Glimmer of Hope for More Affordable Housing Funds

April 10, 2014

Remember the National Housing Trust Fund? I wouldn’t blame you if you don’t because it has never helped finance any affordable housing units, though that’s what it’s supposed to do.

Now it looks as if the Trust Fund may fulfill expectations, but probably not until some time around 2020, if then. So we’ll still need more funding for affordable housing programs now — and would even if the Trust Fund were a for-sure, near-term source.

Why the Trust Fund Has No Funds

As I wrote some time ago, Congress established the Trust Fund in 2008 to address what was already an affordable housing shortage.

The Fund was to be a source of grants to states. They were to use 90% of the money for rental housing. And 75% of it had to go to rental housing that was affordable for extremely low-income households, i.e. those with incomes at or below 30% of the median for the area they live in.

But the Fund never had any funds for grants because its revenue stream was to come from Fannie Mae and Freddie Mac. They became essentially bankrupt when the housing bubble burst.

The agency that took over to manage them back to solvency suspended their contributions to the Trust Fund. And the freeze still stands, even though they’re turning profits again.

President Obama has repeatedly included one-time $1 billion financing for the Trust Fund in his proposed budgets. Well, we know what’s come of them. Bills have been introduced in Congress to provide funding in others ways. Nothing has come of them either.

And so, as PoltiFact says, the Trust Fund “is nothing more than a page on HUD’s website.”

A New Revenue Stream

Senator Tim Johnson, who chairs the Senate Banking Committee, and Senator Mike Crapo, its most senior Republican member, have introduced a bill that would provide the Trust Fund with an ongoing revenue stream — potentially more than $5 billion a year,* according to the National Low Income Housing Coalition.

The bill as a whole would replace Fannie and Freddie with a new entity to regulate the secondary mortgage market, i.e., securities backed by bundled mortgages that are sold to pension funds, insurance companies and other investors.

Like Fannie and Freddie, the new entity — the Federal Mortgage Insurance Corporation — would guarantee investors against losses, but only those that exceed 10% of the securities’ value.

Institutions that choose to participate in the new system would be charged a user fee. FMIC could calibrate it to provide incentives for issuing mortgages in underserved areas. But fees would have to average 10 basis points, i.e., 10 hundredths of a percent, on all covered securities.

Seventy-five percent of the fees would go to the Housing Trust Fund. AnotherĀ  15% would go to the Capital Magnet Fund, providing a further boost for affordable housing.

So one can understand why NLIHC says that the bill “would provide the most significant new investment in rental housing affordable to America’s neediest families in forty years.”

But Will It Pass?

Zillow Real Estate Research, which provides a very useful summary of the very complex bill, cites “substantial” near-term hurdles to Congressional approval — and some that may prove not only near-term.

Some Democrats and advocacy groups, it says, believe the bill doesn’t do enough to promote affordable housing. This, I take it, refers to the fact that it eliminates the affordable housing goals that were supposed to govern Fannie and Freddie’s mortgage purchases.

The bigger hurdle, as you might expect, is right-wing Republicans’ antipathy to most anything the federal government does to regulate private markets — and to compensate for their failures.

Housing Finance Committee Chairman Jeb Hensarling is thus “skeptical of any approach that does not end the permanent government guarantee in the secondary mortgage market” — a function his committee’s bill would largely privatize.

More to the point, the bill would eliminate the Trust Fund and the Magnet Fund — and replace them with … well, nothing. “The best affordable housing program is a job,” Hensarling says.

All the Congress-watchers I’ve read agree that we’ll see no definitive action on housing finance reform any time soon — almost surely not until next year, when the upcoming elections are history.

Meanwhile the Affordable Housing Crisis Worsens

NLIHC reports a shrinking “sliver” of the rental market still affordable and available to ELI households, making for a shortfall of seven million units in 2012. Only a quarter of households eligible for federal and local subsidy programs receive assistance, it adds.

In the last year alone, some 70,000 fewer families have had federally-funded vouchers to help pay their rent, according to Center on Budget and Policy Priorities estimates. And last December’s budget deal won’t free up enough funding to restore even half the vouchers lost.

Even if Congress were to provide funding for all the lost vouchers, we’d still have waiting lists — and at least 4.9 million ELI households paying more than half their income for rent.

* This figure comes from the NLIHC report I recently wrote about. Its earlier press release (linked to further on) put the potential revenue stream at more than $3.5 billion a year.


Rent’s Way Too High for Low-Income DC Residents

March 27, 2014

The National Low Income Housing Coalition celebrates the 25th anniversary of Out of Reach — its annual report on rental housing (un)affordability for low-income households.

As in the past, it provides figures for the U.S. as a whole, each state and the District of Columbia, along with rankings of highest and lowest-cost jurisdictions.

The Big Picture

The big-picture story is well-known, though the figures give it new punch.

There’s a growing shortage of units that are both affordable and available to extremely low-income renter households, i.e. those whose gross incomes are at or below 30% of the median for the area they live in.

