Virginia Housing Trust Fund and Financial Status of the Housing Partnership Revolving Fund (December 2023)
Summary
Report to the Governor and legislative committees on The Virginia Housing Trust Fund and the Financial Status of the Virginia Housing Partnership Revolving Fund, submitted by the Department of Housing and Community Development, December 2023. It states that the Biennium Budget for 2022-2024 allocated $75,000,000 for the first year and $75,000,000 for the second year to fund activities through the Virginia Housing Trust Fund (VHTF). It says at least 80 percent of the Fund is to be used for short, medium and long-term loans to reduce the cost of homeownership and rental housing, and up to 20 percent may be used for grants for targeted efforts to reduce homelessness. Part II updates the financial status of the Revolving Fund.
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“Virginia Housing Trust Fund and Financial Status of the Housing Partnership Revolving Fund (December 2023).”
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Report to the Governor, the Secretary of
Commerce and Trade, the House
Appropriations Committee, and the Senate
Finance and Appropriations Committee
The Virginia Housing Trust Fund
and the
Financial Status of the Virginia Housing Partnership Revolving
Fund
____________________________________________________
Submitted by:
The Department of Housing and Community Development
December 2023
1
The Virginia Housing Trust Fund and the Financial Status of the Virginia Housing Partnership
Revolving Fund
Introduction
During its 2013 regular session, the General Assembly amended provisions of Chapter 9 of Title
36 of the Code of Virginia to provide statutory direction for the administration of the Virginia
Housing Trust Fund (VHTF). Item 108 G of the 2012 Appropriations Act established the Trust
Fund and provided an initial allocation of $8 million to become available in FY 2014. The 2013
statutory changes modified certain reporting requirements that originally applied to the former
Virginia Housing Partnership Revolving Fund. Effective July 1, 2013, § 36-150 of the Code of
Virginia required the Department of Housing and Community Development (DHCD) to report
annually on the Trust Fund and such other matters the Department may deem appropriate,
including the status of the former Housing Partnership Revolving Fund. Designated recipients of
the report include the Governor, Secretary of Commerce and Trade and the Chairs of the House
Appropriations and the Senate Finance and Appropriations Committees.
In accordance with the requirement of § 36-150 of the Code of Virginia, DHCD presents the
following document, which includes two sections.1 Part I reviews the current allocation of funds
for VHTF activities and the impacts of funds allocated in 2022-2023, as well as changes to the
VHTF Program Design for 2023-2024. Part II updates information concerning the financial status
of the Virginia Housing Partnership Revolving Fund, presently administered by Virginia Housing.
The latter section continues the format used during previous years in accordance with the
former statute and incorporates materials provided by Virginia Housing’s independent auditor,
KPMG, LLP.
Part I: The Virginia Housing Trust Fund
Purpose and Background
The Biennium Budget for 2022-2024 (Special Session 1, 2022) allocated $75,000,000 in the first
year and $75,000,000 in the second year to fund activities through the Virginia Housing Trust
Fund (VHTF). This is an increase from the 2020-2022 Biennium Budget, which allocated
$70,700,000 in the first year and $55,000,000 in the second year to support the activities of the
VHTF.
1
https://law.lis.virginia.gov/vacode/title36/chapter9/section36-150/
2
At least 80 percent of the Fund is to be used for short, medium and long-term loans to reduce
the cost of homeownership and rental housing. Up to 20 percent of the Fund may be used to
provide grants for targeted efforts to reduce homelessness.
The entities charged with administering the VHTF—the Department of Housing and Community
Development (DHCD) and Virginia Housing (previously named Virginia Housing Development
Authority)—have extensive experience in implementing the activities needed to carry out the
provisions of the VHTF. Virginia Housing originates and services loans on a regular basis through
its bond and revenue programs. It also services loans made with HOME funds administered by
DHCD. Both agencies, which are overseen by boards subject to gubernatorial appointment,
have more than two decades of experience in developing housing policy and structuring and
implementing programmatic tools to operationalize those policies.
Further, DHCD and Virginia Housing worked collaboratively to implement the provisions of the
Virginia Housing Partnership Revolving Fund, which was the predecessor to the VHTF. Both
DHCD and Virginia Housing are skilled at packaging affordable housing projects that include a
range of funding sources in order to leverage their resources. The budget language creating the
VHTF identified leveraging as an important component of its operation.
Input Into the Structure of the Housing Trust Fund
Significant stakeholder input was gathered leading up to the development of the initial VHTF
framework. Building on this foundation, input sessions were held during January and February
2023 to gather feedback. Invitations were broadly extended to DHCD grantees, partners, and
the public, as well as posted on the department’s website and in statewide news publications.
