Secure: Preserve, Provide, and Expand Safe Affordable Housing
Affordable housing can be either subsidized by federal, state, and local subsidies and tax incentives or unsubsidized. Federally subsidized housing accounts for 10 percent of the rental housing stock in the United States, or 4.9 million units (Public and Affordable Housing Research Corporation and National Low Income Housing Coalition [PAHRC and NLIHC], 2020). Unsubsidized or naturally occurring affordable housing (NOAH)1 provides more affordable housing relative to the aggregate of all privately owned subsidized rental properties. An estimated 5.5 million rental housing units across the United States are affordable without public subsidy support (CoStar, 2016).
The supply of affordable housing is inadequate in most localities and extremely limited in many others (Aurand et al., 2020), and low-income renters must compete with higher-income renters for the limited number of affordable units. According to the National Low Income Housing Coalition, “only 36 affordable and available rental homes exist for every 100 renter households with extremely low incomes” (Aurand et al., 2020, p. 8). Over the period 1990–2017, the proportion of low-cost housing units out of the total number of units declined in every state. While the severity of the gap between the supply of and demand for available units varies from state to state, no state has a sufficient supply of affordable units (La Jeunesse et al., 2019). To meet the current shortfall nationwide, the United States would need 7 million additional units that are both affordable and available (Benfer et al., 2020).
An analysis of the American Community Survey found that the number of low-cost rental units decreased in all eight southeastern cities examined from 2006 to 2014 (Immergluck et al., 2016).2 These losses were concentrated disproportionately in a small number of census tracts. The gaps in the affordable housing supply have been exacerbated during the COVID-19 pandemic because of budget shortfalls for local and state government programs and downturns in the construction of new affordable housing due to financing issues and material delays (see Sisson, 2020). Nationally, 33
1 Rental housing that is affordable to people living at or below the area median income without subsidy.
2 The eight cities were Atlanta, Birmingham, Jacksonville, Memphis, Miami, Nashville, Orlando, and Tampa.
percent of affordable federally subsidized units are at risk of conversion to market rate as contracts keeping owners in affordability programs expire and in some cases are not renewable (Jordan and Poethig, 2015). Particularly when combined with other factors, such as highly desirable neighborhood locations and for-profit ownership, these exit risks can be significant (PAHRC and NLIHC, 2020). It is much less costly to preserve existing affordable units than to build new ones, and preservation can also yield social and environmental benefits compared with new development (PAHRC and NLIHC, 2020).
While Goals 1 and 2 entail short-term solutions to prevent evictions during the pandemic, this goal focuses on increasing the supply of affordable housing to provide long-term systemic and sustainable change following the COVID-19 pandemic and prepare for the next crisis. This could be achieved through three complementary sets of actions detailed below: (1) preserve the existing stock of affordable housing, including both subsidized and unsubsidized units; (2) produce more affordable housing for renters at different income levels; and (3) reform policies that impede the preservation and development of affordable housing.
All four scenarios examined by the Strategy Group highlight the costs and risks associated with an ongoing lack of safe affordable rental housing, ranging from housing instability to health, human dignity, and social and economic harms. The fallout along these lines from the COVID-19 crisis has been far greater than it would have been with a larger stock of affordable rental housing; therefore, increasing the stock is important for boosting resilience in the face of future crises. Thus, the Strategy Group prioritized the following actions as adaptive and resilient means of preserving, providing, and expanding quality affordable housing in the medium and long terms.
Preserve the Existing Stock of Affordable Housing for Renters, Including Both Subsidized and Unsubsidized Units
Rationale: Preservation is critical to maintaining existing affordable housing stock. Effective subsidized preservation programs include the Low-Income Housing Tax Credit (LIHTC), the HOME Investment Partnerships Program (HOME),3 the National Housing Trust Fund (HTF),4 and the Rental Assistance Demonstration (RAD) program, and the Public Housing Capital Fund.5 The LIHTC and HOME are the largest federally funded subsidy programs providing resources to preserve existing affordable rental housing stock in need of capital investment (Scally et al., 2018).
3 See https://www.hudexchange.info/programs/home.
4 See https://www.hudexchange.info/programs/htf/about; https://nlihc.org/explore-issues/projects-campaigns/national-housing-trust-fund.
