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HUD’s $214 Million in HTF Allocations–Part of a $5.5 Billion FY 2024 Funding Announcement–Is A Nearly 50% Decrease from Last Year

Published by Peter Lawrence on Monday, June 10, 2024 - 7:14AM

The U.S. Department of Housing and Urban Development (HUD) on May 7 announced $5.5 billion in funding was made available through more than 2,400 grants to state and local jurisdictions for fiscal year (FY) 2024. The announcement included $214 million in Housing Trust Fund (HTF) grants allocated to the states, the District of Columbia and U.S. territories, an amount nearly 50% less than the 2023 allocation of nearly $382 million.

HUD’s Office of Community Planning and Development's (CPD’s) formula programs covered by the May funding announcement include:

  • HOME Investment Partnerships (HOME);
  • Community Development Block Grants (CDBGs);
  • CDBG Recovery Housing Program (RHP);
  • Emergency Solutions Grants (ESGs);
  • Housing Opportunities for Persons With AIDS (HOPWA); and
  • Housing Trust Fund (HTF). 

These programs help to provide necessary funding for affordable housing and community development. HOME, CDBG and HTF are often used with the low-income housing tax credit (LIHTC) as gap financing. The HTF in particular often helps make financing LIHTC housing for extremely low-income (ELI) households more financially feasible.  

Blog Graphic: $5.5 Billion in Funding for Community Planning and Development Formula Programs

Why Is The 2024 HTF Allocation Lower Than 2023? 

The impact of rising interest rates and high mortgage rates has significantly affected the government-sponsored entities (GSEs) Fannie Mae and Freddie Mac’s contributions to the HTF.  Novogradac’s ongoing analysis of HTF and CMF allocation had already warned that the FY 2024 HTF and Capital Magnet Fund (CMF) allocations, both based on 2023 U.S. Securities and Exchange Commission (SEC) filings by GSEs, would be significantly lower than in previous years. The decline in CMF and HTF funds was expected due to the substantial mortgage rate increases in 2022-2023, which had a chilling effect on the housing market, lowering demand for refinance and purchase mortgages, and subsequently led to reduced GSE contributions for the HTF. 

Who Benefits from HTF Allocations? 

The HTF was established in 2008 by the Housing and Economic Recovery Act and benefits vulnerable populations. The purpose of the HTF is to finance affordable housing for both ELI households (defined as those with incomes less than 30% of the area median income (AMI) or the federal poverty line, whichever is greater) and very low-income households (defined as those with incomes between 30% and 50% of the AMI). 

HUD allocates funds to eligible states, the District of Columbia and the U.S. territories through a formula-based grant system, and most of the funding must be used for rental housing–states must allocate at least 80% of its annual grant for rental housing, up to 10% of their grants for certain homeownership activities and up to 10% for the grantee’s reasonable and administrative planning costs. When the overall annual HTF amount available is $1 billion or less (as was the case in 2024 and likely will be the case for the foreseeable future), all funding must be used for ELI households. The GSEs’ contributions to the HTF and CMF are based on 4.2 basis points of their annual new business purchases. HUD distributes HTF funds according to a formula that considers the needs of the lowest-income renter households in each state, Washington, D.C., and U.S. territories. The HTF serves as an essential tool to enhance existing programs and funding for affordable housing. By focusing on ELI and very low-income households, the HTF ensures dedicated funding for those most in need.

How Were 2024 HTF Funds Allocated Among States? 

The $214 million allocated in FY 2024 was divided between U.S. states and territories, with each state receiving at least the mandatory minimum of approximately $3 million. The table below displays the FY 2024 allocations by location compared to the FY 2023 allocations. The right column shows the HTF percentage of all HOME funds in the state including both the state allocation and the total of all local participating jurisdictions in the state for 2024. The table also shows a total 44% decrease in HTF grants from FY 2023 to FY 2024, similar to the 48.9% decrease last year from FY 2022 to FY 2023. In contrast, HTF allocations increased from FY 2020 to FY 2021 and FY 2021 to FY 2022.

Blog Graphic: Housing Trust Fund Allocations by Fiscal Year

How Will Reduced HTF Allocations Affect ELI Households? 

