Common revenue sources for housing trust funds at the state, county, and city levels include real estate transfer taxes, document recording fees, and developer fees.
State housing trust funds
- Document recording fee -- A per-page surcharge on all documents added to the public record, such as birth certificates, deeds of trust, and marriage licenses. The Delaware State Housing Authority's Housing Development Fund received around $1.5 million in 2007 from a $5 per-page surcharge on recording fees.
- Public purpose charge -- A small percentage surcharge added to customer's utility bills. A surcharge added to energy bills in Oregon provided approximately $3 million in 2008 in funding for the State's Housing Development Grant Program.
- Real estate transfer tax -- A state surcharge on the sale of property, levied on the seller, the buyer, or both parties; this fee generally increases with the size or value of the property changing hands. This tax provides a dependable source of revenue for state housing trust funds in a healthy real estate market. In less healthy housing markets, declining home sales and prices obviously reduces real estate transfer tax revenues which reduces funding for state housing trust funds as well.
- Interest earned on title company escrow accounts and unclaimed property funds -- Escrow accounts are maintained by title companies to hold and disburse money associated with real estate transactions, while states maintain unclaimed property funds to hold undeliverable tax refunds, abandoned bank account balances, and other unclaimed money. Since 1992, the Maryland Affordable Housing Trust has received between $1 and $4 million annually from interest revenue collected on title company escrow accounts.
- Other sources -- In 2007, the State of Indiana approved a tax increase on smokeless tobacco products, estimated to generate up to $6 million in 2009. The tax revenues provide a dedicated funding source for its Affordable Housing and Community Development Fund, which is used to develop new homes for low- and very low-income families. Revenues will also support other local housing trust funds.
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Photo credit: Hispanic Housing Corporation |
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County housing trust funds- Document recording fee -- A per-page surcharge on all documents added to the public record, such as birth certificates, deeds of trust, and marriage licenses. One of the most common types of document recording fees is the deed/mortgage recordation fee. Passed in 1992, Pennsylvania's Act 137 authorizes counties in that state to increase fees for recording deeds and mortgages for the purpose of raising money for affordable housing. Implementation is monitored by the state's Housing Finance Agency, and as of March 2005, 49 of 66 counties had created a housing trust fund under this authority. [1] Click here for more information on individual counties' activity.
- Real estate transfer tax -- A county surcharge on the sale of property, levied on the seller, the buyer, or both parties; this fee generally increases with the size or value of the property changing hands. This tax provides a dependable source of revenue for county housing trust funds in a healthy real estate market. In less healthy housing markets, declining home sales and prices obviously reduces real estate transfer tax revenues which reduces funding for county housing trust funds as well.
- Developer fees, including linkage fees, demolition fees and inclusionary zoning in-lieu fees. Developer fees are even more dependent on a healthy economy than real estate transfer taxes, because they usually (but not always) rely on new residential and commercial development, while transfer taxes can be collected on the sale of existing properties. The recent economic downturn, which severely curtailed new development, also significantly reduced these fees and highlighted the volatility of developer fees as a dedicated funding source.
- Hotel/motel taxes -- The Columbus/Franklin County, OH Housing Trust Fund receives 8.37 percent of hotel tax revenues, generating about $1 million in funding each year. Using hotel tax revenues to fund county housing trust funds might be an appropriate solution in expensive resort communities as well. Most resort communities require a broad base of lower-paid service workers to support their economy and many lack affordable housing options for their workforce.
- Property taxes-- can be dedicated from either residential or commercial development to generate revenue for housing trust funds.
| State Enabling Legislation
One of the biggest challenges involved in creating city and county housing trust funds is finding a significant and reliable source of funding, especially in states that place restrictions on the use of potential funding sources. As a legal matter, states generally have considerable flexibility in selecting revenue sources for housing trust funds. [1] Many localities also have broad authority to establish dedicated funding streams, though in some states, localities are constrained by state regulation of local taxing and bonding authority and by other limitations on the ability to tap and use specific revenue streams.
Some states have made it easier for cities and counties to create their own trust funds by passing "enabling legislation" that provides authority for localities to use new avenues of funding. For instance, in 1993, the Washington State Legislature passed a law allowing cities and counties to exceed state-mandated limits on property taxes for the purpose of creating affordable housing.