The LIHTC program is the nation’s longest-running federal multifamily housing program and is administered by state housing agencies, whose housing priorities are outlined in their Qualified Allocation Plans. The LIHTC program provides federal tax credits for construction or rehabilitation of 100,000 affordable housing units each year (Fischer, 2018). Despite some improvements, however, the LIHTC has been criticized for not meeting its potential to help lower-income renters access high-opportunity neighborhoods and for failing to reach the lowest-income households with the greatest need (Fischer, 2018). To help fill this gap, the Affordable Housing Tax Credit Improvement Act, introduced on April 15, 2021,6 would revise the provisions of the LIHTC and increase the supply of affordable rental housing by more than 550,000 units over 10 years. The bill would expand the LIHTC by 50 percent and increase existing incentives for developers to build affordable rental units. In addition, it would increase the number of housing credits that developments serving extremely low-income tenants receive.
HUD’s HOME and HTF programs supplement LIHTC-funded projects and help reach the lowest-income renters through block grant funds (Scally et al., 2018). HOME provides at least $3 million annually in flexible block grant funding, while HTF provides grants for preservation or production of affordable housing, with a minimum affordability period of 30 years (Scally et al., 2018).7
The RAD program8 enables public housing properties to shift to more sustainable Section 8 Project-Based Voucher (PBV) and Project-Based Rental Assistance (PBRA) platforms. These project-based Section 8 programs, such as the Housing Assistance Payment (HAP), benefit from greater private-sector involvement and, importantly, can leverage private financing for modernization since much of the public housing inventory needs extensive rehabilitation (Stout et al., 2019).
Successful strategies for the preservation of unsubsidized housing include programs that equip tenants and nonprofit housing organizations to own and govern their properties cooperatively; examples include Tenant Opportunity to Purchase Act (TOPA) and Community Opportunity to Purchase Act (COPA) policies,9 NOAH Impact Funds10 that incentivize socially motivated investment to prevent loss of affordable housing stock, and public–private acquisition fund programs (Kende, 2017). Other effective preservation strategies include programs that incentivize owners to sell their homes to mission-driven nonprofit community-based organizations that can ensure long-term affordability (Bratt et al., 2006).11 Such nonprofits can prevent “predatory equity,” whereby buyers purchase multifamily properties with cash, resulting in the loss of naturally occurring affordable housing stock. There is also considerable private capital interest in investing in affordable and NOAH properties. It is important for the public sector to provide incentives to private capital to preserve existing affordable stock, as well as to develop new affordable projects.
6 See https://www.ncsha.org/wp-content/uploads/OTT21288.pdf.
7 See https://www.hudexchange.info/programs/htf/about.
8 See https://www.hudexchange.info/programs/rad.
9 See https://allincities.org/toolkit/tenant-community-opportunity-to-purchase.
10 See https://gmhf.com/finance/noah-impact-fund.
11 E.g., such organizations as Preservations of Affordable Housing (POAH), the Stewards of Affordable Housing for the Future (SAHF) network, Bridge Housing, Volunteers of America, and other nonprofit developers and owners.
Action 4A-1: The U.S. Congress should consider extending and improving the LIHTC program to ensure that LIHTC units are prioritized and subsidized for the lowest-income individuals and families. This would increase incentives for developers to make housing affordable for extremely low-income renters (<30 percent of the area median income) and incentivize affordable housing development in tribal and rural communities (NLIHC, 2019). Such tax credits could be financed by Government Sponsored Enterprise (GSE)12 purchases. Absent market incentives for GSEs to invest in these credits under conservatorship, they should be encouraged to do so by the Federal Housing Finance Agency under the direction of the Department of Treasury.
Action 4A-2: Federal policy makers could ensure that the LIHTC expands recapitalization and preservation of existing affordable housing properties nearing the end of their original compliance periods.
Action 4A-3: State governments should consider prioritizing preservation in LIHTC Qualified Allocation Plans.
Action 4A-4: The U.S. Congress should consider increasing funding for the National Housing Trust Fund that supports low-income residents.
Action 4A-5: HUD should consider expanding the RAD program to allow more public housing properties to shift to more sustainable Section 8 PBV and PBRA platforms and ensure that RAD does not displace families. In addition, housing subsidies should be provided to incentivize the renovations needed to meet the backlog of public housing maintenance and repairs so as to ensure that affordable housing is fully functional and safe.
