Housing Trust Fund (State and Local)

What Is a Housing Trust Fund?

A housing trust fund is a distinct account that an elected body — a state legislature, county commission, or city council — creates by law and fills with public revenue dedicated to affordable housing. The defining feature is the dedication. Instead of competing for money in each year’s budget, the fund has its own source of revenue and its own limited purpose.

The model has spread widely. The National Low Income Housing Coalition (NLIHC), which took over the long-running Housing Trust Fund Project in 2024, counts at least 861 state, county, and city trust funds. Based on fiscal year 2024 collections, it reports that they generate nearly $1.6 billion a year.

How It Works

Trust funds are typically paid for by one or more recurring sources:

• Real estate transfer taxes or documentary stamp taxes
• Document recording fees
• Linkage fees and other developer fees
• Property tax levies or sales taxes
• General-fund appropriations or bond proceeds

A housing or community development agency usually administers the fund, often with an advisory board. Because the money is not federal, the jurisdiction writes its own rules. Funds commonly make gap financing loans for new rental construction, but eligible uses also range from down payment assistance and home repair to emergency rental assistance and community land trusts. Income targets vary; some funds reserve shares for very low-income households while also serving households up to 100% of area median income.

Delaware’s Housing Development Fund, run by the Delaware State Housing Authority, is an example of a state-level trust fund supported by annual appropriations from general revenue. See the Delaware Housing Development Fund entry.

State and Local Funds vs. the National Housing Trust Fund

The National Housing Trust Fund is a separate federal program administered by HUD and passed through to states. It follows federal rules and is aimed mainly at the lowest-income renters. State and local trust funds are created and controlled by those governments, so they can be designed around local priorities, including the moderate-income households that federal programs often miss.

Criticisms and Limitations

• Revenue can swing. Funds tied to real estate transfer taxes rise and fall with property sales, and the amount received can change from year to year.
• Dedication is not permanent. Funds that rely on appropriations depend on future budget decisions.
• Scale. Even large funds are small next to the cost of building housing, so they usually work as one layer in a project’s capital stack rather than as the sole source.
• Legal authority. In some states, localities need explicit state enabling legislation before they can create a fund or dedicate a tax to it.