1. Texas Association of CDCs
National Housing Trust Fund: Implementation Around the Country and Getting Ready for Next Year
Texas Association of CDCs
October 12, 2016
Ed Gramlich
National Low Income Housing Coalition

2. Introduction National Housing Trust Fund (NHTF)
The primary purpose of the NHTF is to increase the supply of rental housing for extremely low income (ELI) households, income less than 30% of the area median income (AMI), and homeless households.

3. Introduction (continued)
Became law on July 30, 2008 as part of HERA (Housing and Economic Recovery Act).
Program for collecting and distributing “dedicated” funds – money not at risk of Congressional appropriations cuts.
Will not compete with existing HUD programs funded by Congressional appropriations.
Block grant to states.

4. How Is the NHTF Funded? No money in NHTF at first.
First dedicated funds were to come from annual 4.2 “basis point” (0.042%) assessment on new business of Fannie Mae and Freddie Mac.
65% to NHTF, 35% to Capital Magnet Fund.
But before funds could get to NHTF, Fannie and Freddie hit by 2008 banking crisis; this source of dedicated money put on hold.

5. How Is the NHTF Funded? (continued)
December 11, 2014, FHFA lifts suspension.
Fannie and Freddie began setting aside funds starting January 1, 2015 through December 31.
April 4, HUD announces nearly $174 million for 2016.
May 5, Federal Register notice shows how much each state and DC will receive.

6. Regulations
HUD published proposed allocation formula on December 4, 2009.
HUD published proposed regulations to carry out the NHTF on October 29, 2010.
Interim regulations published, January 30, 2015,
HUD will solicit comments after states gain experience.
NHTF rule is at 24 CFR part 93.
Modeled on HOME regulations.

7. Need for Affordable ELI Rental Housing (part 1)
National shortage of 7.2 million homes affordable and available to extremely low income (ELI) renter households.
ELI means income at or below 30% of area median income (AMI).
There are only 31 rental homes affordable and available for every 100 ELI renter households.
75% of ELI renter households spent more than % of their income for rent and utilities.

8. Need for Affordable ELI Rental Housing (part 2)
National shortage of 3.4 million homes affordable and available to deeply low income (DLI) renter households.
DLI means income at or below 15% of area median income (AMI).
There are only 17 rental homes affordable and available for every 100 DLI renter households.
90% of DLI renter households spent more than % of their income for rent and utilities.

9. Need for Affordable ELI Rental Housing in Texas (part 1)
Texas has a shortage of 549,135 homes affordable and available to extremely low income (ELI) renter households.
ELI means income at or below 30% of area median income (AMI).
There are only 25 rental homes affordable and available for every 100 ELI renter households.
78% of ELI renter households spent more than % of their income for rent and utilities.

10. Need for Affordable ELI Rental Housing in Texas (part 2)
Texas has a shortage of 251,539 homes affordable and available to deeply low income (DLI) renter households.
DLI means income at or below 15% of area median income (AMI).
There are only 14 rental homes affordable and available for every 100 DLI renter households.
93% of DLI renter households spent more than % of their income for rent and utilities.

11. How Will NHTF Block Grant Be Distributed To States? (part 1)
NHTF law requires money to be distributed to states by formula.
Formula based on:
Shortage of rental properties affordable and available to ELI and VLI households.
Number of ELI and VLI renter households paying more than 50% of their income for rent and utilities (severe cost burden).
Priority given to ELI households – % of formula weight.

12. How Will NHTF Block Grant Be Distributed To States? (part 2)
Amount of money your state gets depends on shortage of rental housing affordable and available for ELI, and extent ELI renters pay more than 50% of income for rent and utilities.
NHTF statute: Each state and DC is to receive a minimum of $3 million.
Texas receiving $4,778,364 in 2016.

13. NHTF Focus on Renters
Law creating NHTF requires at least 90% (80%) of a state’s NHTF money be used to produce, rehabilitate, preserve, or operate rental housing.
Up to 10% may be for homeowner activities.