Action 4A-6: State and local housing authorities should incentivize rental management companies to invest private capital in preserving LIHTC, HAP Section 8, and NOAH properties. Specific strategies these companies should employ are
- converting non–rent-regulated NOAH properties to rent-restricted properties in conjunction with public incentives, for example, tax abatements, soft money loans, and/or public grants in exchange for renovating and preserving the affordability of NOAH properties;
- maintaining long-term HAP Section 8 contracts to ensure long-term affordability through the HUD Mark-to-Market process to increase Section 8 market rent reimbursements to the prevailing market rates; and
- making investments to improve long-term property energy efficiency in order to lower the utility costs of affordable residences, and seeking out rebates from utility companies to offset the capital expenditure on energy enhancements.
Action 4A-7: Local governments, in partnership with public housing authorities and nonprofit housing organizations, should identify at-risk properties and provide resources for rehabilitating and/or purchasing them, and should consider establishing or expanding such programs as the TOPA and COPA policies and NOAH Impact Funds.
Action 4A-8: Local, state, and federal governments, in partnership with philanthropies, should increase funding for housing partnership networks that enable community-oriented financing, scaled for the number of rental units needed, and should support community and nonprofit ownership models that move affordable housing out of the speculative market.
Expand Programs Supporting the Production of Affordable Housing
Rationale: There is a need for expanded financing mechanisms that provide direct funding to empower localities. Federal grant programs for housing are complex, often requiring developers to apply for multiple subsidies to build affordable housing (Bach et al., 2007; Mallach, 2017). Programs that support the production of affordable housing are divided among different federal agencies, with some under the auspices of HUD (HOME and the National Housing Trust Fund) and others under the Department of the Treasury (the Community Development Financial Institutions [CDFI] Fund,13 the LIHTC, and the Capital Magnet Fund [CMF]14). These funds all support CDFIs as lenders and for- and nonprofit housing developers in developing and investing in affordable housing, often layered with a federal tax incentive and state and local programs. Established in 2008 under the Housing and Economic Recovery Act,15 the CMF provides competitive grants to CDFIs and nonprofit housing organizations to attract capital for affordable housing. A 2014 interim assessment found that the CMF had successfully increased the number of affordable housing units by almost 7,000 and had leveraged the CMF investment by 12 times in additional public and private capital (U.S. Department of the Treasury, 2014).
Action 4B-1: The U.S. Congress, Treasury, and HUD should consider expanding Treasury’s CDFI Fund and HUD’s HOME Investments Partnership program and the National Housing Trust Fund, which support CDFIs and for- and nonprofit housing developers to develop and invest in affordable housing.
13 See https://www.cdfifund.gov.
14 See https://www.cdfifund.gov/programs-training/programs/cmf.
15 See https://www.hudexchange.info/resource/4405/housing-and-economic-recovery-act-of-2008.
Action 4B-2: Philanthropies should fund academic or other research institutions to study the CMF in order to understand its impacts.
Action 4B-3: In partnership with community investment organizations, HUD should consider initiating programs to close credit gaps and create financial incentives for developers to build or rehabilitate affordable housing.
Reduce Exclusionary Zoning Practices
Rationale: Regulatory barriers, especially exclusionary land-use barriers, can be significant impediments to the development of affordable housing (Stegman, 2019). Such barriers also increase housing prices, which disproportionately impacts the most at-risk populations. These populations, frequently Black and Latinx, are more likely to include low- to moderate-income households, seniors, individuals with disabilities, and children. Recent research suggests that more racially segregated metropolitan regions are showing wider disparities in COVID-19–related morbidity and mortality compared with their less segregated counterparts (Austin, 2020; Barber et al., 2020; Cortright, 2020; Rast et al., 2020; Scott, 2020; Wise, 2020). According to the CDC, racial housing segregation is linked to an increased risk of severe illness or death from COVID-19 (Centers for Disease Control and Prevention, 2021). While some zoning regulations are necessary to enhance public health and safety and protect vulnerable populations, many—including excessive development fees, exclusionary zoning restrictions (reduced density or multifamily use, height restrictions, single-use zones, prohibition of accessory dwellings), and burdensome permitting processes—can effectively exclude affordable housing development.