There are 10.2 million of them — about one in four of all renter households. Three-quarters of them spend at least half their income on housing, leaving them little for other expenses — and at high risk of homelessness.

Their so-called severe housing burdens are partly the result of the growing shortage — a 7 million unit deficit in 2012. They also reflect inadequate funding for housing assistance programs, which now help only about a quarter of eligible households.

Rental housing in the District is more expensive than in all but one state — Hawaii — according to NLIHC’s measures (of which more below).

A modest two-bedroom apartment, plus basic utilities would be out of reach even for workers who earn the local average for renters — and way out of reach for minimum wage workers.

How NLIHC Measures Housing Affordability

As I’ve written before, NLIHC uses several major measures:

  • The fair market rent for a two-bedroom apartment, as set for the jurisdiction by the U.S. Department of Housing and Urban Development.
  • The housing wage, i.e., how much a full-time worker would have to earn per hour for the apartment to be affordable at the customary 30% of gross income.
  • The estimated average wage for renters, based on several federal sources.

We’re cautioned against comparing this year’s figures to those NLIHC has previously reported because, it says, the FMR methodology HUD now uses introduces more year-to-year variability. Frustrating for those of us who want to track trends. And who doesn’t?

Be that as it may, here’s what we learn about how affordable rents are out of reach for several, mostly overlapping groups of low-income households in the District.

Perspectives on Rental Housing Costs in DC

The FMR for a two-bedroom apartment in the District is $1,469 a month. It would thus be affordable for a household earning $58,760 a year. This translates into a housing wage of $28.25 an hour — $20 more than the current minimum wage.

A minimum wage worker would have to put in 137 hours a week, every week to afford the apartment. Looked at another way, a household would have to include 3.4 full-time, year round minimum wage workers.

And in another way, the gap between the full-time minimum wage and earnings that would make the apartment affordable is nearly as large as the FMR — $1,049 a month.

The apartment is unaffordable, though far less so for District residents earning the local average for renters — $1,327. The gap in this case is $142. The renter would have to work 44 hours a week, year round to close it.

The gap reported for ELI households is $667 a month, but it’s surely larger for many. For one thing, the gap is based on the maximum 30% of AMI, though many households have to get along on less. For another, the AMI itself is misleadingly high because it’s inflated by incomes in nearby suburbs.

Last and worst off are households that rely solely on one member’s SSI (Supplemental Security Income) benefits. For them, the gap is a jaw-dropping $1,253.

Notwithstanding the caution, I’ll note that the gaps are all bigger than those NLIHC reported last year. This is not only because rental costs are rising — and low-cost rental units vanishing. It’s also because incomes aren’t keeping up — at least, for households in the bottom 40%.

The average hourly wage for renters is only 32 cents higher than what NLIHC estimated for 2013, while the housing wage is $1.10 higher. And though the District’s minimum wage will rise to $11.50 in 2016, it will still be less than half this year’s housing wage.

Do we need more local funding for affordable rental housing programs? Oh yes, we do.


Not Much in DC Affordable Housing “Pipeline” for Lowest-Income Renters

December 30, 2013

As I recently wrote, I asked the DC Department of Housing and Community Development for some specifics about the “nearly 3,200″ additional units of affordable housing that the Gray administration recently announced.

Marcus Williams, the Public Information Officer there, responded with just what I asked for. Here’s what I learned.

But first, a few prefatory remarks. As I said in my prior post, the area median income for the District this year is $107,500. Affordability is calculated for both percent of AMI and household size.

So there are lots of income ranges — and by the same token, lots of maximum monthly rents. The AMI itself is based on a four-person household. For the sake of simplicity, I’m going to use that here. Other household sizes are in this table.

As I also said, “nearly 3,200″ is actually 3,137. This is the number of units in the “pipeline” for the current and next fiscal years. In other words, they’re at some stage of development — anywhere from still getting underwriting to actually under construction or renovation.

DCHCD doesn’t yet know for what tier (or tiers) of low-income households 710 of the units will be affordable. These belong to a TOPA (Tenant Opportunity to Purchase Act) project that’s due for some financial assistance from the Housing Production Trust Fund.

At this point then, DCHD can account for the affordability tiers of 2,427 units. And so, without further ado …

SixtyFifty-six percent will be for the highest of the low-income tiers, i.e., for households with incomes between 51% and 80% of the AMI. The current range for a four-person household is $54,825 to $70,900.

But the allocation tilts toward the lower end of the tier. All but 114 (5%) of the 1,358 units in this category will be for households with incomes topping out at 60% of the AMI — $64,500 for our four-person household. This is $580 less than last year’s median income for D.C. families with children.

Twenty-seven percent of the units will be for households in the lowest of the low-income tiers, i.e., those classified as extremely low-income. For our four-person household to qualify, its annual income would have to be no greater than $32,250.

Nearly two-thirds of these units (657) will be in housing that’s linked to supportive services, e.g., mental health and/or employment counseling, training in “life skills” like financial management.

Some will be in transitional housing, which is usually limited-term, and the rest in permanent supportive housing, which has no fixed time limit. Both are usually for individuals and families who’ve become homeless.

