The Impact of Formula Allocation Discretion in the Housing Trust Fund

Abstract

The federal Housing Trust Fund (HTF) was created through the Housing and Economic Recovery Act of 2008, which also required the U.S. Department of Housing and Urban Development (HUD) to establish a formula for allocating housing subsidies to states and Insular Areas (American Samoa, Guam, the Northern Marianas Islands, and the Virgin Islands) on the basis of need. HUD’s Office of Policy Development and Research conducted a regulatory impact analysis of the Department’s proposed formula rule, assuming a hypothetical congressional appropriation of $1 billion for the HTF. The analysis summarized the Department’s approach to weighting various statutory factors of housing need and recognized distributional implications for states. The primary impact was determined to be a transfer from the federal government to states in an amount equal to the appropriation. A number of economic factors are not considered in this determination, but it is not clear that the data or capacity exists to examine such factors. This article updates the impact analysis using recent data and incorporates several corrections. Impact A regulatory impact analysis must accompany every economically significant federal rule or regulation. The Office of Policy Development and Research performs this analysis for all economically significant rules of the U.S. Department of Housing and Urban Development. An impact analysis is a forecast of the annual benefits and costs accruing to all parties, including the taxpayers, from a given regulation. Modeling these benefits and costs involves use of past research findings, application of economic principles, empirical investigation, and professional judgment.