From its inception, the Fair Housing Act (and subsequent laws reaffirming its principles) has prohibited discrimination in housing-related activities and transactions. This act has also allowed, through the duty to affirmatively further fair housing (AFFH), “for meaningful actions to be taken to overcome the legacy of segregation, unequal treatment, and the historical lack of access to opportunity in housing” (HUD, 2015, p. 42272). Pursuant to the AFFH mandate in Section 808(e)(5) of the Fair Housing Act and other legislative enactments, HUD issued the AFFH rule in July 2015. The regulation provides recipients of federal housing and urban development funds and other federal funds (i.e., program participants) with an effective planning approach to aid them in taking “meaningful actions” to overcome historical patterns of segregation, promote fair housing choice, and foster inclusive communities free from discrimination. In August 2020, HUD replaced the AFFH rule with the Preserving Community and Neighborhood Choice rule (HUD, 2020b), effective September 8, 2020, which defined fair housing much more broadly as “affordable, safe, decent, free of unlawful discrimination, and accessible as required under civil rights laws” (p. 47905). Moreover, and perhaps more importantly, this new rule allowed affected municipalities to self-certify compliance, and instead of having to show
“meaningful action” to address segregation and other types of disparities, local and state governments must merely show that they took “some active step to promote fair housing” (p. 47902). On April 12, 2021, the secretary of housing and urban development submitted a draft rule to the Office of Management and Budget to reinstate the 2015 AFFH rule.16
Action 4C-1: HUD should require that, to receive competitive funding for housing, states and local governments must demonstrate measurable progress toward meeting regional housing needs and distributing affordable housing across a diverse range of communities. Federal oversight of local land-use regulations could be strengthened by increasing reporting requirements for jurisdictions that receive Community Development Block Grants (such as the Yes in My Backyard [YIMBY] Act [Up for Growth, 2020]) and requiring municipalities to reexamine local land-use restrictions when applying for some federal transportation grants (such as the Build More Housing Near Transit Act [Up for Growth, 2019]). Through enabling legislation, states should provide local communities with state regulatory environments that allow them to mandate inclusionary units and/or provide incentives to zone for new multifamily housing development. States should reduce regulatory requirements that increase costs and prevent the development of such housing, and provide property tax exemptions in designated areas for specified time periods for rental or owner-occupied properties (see Whitehead and Williams-Derry, 2014).
Action 4C-2: Local governments should create local incentives, combined with inclusionary zoning mandates where possible, to increase the supply of affordable housing through mechanisms including zoning reform, acquisition, and increased production of new affordable housing.17
Action 4C-3: State and local governments should encourage governors, mayors, and city councils to continue to work to eliminate exclusionary land-use regulations, which raise housing costs and restrict access to housing and economic mobility, entrenching existing inequities.18
Action 4C-4: HUD and the Department of Justice should continue enforcing existing fair housing legislation.
16 See https://www.reginfo.gov/public/do/eoReviewSearch, U.S. Department of Housing and Urban Development, Affirmatively Furthering Fair Housing; Restoring Statutory Definitions and Certifications (FR-6249).
17 Inclusionary zoning policies mandate or incentivize that new or renovated developments set aside a small percentage of the units for low-income residents at below-market rates. Frequently these programs have the additional benefit of creating affordable housing that is dispersed throughout a jurisdiction and in areas with high neighborhood opportunity. To make inclusionary zoning effective policy, such policies are frequently combined with density bonuses and refinements to allow for the seamless blending of inclusionary units into development. Additionally, the density bonuses address the potential issue of the mandate for inclusionary housing being an uncompensated taking. These strategies are supported by HUD research and policy recommendations concerning regulatory barriers to affordable housing over many years (HUD, 2021; see also https://www.huduser.gov/portal/taxonomy/term/42). “Acquisition” refers to the purchase of existing low-cost housing units to be added to the long-term affordable housing stock. “Zoning reform” refers to reducing regulatory barriers, especially such exclusionary land-use barriers as regulations barring high-density housing. Zoning reform to enable higher-density housing would facilitate acquisition.
18 See the strategy employed in Massachusetts (Chapter 40B, 40R) (Cowan, 2006; Karki, 2015). Recent research suggests that Chapter 40B has effectively boosted the supply of affordable housing and overcome local exclusionary barriers in the jurisdictions most resistant to affordable housing development in Massachusetts (Fisher and Marantz, 2015; Marantz and Zheng, 2020; Reid et al., 2017).
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