Low-income renters are struggling. Here’s how Democrats plan to help them.

The affordable housing crisis is affecting almost everyone in America. First-time middle-class homebuyers can’t afford to buy homes. High-income earners in expensive coastal markets have trouble making rent. Low-income earners struggle with rent everywhere.

This has made housing affordability a national election issue for the first time in decades. Democratic candidates for president have released detailed housing plans that attack the problem from a number of different angles, but one policy prescription stands out—massive investments in the National Housing Trust Fund (HTF).

Even some people versed in housing policy may be unfamiliar with the Housing Trust Fund. Launched in 2016, it is used by states to build and rehabilitate affordable housing for the lowest-income Americans. So far it receives about $200 million in annual funding, but Democratic candidates have proposed increasing that figure to a whopping $40 billion or more per year in hopes of building or keeping up the estimated 7 million new affordable housing units—whether publicly or privately owned—needed for the lowest-income Americans.

“In communities with high vacancy and lower cost, what’s needed is something to bridge the gap between what people earn and what rent actually costs,” says Diane Yentel, CEO of the National Low Income Housing Coalition (NLIHC). “You do that through rental assistance. But in other cities that are very low-vacancy, high-cost communities, there’s simply not enough apartments for people to live in. So what’s needed there is construction of apartments affordable to the lowest-income renters, and we do that through the Housing Trust Fund.”

The National Housing Trust Fund was first proposed by the NLIHC in the early 2000s, modeled after state-level housing trust funds. The state trust funds had varying levels of success, but some included homeownership programs. The NLIHC saw a need for a national fund targeted to extremely low-income renters. After years of different proposals for the fund, Rhode Island Senator Jack Reed pushed the National Housing Trust Fund into law as part of the Housing and Economic Recovery Act of 2008, which passed mere months before the financial crisis hit in September 2008 and contained a number of different affordable housing measures.

While the Housing and Economic Recovery Act provided the right timing to pass the fund into law, the timing wasn’t right for implementation. The HTF is funded by taking 0.042 percent of Fannie Mae and Freddie Mac’s revenue, but after the financial crisis those two companies were in utter ruin, so funding for the HTF was suspended until 2015, after Fannie and Freddie—and the housing market—had recovered.

Because the HTF is dependent on what Freddie and Fannie bring in—instead of being determined by a Congressional budget appropriation like other programs under the Department of Housing and Urban Development (HUD)—its annual budget changes from year to year. In 2016, the first year the funds were distributed to states, the fund had $174 million. In 2019, it got $245 million.

Each state gets at least $3 million from the fund, and the remainder is distributed according to a formula created by HUD. That initial $3 million goes further in some states than others, but it’s usually not enough to fund even one entire affordable housing development, so the money thus far has mostly been used in combination with funds from other federal affordable housing programs like Low Income Housing Tax Credits to build affordable housing.

This makes it hard to measure exactly how many housing units the program has created or preserved. The NLIHC estimated that through February 2019, the fund had made 1,662 homes available to extremely low-income households, defined as households who make less than the federal poverty level or 30 percent of the area median income. By law, the HTF must serve only these extremely low-income households.

States have been reluctant to find creative uses for HTF money because with Republicans in power, the program has been at risk of being shuttered altogether. In addition to proposing dramatic budget cuts to most of HUD’s programs in each of its annual budget requests, the Trump administration has recommended eliminating the HTF in its entirety. However, while Republicans had full control of the presidency and Congress in 2017 and 2018, the threat has dissipated since Democrats took control of the House in 2019.

“I have a sense that states are now much more comfortable with it,” says Ed Gramlich, a senior advisor to the NLIHC. “They’re used to it. They value it even if it’s a little bit of money for some of them. Some of them are coming up with creative more targeted ways of using the money going forward.”

Low funding and Republican threats may have gotten the program off to a sluggish start, but if a Democrat wins the presidency in 2020 and that Democrat follows through with their housing plan, the HTF would be transformed from an affordable housing afterthought with almost negligible funding to one of the largest sources of funding for affordable housing production in the country.

Vermont Senator Bernie Sanders has proposed the largest allocation to the HTF in his housing plan—a whopping $148 billion annually, some of which he would use for the construction, rehabilitation, and operation of public housing units.

While the there’s nothing in the law that prevents HTF funds from being used on public housing, Yentel believes using limited HTF money for the rehabilitation of existing public housing would defeat the purpose of the fund, which is to expand the affordable housing stock.

“If we were to get to a place where we have $40 billion a year for the Housing Trust Fund or more, potentially some of that money could be used to repair some units when we’re also building more,” she tells Curbed. “The lines wouldn’t have to be quite as clear once the funding level gets up to $40 billion, but for now it’s important that the funding be used to increase the stock of apartments, and separately there should a push for funding to repair public housing.”

Minnesota Senator Amy Klobuchar’s housing plan allocates the recommended $40 billion annually to the HTF, which is the NLIHC’s recommendation. Massachusetts Senator Elizabeth Warren would provide $50 billion annually, businessman Tom Steyer $47 billion, former South Bend, Indiana, mayor Pete Buttigieg $17 billion, and former vice president Joe Biden $20 billion. These plans would also change the funding mechanism from being dependent on Fannie and Freddie to a congressional budget allocation so the money would be more consistent.

For comparison, Congress allocated $4.5 billion to the Public Housing Operating Fund—which funds the operations of public housing developments—for fiscal year 2020. Community Development Block Grants—which are formula grants provided to municipalities for housing and infrastructure projects—received $3.4 billion, and tenant-based rental assistance—housing vouchers—received $23.8 billion.

It’s hard to project what effect the increased HTF funding would have on rental markets, because while the money would begin flowing immediately, construction of new affordable housing units would take a decade or more.

And while the candidates’ plans are still very much in the conceptual phase, it’s remarkable that the NLIHC has been able to create consensus among Democratic candidates that the HTF is the vehicle for alleviating housing costs for the most vulnerable Americans.

“To the extent that housing has ever been talked about in previous presidential campaigns, it’s almost always been around middle-class homeownership,” Yentel says. “This time it’s entirely about the lowest-income renters, the cost burdened. That’s where the solutions are most needed. It’s very exciting and very heartening. That gets us closer to being able to enact some of these solutions.”