What is a Leverage Ratio?
Is leverage an appropriate measure of success?
Comparing the number of State Housing Trust Fund Dollars invested in a project to its total cost results in a ratio that is known as the leverage. All projects funded with SHTF dollars require leverage. Different types of projects result in very different leverage ratios. Generally, rehabilitation projects that preserve affordable housing units have a modest leverage ratio, sometimes as little as 1:1. However, projects that create new, multi-family affordable units often have a leverage ratio closer to 1:25. Iowa requires a strategic plan that combines preservation of existing units through repair based programs as well as the continued addition of new affordable units. The Board of Directors of each LHTF is charged with assuring that its plan is appropriate for their community.