Arizona could invest $150M for affordable housing through a trust fund. What does that mean?

Arizona could soon make an unprecedented investment in affordable housing.

The budget plan crafted by Democratic Gov. Katie Hobbs and Republican legislative leaders that began moving through the Legislature on Tuesday proposes allocating $150 million to the state’s Housing Trust Fund, which funds affordable housing projects and housing assistance programs. If approved by lawmakers, the investment would be the largest in the fund’s history by far.

Here, we break down what the Housing Trust Fund is, what it has accomplished so far and what housing advocates think the next round of funding should be spent on.

What is the Housing Trust Fund?

Since 1989, the Housing Trust Fund has provided money for the Arizona Department of Housing to invest in affordable housing initiatives. The money can be used for a wide array of projects, including building new housing and funding homeless shelters, transitional housing and reentry housing for formerly incarcerated people. The fund received an infusion of $60 million in 2022 and has awarded a total of more than $350 million since its inception.

Housing advocates have long been lobbying the state to allocate more money to the fund. In years past, the fund brought in an average of $10 million annually from the sale of unclaimed property in Arizona. But in 2012, the Legislature capped the amount the fund could receive from unclaimed property at $2.5 million per year.

What is the money currently going toward?

Last year’s $60 million investment is being spent on a transitional housing facility in Phoenix, a home for youth experiencing homelessness in Flagstaff and 40 container homes for formerly incarcerated people working at an egg farm in Tonopah, among other projects, according to the Arizona Department of Housing. More than half of the money was allocated to projects in rural communities.

What should the next round of funding be spent on?

Housing experts have a laundry list of ideas for how the proposed funding could make a difference.

To Sheila Harris, the former, founding director of the Arizona Department of Housing, those ideas are best distilled into one overarching purpose: “Leverage.”

In other words, the Housing Trust Fund dollars should be strategically layered with other available funding sources, such as American Rescue Plan Act funds and Private Activity Bonds from the Arizona Commerce Authority, to fund affordable housing developments that might not happen otherwise, Harris said.

“If you can take that $150 million and leverage it with bond money and other stimulus funds, you would get a tremendous impact — in a very positive way — on the housing stock that we have,” Harris said.

Joanna Carr, interim executive director of the Arizona Housing Coalition, agreed that the money should be used to fill the gaps in housing and homeless services. For example, it could fund affordable housing projects that applied for but were not awarded Low-Income Housing Tax Credits, she said.

The federal Low-Income Housing Tax Credit program is one of the main financial drivers of affordable housing development. But the tax credits are competitive: Arizona funded just 16 of the 33 applications it received for the 9% Low-Income Housing Tax Credit program in 2022, according to the Arizona Department of Housing.

The Housing Trust Fund could also support more non-congregate shelter settings and eviction prevention programs, such as the emergency rental assistance program funded by the U.S. Department of the Treasury in response to the COVID-19 pandemic, Carr said.

“U.S. Treasury funds are about to dry up, and we don’t have a robust source of emergency rental assistance,” she said.

Lisa Glow, CEO of Central Arizona Shelter Services, said she would like to see the funds go toward building affordable housing, creating more emergency shelters and transitional housing, and offsetting operating costs for new services that housing providers across the state have been launching.

“We have such a huge increase in homelessness that we’ve got to act quickly to get people off the streets,” Glow said.

Arizona’s homeless population increased by 30% between 2020 and 2023, according to the point-in-time count.

Rachel Milne, the director of Phoenix’s new homeless solutions department, agreed with putting the funds toward covering operating costs for emergency shelters. She also stressed the need for more permanent supportive housing.

"Permanent supportive housing is my number one thing that would help the homeless service system," Milne said. "We just don't have enough."

Harris, formerly of the Arizona Department of Housing, said she’s “extremely pleased” to see the proposed investment into the fund.

“This is an excellent start,” Harris said. “And I hope this is the beginning of many more conversations about how we get additional resources and how we leverage them.”

Help underway: West Phoenix corridor to be transformed with shelter, affordable housing, workforce training

Juliette Rihl covers housing insecurity and homelessness for The Arizona Republic. She can be reached at jrihl@arizonarepublic.com or on Twitter @julietterihl.

A grant from the Arizona Community Foundation supports coverage of housing insecurity on azcentral.com and in The Arizona Republic.

This article originally appeared on Arizona Republic: Proposed budget includes $150 million for Arizona's Housing Trust Fund