Photo by Ryan McKnight on Flickr.

The Housing Production Trust Fund (HPTF) is a pot of money used to build affordable housing in DC. Since 2001, money from the fund has helped to produce or preserve nearly 10,000 units of affordable housing. Unlike other programs, which rely on federal funds to increase the supply of affordable housing, the HPTF is funded entirely with money raised within the District.

The HPTF is designed to focus on affordable housing for low- and extremely low-income residents. Typically, the fund provides “gap financing,” bridging the gap between sources developers use to build affordable housing — including federal tax credits and subsidies — and the actual costs of building it.

In this explainer, I focus on the details of how the HPTF finances affordable housing development and some of the key challenges that it faces.

The Housing Production Trust Fund is a dedicated source of money used to finance the production and preservation of affordable housing

Many cities, including Los Angeles, Seattle, and Philadelphia, have similar types of funds. Each city has different rules for actually providing the Fund with money and distributing that money.

In DC, the HPTF is controlled by the Department of Housing and Community Development (DHCD). DHCD issues a notice of funding availability (NOFA) and developers apply to use the money to build.

This process means that the HPTF is a way to leverage both private and federal funds to create affordable housing. Developers may use private financing, federal low-income housing tax credits (LIHTC) and money from the HPTF to build affordable housing. For every dollar invested in affordable housing from the HPTF, another $2.50 is invested from other sources.

There are many examples of affordable housing in DC that was produced using HPTF money, as detailed in this recent report from the Coalition for Nonprofit Housing and Economic Development. The developers that built Overlook at Oxon Run in Ward 8 used HPTF funding to cover about a third of the project’s total cost. The building includes more than 300 units of affordable housing, many of which are specifically designed for seniors.

Using money from the HPTF, developers are able to build units that they can rent to families with lower incomes. Also, developers may use this money to construct units that they otherwise would not build given market constraints, including larger units oriented toward families.

The Housing Production Trust Fund receives funding from two sources

The main source of funding for the HPTF is the deed transfer and recordation tax, which is what property owners pay the city whenever they sell a building or piece of land.

In 2003, the DC Council designated 15 percent of revenue from these taxes to fund the HPTF.

However, this dedicated funding source fluctuates wildly based on the housing market. When people are buying and selling frequently, the HPTF sees a boost in funding; when the market slows, there are fewer property transactions to fund the HPTF.

The city can add additional revenue to the HPTF from the city’s general fund, which is the pot of money used to pay for most other city agencies. In recent years, as Mayor Bowser promised to raise the HPTF to $100 million, the city added additional revenue from the general fund to reach these funding goals.

Last year, less than half of the funds for the HPTF came from dedicated taxes.

The Housing Production Trust Fund must be used to finance housing for low- and extremely low-income families.

The rules of the HPTF stipulate that at least 40 percent of funds must be targeted to assist households below 30 percent of the AMI. In DC, this means housing for families of four earning up to $32,760.

An additional 40 percent are targeted at households earning between 31 and 50 percent of the AMI. In DC, this means housing for families of four earning up to $54,600. The remaining funds can assist in the production of housing units for families earning up to 80 percent of the AMI.

However, a recent audit of the HPTF reveals that DHCD has failed to finance the required units for extremely low-income households in recent years.

A recent report from the DC Fiscal Policy Institute reported that 9,900 units have been produced using the HPTF since 2001.

Nearly half of these units — 4,708 — were produced in Wards 7 and 8, the areas east of the Anacostia River that historically have seen less investment.

Units produced with funds from the HPTF must remain affordable for a period of time. Ownership units typically must remain affordable for 15 years. Rental units must remain affordable for 40 years.

Despite helping to finance thousands of units of affordable housing, the HPTF faces continued challenges

Critics regularly contend that the HPTF needs a more dedicated source of funding to make it less reliant on the political priorities of each mayoral administration. Money from DC’s General Fund is up for grabs every year, so appropriations from it are highly political.

Rather than a share of the deed transfers and recordation taxes, researchers at the DC Fiscal Policy Institute suggest a set dollar amount from these taxes.

This dedicated funding would decrease the reliance on political leaders to fund the HPTF each year. Although the Bowser administration has committed to funding the HPTF up to $100 million, proponents of the HPTF are concerned that the fund may be less of a priority for future administrations.

Additionally, critics have expressed concerns about the ability the HPTF to meet its affordability goals. Since there are few programs used to create deep affordability (for households earning less than 30 percent of the AMI), the HPTF is an extremely important tool.

Finally, observers are always looking to ways that the HPTF can better leverage its funds to increase affordable housing production.

Despite these concerns, the HPTF remains the largest — and most important — tool of the District government to protect, preserve and maintain affordable housing.

Brian McCabe is an assistant professor of sociology at Georgetown University.  His recent book, No Place Like Home: Wealth, Community and the Politics of Homeownership (Oxford University Press, 2016), investigates the enhanced citizenship claims of homeownership.  He lives in Shaw.