14. NHTF Focus on Extremely Low Income Renters (part 1)
Law also requires at least 75% of a state’s NHTF used for rental housing to benefit extremely low income (ELI) households:
Income less than 30% of area median income, AMI, or
Income less than federal poverty level
Whichever is greater, according to regulations.

15. NHTF Focus on Extremely Low Income Renters (part 2)
Law limits to 25%, the amount of a state’s NHTF used for rental housing to benefit very low income households.
Generally, very low income (VLI) is between 30% and 50% AMI.
Interim reg: When there is less than $1 billion, % must benefit ELI (rental and homeowner).

16. How Will NHTF Be Allocated Within States?
States must choose a state agency, such as housing finance agency, or housing department, or a tribally-designated housing entity to receive NHTF and administer its program.
Texas chose Texas Department of Housing and Community Affairs (TDHCA)
Marni Holloway Multifamily Finance Director Texas Department of Housing and Community Affairs

17. How Will NHTF Be Allocated Within States
How Will NHTF Be Allocated Within States? (continued) NHTF Allocation Plan
NHTF law requires states to prepare an “Allocation Plan” every year.
Allocation Plan must show how state will distribute NHTF it will receive in the upcoming year.
Distribution of NHTF must be based on priority housing needs in Consolidated Plan (ConPlan).
Rule requires state’s NHTF Allocation Plan be integrated into its Consolidated Plan.

18. How Will NHTF Be Allocated Within States
How Will NHTF Be Allocated Within States? (continued) Allocation Plan and Public Participation
When preparing Allocation Plan, law requires states to:
Notify the public that Allocation Plan will be drafted.
Provide for public comment.
Consider public comments.
Make final Allocation Plan available.
NHTF law requires compliance with Consolidated Plan public participation requirements.
Rule inserts NHTF Allocation Plan requirements into the ConPlan rule.

19. How Will NHTF Be Allocated Within States
How Will NHTF Be Allocated Within States? (continued) Allocation Plan and Public Participation (continued)
Tip for Advocates
Action around Allocation Plan is at state level.
Advocates used to advocacy only at local level need to learn how to advocate at state level.

20. Allocation Plan (continued) “Recipients”
Allocation Plan must describe requirements
“recipients” must meet when applying for money.
Recipients may be nonprofit, for-profit, or public entity.
States allocate NHTF to “recipients” to carry out specific projects.
Recipient must have relevant experience and financial capacity.

21. Allocation Plan (continued) Selecting Applications for NHTF Dollars
Allocation Plan must describe criteria for selecting applications from potential recipients.
Allocation Plan must give priority to projects based on:
Extent rents are affordable, especially for ELI households.
Length of time apartments will remain affordable.
“Merit” of a project. HUD gives a few examples:
Serving people with special needs.
Accessible to transit or employment centers.
Energy saving and non-polluting features.
Geographic diversity, as reflected in ConPlan.
Extent project will use non-federal funds.
Applicant’s ability to obligate money and carry out project in timely way.

22. How Can The Money Be Used? Forms of Assistance
NHTF assistance may be:
Loans, including no-interest loans and deferred payment loans
Grants
Interest subsidies
Equity investments
Other forms
States may decide the terms of assistance.

23. How Can The Money Be Used? (continued) Project Costs
Many eligible “project costs” may be met with NHTF:
Buying property
Development “hard costs” associated with construction
Relocation
Demolition
Utility connections
Site improvements
Project “soft costs” associated with financing and development
Affirmative marketing to prospective tenants and homeowners
Builders and developers fees
Architectural, engineering, related professional services
Refinancing
Paying construction loans
Staff costs directly related to carrying out a project
Operating assistance

24. How Can The Money Be Used
How Can The Money Be Used? (continued) Operating Cost Assistance (part 1)
NHTF may be used at NHTF-assisted rental homes to provide operating cost assistance.
Operating cost assistance reserve may be funded upfront for NHTF-assisted units to ensure project feasibility for affordability period.
Up to 33% of state’s NHTF annual allocation may be used for operating cost assistance or reserves.

