National Housing Trust Fund (HTF)

How It Works

The Housing Trust Fund is a formula grant to states, the District of Columbia, Puerto Rico, and the insular areas. Unlike most HUD programs, it does not depend on annual appropriations. Instead, the government-sponsored enterprises Fannie Mae and Freddie Mac set aside 4.2 basis points (0.042%) of the unpaid principal balance of the mortgages they buy each year. That works out to 42 cents per $1,000 of mortgages. Sixty-five percent goes to HUD for the HTF, and 35% goes to the Treasury’s Capital Magnet Fund. The companies may not pass the cost on to lenders.

Because the set-aside is tied to mortgage volume, the size of the fund rises and falls with the housing finance market. Contributions are based on the prior calendar year’s purchases.

HUD divides the money among states using a needs-based formula. It considers shortages of rental homes affordable to extremely low- and very low-income renters, how many of those renters pay more than half their income for housing, and construction costs. Each state and D.C. receives at least $3 million.

A state agency administers the grant under an allocation plan included in its Consolidated Plan. Permitted uses:

• Rental housing (at least 80%): new construction, acquisition, rehabilitation, and preservation. Up to one-third of a state’s annual grant may cover operating cost assistance.
• Homeownership (up to 10%): help for first-time homebuyers with incomes in the eligible range.
• Administration (up to 10%).

Who It Serves

The HTF targets deeper poverty than almost any other federal production program. By statute, at least 75% of rental funds must benefit extremely low-income households or those at or below the federal poverty line, whichever limit is higher. The remainder can serve very low-income households, at or below 50% of AMI.

HUD’s regulations go further. In any year when total HTF funding is below $1 billion, all of it must serve extremely low-income households. Funding has never reached $1 billion, so that stricter rule has applied every year. According to the Congressional Research Service, the poverty line, rather than 30% of AMI, sets the higher limit in about 69% of counties.

Rents, including utilities, generally cannot exceed 30% of the income limit that applies to the unit. Rental units must stay affordable for at least 30 years.

How to Access It

Renters apply directly to HTF-assisted properties; there is no central waiting list. Developers apply to their state’s designated HTF agency, which selects projects under its published allocation plan. HUD posts HTF income and rent limits annually on HUD User.

Because rents this low rarely cover operating costs, HTF units are often paired with ongoing rental assistance. HUD’s December 2024 production report, as summarized by CRS, found that about 38% of completed HTF units also had Section 8 project-based vouchers.

History

Advocates pushed for years for a national housing trust fund with a dedicated revenue source outside the appropriations process. Congress created it in HERA, signed July 30, 2008. In September 2008, Fannie Mae and Freddie Mac entered federal conservatorship, and that November their regulator suspended contributions before any were made.

In late 2014, the Federal Housing Finance Agency directed the companies to begin setting aside funds in 2015. HUD issued an interim rule in January 2015 and made the first state grants in 2016, totaling about $174 million. Contributions have continued every year since.

According to CRS, HUD allocations peaked at about $749 million in FY 2022, after a surge in the companies’ mortgage purchases in 2020 and 2021, then fell. FY 2026 allocations, announced in September 2026, totaled about $256 million.

Limitations

• Volatile funding. The fund depends on mortgage activity and on the regulator, which can suspend contributions if they threaten either company’s finances.
• Small relative to need. Many states receive near the $3 million minimum, often enough for only a few projects a year.
• Hard to underwrite alone. Rents capped for the lowest-income tenants usually require additional rental or operating subsidy.
• Uncertain future. Any change to the conservatorship or structure of Fannie Mae and Freddie Mac could affect the HTF’s funding source.