DHCD held virtual input sessions due to COVID-19 restrictions. Sessions were organized by
programmatic purview, but open to all. More than 140 individuals participated in these
sessions.
Virtual Public Input Sessions
Focus When
Affordable Housing January 30, 2023
Homeless Services January 31, 2023
Community Development February 1, 2023
Parameters of the Housing Trust Fund
The 2012 Budget Bill (Special Session I) included language establishing the basic parameters for
the VHTF. These parameters included guidance on the allocation of funds for grants and loans,
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a statement describing the types of activities eligible for grants or loans, and a list of the types
of organizations eligible to receive program funds. The budget direction also stressed the
importance of considering opportunities for leveraging and providing flexibility in loan
products.
To implement the provisions of the Appropriations Act, DHCD and Virginia Housing encourage a
variety of responses from eligible applicants so funds are deployed in a timely and strategic
manner and propose to continue to allocate funds through the broad categories shown on the
following table.
2023-2024 Virginia Housing Trust Fund Allocation
Loans
Competitive Loan Pool $60,000,000
Grants
Homelessness Reduction Competitive
$12,000,000
Grant Pool
Administration $3,000,000
Total $75,000,000
Affordable Housing Loan Program
At least 80 percent of the funds allocated to the VHTF must be used to provide loans that
reduce the costs of affordable rental housing and homeownership. Building on previous
experience with the VHTF and the Virginia Housing Partnership Fund, the housing agencies
have determined Virginia Housing will assist in providing the underwriting services needed to
implement the key provisions of loans made through this program. DHCD, with the
participation of Virginia Housing, will structure the design of the loan component with sufficient
flexibility to maximize the long-term affordability and sustainability of the housing projects
receiving assistance. They will also include provisions that encourage opportunities to include
project participation from other public and private funding sources.
The loan program will have two distinct components. A majority of the loans will be offered
through a competitive loan pool open to a variety of eligible projects accomplishing the VHTF’s
purposes.
Competitive Loan Pool
While the competitive loan pool will accommodate a wide array of possible projects, it will
acknowledge the direction of a number of gubernatorial and General Assembly initiatives as
4
well as the limited availability of funds by giving priority to demonstration projects that address
articulated state housing policies. Such policies include permanent supportive housing options
for persons with disabilities (including housing for people with serious mental illness and
funding that could aid the state response to the U.S. Department of Justice settlement) and
expanding permanent housing opportunities for persons experiencing homelessness. DHCD
uses a consolidated application process, which allows applicants to apply for four sources of
funding with one application. The Affordable and Special Needs Housing Consolidated
Application combines VHTF monies with Federal HOME and Federal Housing Trust Fund monies
as well as Housing Innovations in Energy Efficiency investments.
Most of the funds in the Competitive Loan Pool will be used to provide low-interest loans that
are structured to meet the financing needs of specific projects. DHCD and Virginia Housing
anticipate that a majority of the loan pool will provide financial assistance for specific projects
that address the affordable rental housing needs of very low-income (household income at or
below 50 percent area median income or AMI) citizens, while giving priority to projects that
address critical housing needs mentioned in the previous paragraph as well as other areas of
need such as returning veterans. To assure the long-term viability of affordable rental projects,
the agencies will give priority consideration to projects that have an identified strategy for
financial sustainability, such as providing rental assistance to income-qualified tenants. In
keeping with the direction that the loans provide flexible financing, the agencies will set
repayment rates and terms for each individual loan from the VHTF. In addition, provisions of
the loan program will encourage applicants to pursue leveraged funds from other sources such
as the Low Income Housing Tax Credit (LIHTC) program and other federal and local housing
programs such as HOME and the Community Development Block Grant (CDBG) program.
DHCD will use a competitive process to select projects for funding. The maximum VHTF amount
available to a single project is capped at $700,000 for affordable housing projects and $900,000
for projects providing permanent supportive housing units. The criteria used to evaluate
projects for funding will include the following: (1) direct impact on one or more high priority
state housing policies; (2) leveraging; (3) affordability; (4) financial sustainability; (5) impact on
local housing needs; (6) feasibility, (7) readiness, (8) coordination of services and (9) the
applicant’s administrative capacity. DHCD will rank competitive project applications using a
standardized review with a 100-point scale. No project will be funded that scores below sixty
percent. DHCD will make funding offers to the highest scoring projects in descending order until
available funds are exhausted or all projects scoring above sixty percent have been funded.
Applicants may be asked to provide additional information to finalize funding offers. Property
funded through a VHTF loan will be subject to a lien intended to ensure its continued use as
targeted, affordable housing during a specified period. The outstanding balance on the loan will
be due in the event the affordability period is not met.
