Housing Trust Funds: Making the Most of a Valuable Resource

For decades, local and state Housing Trust Funds (HTFs) have served as an essential gap financing resource for the development of new affordable housing.

Born in the early 1980s in response to drastic cuts to federal housing spending during the Reagan administration, developers have long paired HTF dollars with Low Income Housing Tax Credit (LIHTC) funds to finance new multifamily projects across the U.S.

In addition to these local funding sources, there is also the National Housing Trust Fund, established in 2008 as part of the Housing and Economic Recovery Act with the goal of creating a new funding source specifically for expanding the affordable housing stock available to households with extremely low incomes.

A key difference between HTFs and other resources is that trust funds rely on “dedicated” sources of revenue (i.e., certain specialized taxes, assessments on public and quasi-public entities, etc.) and are not tied to local, state or federal appropriations processes.

Since its inception, however, experts say the National HTF has been characterized by disappointing funding levels that vary from year to year, falling far short of original expectations for its overall contribution to production of new affordable units over the ensuing years. 

Now, as Trump administration-proposed cuts to federal housing programs loom and housing costs continue to rise, experts say that protecting the dollars already dedicated to HTFs at all levels of government and identifying additional funds for trust fund programs will be an important step in filling some of the loss of other federal resources.

“The number one thing that makes any HTF effective is having ongoing revenue that you can predict,” says Michael Anderson, co-director of Bridge to Power, a national housing justice network based in Cincinnati. “State and local HTFs show that in order for communities to be able to thrive, they need to be able to fund HTFs at a consistent level.”

The Rise of State and Local HTFs
In the early 1980s, Congress made dramatic cuts to federal public housing funding, slashing the budget for low-income housing subsidies by 50 percent in 1982; President Ronald Reagan would eventually attempt to eliminate all federal housing assistance for low-income Americans in the years after.

As the amount of federal dollars for state and local housing authorities across the country began to diminish, officials and advocates sought alternative sources of funding for developing new affordable units and maintaining existing stock. Thus were local HTFs born.

 “The HTF movement is the state and local response to President Reagan gutting federal housing programs,” Anderson says. “It’s essentially saying ‘we can’t do nothing, we have to figure out how to make a contribution in order for the people in our communities who are being priced out to have a shot.'”

In 1986, the nonprofit organization Community Change launched the Housing Trust Fund Project, an effort dedicated to helping localities launch HTFs.

“What Community Change was able to do with the Housing Trust Fund Project was help when new jurisdictions decided they needed to do something about housing,” explains Anderson, who led the Housing Trust Fund Project for 10 years starting in 2014. “We would help them develop a proposal that meets their local needs, because every housing market is different, and the opportunities and the challenges are distinct.” 

According to data from Community Change, by 1999, nearly 150 municipal, county and state HTFs had been launched across the country, accounting for around $1.5 billion to fund the creation of about 200,000 affordable units.

Today, there are at least 843 HTFs funding affordable housing in 49 states, Washington D.C., Guam and Puerto Rico, according to the National Low Income Housing Coalition (NLIHC).

Anderson explains that the crucial elements for the success of the state and local HTF model has been their specificity and reliability as a funding source for developers. “What an HTF says is that not only are we making this investment in housing, but we’re also going to set guidelines and requirements that ensure the investment actually goes towards the most urgent needs of our community.”

The Urban Development Authority of Pittsburgh’s HTF, for example, is aimed specifically at addressing affordable housing shortages driven by rapid gentrification occurring across the City of Pittsburgh. Because it has a dedicated annual revenue of $10 million from a real estate transfer tax, developers can make plans to compete for these funds over the long term, says Anderson.

In Kalamazoo County, Mich., officials placed a high priority on creating affordable housing for families experiencing — or at risk of — homelessness, Anderson says. This priority is reflected in the selection of projects aimed specifically at housing and providing support services for insecurely housed families. 

