Report

The District’s Housing Production Trust Fund Has Developed Thousands of Affordable Units Since FY 2001

by:
Maribeth DeLorenzo, Coalition for Nonprofit Housing and Economic Development
Angie Rodgers, DC Fiscal Policy Institute
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Key Findings:

  • Some 5,039 units have been completed or are in the development pipeline due to the direct support of the Housing Production Trust Fund (HPTF).
  • The HPTF has expended $121 million on projects, leveraging some $648 million in financing from other sources, both private and public.
  • The number of units developed under the Trust Fund has grown dramatically, from a few hundred in FY 2001 to nearly 1,500 in FY 2006.  Expenditures from the Trust Fund also have risen, reaching $30 million in just the first quarter of FY 2007. This is nearly as high as in the entire year for FY 2005 and FY 2006.
  • In 4 of the 6 complete fiscal years since FY 2001, the HPTF has met or exceeded its target to utilize at least 40 percent of its expenditures on units for households with income under 30% of AMI.
  • Overall, since FY 2001, 33.3% of the units either completed or in the pipeline have been affordable to households with income under 30% of AMI; some 37.4% have been for households between 31 and 50% of AMI; and 29.4% have been for households between 51 and 80% of AMI.
  • The majority ‘ 4,244 units, or 84% ‘ of the 5,039 units supported by the HPTF have been rental units, with 478 units reserved for elderly residents and 109 units reserved for residents with special needs.
  • The HPTF is experiencing tremendous demand. In order to meet the affordable housing financing needs of the city, it will need increased revenue.

Introductions

The District’s Housing Production Trust Fund (HPTF) was established in the late 1980s, but it did not receive notable funding until FY 2001.  Since then, the Trust Fund has supported the construction, rehabilitation, and/or acquisition of over sixteen hundred units affordable to low- and moderate-income households. Thousands more are currently in the process of being developed.  These units ‘ which will remain affordable for 40 years in the case of rental units and 15 years in the case of ownership units ‘ represent a critical asset for the city, as residents continue to experience significant housing affordability pressures.[1]

In recent years, the Housing Production Trust Fund has become the primary affordable housing development tool in the District.  The number of units developed under the Trust Fund has increased sharply since FY 2005, leading to a substantial increase in expenditures.  These successes, combined with efforts to use the Trust Fund for an increasing number of purposes, have resulted in a situation where demands for Trust Fund resources now exceed available funds.  To maintain its success, the Trust Fund will need additional resources.

Data compiled by the Department of Housing and Community Development (DHCD) and analyzed by the DC Fiscal Policy Institute and the Coalition for Nonprofit Housing and Economic Development indicate the following:

  • Since FY 2001, the HPTF has funded 1,670 completed units of affordable housing; another 3,369 units are in the development pipeline. The 5,039 units either completed or in the pipeline have been supported directly by the HPTF, but those units sit on projects that include an additional 1,858 units, for a total of 6,897 units which would have been impossible to produce without HPTF support. [2]
  • The vast majority ‘ 4,244 units, or 84 percent ‘ of the 5,039 units supported by the HPTF are rental units.  Some 11.3 percent of those rentals ‘ 478 units ‘ are reserved for elderly residents and another 2.6 percent ‘ 109 units ‘ are for residents with special needs.
  • The HPTF has expended $121 million on projects, leveraging some $648 million in financing from other sources, both private and public.
  • The HPTF, required by law to utilize 40 percent of its expenditures each fiscal year on units for households with income below 30 percent of AMI ‘ $28,350 in 2007 for a four-person household ‘ met or exceeded that goal in four of the six complete fiscal years since FY 2001.[3]
  • Overall, since FY 2001, 33.3 percent of the units, including those with expenditures and those without expenditures to date, are affordable to households with income under 30 percent of AMI; some 37.4 percent are affordable to households with income between 31 and 50 percent of AMI; and 29.4 percent are affordable to households with income between 51 and 80 percent of AMI.
  • HPTF-funded affordable housing projects are located in all wards of the city, with the exception of Ward 3.  Almost three-fifths are east of the Anacostia River, with Ward 8 accounting for fully 40 percent of the overall units ‘ both produced units and units in the development pipeline. Wards 1 and 5 each account for 13 percent of the units produced, while nine percent of the units are in Ward 2, and three percent each are in Wards 4 and 6.
  • Overall, between FY 2001 and FY 2006, the HPTF averaged $38,547 per unit in subsidy when both the total number of completed and pipeline units are considered; if only the completed units are considered, the average per-unit subsidy was $37,341.

The pace of production of affordable housing under the Housing Production Trust Fund has picked up dramatically in recent years, from a few hundred units in FY 2001 to 1,500 units in FY 2006.  As a result, expenditures from the HPTF also have increased substantially.  In just the first three months of FY 2007, Trust Fund expenditures totaled $30 million, more than in any year prior to FY 2006.

Although the HPTF has spent millions of dollars to fund thousands of units of affordable housing since FY 2001, the Trust Fund maintained a fund balance of $88 million at the end of the first quarter of FY 2007.  An analysis of the Trust Fund’s commitments, however, reveals that projected expenditures outweigh both the fund balance and additional revenues the Trust Fund expects to receive.

  • Considering both fund balance and revenues to be added in the remaining three quarters of FY 2007, the HPTF will have $136 million at its disposal for the remainder of FY 2007.
  • By comparison, the HPTF currently faces $243 million in identified spending needs, including $142 million for affordable housing projects that have already been competitively selected by DHCD.  Some projects at early stages of development may be withdrawn, and other projects may not need funding until FY 2008.  Nevertheless, it is clear that demand for HPTF resources is high and exceeds available funds. 

The significant spending demands against the current fund balance will require careful deliberation and management in the coming years. While expenditures have been increasing rapidly, revenue projections will likely level off as the housing market cools, and the dedicated deed taxes shrink. Meanwhile, the city’s high level of demand for affordable housing continues unabated. This suggests that additional resources may need to be identified to meet the demands currently being placed on the Trust Fund.

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End Notes:

[1] Ownership units in high-poverty Census tracts carry a reduced affordability period of 10 years.

[2] It is important to note that some of the projects supported by the Housing Production Trust Fund are mixed-income developments. While all of the units directly supported by the Trust Fund must be affordable to households at or below 80% of area median income, leveraged units may not be.

[3] Although the law that authorized the HPTF, DC Official Code §42-2802, requires DHCD to report affordability mix by amounts expended each year, the regulations governing the HPTF allow DHCD to report affordability mix by amounts awarded each year.  Using the “award” standard, the HPTF met or exceeded its goal in five of the six completed fiscal years since FY 2001.