Only 227 units in the ELI group (about 9% of all the accounted-for units) are for households who are poor or nearly so, but have somehow managed to keep a roof over their heads.

Rounding out the list are 412 units for very low-income households, i.e., those with incomes between 31% and 50% of the AMI. The current maximum for our four-person household is $52,750.

I’m not sure what we should make of all this, but I’ll take a stab at it.

Insofar as the unit breakout reflects priorities, we see two. One is a preference for housing that will be affordable for what would generally be considered middle-class families, whose budgets can be stressed by rising housing costs here.

The other preference is for housing that will get homeless people out of shelters — or actually off the streets — and then try to move them to a point where they can pay for housing on their own.

All well and good. But we don’t see a priority for other extremely low-income people, including prospective graduates of transitional housing or PSH.

Nearly two-thirds of households in this category had “severe housing burdens” in 2010. This means they paid more than half their income for rent, putting them at high risk of homelessness.

Very low-income households don’t seem much of a priority either. Seventeen percent of the units are designated for them, but nearly a third had severe housing burdens.

Well, choices must be made. And no one, to my knowledge, believes that Mayor Gray’s one-time $100 million commitment to affordable housing will meet the needs of all the many residents for whom the influx of high-earners is creating an ever-greater crunch.

Nor, for that matter, would a steady stream of revenues from the property transaction taxes that are dedicated to the Housing Production Trust Fund — not, at this point, a certainty, as the latest housing market plunge showed.

We have a complex problem, rooted in a diversity of interests, needs, imperatives and constraints. I doubt that a budget boost for affordable housing construction and preservation would solve it. But it sure could help.

For Whom Is DC’s Affordable Housing Affordable?

December 23, 2013

The New York Times leads off an article on the squeeze rental costs are putting on the poor with the story of a middle-aged woman who lives in a one-bedroom apartment in one of the District’s gentrifying neighborhoods.

She pays $828 a month for rent, which she’s able to do only by collecting $400 from an acquaintance who sleeps on the living room floor. Even her share is unaffordable, by the customary 30% of income standard.

And her landlord demands more. They want to drive her and fellow tenants out, she thinks. Not unlikely, since they could get double the rent once they renovated the grungy place.

The article duly notes Mayor Gray’s $100 million commitment to increasing affordable housing in the city.

The commitment is actually an $80 million increase, mostly for the Housing Production Trust Fund, plus a $20 million repayment of money taken out of the Fund to shore up the District’s locally-funded housing voucher program.

Added to other revenues that have flowed into the Fund, there’s now $187 million available to both preserve existing affordable housing and support construction of more. And the Gray administration is making a big deal of it.

The Mayor and two of his deputies recently held a press conference to celebrate the “nearly 3,200 units” the Fund would create or preserve.

Generous rounding up here, since the actual number is 3,137, according to a project-by-project list produced by the Department of Housing and Community Development. A lot of units nonetheless.

How many would benefit residents whom most of us think of as low-income? And how many of the 5,291 units the administration claims have been completed or will be fairly soon?

These might seem niggling questions to those who aren’t familiar with the intricacies of affordable housing terms. In fact, I think it’s a question we should always ask. Here’s why.

Like the U.S. Department of Housing and Urban Development, the District and other communities use three tiers of affordability — all based on the median income for households in the area, i.e., the geographic area the federal government has defined for statistical purposes.

So we’ve got:

  • Extremely low-income households, whose earnings are no greater than 30% of AMI.
  • Very low-income households, whose earnings are between 31% and 50% of AMI.
  • Just plain low-income households, whose earnings are between 51% and 80% of AMI.

HUD sets the AMI, based on Census data. And for the District, it’s always inflated because the area includes very well-off nearby suburbs. This year, the District’s own median income is 23% lower than the AMI.

For the upcoming year, the AMI is $107,500.* Starting from that, we get the standard tiers for households. Then the maximum affordable housing cost for each is broken down by household size.

For public housing and Housing Choice (Section 8) vouchers, HUD makes a further adjustment for communities like the District where housing costs are unusually high relative to income. The District adopts HUD’s figures for its locally-funded vouchers. These, like Housing Choice vouchers, are only for extremely low-income households.

The District doesn’t make the adjustment for projects developed with Trust Fund support, however — or for the “affordable” units that developers are supposed to include in certain new and expanded residential housing projects, under the D.C. inclusionary zoning law.

So for IZ and the Fund, a unit for a low-income parent with two children would qualify if the rent were about $1,581 a month. That’s nearly $855 more than would be affordable if the family were in the bottom, extremely low-income tier.

Now, the District didn’t invent these standards or set the area for the median income calculations. And it’s got to use them when HUD funding is involved. But you can see why a mere announcement of some number of affordable units created and/or preserved doesn’t tell us what we need to know.

So I asked the Department and Housing and Community Development for some specifics — and got them. I’ll have something to share in the next week or so.

* This figure was provided by DCHCD. I’ve looked in vain for an online source to link to.


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