25. How Can The Money Be Used
How Can The Money Be Used? (continued) Operating Cost Assistance (part 2)
Operating cost assistance covers the gap in rent paid by households and cost of operating rental housing.
Operating costs include maintenance, utilities, insurance, property taxes, scheduled payments to reserve for replacement of major systems, etc.

26. How Can The Money Be Used
How Can The Money Be Used? (continued) Operating Cost Assistance (part 3)
State may commit funds from an NHTF grant received in a single year to provide funds for operating cost assistance or reserve over multiple years.
Funds committed in that single year must be spent within five years.
State may renew operating cost assistance with future year NHTF grants during affordability period.

27. Allocation Plan Suggestions
Critique of TDHCA’s draft NHTF Allocation Plan
Mashup of HUD Sample Form (first 9 pages meaningless to the public) and photocopied pages inserted from Annual Action Plan and ConPlan starting in mid-sentence.
Concern that next year, won’t be stand alone NHTF Allocation Plan. Instead NHTF information will be lost in the gross generality that Annual Action Plans and ConPlans have sunk to.

28. Allocation Plan Suggestions (part 2)
Weighing the Six Statutory Priority Factors. NHTF statute requires states to give priority in awarding NHTF to projects based on six factors. Statute and regulation do not give weight to factors. HUD Sample Form asks for “relative importance of criteria”. Advocates might suggest awarding NHTF to applicants based on applicant’s total points, up to 100 points.

29. Allocation Plan Suggestions (part 3)
Weighing the Six Statutory Priority Factors continued TDHCA’s draft NHTF Allocation Plan does not use point system. TDHCA distributes NHTF using Chapter 10 of Texas Administrative Code. List of priorities implies unspecified scoring system (page 12).

30. Six Statutory Priority Factors: 1. Affordability (part 1)
Advocates might suggest 50 points for affordability.
Will rents be affordable?
A basic housing policy is “Brooke rule” which considers housing “affordable” only if households use no more than 30% of their income for rent and utilities.
Neither NHTF law nor HUD’s rule cap resident rent and utility payments at 30% of their income.

31. Six Statutory Priority Factors: 1. Affordability (part 2)
HUD’s rule sets maximum rent (including utilities) household pays at fixed amount equal to % of 30% AMI or 30% of poverty level, whichever is greater.
HUD recognizes some residents will pay more than 30% of their income.
HUD thinks fixed rent is necessary so owners and lenders can budget for future revenues from fixed, known rents.

32. Six Statutory Priority Factors: 1. Affordability (part 3)
Advocates might seek to have Allocation Plan use the lesser of 30% of 30% AMI or 30% of poverty line.
If 30% of poverty used (256 counties):
3-person household with income at 30% AMI in all but 10 counties would be cost-burdened, with 89 counties paying 43%.
3-person household with income at 20% AMI in all but 36 counties would be severely cost-burdened, with 84 paying 64%.
1-person household with income at 30% AMI in 129 counties would pay about 31% or 32%.
1-person household with income at 20% AMI none would be severely cost-burdened (99 at 48%).

33. Six Statutory Priority Factors: 1. Affordability (part 4)
Statute: Extent to which rents are affordable, especially to extremely low income families.
Regulation for states: extent to which project has federal, state, or local project-based rental assistance so rents are affordable to ELI.
No basis in statute for narrowing to
“federal, state, local project-based assistance”.

34. Six Statutory Priority Factors: 1. Affordability (part 5)
TDHCA parrots “The extent to which project has federal, state, or local project-based rental assistance so rents are affordable to ELI families”.
However, TDHCA adds:
“Of highest priority in the evaluation of applications will be the creation of new units serving ELI households that would not otherwise exist. While the availability of project-based rental assistance will be considered, only applications that demonstrate the ability to meet underwriting requirements will be funded.” (page 12)

35. Six Statutory Priority Factors: 1. Affordability (part 6)
TDHCA unclear language:
“Applications that will create new ELI units without preexisting vouchers or other rental subsidy will be prioritized, and additional criteria may be imposed fro applications not layered with tax credits.” (Un-numbered page 21 of draft HTF Allocation Plan is insert from what appears to be page 67 of 2016 Annual Action Plan [but seems to actually follow page 74 of the Action Plan on TDHCA’s website]).
? What is meant by “preexisting”?
? Does it mean application with a commitment for vouchers, as indicated in previous slide?