Every year, research highlights the growing and seemingly insurmountable issue of affordable housing scarcity. The National Low Income Housing Coalition’s (NLIHC’s) 2024 Gap Report shows that the U.S. faces a shortage of 7.3 million affordable and available rental homes. The report found that there were only 34 affordable and available homes for every 100 extremely low-income renter households, and that no state has an adequate supply of rental housing affordable and available for extremely low-income households. Providing housing for ELI households becomes even more challenging as the rents that are affordable to them often fall short of covering the development costs and operational expenses associated with new housing. The nearly 50% reduction in HTF allocations for a second year in a row translates to significantly fewer homes aimed at ELI households being financed or preserved compared to the record-setting allocations of 2022 and 2021, which were driven by the tremendous demand for refinance and purchase mortgages at the time.

This year marks another significant decrease since 2022. The HTF allocations for FY 2024 are the lowest it has been since 2016. 

Blog Graphic: HTF Year-Over-Year Allocations

More than $3.2 billion has been allocated through the HTF since 2016. Of this $3.2 billion, more than $2.2 billion, or 68.4%, has been allocated to the top 20 states displayed below during this time. The five states with the largest cumulative HTF allocations are:

  • California - $477 million
  • New York - $283 million
  • Texas - $168 million
  • Illinois - $ 142 million
  • Florida - $140 million

Blog Graphic: Largest 20 Cumulative State HTC Allocations 2016-2024

The $5.5 Billion in Grants Helps Address the Nation’s Housing and Community Development Needs

In addition to the HTF allocations, of the $5.5 billion in funding for grants, HOME was awarded $1.3 billion to be distributed to 668 grantees to build more affordable housing. As detailed in the White House fact sheet, HOME is a crucial federal initiative that supports states and local governments in their efforts to provide affordable rental and owner-occupied housing for low-income families. Through formula grants, HOME funds a wide range of activities, including constructing, purchasing and rehabilitating affordable housing for both renters and homebuyers. Additionally, the program offers direct rental assistance to low-income individuals. Per the fact sheet, in many cases, HOME developments also leverage non-federal funds, such as tax credits, to promote affordable rental housing. In 2023, the program facilitated the creation of more than 13,000 homes, and more than 13,000 households received tenant-based rental assistance through the HOME program.

Also, $3.3 billion in funding was distributed to 1,254 grantees to build stronger communities through CDBGs. The CDBG program allocates annual grants based on a formula to states, cities, counties and insular areas. Its primary objective is to foster stronger and more resilient communities. CDBGs aims to enhance the quality of life by ensuring access to decent, safe and sanitary affordable housing and by expanding economic prospects, particularly for low- and moderate-income individuals. In 2023, the program had a significant impact, as the following details from the White House fact sheet illustrate. The CDBG program has assisted 62,000 families through various housing initiatives. It also benefitted more than 25,500 individuals through job-related efforts such as job creation or retention. The program improved homelessness facilities for 52,000 people experiencing homelessness, supported more than 5.4 million people by supplying public services and positively impacted more than 41.8 million people through public improvements.

Given the Reduced HTF Allocations, Passing Affordable Housing Legislation is More Critical than Ever 

The market realities detailed above explain the decrease in HTF contributions as well as why additional tools like the LIHTC are needed to compensate for the shortfall in this funding. As HTF allocations return to pre-pandemic levels, existing incentives will have to be strengthened and new tools created. 

President Joe Biden’s proposed 2025 budget contains housing proposals that could finance as many as 2 million affordable homes. The proposal includes components of the Affordable Housing Credit Improvement Act (AHCIA, H.R. 3238, S. 1557), a bill that on its own, has the potential to fund the construction of nearly 2 million additional affordable rental homes over a decade through its various provisions to strengthen and enhance the LIHTC. Notably, the AHCIA includes a provision for a 50% basis boost specifically for apartments aimed at ELI households that could finance 110,300 additional affordable rental homes over the same time period. Passage of legislation to tackle the country’s housing crisis becomes even more critical. 

To learn more about how the HTF and LIHTC are used to address the nation’s affordable housing crisis, and what can be done to ensure the longevity of these funding sources, please consider joining the LIHTC Working Group. Additional opportunities to learn about the LIHTC include our various housing conferences–those looking to connect with hundreds of professionals, policymakers and stakeholders working with the LIHTC and private activity bonds to create affordable housing across the country should register for the upcoming Novogradac 2024 Housing Tax Credit and Bonds Conference Sept. 26-27 in New Orleans.   

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