In New Orleans, where more than 40 percent of households spend more than half their income on rent, and family homelessness jumped nearly 70 percent in just the past two years, officials pushed for an HTF with an especially robust and reliable funding source to combat these conditions. Last year, voters in New Orleans approved an automatic annual allocation of two percent of the city budget – roughly $17 million annually – as the revenue source for an HTF for the city.

“Most private developers, who have private equity, have enough liquidity and resources that they can acquire and hold on to land and properties until the moment of development is most profitable or makes most sense or aligns with their overall business plan,” explains Anderson. “On the nonprofit or housing authority side, there’s no such liquidity like that.” This makes consistently funded local HTFs critical. “In three years from now, when you’re going to be ready to take that old school site and turn it into housing for people with disabilities, you know that there’s going to be money in there.” 

The National HTF’s Disappointing Outcome to Date
The importance of a consistent and reliable funding source for ensuring an HTF’s success is underscored by the trajectory of the National HTF, which experts say has so far has not provided the amount of dedicated funds originally envisioned.

Since at least 2000, the NLIHC and allied advocacy groups had lobbied for the creation of a federal HTF, intended to provide a national source of funding targeted to providing rental housing for extremely low-income households (defined as those making less than 30 percent of Area Median Income) says Ed Gramlich, senior advisor at the NLIHC. The U.S. in 2025 is approximately 7.1 million units short of providing affordable and available housing for renters with extremely low incomes, according to the NLIHC’s 2025 Gap Report. “There are far more extremely low-income people who need affordable rental housing than there are households with incomes of 50 or 60 percent AMI who need housing,” Gramlich says. “And the National HTF is meant to fill that void.” 

The National HTF was originally codified within the larger Housing and Economic Recovery Act of 2008, the sweeping legislative package aimed at addressing the subprime mortgage crisis.

The National HTF statute requires states to designate an administrative body, referred to by the Department of Housing and Urban Development as State Designated Entities, to administer the annual allocation of National HTF funds.

The National HTF is funded through the annual assessment of 4.2 basis points (0.042 percent) on each dollar of the unpaid principal balance of all of Fannie Mae’s and Freddie Mac’s total new mortgage purchases (both single-family and multifamily). This means that available National HTF funding is tied to fluctuations in the volume of one aspect of Fannie Mae’s and Freddie Mac’s business activity.

Although the National HTF was created in 2008, it did not receive funding until 2016, since the Federal Housing Finance Agency (FHFA) suspended collecting the 4.2 basis point assessment on new Fannie Mae and Freddie Mac business until 2015 following the 2008 financial crisis. 

Since then, “the amount of money that’s generated by that dedicated sources of funding from Fannie and Freddie has been pretty minuscule,” says Gramlich. “In 2007, experts reasonably thought there would be around a billion dollars in the HTF, but the closest we’ve gotten since then was around $740 million in 2022.”

To be clear, the National HTF has contributed to the proliferation of new affordable housing units across the country, particularly for the lowest-income Americans. According to a 2025 NLIHC report covering the 2020 National HTF (the most recent year for which detailed data is available), $323 million were allocated to all 50 states plus D.C., which helped fund 1,625 units across 216 projects. These National HTF-assisted units generally targeted the most vulnerable populations, including people experiencing homelessness, people with disabilities and seniors.

However, after nearly ten years of fluctuating and disappointing funding — the consequence of what Gramlich says are relatively consistently high mortgage rates and a subsequently depressed consumer willingness to take out mortgages for new home purchases or to refinance to make home improvements — the National HTF received a paltry $223 million in funding in 2025. “The National HTF has so far only generated modest amounts of funding that can be used to help reduce the gap in rental units available and affordable to extremely low-income households,” Gramlich says. For that reason, NLIHC continues to seek additional sources of dedicated funding as well as other sources to help address that gap.

Anderson says the thus-far limited success of the National HTF points to the necessity of establishing a sufficient number of dedicated revenue sources for HTFs. “There’s a theme here,” says Anderson: “Trust funds that are established without regular and consistent funding fail to deliver for our communities.”