36. Six Statutory Priority Factors: 1. Affordability (part 7)
Advocates might seek to have Allocation Plan define “affordability” to mean:
Household spending no more than 30% of income for rent and utilities – “Brooke Rents” or
Mix of units with fixed rents at:
30% of 30% AMI,
30% of 20% AMI, and
30% of 10% AMI
NLIHC Developer Advisory Group knows is difficult, but possible; they have done it without vouchers.

37. Six Statutory Priority Factors: 2. Length of Affordability (part 1)
Advocates might suggest 15 points for length of affordability.
How long will NHTF-assisted units be affordable?
Regulation requires minimum affordability period of 30 years.
Advocates might suggest, extent project exceeds years determines points, to maximum of 15 points for projects committing to permanent affordability.

38. Six Statutory Priority Factors: 2. Length of Affordability (part 2)
Advocates might suggest 15 points for length of affordability.
TDHCA:
“While applications that propose a longer affordability period could have a scoring advantage, they still must provide evidence of feasibility for the entire affordability period.” (page 12)

39. Six Statutory Priority Factors: 3. Merit of Project (part 1)
Advocates might suggest 30 points for project’s “merit”.
Statute requires states to consider merit of project.
Regulation refines: merit of project in meeting ConPlan priority housing needs.
Examples in regulation:
Housing that serves people with special needs
Housing accessible to transit and employment
Housing that is energy efficient

40. Six Statutory Priority Factors: 3. Merit of Project (part 2)
TDHCA, unlike most states, does not offer specifics:
“The merits of the application in meeting the state’s priority housing needs. The Texas NHTF will prioritize housing needs of extremely low income households in accordance with the Analysis of Impediments and the high opportunity measures of the Texas Qualified Allocation Plan.” (page 13)
This is actually a moderate affirmatively furthering fair housing statement.

41. Six Statutory Priority Factors: 3. Merit of Project (part 3)
Related to “merit” is targeting to particular populations.
Draft NHTF Allocation Plan indicates that it will limit beneficiaries and/or give preferences to several segments of ELI population.
Does not list or name populations.
Just refers to “AP-25” of 2016 Annual Action Plan.
No link to it on draft NHTF Allocation Plan. (page 16)
Public must search for 2016 Annual Action Plan.
Only 2015 Annual Action Plan on TDHCA’s webpage.
Key word search reveals 2016 Annual Action Plan.
“AP-25” is “Allocation Priorities” required by ConPlan regs.
AP-25 discusses very broad range of population characteristics (at least 15) for HOME, ESG, and CDBG programs.

42. Six Statutory Priority Factors: 3. Merit of Project (part 4)
Advocates might suggest awarding points on extent project meets needs of lowest income households within state’s ConPlan priority housing needs.
For example, projects affordable to households with income less than 15% of AMI.
Texas has only 14 rental homes affordable and available for every 100 DLI renter households.

43. Six Statutory Priority Factors: 4. Geographic Diversity (part 1)
Advocates might suggest 0 points for geographic diversity.
Given small amount of NHTF money first year,
suggest focusing on projects with most impact,
rather than distribute small amounts of money
to many projects.
In future when NHTF is more robust, geographic diversity will be very important.

44. Six Statutory Priority Factors: 4. Geographic Diversity (part 2)
TDHCA will distribute funds through competitive NOFA.
Initially funds to be available geographically, based on proportion of ELI renter households to total population of renter households in each of state’s 13 State Service Regions.
A minimum will be calculated for each region as a ratio of available allocation divided by 13, and available competitively within each region prior to collapse into a statewide competition. (page 12)
For any year NHTF Allocation is less than $10 million, TDHCA will use above process. (Un-numbered page 25 of draft NHTF Allocation Plan, an insert to what appears to be ConPlan [but it is not page 18 of that document]).

