OLR Research Report

March 6, 2000





By: John Moran, Research Analyst

You asked what governance structures other states have used in establishing state housing trust funds.


Statewide housing trust funds are basically set up three different ways:

● Under a state housing finance authority or agency;

● Under a state department of housing, community development, or economic and community development;

● As a separate independent entity (Vermont is the only state with this model).

Often when the fund is created a board is established to set overall policy and provide oversight for the trust fund. In some cases the board has real policy authority. In others it is purely advisory. The boards usually include representatives of nonprofit housing corporations, residents of low-income housing, and low-income housing advocates. Boards may also include representatives from the home builders industry, the real estate lending industry, and other appropriate representatives. Pertinent state commissioners (or their representatives) such as the executive director of the housing finance agency are usually on the board, too.

The Housing Trust Fund Project, which monitors housing trust funds around the nation, believes the trust fund governance structure is less important than having a pro-active, creative staff (regardless of who is their employer) dedicated to making projects work. The Housing Trust Fund Project says it has observed successful trust funds operating under each of the three governance structures.


Housing trust funds are typically established to serve a purpose not already addressed by existing housing agencies and programs. This usually involves grants or no-interest loans for low-income housing projects or other housing needs for the poorest residents. Grants and no-interest loans often go hand-in-hand with serving the poorest residents as housing finance agencies are already set up to serve moderate- and middle-income residents. Trust funds are often established under the agency that already handles federal housing programs such as HOME.

Trust funds usually have a dedicated, non-lapsing source of income. This may be a portion of the state's real estate transfer tax or document recording fees. It may also be a fee on developers or some other designated source.

There are more than 130 housing trust funds in the U.S., including 35 state trust funds, according to the Housing Trust Fund Project.

The Housing Trust Fund Project believes it is very important to establish some kind of oversight board that involves community members. The project's director, Mary Brooks, said oversight boards not only keep tabs on how the fund is used, but they provide a vehicle for the community to stay involved. Community involvement helps keep pressure on the fund to move money out to proposed projects and helps spread the word that the fund exists. Most funds, whether they are part of a state department or state finance agency, have some type of board. About half of the existing boards are advisory only and half have some form of policy authority. Depending on the particular state, there is a varying degree of how well advisory board recommendations are followed.

When the trust fund is set up under a finance agency, the finance agency board often approves the individual proposals, as is the case with North Carolina (see below). When the trust fund is set up under a housing or community development department, the trust fund board is often empowered to approve the individual deals.



Vermont is the only state with an independent board. It was established when Vermont's trust fund was created in 1987. The trust fund is also unique in that it has the dual purpose of creating affordable housing and preserving agricultural, historic, and important natural lands. Known as the Vermont Housing and Conservation (VHC) Board, this trust fund is completely independent of any other Vermont state agency, although three state commissioners (agriculture, housing and community development, and natural resources) and the executive director of the Vermont Housing Finance Agency sit on the board. Five citizen members also sit on the board including an advocate for low-income Vermonters and a farmer.

The VHC Board is funded by 50% of the state's property transfer tax. In the board's early years it received additional funds through direct appropriations from the state legislature, including $20 million from the state surplus in 1988.

The board was formed as a separate, quasi-public agency in order to give it more flexibility, according to Larry Mires, the board's current finance director. The board can be more flexible than the Vermont Housing Finance Authority in financing housing development projects because it does not always need to have the money paid back. It can approve grants or no-interest loans to help make a deal work. In short, the source of the VHC Board's money does not come with the same financial constraints as the funds from a housing finance authority. The VHC Board can also act more quickly than a finance authority or a state department.

To date the VHC Board has awarded over $130 million to nonprofit housing and conservation organizations, towns, and state agencies. These funds have leveraged about $450 million in private and other public funds. Its funding has resulted in the creation of 5,700 units of affordable housing, according to the VHC Board web site (

North Carolina

North Carolina is an example of a trust fund established under an existing housing finance agency with its own board that sets broad policy for the fund. The fund was created in 1987 using money from a legal settlement the state received due to oil company overcharges.

The fund is administered under the state housing finance agency. The board created to oversee the fund, the North Carolina Housing Partnership, is part of the housing finance agency. The partnership is authorized to establish the trust fund's policies, rules, and regulations and generally oversee it. The North Carolina Housing Finance Agency administers the fund according to the partnership's policies. The finance agency board must approve any proposal or development that uses trust fund money.

The Partnership Board consists of 13 members including the executive director of the North Carolina Housing Finance Agency, the secretary of the Department of Natural Resources and Community Development, and the state treasurer. The other 10 members are appointed by the General Assembly (with five each nominated by the respective leaders of the House and Senate). The following groups must be represented: (1) low-income housing advocates, (2) homebuilding industry, (3) League of Municipalities, (4) nonprofit housing development corporations, (5) residents of low-income housing, and (6) the real estate lending industry (N. Carolina Statutes, Chapter 122E).

The partnership can appoint an executive director who is empowered to hire a staff. Despite being granted this authority, the partnership has never hired its own director. William Dowse, the North Carolina Housing Finance Agency's Policy and Strategic Investment Director, stated the partnership never used this authority because it was satisfied with the performance of the finance agency's staff in carrying out the trust fund mission. By statute, the trust fund must focus on low-income housing. He said the trust fund is able to assist low-income housing that the finance agency normally could not accommodate. He said 86% of the money allocated from the trust fund went to households that are at or below 50% of the median income level.

The trust fund has complemented the activities of the finance agency, according to Dowse. Sometimes trust fund money is packaged with finance agency loans to make a deal workable. In some cases trust fund money made a program work that was unfeasible under the finance agency's rules. For example, he said a finance agency elderly low-interest rehabilitation program was not financially possible for the target population because they still had to pay the loans back. Now using trust fund money, the program works using no-interest, deferred loans that are only paid back when the house is sold.

The North Carolina Trust Fund does not have a dedicated funding source. It depends on yearly allocations from the state legislature. It was originally capitalized with $20 million from the oil overcharge fund. It has distributed $40 million for housing programs, thus enabling projects worth over $220 million to reach completion. This has meant 8,500 housing units have been developed or rehabilitated since 1987.

New Jersey

The New Jersey Neighborhood Preservation Balanced Housing Program functions like a trust fund in that it has a dedicated funding source and provides grants and loans for low-income housing. It is an example of a program operating under a state department, in this case the Department of Community Affairs' Division of Housing and Community Development.

This program was established in 1985 as part of the Fair Housing Act that also established the Council on Affordable Housing. The Neighborhood Preservation Balanced Housing Program provides funds to municipalities to provide affordable housing. The only eligible municipalities are those with an affordable housing plan certified by the Council on Affordable Housing or those who have entered into a judicially approved agreement to satisfy their affordable housing obligations.

The program is funded through a portion of the realty transfer tax. No board oversees how the program is operated, although its mission is complementary to the mission of the Council on Affordable Housing. The Council on Affordable Housing can provide a municipality with the technical assistance to craft an affordable housing plan that meets the Council's requirements. Once that is done, the municipality is eligible for funding through the Neighborhood Preservation Balanced Housing Program.