Similarly, Act 137 in Pennsylvania, passed in 1992, allowed every county except Philadelphia to increase deed and mortgage recording fees in order fund affordable housing. Act 137 has since been amended to include Philadelphia, facilitating the creation of its housing trust fund. Well over half of Pennsylvania's 67 counties now have affordable housing trust funds.
[1] A minority of states are prohibited by state law from establishing a dedicated funding stream or using a particular type of dedicated funding source. Georgia's Constitution, for example, specifies that "All money collected from taxes, fees and assessments for State purposes...shall be paid into the General Fund of the State Treasury and shall be appropriated therefrom," prohibiting the state from dedicating public revenue for any purpose. |
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City housing trust funds- Developer fees, including linkage fees, demolition fees and inclusionary zoning in-lieu fees. Some cities collect fees from developers to ensure new construction (residential or otherwise) does not compromise the availability of affordable housing. Revenue from these fees can be deposited into a city trust fund to increase the supply of homes for working families. Developer fees are even more dependent on a healthy economy than real estate transfer taxes, because they usually (but not always) rely on new residential and commercial development, while transfer taxes can be collected on the sale of existing properties. The recent economic downturn, which severely curtailed new development, also significantly reduced these fees and highlighted the volatility of developer fees as a dedicated funding source.
Cambridge, MA's Incentive Zoning Ordinance requires certain non-residential developers to pay a linkage fee of $4.25 per square foot of new construction; proceeds go into the city's trust fund for the development of affordable homes. By tying the fee to commercial development, they can separate trust fund revenues from the health of the housing market. Residential and commercial real estate markets do not always move in tandem, one can be up while the other is down and vice versa. When combined with other funding options, this could reduce the volatility of using these fees as a funding source.
- Tax increment financing -- The Salt Lake City Housing Trust Fund is funded through Tax Increment Financing (TIF) proceeds. Administrators must apply for a portion of TIF revenues on an annual basis, and typically receive between $360,000 and $1 million each year. The TIF district is set to expire in 2025.
- Document recording fee -- A per-page surcharge on all documents added to the public record, such as birth certificates, deeds of trust, and marriage licenses. The Philadelphia Housing Trust Fund, established in 2005, is expected to generate $10 million each year through a surcharge on document recording fees that range from $57 to $72 depending on the document type.
- Hotel/ motel taxes -- Most major cities generate significant revenue through hotel/ motel taxes due to tourism and convention business. Hotels and motels generate a significant amount of lower-paying jobs and many cities lack housing that is affordable or acceptable to these workers. Using hotel taxes to fund a city housing trust fund might be an appropriate solution in these cities.
- Property taxes can be dedicated from residential or commercial development as a way to generate revenue for housing trust funds. In Boulder, Colorado, a portion of the Community Housing Assistance Program (CHAP) funding comes from a portion of property taxes, equivalent to approximately $19 per year on a $300,000 home, which helps produce affordable homes for renters and owners.
What is a linkage fee?
The creation of new jobs in a community also stimulates new local housing needs. Some communities assess "linkage fees" on the developers of new commercial, industrial or retail properties to help offset local housing impacts and make sure that the development of affordable homes keeps pace with local economic development and job growth. These fees are usually charged on a per-square-foot basis and deposited into a housing trust fund, from which funding awards are made according to local preferences and priorities. By establishing a direct connection between new jobs and the need for new homes, linkage fees help to make it possible for families to live in the communities where they work. Visit PolicyLink's Equitable Development Toolkit to learn more about linkage fees.
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Revenue sources for housing trust funds
State and local housing trust funds rely on a variety of different funding sources. Establishing a dedicated source of revenue assures a secure funding stream for the development, preservation, or operation of affordable homes.
Other pages in this section:
 How housing trust fund dollars are used
Free from the spending limitations associated with federal programs, administrators of housing trust funds enjoy a great deal of flexibility in determining how trust fund revenues can best be used to benefit the community.
Click here to view other resources on housing trust funds.
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[1] Initially 66 of 67 counties were authorized to increase document recording fees under Act 137; Philadelphia County, whose boundaries are coterminous with the City of Philadelphia, was not allowed to participate. In the summer of 2005 the City Council and State Senate voted to amend Act 137 and allow Philadelphia to create its own housing trust fund; the Philadelphia Housing Trust Fund was established shortly thereafter. 