Homeless Reduction Grant Program
Up to 20 percent of the funds allocated to the VHTF are permitted for the reduction of
homelessness. The Homeless Reduction Grant funds may be used for temporary rental
5
assistance, not to exceed one year, housing stabilization services in permanent supportive
housing for the chronically homeless, and predevelopment assistance for permanent
supportive housing for the chronically homeless. In accordance with budget language, priority
consideration will be given to efforts to reduce the number of homeless youth and families.
DHCD will select projects based on need, approach, local coordination, and capacity. As with
the loan program, projects will be selected for funding through a competitive application
process. Applicants may apply for the amount needed to administer the project, DHCD does not
anticipate entering into grant agreements for less than $25,000. As with the loan program,
DHCD will rank competitive project applications using a standardized review. DHCD will make
funding offers to the highest scoring projects in descending order until available funds are
exhausted or all projects scoring above sixty percent have been funded. Applicants may be
asked to provide additional information to finalize funding offers.
Organizations Eligible for Virginia Housing Trust Fund Allocations
Several types of organizations are specified in the Code and guidelines as being eligible to
receive funding through the VHTF; local governments, local housing and redevelopment
authorities, regional or statewide organizations providing affordable housing and homeless
assistance/services to Virginia residents, and holding companies expressly created for owning
and operating affordable housing are deemed eligible to apply for VHTF monies. This would not
preclude eligible organizations from contracting with a variety of other parties to assist in
providing the housing and other resources required to satisfy the conditions of the grant or
loan product.
Virginia Housing Trust Fund Administration and Management
Funding for the VHTF is included in DHCD’s budget. DHCD is to work in collaboration with
Virginia Housing to carry out the provisions of the VHTF. DHCD and Virginia Housing have a
proven record of accomplishment in jointly administering statewide housing initiatives. In the
late 1980s, the General Assembly passed legislation creating the Virginia Housing Partnership
Fund. It was created to improve the quality and affordability of housing throughout the
Commonwealth and was jointly administered by DHCD and Virginia Housing. DHCD set policy,
provided technical assistance to its housing development partners in responding to funding
opportunities, and selected projects for funding through a competitive application process.
Virginia Housing provided underwriting services and originated and serviced loans.
Based on the model of the Partnership Fund, DHCD and Virginia Housing jointly determine the
policy parameters of the Housing Trust Fund. Specific aspects of the VHTF implementation are
handled by the individual agencies in accordance with their designated areas of expertise and
responsibility.
With respect to the loan offerings, DHCD provides technical assistance during project
development. Virginia Housing, drawing on its forty-year experience in mortgage lending as the
6
state’s housing finance agency, provides project underwriting for the Affordable Housing Loan
Program and performs loan origination, servicing and monitoring for all program loans. DHCD,
which has more than thirty years’ experience in managing federal and state grant and loan
programs for housing and community development, as well as extensive involvement in
homeless programs, administers the process to solicit applications for both the Competitive
Loan Program and the Homeless Reduction Grant Program. Overall responsibility for the
ongoing administration and monitoring of grants made through the Homeless Reduction Grant
Program falls to DHCD.
Summary of Changes
Since the completion of last year’s VHTF report, DHCD’s Office of Homeless and Special Needs
Housing (HSNH) has adjusted its application cycle to synchronize the program year with the
calendar year. As such, outcome data for HRG funding administered in FY 2023 is not presently
available and will be included in next year’s report. DHCD did not make any other substantive
changes to the VHTF program design during FY 2023.
Summary of 2022-23 Utilization
2022-2023 Virginia Housing Trust Fund Allocation
Loans
Competitive Loan Pool $60,000,000
Grants
Homeless Reduction Grant Pool $12,900,000
Administration $2,100,000
Total $75,000,000
FY 2023 Summary for Competitive Loan Pool
- Approximately $59.5 million was requested for the $60 million VHTF made available in the
Competitive Loan Pool; ASNH overall had $212.8 million requested with $163 million
available across all sources
o 88 applications requested VHTF
o 80 developments were awarded VHTF
o Many projects serving very low and extremely low-income populations that are very
hard to serve, such as chronically homeless and persons with intellectual and
developmental disabilities
- Creation and Preservation of Affordable Housing units (Competitive Loan pool)
o $59.5 million invested to leverage $2.3 billion in other resources
o 5,780 affordable units will be created or preserved
7
o 42 projects with permanent supportive housing (PSH) units for a total of 608 PSH
units created
- VHTF assisted in expanding affordable homeownership with 16 of the 80 awarded projects,
creating 195 for-sale units
FY 2023 Summary for Homeless Reduction Grant (HRG) Pool
- Over $16.8 million requested for $12.9 million in Homeless Reduction Grants
o 86 applications
o 68 awards
- HRG contracts follow the calendar year from January 1 – December 31. Final FY 2023
service numbers will be reported in next year’s report
- FY 2022 is the last complete year of HRG implementation. During FY 2022, 46 projects
utilized $8.3 million to serve the following households:
o 14 Rapid Rehousing (RRH) Projects served 788 households
o 14 Underserved Population Innovation (UPI) projects served 393 households
o 18 PSH projects served 705 households
o A total of 1,886 households experiencing homelessness were served during FY 2022
with HRG funding
8
Housing Trust Fund Snapshot 2023-2024 Allocation
Trust Fund Grants Loans Totals
Components
& Homelessness Competitive
Features Reduction Loan Pool
Purpose Provide competitive grants to Through a competitive process,
local/ regional partners providing provide local/ regional partners
temporary (<1 year) rental with low-interest loans that will
assistance; housing stabilization assist in financing housing
services in permanent supportive projects that meet critical state
housing; and pre-development housing policies.
