New move to lift cap on housing trust fund – but it’s empty

TALLAHASSEE, Fla. – Sept. 25, 2009 – In a bitter irony of Florida’s recession-ravaged budget, housing advocates say they hope to lift a cap imposed by the Legislature on a state trust fund now that it’s empty of cash.

Lawmakers drained the remaining $92 million last spring from the state’s affordable housing trust fund to help plug a $6 billion budget deficit – the second time in less than six months the Legislature drew on the dwindling account.

But with nothing left to take, lawmakers from both parties say the time is right to lift a three-year-old limit on how much the state can spend on helping Floridians buy homes.

“We have to anticipate that money will flow into the trust fund again,” says Rep. Ron Saunders, D-Key West, who has introduced legislation (HB 95) to remove the spending cap. “We’ve basically been breaking trust with the housing industry by diverting this money.”

During the state’s housing boom, the affordable housing trust fund ballooned to more than $600 million. Cash poured into the trust fund from what seemed like an endless stream of real estate transfer taxes. Awash in cash, lawmakers in 2006 imposed a cap on how much money in the fund could be spent, limiting it to $243 million. That allowed them to skim the rest – millions of dollars – for other areas of the budget.

But even as new dollars going into the fund slowed with the housing collapse over the past two years, lawmakers continued to tap the fund, pulling $190 million from the program during January’s budget-cutting special session. In the spring, legislators set aside $31 million for county housing assistance – about one-tenth of what was formerly spent – before legislators pulled the last $92 million.

The timing couldn’t have been worse, housing officials say. Florida’s housing market is contending with 300,000 unsold homes, a backlog that weighs on the state’s already struggling economy. Foreclosures in the state are among the highest in the nation, and lenders have begun to enforce stricter loan policies making it more difficult for low- and moderate-income Floridians to buy.

“There’s definitely demand out there,” says Mitchell Glasser, manager of Orange County’s Housing and Community Development division. “But we’re getting zero help from the state. We used to get $7.5 million-a-year. That’s quite a hit.”

Glasser says federal and county funds keep the local program alive. But the amount of assistance for eligible residents has been roughly cut in half – to as little as $5,000 in county-assisted loans for those with moderate-incomes, to $25,000 for those considered very low-income.

The Florida Home Builders Association and Florida Association of Realtors®, organizations that went along with tax increases almost 20 years ago to support creation of the affordable housing program, support the latest move to lift the cap.

“Getting money back into this program is a necessary effort with the economy the way it is,” says Sen. Victor Crist, R-Temple Terrace, who tried last session to expand the affordable housing program. “But we know with the budget next year, it’s likely not to get much better for now.”

Being rebuilt from zero, the trust fund is not likely to contain more than tens of millions of dollars by next spring, analysts said. But Saunders, who sponsored the legislation in 1992 that created the program – named after late Community Affairs Secretary Bill Sadowski – says it’s important to revive the effort and plan for better financial days.

“Without a cap on funding, the Legislature can still pull money out of the program,” Saunders conceded. “But it won’t be automatic. They’d have to actively vote to divert the funds.”

Source: News Service of Florida, John Kennedy