Local Assistance: Housing Trusts, Local Funding, and Indirect Support
While it is usually not efficient or feasible for communities to directly develop affordable housing, communities often contribute financially. This has become especially true in recent years as competition for limited federal and state resources has increased. As a result, many municipalities have developed local funding mechanisms. These resources can:
- Make it possible for communities to tailor their assistance to locally identified priorities
- Make it easier to leverage state and federal funds as applicants who can provide a local match usually have a competitive advantage in seeking tax credits and other public funding.
Local assistance can take a variety of forms, including providing direct funding or indirect assistance in the form of tax relief and/or fee reductions and waivers. Private donations and fundraising can also provide critical assistance to local projects. In Massachusetts, one of the most widely used local funding mechanisms is the Community Preservation Act. Another popular mechanism is creating a housing trust or an affordable housing fund. To use these programs most effectively, it's important to understand how they work.
Community Preservation Act (CPA)
The Community Preservation Act is a flexible tool that helps communities preserve open space, historic resources, and affordable housing. As described above, CPA funds can support planning and pre-development activities, but can also directly fund the construction of housing for households and individuals earning up to 100 percent of the area median income. CPA allows communities to adopt a local property tax surcharge to fund open space, historic preservation, affordable housing, and outdoor recreational facilities. The surcharge can range from 0.5 percent to 3 percent, and municipalities can exempt low- and moderate-income households and/or commercial properties. The funds go into a local community preservation fund and the state provides matching funds from its own Community Preservation Trust Fund.
Communities are required to allocate at least 10 percent of funds raised each year to each of the three categories—open space, historic preservation, and affordable housing. The remaining 70 percent may be allocated among any of the three and to recreation. CPA funds can be used for a wide range of housing purposes, making it a valuable resource for communities at all stages of addressing their housing needs, from developing initial strategies to creating programs and preserving existing developments. CPA offers local control, flexibility, and fairly simple administration and can be used to combine housing activities with open space and/or historic preservation activities. The Community Preservation Coalition offers extensive free help to communities using or considering CPA. For examples and more information about the Community Preservation Act, check out the Massachusetts Housing Partnership's CPA guidebook.
Local and Regional Housing Trusts and Housing Trust Funds
The term "housing trust" is commonly applied to any local nonprofit housing entity established to undertake community initiated projects, including some entities created by local housing authorities. It should not be confused with an affordable housing trust fund, though many housing trusts are set up to receive funds as well as acquire and develop housing.
Dozens of communities in Massachusetts have established housing trusts, with varying powers and governance structures and revenue sources, depending on the language of the bylaw, ordinance, or legislative act used to establish them. Generally governed by local residents, they are often empowered to acquire and/or develop affordable housing. They may also receive gifts of money or property and apply for and expend funds in the production of affordable housing. They can be local or regional, and some target particular unmet needs in areas where there is good general capacity among local nonprofits.
There are many ways for a community to establish a nonprofit housing entity, depending on what it wants to accomplish. Trusts are typically governed by a board of directors but vary in terms of their relationship to the municipality. Some are under the supervision of the select board or town manager, while others may have no official link to the municipality at all. More than a dozen have been created by special legislation under home rule petitions to establish a town entity under the supervision of the select board or town manager. The most common form of local trust is a municipal affordable housing trust (MAHT), a result of a 2005 state law making it easier to create trusts that can own and manage real estate without a home rule petition.
For information on how to form and fund trusts, check out MHP's affordable housing trust guidebook. For more detailed information on how to effectively manage your housing trust, check out MHP's Municipal Affordable Housing Trust Operations Manual.
Contact Shelly Goehring at MHP for more information on housing trusts.