housing government sponsored entities (GSEs) Fannie Mae and Freddie Mac are required by the Housing and Economic Recovery Act (HERA) of 2008 to contribute annually to the HTF. HTF allocations serve as a complement to existing housing production and preservation programs because these funds are earmarked to increase and preserve the supply of safe affordable housing for very-low income households. Regulations require all HTF funding for ELI households when the overall annual amount available is $1 billion or less, as is the case for 2021. The GSEs’ annual contributions to the HTF are based on 4.2 basis points of annual new business purchases. HUD distributes the HTF funds according to the HTF formula for the 50 states, Washington D.C., and U.S. territories. The HTF formula is particularly focused on the needs of the lowest income households of the state. A state must use at least 80% of each annual grant for rental housing, up to 10% for homeownership, and up to 10% for the grantee’s reasonable and administrative planning costs. According to the latest HUD HTF report, 1,248 homes have been financed and 800 homes completed to date.

2021 HTF Allocation By State

The 2021 HTF state grant amounts provides a specific state-by-state view of 2021 HTF allocations. The table below shows the 2021 Allocations per State and U.S. territory, compared to their increases year over year, and their percentage of HOME funds for 2021. The table calls out the depth of the increase in HTF funding this year, evidenced by total year-over-year increase in HTF grants at 114.8% across all states.  The 2021 HTF total allocation listed in the table of nearly $700 million varies slightly from HUD’s reported allocation of $689.6 million, as our sum includes the total HTF allocation when added up by state. A comparison to the 2020 HTF Total of $322.6 million when added up by state also highlights the weight of the increase in funding. This year’s actual allocation was very close to previous estimate of 2021 HTF funding of $688 million. It is also noteworthy how large the FY 2021 HTF allocation is as compared to the cumulative regular HOME allocations for the state.

Blog Table: Housing Trust Fund Allocations by Fiscal Year
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Deploying 2021 HTF Funds

The need to serve ELI households is evidenced by NLIHC’s 2021 Gap Report. The report found that there are only 37 homes affordable and available for every 100 ELI renter household nationwide. While the significant increase in HTF funds will help to address the rental housing shortage highlighted in the research, the year ahead may present some challenges with states deploying 2021 HTF Funds. First, staffing constraints in state agencies could make it difficult to deploy funds. Without additional manpower, states may be unable to meet funding deadlines. It should be noted that state agencies are still processing the state portions of the more than $46 billion in emergency rental assistance authorized by the American Rescue Plan Act and the December 2020 COVID relief legislation. HUD also announced April 8 $5 billion in special HOME allocations authorized by the American Rescue Plan Act.

Second, it will also be difficult to ensure the lowest income households are served without long-term rental assistance. A Novogradac analysis of how the minimum wage affects HTF and LIHTC highlights the challenge. In some portions of states, it is possible that families earning minimum wage incomes won’t be served by HTF. It is difficult, if not impossible, to find an affordable rental home while working a full-time, minimum wage job. The wages earned by these workers can often exceed the HTF program income limits. Even with this historic HTF allocation, there is still a tremendous shortage of homes available across states for those employed households earning the minimum wage.

Cumulative HTF Allocations (2016-2021)

With this most recent allocation, the HTF has allocated more than $1.9 billion through five years of allocations. The top 20 historical allocations by state are listed below. The top five total state HTF allocations over 2016-2021 were California (CA) with $279.8 million, New York with $165.7 million, Texas with $95.3 million, Florida with $81.6 million, and Illinois with $72.9 million. When comparing the historic California allocation to the 2021 CA allocation of $126.6 million this year, CA alone 159% increase in funding year over year. These 20 states account for $1.3 billion, or 67.0% of total HTF allocations over 2016-2021.

Blog Chart: Largest Cumulative State HTF Allocations 2016-2021
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Conclusion

As all HTF-assisted homes will be required to have a minimum affordability period of 30 years, this historic allocation will go a long way toward preserving and producing quality, affordable homes for ELI families for many years to come. The ELI boost provision in the Affordable Housing Credit Improvement Act (AHCIA) and HR 2, the Moving Forward Act, both introduced in the 116th Congress, would expand the reach of HTF resources through increasing the credit for certain properties designated to serve ELI households. States will be faced with the challenge of deploying historic increase in HTF funds in combination with LIHTC and other federal, state, and local funding programs to continue to meet the needs of families that are underemployed and minimum wage-earning households priced out of ELI homes available. Per the HTF report referenced earlier in the post, through 2020, the HTF has supported the construction or rehabilitation of 800 homes from $91 million in HTF funding (in addition to other funding sources), and the development of 1,278 homes based on $255 million in HTF commitments (out of the $1.2 billion in allocations over 2016-2020). Per the HUD press release, there are currently 480 additional properties under construction and 5,400 additional affordable homes are expected to be produced with 2021 HTF funding. This certainly goes a long way in helping to address the country’s affordable housing shortage. Additional support in the form of the to-be reintroduced AHCIA provides measures for affordable housing advocates to rally behind.