PA Housing Trust Fund Bill Gains Early Support

HARRISBURG, PA – February 13, 2015 – (RealEstateRama) — Backed by newly released data from the Federal Reserve Bank of Philadelphia on the unmet affordable housing needs among lower-income renters, a large group of Pennsylvania senators and representatives from both parties are preparing to launch a renewed effort to expand the state housing trust fund statewide, using new revenue from the growing Realty Transfer Tax to create badly needed homes affordable to thousands of lower-income families and individuals across the Commonwealth.

“The Fed study shows that the affordability gap has only gotten wider in recent years in Pennsylvania, underscoring the urgent need to expand the Housing Trust Fund program to the entire state,” said Liz Hersh, executive director of the Housing Alliance of Pennsylvania.

According to the Fed report, the shortage of rental homes that are both affordable and available to households with incomes below $25,000 a year has grown over the past five years.

Republican Senator Elder Vogel of Beaver County, having seen the positive effects of housing trust fund investment in his area, and Democratic Senator Shirley Kitchen of Philadelphia are the prime co-sponsors of the Senate bill – now up to 22 co-sponsors – which is expected to be reintroduced shortly. The House version of the bill, sponsored by Republican Representative Tom Killion of Delaware County, now has 38 co-sponsors in total. Both bills have strong bi-partisan support.

The Housing Trust Fund, officially called the Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE), was created in December 2010 and got its first revenue source in February 2012 from the Marcellus Shale Impact fee. It has since funneled $26 million into affordable homes in the Shale region with almost 2,900 households being helped through rental rehab, homeowner repairs, rental assistance, site preparation, new construction and a wide range of activities based on local needs.

Aside from helping fill the housing gap for low-wage-earning families, veterans, disabled citizens and others, the statewide expansion of the program is projected to create 500 direct and indirect jobs related to the rehabbing and construction of homes.

“This is a program that has essentially been piloted in 37 counties over nearly four years. It is working,” said Liz Hersh, executive director of the Housing Alliance of PA, which has been the leading advocate for the program. “It is running smoothly and effectively to meet local needs. The program administration at the Pennsylvania Housing Finance Agency is based on a plan that is made available annually for public input, and they are getting results; it is both transparent and accountable. Now we have the opportunity – really, the imperative – to take it statewide. Furthermore, the program can be capitalized without raising taxes or fees. It’s a win-win.”

The Senate Urban Affairs Committee last June unanimously voted to expand the program statewide. The House then introduced its version of the bill in August. The end of the legislative session in November delayed further action until now.

Under the proposed legislation, the money to pay for the expansion would come without creating new fees or raising taxes. Instead, revenue would be drawn from future growth in the Realty Transfer Tax. As the real estate market continues to grow in Pennsylvania and produces additional transfer tax revenue, a portion of that growth would be directed into the trust fund and reinvested in the residential real estate market.

Under the bills, the trust fund would receive 40% of the growth in revenue, capped at $25 million per year. Based on current growth, the Housing Alliance forecasts it would probably take until 2019 to reach that $25 million ceiling. The transfer tax equals 1% of the sale price of a property and the state expects the tax to bring in close to $450 million this year.

“None of the current revenues would be touched,” Hersh said. “That money will continue to be used for the current purposes. Only new money from the same 1% tax would be sent to the trust fund. The beauty of the plan is that it uses housing-related taxes to create more housing.”

The money goes into Pennsylvania communities to fix up homes, prevent homelessness, address blight, and make rents more affordable. The fund is available to provide housing opportunity for low and moderate-income families and individuals, generally those with incomes at or below $50,000 a year (statewide average), with an emphasis on those earning less than $40,000. At least thirty percent of the funds must go to people living on less than $25,000, the area where there is the greatest need. The specific characteristics of the programs are designed by participating counties so they can best be targeted locally and coordinated with other local efforts.

Revenue sent to the trust fund from the transfer tax would be added to money now being collected for housing from the impact fee, enabling expansion into non-Marcellus counties.

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