On May 24, 2021, District of Columbia Mayor Muriel E. Bowser announced plans to invest a record-setting $400 million into the District’s affordable housing production via direct injection into the Housing Production Trust Fund (HPTF). The funding was included in the Mayor’s FY 2022 budget proposal to the DC Council, and, if passed by the Council, is expected to invigorate the District’s affordable housing development goals.
Background on the Housing Production Trust Fund
The HPTF is the primary tool used to produce and preserve affordable housing in the District of Columbia. It is a permanent, revolving special revenue fund created by the Housing Production Trust Fund Act of 1988, and administered by the Department of Housing and Community Development.
The program is funded entirely with money raised within the District—specifically through (i) 15 percent of revenue collected from residential and commercial deed recordation and transfer taxes and (ii) the District’s general fund—to provide gap financing to eligible nonprofit and for-profit affordable housing developers looking to create a well-rounded capital stack for their developments through federal, private, and District funds.
The HPFT requires that each fiscal year,
- At least 50 percent of HPTF spending serves households with incomes below 30 percent of the area median income (AMI).
- At least another 40 percent of expenditures serve households with incomes between 30 percent and 50 percent AMI.
- The balance of funds can serve households with incomes up to 80 percent AMI.
HPTF financing is available for a variety of uses, for example,
- pre-development loans for nonprofit housing developers;
- financing for site acquisition, construction loan guarantees, collateral, or operating capital;
- bridge loans and gap financing to reduce up-front costs and costs of residential development and to keep a housing project in operation, if circumstances change adversely during development; and
- outreach and housing production counseling and technical assistance to affordable housing groups, including tenant groups seeking to buy their buildings under the Tenant Opportunity to Purchase Act.
The Mayor’s Proposal
Typically, funding for the HPTF can be uncertain, because its dedicated funding source of real estate recordation and transfer taxes can fluctuate greatly in times of real estate booms and busts. In addition, funding through the District’s general appropriations budget is subject to the political and budgetary priorities of each Mayor and Council.
The Mayor’s current proposal comes at a time when real estate tax revenues might otherwise be down, but the District is flush with federal COVID-19 relief money. The $400 million investment provides an immediate boost to the Housing Production Trust Fund by directing an additional $150 million into the fund for the current fiscal year, with $250 million more allocated for fiscal 2022. Mayor Bowser has placed at least $100 million into the housing fund each year since 2015, totaling over $1 billion in direct investment. Her ultimate goal is to build 36,000 housing units by 2025, 12,000 of them affordable to targeted income groups.
The Mayor’s office has said the District will survey housing developers to explore how best to utilize the new pot of money and will offer greater subsidies for projects in areas with high land values. This aligns with the city’s stated priority to spread affordable housing options throughout the city move evenly, including in affluent neighborhoods that have lacked them historically. The District’s robust investment in the HPTF is the largest such fund for affordable housing in the entire United States, and may very well set precedent for how states nationwide will conduct their own affordable housing funds.
The Application Process
Traditionally, DHCD has issued a notice of funding availability (NOFA)/Request for Proposal via online application, twice annually. These solicitations result in proposals from developers that are assessed based upon how they meet the HPTF affordability criteria. Certain preferences exist for non-profit developers, family-sized units, Permanent Supportive Housing units, senior housing, mixed-income projects, TOPA projects, and projects located near public transit.
The application process also allows developers to seek additional financing from local and federal sources beyond the HPTF, such as federal Low-Income Housing Tax Credits (LIHTC) and the Local Rent Supplement Program (LRSP). For every dollar invested in affordable housing from the HPTF, typically another $2.50 is invested from private and federal financing.
The HPTF proposal process is competitive and complex.