Kriston Capps is a staff writer for CityLab covering housing, architecture, and politics. He previously worked as a senior editor for Architect magazine.
The White House proposes cuts to HUD that top 13 percent. Among the victims: the National Housing Trust Fund, a resource devoted exclusively to America’s most vulnerable households.
The National Housing Trust Fund is one of the only new social safety net programs in a generation. It was launched by the bill President George W. Bush signed into law in 2008 to try to rescue Fannie Mae and Freddie Mac from the subprime mortgage crisis. The fund was designed to create and preserve affordable housing for families with worst-case needs, but it only recently came online. When the financial crisis threatened to become a global catastrophe in 2008, the Housing Trust Fund was shelved.
In April 2016, the U.S. Department of Housing and Urban Development announced that the Housing Trust Fund was finally fully operational. Its first tranche of funding, $174 million, would serve extremely low-income and very low-income households—vulnerable families struggling to stay in homes. The funds would be distributed to housing agencies across the country, a block grant with certain mandates about how and where the money needed to be spent.
The Housing Trust Fund is a godsend for vulnerable families. But it is unlikely to survive its first encounter with a Republican administration after the one that signed it into law: In the federal budget for 2018 released today, the Trump administration zeroes out funds for the Housing Trust Fund, eliminating one of the country’s few mechanisms for establishing and keeping deeply affordable housing.
President Trump’s budget for includes cuts for HUD of over 13 percent. It eliminates the Community Development Block Grant program entirely and carves out billions in housing assistance. But losing the Housing Trust Fund would be particularly punitive, given the way that the fund is financed, the very small amount of money in question, and above all, the desperate profile of the families this fund serves.
Here’s how the Housing Trust Fund works: The Housing and Economic Recovery act of 2008 authorized a dedicated source of funding for new deeply affordable housing. It assigned 4.2 basis points (or 0.042 percent) of new business at Fannie Mae and Freddie Mac be set aside for the Housing Trust Fund. (This set-aside also funds a community revitalization purse called the Capital Magnet Fund—likewise eliminated by Trump’s budget.) By September 2008, as the economy went to seed and both GSEs were placed under the conservatorship of the Federal Housing Finance Agency, the agency mothballed the set-asides for the Housing Trust Fund through 2014.
Former HUD Secretary Julián Castro announced last April that home sales over 2015 had generated $174 million for the Housing Trust Fund. Divided between 50 states, U.S. territories, and the District of Columbia, this meant a small purse for most: roughly $3 million per state on average. Home sales were even higher in 2016, meaning more for the fund in 2017. The Trump administration struck $194 million in allocations for the Housing Trust Fund for fiscal year 2018, reflecting higher anticipated funding levels.
The Housing Trust Fund is not remotely adequate for solving the growing problem of worst-case housing needs. But it was a flexible funding source, driven by local partners to help families with few to no other options: low-income seniors, families with disabilities, Native American communities with substandard housing options, and other vulnerable populations. In many communities, it served as a source of gap funding to create more-deeply affordable housing in inclusionary developments. The number of households facing worst-case needs skyrocketed as a result of the Great Recession, rising from 5.9 million renters in 2007 to 8.5 million renters in 2011, according to HUD.
Heres’s the truly mean trick in Trump’s housing budget: It proposes growing costs savings over time by eliminating the Housing Trust Fund. Since the fund is pegged to home sales, a growth in savings means the Trump administration predicts an absolutely booming housing market. For example, Trump’s budget suggests savings of $177 million in 2020 by eliminating the Housing Trust Fund and Capital Magnet Fund. Meaning that the set-aside from home sales would have otherwise generated $177 million for that year. In 2021, that figure jumps to $247 million. In 2022, it’s $321 million.
In other words, Trump is suggesting double-digit growth in home sales, year after year, for the next several years. By 2027, the costs savings for eliminating the Housing Trust Fund and Capital Magnet Fund run to $378 million. That’s money that the government might have put toward, say, permanent supporting housing for people with AIDS, or families making just 30 percent of area median income. Cue Treasury Secretary Steven Mnuchin, who says future economic growth will be so profound—$2 trillion over 10 years—that forthcoming tax cuts will pay for themselves.
The savings from the Housing Trust Fund will be redirected toward tax cuts for the very wealthiest Americans. Notably, those allocations for the Housing Trust Fund might have never materialized. The housing market could nose dive, GSE reform might collapse, the fund could be suspended again. No doubt, the tax cuts will be real enough, if the Republican Congress abides by Trump’s blueprint. They’ll be funded in part on the backs of the worst-off families in America.