for long-term housing Project underwriting will tailor
opportunities for the homeless. repayment rates and terms to
Require coordination with CoC. specific project needs. The
highest priority will go to those
demonstrating financial sustain-
ability and leveraging.
Prioritize projects serving special
needs populations—ID/DD,
Severe mental illness, Permanent
Supportive Housing
Funding $12,000,000 $60,000,000 $75,000,000
Available ($3,000,000
Administration)
Project Caps None – based on need $700,000 per affordable
housing project/ $900,000 for
projects providing PSH
Part II: Financial Status of the Virginia Housing Partnership Revolving Fund
The 1988 General Assembly established the Virginia Housing Partnership Revolving Fund to
expand the availability of affordable housing opportunities within the commonwealth. The
Virginia Housing Development Authority (VHDA) administered and managed the partnership
fund, subject to policies, procedures and programs established by the Department of Housing
and Community Development (DHCD). In accordance with a Memorandum of Understanding
between the two agencies, the Authority made underwriting recommendations and provided
legal and loan servicing assistance for loan and grant applications identified by the department.
9
Following 1989, the partnership fund provided grants and loans to a variety of housing
providers and to persons and families of low and moderate-income. While in active operation,
the partnership fund allocated over $163 million to housing proposals financing 17,626 units.
In 2003, as part of a series of actions taken to close a serious budget gap, Item 111 G of the
Appropriations Act directed the sale of the portfolio of outstanding loans and other assets of
the Partnership Fund to VHDA.2 A portion of the proceeds of the sale were paid to the General
Fund, while another portion was directed to the Commonwealth Priority Housing Fund (CPHF),
which in the near term provided a resource for addressing certain high priority housing needs.
Ultimately, following the enactment of additional legislation during 2005, the remaining
balance of the CPHF was transferred to a community development bank inaugurated by the
commonwealth where it continued to provide a source of mortgage loan funding. A remnant of
the Virginia Housing Partnership Revolving Fund remained on the books of VHDA where it was
subject to annual financial reporting.
With the passage of legislation establishing the Virginia Housing Trust Fund (VHTF) during the
2013 Session of the Virginia General Assembly, VHDA assumed the role of administrator for
VHTF, subject to program guidelines established by DHCD.3 For the purposes of the program
and VHDA’s financial reporting, the VHTF received the investments previously held in the
partnership fund. This effectively eliminated the partnership fund as a separate entry onto the
books of the Authority, where the VHTF replaced it.
Thus, this portion of the report, in accordance with the provisions of § 36-150 of the Code of
Virginia, addresses the financial status of the Virginia Housing Trust Fund and the former
Virginia Housing Partnership Revolving Fund. The unaudited status of the Virginia Housing Trust
Fund and the former Virginia Housing Partnership Revolving Fund is reflected as of June 30,
2023 (pages 13-15 attached below). This report addresses the net position, changes in net
position, revenues and expenses associated with the Virginia Housing Trust Fund. Virginia
Housing, as administrator of a portion of the VHTF, provided the material included in this
report. The financial status report on the VHTF was included in the Virginia Housing financial
statements for the year ended June 30, 2023. The public accounting firm KPMG audited these
statements (pages 16-20 attached below). The Department of Housing and Community
Development has received and reviewed a copy of these financial statements and concluded
that they accurately reflect the status of the VHTF.
2
https://leg1.state.va.us/cgi-bin/legp504.exe?031+bud+21-111
3
Chapter 754, 2013 Acts of Assembly: https://lis.virginia.gov/cgi-bin/legp604.exe?131+ful+CHAP0754+pdf
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