45. Six Statutory Priority Factors: 5
Six Statutory Priority Factors: 5. Use of Non-Federal Resources (part 1)
Advocates might suggest 5 points for use of non-federal resources.
To achieve deep affordability for ELI households, extent application makes use of:
State and local publicly-controlled funds and/or donated land.
Private funds or in-kind commitments, including donation of land.

46. Six Statutory Priority Factors: 5
Six Statutory Priority Factors: 5. Use of Non-Federal Resources (part 2)
Advocates might suggest 5 points for use of non-federal resources.
TDHCA:
“The proportion of leveraged non-federal fund sources in relation to the NHTF funds requested will be part of the scoring criteria for competitive applications Applications with the highest proportionate leverage will have an advantage in scoring.” (page 13)
No indication of amount of score.

47. Six Statutory Priority Factors: 6. Ability to Obligate NHTF (part 1)
Advocates might suggest 0 points for ability to obligate funds and undertake activities in timely manner.
Statute has this as single factor.
HUD transforms into two priority factors.
Resulting in distorted priority.
Ought to be a threshold consideration.
If applicant lacks capacity it should not make the cut.

48. Six Statutory Priority Factors: 6. Ability to Obligate NHTF (part 2)
Advocates might suggest 0 points for ability to obligate funds.
Texas is only state to make this a threshold factor.
TDHCA: “Applicant’s experience in completion of similar projects, evidenced by TDHCA’s Experience Requirement, along with ability to present complete application package, are threshold requirements that indicate ability to timely obligate NHTF funds.” (page 12)

49. Six Statutory Priority Factors: 6. Ability to Obligate NHTF (part 3)
Advocates might suggest 0 points for ability to undertake activities in timely manner.
This ought to be a threshold consideration; if applicant lacks capacity it should not make the cut.
TDHCA: “Application criteria including readiness to proceed as evidenced by site control, appropriate zoning, architectural plans, and evidence of financing will be considered.” (page 12)

50. Six Statutory Priority Factors: 6. Ability to Obligate NHTF (part 4)
Statute requires recipient to have demonstrated experience and capacity to conduct NHTF activity, evidenced by ability to:
Own, construct, or rehabilitate, and manage and operate affordable multifamily rental housing.
Regulation defines “commitment” for recipients as:
For new construction or rehabilitation, starting construction within 12 months of date of contract between recipient and state.
For acquisition of existing housing, receipt of title within 6 months of date of contract between recipient and state.

51. Six Statutory Priority Factors: 6. Ability to Obligate NHTF (part 5)
Advocates might suggest considering applicant’s:
Experience serving extremely low income households and special needs populations, such as homeless families and people with disabilities.
Successful completion of similar projects.
Advocates might suggest limiting recipients to mission-driven nonprofits, or for-profits with proven track record of providing and operating rental housing for ELI households.

52. Additional Feature Maximize affordability:
Projects should have as little debt service as possible.
Provide NHTF as grants or zero-interest loans.
TDHCA: “Because NHTF is required to benefit ELI households at 30% AMI or less, units will likely not be able to service debt payment. Constraints on NHTF dictate that funds be available as 0% interest, deferred payment loan, or as a 0% interest cash flow loan, if required, to leverage tax credits or other financing mechanisms.” (Un-numbered page 21 of draft HTF Allocation Plan is insert from what appears to be page 67 of 2016 Annual Action Plan [but seems to actually follow page 74 of the Action Plan on TDHCA’s website]).

53. More NHTF Information
NLIHC has additional materials about the National Housing Trust Fund.
Periodically check
HUD’s NHTF webpage,

54. Become an NLIHC Member
Members are essential in helping NLIHC advocate on behalf of low income people in need of safe and affordable housing.
Membership is open to individuals, organizations, corporations, and government agencies.
Join NLIHC at
Contact Sarah Jemison, NLIHC Housing Advocacy Organizer, or x 244.

55. Contact Me
Ed Gramlich National Low Income Housing Coalition x 314