Housing Trust Funds Seek to Meet Need
Colorado Real Estate Journal, April 30, 2005
In 2003, the National Low Income Housing Coalition reported that a person would have to work 144 hours at minimum wage in order to afford to live in Denver. One in five homeowners and two in five renters in Colorado are paying more than 30% of their monthly income towards housing costs. According to a 2003 survey, unemployment and inability to pay housing costs were the leading causes of homelessness in the Denver metro area, and 67% of the homeless are people with families.
Many people who work full time can't afford to live in the communities they serve. This includes teachers, police officers, health care workers, and others who perform necessary and valuable roles in society, many of whom are considered to be professionals. In 2001 the Colorado Division of Housing estimated that there were 38,700 families in Colorado whose income fell between $34,620 and $46,160, 60 percent and 80 percent, respectively, of median area income. At that time a "benchmark" 3-bedroom, 2-bath home in Colorado cost $158,215, and was out of their reach. The situation has gotten worse since then. One aspect of Colorado's "unaffordable" housing situation is that it can deter new business from moving to our state. It has been said that Denver has the highest housing cost of any city in the United States without a beach. Companies considering locating here want to know where their workers will live, and how they will get to work. A recent study of the southeast Denver business corridor showed that over 80 percent of new jobs in the area paid $20 per hour or less, but people earning $20 per hour can afford to purchase only 1.4 percent of the houses in Douglas County, and 12 percent of the homes in Arapahoe County. Improving the supply of affordable housing near employment centers would help the Denver metro area be more competitive in attracting new business from out of state.
A "decent home and suitable living environment" has been part of national policy in the United States since the passage of the Housing Act in 1937. Many who object to the government getting involved in paying for affordable housing feel it is inappropriate, and may perceive that enough (or perhaps too much) is already being done. But they forget that tax deductions are a housing subsidy. In 2003, housing related tax expenditures amounted to $131 billion; $113 billion took the form of itemized deductions from taxable income for families earning enough to benefit from this, and the rest went to investors. That same year, only $36 billion went to low-income housing assistance. Put another way, in 2003, 54 percent of households in the upper-income bracket reported deductible housing-related expenses and paid less income tax as a result, but only 13 percent of the households in the bottom quintile received federal housing assistance of any kind.
The Colorado Housing Trust Fund Coalition is working to create a permanent state revenue source dedicated to the creation and preservation of high-quality, affordably priced rental housing and home ownership opportunities throughout Colorado. Nationwide, 36 states have created housing trust funds that provide grants and loans to support the development of affordable housing. All kinds of housing needs are included, from homeless shelter beds to senior housing to down-payment assistance for moderate-income home buyers. Trust funds can be flexible, and can support a variety of activities, including new construction, preservation of existing affordable housing, land acquisition, down payment assistance, and offsetting infrastructure costs through both loans and grants. A housing trust fund will allow local communities to determine their priorities and plan for their particular housing needs. It isn't enough to expect developers to include affordable units in their projects-the money to make that feasible has to come from somewhere. The market can't provide it, nor should it. Affordable housing promotes the well-being of communities as a whole, just as roads, parks, and schools do.
According to the Colorado Trust Fund Impacts Report, a $26.5 million trust fund will produce 3,400 affordable housing opportunities, create 3,200 jobs, generate $334 million in economic activity, and realize $26 million in tax revenue annually, with $13 million to local governments. The report estimates that every dollar of trust fund investment would leverage ten dollars of additional public and private investment. The Coalition says there is a $26.5 million per year gap between the need for affordable housing opportunities and the existing resources to create those opportunities. The report lists numerous economic and social benefits to be realized from this level of investment in affordable housing, including family stability, improved air quality (from shorter commuting distances to work), and economic development. For example, studies show that children who change schools frequently tend to have lower math and reading scores and are significantly less likely to finish high school on time. Decent, affordable, and accessible housing improves family stability, which leads to improved outcomes for poor children.
Funding the trust is the big question. The most commonly used sources are general fund appropriations and real estate transfer taxes. Other sources include interest on state funds, interest on real estate escrow accounts, grants and donations, document recording fees, bond proceeds, interest on security deposits, and unclaimed property funds. In most states a government agency administers the fund and awards grants and loans to local governments, non-profit developers, for-profit developers and, sometimes, individuals, for a variety of low-income and moderate-income housing opportunities.
For more information on the Colorado Housing Trust Fund go to www.colradohousingtrustfund.org.
