Sara Harkness was once homeless in Traverse City.

She slept in her car. She slept on a couch in Meijer’s. She couch-surfed and lived in places she was not comfortable living in.

But with help from the Students in Transition program at Traverse City Alternative High School—and armed with a genuine commitment to make it in life—the 24-year-old now has a solid chance to achieve her goals. She works as a waitress and goes to school while renting a home in downtown Traverse City.

Her biggest challenge? Making her $850 a month rental payment.

“I’m pleased to live where I can ride my bike to school and work,” said Ms. Harkness, who uses student loans and Bridge Card assistance to survive. “What would I do (without the student loans)? I don’t know. I don’t have anywhere else to go.”

Helping young people like Sara find housing that is both affordable and close to where they work is a major goal of a new movement in this part of northern Michigan.

Two months ago, Grand Traverse County officials took a very promising step in that direction by establishing the Grand Traverse County Affordable Housing Trust Fund. The fund is a unique financing mechanism for building or rehabbing housing: It stockpiles money from tax foreclosure sales in the county, and then invests in affordable housing projects that could help keep young people like Ms. Harkness in the city.

Sarah Lucas, an affordable housing policy specialist for the Northwest Michigan Council of Governments, said the trust fund has already collected $195,000 from tax foreclosure sales. The money has already helped the county win a matching grant from the federal government. It will be used to build new housing that’s priced for working families with low and moderate incomes.

Generally, that means families of four that earn less than $45,000 a year. In this part of the state, that turns out to be a lot of people.

“A really big portion of our work force falls into that category,” Ms. Lucas said. “We have a lot of police officers, teachers, firefighters, retail clerks, and bank tellers and a lot of service occupations in the area.”

A Step Toward a Vision
As the county’s affordable housing trust fund grows, Ms. Lucas and other advocates for centrally located, reasonably priced housing say they expect it will prove to be an important step in implementingThe Grand Vision—the two-year, citizen-based land use and transportation project that produced a 50-year outline for growth in the six-county Grand Traverse region.

More than 15,000 people participated in The Grand Vision, and a strong majority surveyed said they wanted more affordable housing in their region. Eighty-one percent of participants said they wanted that growth in existing community centers, while 64 percent wanted more walkable neighborhoods.

That strong support could be used to help address the great need for more housing options in the six-county region covered by The Grand Vision. At least 59 percent of Grand Traverse County’s 90,000 residents meet the guidelines for needing affordable housing. That means they are paying more than a quarter of their household income on their rent or mortgage.

In fact, Traverse City and Grand Traverse County need nearly 600 new, affordable rental units, according to a comprehensive 2009 assessment. Many housing advocates view the county’s housing trust fund as a strong first step in getting those units in the pipeline.

People concerned about housing are taking other steps, as well. A collaborative team of housing professionals from across the region is meeting as the Affordable Housing Network to help implement The Grand Vision’s housing goals.The network team is looking at ways to leverage the trust fund—that is, using its capital as a way to attract more developers and, with them, additional money and investment.

“We want to have this revolving fund,” said Jean Derenzy, director of the county’s Land Bank Authority, and a network member. She says that means “loans that would be paid back.”

The Fine Print
The new housing trust fund money so far has captured proceeds from 2006 and 2009 tax foreclosures, even though it was established just a few weeks ago, at the beginning of 2011. For its first three years, the fund will collect 75 percent of the net sale proceeds from tax-foreclosed properties. In the fourth year, officials will evaluate that ratio; they could then either increase or decrease it.

The trust fund’s dollars will generally go to local, non-profit, affordable housing organizations like Habitat For Humanity and Homestretch. Those organizations will use the funds to subsidize new and rehabbed housing projects. The groups must also guarantee that the people who move into them can actually afford to meet their rent or mortgage obligations.

That, according to Ms. Lucas, is the right way to handle what is essentially public money.

“When you have that kind of situation, it’s not individuals who are getting a direct handout,” Ms. Lucas said. “The non-profits are running eligibility screening processes to make sure those benefiting qualify for a mortgage or that they can qualify for their rent payments or repay a loan being made to rehab a home.”

Mary Brooks, a national expert on housing trust funds, ticked off what she said are the keys to successful trusts like the one Ms. Lucas describes: They must be maintained as distinct, separate funds. They must be established by city, county or state governments. And they must receive ongoing, dedicated public funding to support the steady production of additional affordable housing.

Ms. Brooks added that such funds usually also capture other affordable housing funding from annual budgets, and often can accept private donations. But, she said, affordable housing trust funds are not public-private partnerships.

Ms. Lucas pointed out that Grand Traverse County’s approach is unusual because it collects money from tax-foreclosed properties, which is a unique funding mechanism for housing trust funds. There are only a few other examples of housing trust funds in Michigan, Ms. Lucas said. Ann Arbor, she said, has used a housing trust fund to build multiple different types of low-income housing, while Kalamazoo is just now launching a new housing trust fund.

“We are kind of breaking new ground in Michigan,” said Ms. Lucas.

Flexing for Success
Pam Doty-Nation is director of the local Habitat for Humanity office in Traverse City, putting her on the front lines of the fight for affordable housing in northern Michigan. She is very supportive of the new county housing trust fund. She said it could be a great asset in helping Habitat finance reasonably priced land, and the money would be paid back through the new owners’ financing.

“Right now we have an opportunity to buy 10 lots for $72,000 in a developed subdivision in Leelanau County,” said Ms. Doty-Nation, who added that the land is a great bargain in a very expensive area.

A housing trust fund in Leelanau County could feasibly offer money to Habitat to purchase the property. Habitat would then develop affordable housing units on the property, and the families who purchase those homes would then pay back, over time, the money used to purchase the land and to build the house.

“That would be hugely helpful,” Ms. Doty-Nation said of the potential project. “You don’t see offers like that come along very often.”

“It’s always a matter of lining up the different resources available,” Ms. Lucas said. “When there’s a guaranteed commitment to fund a portion of the project, it’s easier to find other funding sources.”

The value of the housing trust fund, Ms. Brooks said, is that the money can be used in a very flexible manner, which is appealing for developers. She said a trust fund can work in any venue, and her organization, the Center for Community Change, reports the funds can be invested successfully in communities as small as 1,000 people.

“We definitely know how to provide housing for everyone—we just haven't committed the resources,” Ms. Brooks said. “The private housing market frankly doesn't serve everyone. It doesn't provide housing that everyone can afford.

“People at lower incomes, fixed incomes, or a single parent with a family often doesn’t make enough money to afford what's being provided in the market,” she added. “Sometimes with just a little help we can do it.”

Glenn Puit is a policy specialist for the Michigan Land Use Institute. Reach him at glenn@mlui.org.