The District's Housing Production Trust Fund (HPTF) does not have enough funding to keep up with rising costs, according to a new report from the DC Fiscal Policy Institute (DCFPI) published on March 10.
The report shows that higher construction costs have caused the fund to lose about a third of its purchasing power since 2015. It would need another $50 million to generate as many houses now as it built then, but even that would not meet current needs.
The DC government created the fund in 1988 to address the lack of affordable housing resulting in part from shrinking assistance from the federal government. It's overseen and administered by the Department of Housing and Community Development (DHCD) to preserve and expand affordable housing in the city.
While the program has provided new homes or helped keep people in already affordable housing for 10,000 households in DC, it has also faced a number of challenges in recent years, including losing the vast majority of its dedicated tax funding during the Great Recession. A 2017 audit showed that the fund could have helped a lot more families with the money it spent from 2001 to 2016, and also done a much better job to ensure that funds went towards the city's neediest families, as required by law.
In line with one of her stated affordable-housing efforts, Mayor Muriel Bowser has allocated at least $100 million per year for the last three fiscal years—a major improvement over the $20 million that the fund received in fiscal year 2012. Nonetheless, $100 million does not buy what it did three years ago.
DCFPI estimates that the fund needs to receive $150 million annually just to break even with its 2015 purchasing power. However, that doesn't mean it will be adequately addressing the local housing shortage. For the fund to build enough homes to meet residents' need, it needs $230 million starting in the coming fiscal year.
As part of her effort to draw Amazon's second headquarters to the city, Bowser suggested doubling the annual contribution to $200 million, which would bring the HPTF’s budget more in line with what it needs to effectively combat the District’s housing woes. DCFPI insists that the DC government can afford to pay the difference.
Currently, the HPTF receives dedicated revenue from the property transfer and deed recordation tax and supplemental funds from DC government surpluses. Bowser and the DC Council have three main options fund the difference between the current inlays and the $200 million the fund needs. DCFPI suggests that money can come from the District’s General Fund, the District’s surplus tax income, or via an increase on the property transfer and recordation tax for property values valuable properties.
Besides generally building more housing, the HPTF has a mandate to help households that most need it. By statute, HPTF must dedicate at least 40% of its resources to residents below 30% of the area median income (AMI), 40% of its resources to residents in the 30%-50% range, and the remaining 20% to residents earning 80% AMI or less. Unfortunately, the HPTF has only met this goal once in the past five years.