Tools to Stop Coming Up Short on Affordable Housing

In the weeks before the Congress for the New Urbanism conference in Savannah, GA, May 15-19, we’re presenting interviews with experts contributing to a day-long exploration of “Affordability: The Intersection of Everything.” A three-hour morning forum on Thursday, May 17, kicks off the discussion, followed by two break-out sessions that afternoon. Below is an interview with Ahmad Abu-Khalaf, research analyst with Enterprise Community Partners. He’ll be on the morning kick-off panel.

Q: First of all, give us a sense of the context in which Enterprise considers the national shortage of affordable homes challenge.

Ahmad Abu-Khalaf, Enterprise Community Partners.

Ahmad Abu-Khalaf, Enterprise Community Partners.

A: Enterprise is committed to creating opportunity for low-income people, and we believe that opportunity starts with an affordable, well-designed place to live. There continues to be  a national shortage of affordable homes, and nearly 11 million renter households are severely cost-burdened – that is, they spend more than 50 percent of their income on housing. Enterprise recognizes that these challenges have created a pressing need to identify innovative solutions for containing the cost of construction and expanding the supply of affordable homes. Therefore, Enterprise has led several efforts to boost the capacity for innovation on the local level through infusions of technical assistance and financial resources. These efforts include examining ways to increase cost-effectiveness in the affordable housing delivery system and identifying approaches to expand the supply of affordable homes.

Q: Can you provide more details about Enterprise’s efforts? Do these efforts identify emerging innovative strategies?

In 2014, Enterprise, in partnership with the Urban Land Institute Terwilliger Center for Housing, released a report, Bending the Cost Curve: Solutions to Expand the Supply of Affordable Rentals, which identified the cost drivers of rental housing development and made actionable recommendations for improving cost-effectiveness without sacrificing quality or resident opportunity.

Building on this research effort, Enterprise established the Expanding the Supply of Affordable Homes program, which provides research and implementation support to improve housing affordability through financial innovations, regulatory optimization, and development/preservation cost-effectiveness. Under this program, Enterprise has been undertaking research initiatives that explore innovative, promising tools for expanding the supply of affordable homes across the nation. Last year, we released reports on utilizing publicly owned parcels for creating affordable homes and preserving and increasing the supply of the small and medium multifamily housing stock, which provides 54 percent of the nation’s rental housing stock and is a key source of affordable housing. In addition, Enterprise conducted research on promoting opportunity through Equitable Transit-Oriented Development (eTOD), aiming at identifying barriers and best practices to expanding the supply of affordable homes near transit and navigating federal transportation policies and programs that can support eTOD. I am looking forward to discussing these strategies and highlighting best practices from across the country during the CNU forum in Savannah on May 17.

Q: What is the role of the federal government in funding efforts for expanding the supply of affordable housing? How can local jurisdictions support these efforts? 

Expanding access to safe, well-designed affordable homes is crucial for low- and moderate-income households across the country, and therefore the federal government needs to support that work. Federal funding is a key component in any effort to expand the supply of affordable homes, and we are thrilled that effective advocacy has led to significant increases in federal funding for housing and community development.

There were major policy wins for housing in 2017 and earlier this year: not only the Low-Income Housing Credit (Housing Credit) – which is the most important federal funding tool for affordable housing development – was retained in last year’s tax reform legislation, but also the 2018 omnibus spending bill included a 12.5 percent boost for the Housing Credit allocation over the next four years. Furthermore, the spending bill includes significant increases for many HUD housing and community development programs, including $1.36 billion for the HOME Program and $3.3 billion for the Community Development Block Grant (CDBG) Program, the highest funding either program has seen in seven years.

Despite these positive changes, it is important to point out that more work is needed to address the negative impact of lowering the corporate tax rate from 35 to 21 percent in last year’s tax reform on the production of affordable homes. An analysis by Novogradac & Company notes that 12.5 percent increase in annual Housing Credit allocations for the next four years will not entirely address the reduced pricing for Housing Credits and therefore lower production of affordable homes – the estimated gain of 28,400 affordable rental units would partially offset the loss of nearly 235,000 affordable rentals over 10 years resulting from last year’s tax reform legislation, explaining that a 16 percent expansion of Housing Credit allocations is needed to sustain current production levels.

Many states and local jurisdictions across the country have adopted policies and created financial mechanisms that can boost the supply of affordable homes. Examples include creating public funding vehicles like linkage fees and affordable housing measures on ballots, utilizing land use controls like the adoption of inclusionary zoning, and leveraging existing assets like publicly owned parcels for affordability. On example is the city of Los Angeles’ recently adopted linkage fee that requires developers to pay $1 to $15 per square foot to generate funds for the city’s Housing Impact Trust fund. Another example is the recent adoption of Washington State legislation that requires the state to inventory underutilized and surplus property, creates a first-right-of-refusal for public agencies seeking to secure state land for affordable housing, and authorizes state and local entities to discount the price of land if it will be developed for a public benefit.

Q: What advice do you have for design, planning and policy-making professionals when it comes to expanding the supply of affordable housing? What’s in the way of accomplishing the desired goal faster?

A: It is important to continue advocating for boosting the federal funding for affordable housing and community development programs. Lawmakers are currently debating fiscal year 2019 appropriations and we encourage housing stakeholders to reach out to their Members of Congress to urge them to allocate more funding to housing and community development programs, which is crucial to expanding the supply of affordable homes.

Despite the recent increases in federal funding, the current levels are not sufficient to address the national shortage of homes that are affordable to low- and moderate-income households. Our daily Community Developments newsletters (sign up using this link) highlights opportunities for affordable housing advocacy, including national sign-on letters and “Dear Colleague” letters in the Senate and House.

Working with states and municipalities on identifying and implementing innovative solutions for locally-identified housing affordability challenges is also crucial. Even with increased federal funds for housing, state, regional, and municipal investments in housing programs are required to begin closing the gap. In addition to addressing challenges related to securing funding for affordable housing development, there is a pressing need to address challenges related to local regulations, such as lengthy approval and permitting processes that add cost, public opposition from nearby neighborhoods – the Not In My Backyard (NIMBY) effect, and design standards and land use regulations that can increase the cost of construction and inhibit innovative construction methods. These challenges can be addressed by working with local lawmakers on adopting legislation that remove barriers to expanding the supply of affordable homes.

Our field knows too well that proposals for affordable housing development often face opposition by local communities, especially in higher-income neighborhoods. However, as the more and more people struggle with cost burdens, localities have started showing more support for prioritizing affordable housing and allocating greater funds for housing production. Examples include surveys that show Denver’s voters support affordable housing and the prioritization of affordable housing by voters in New Orleans. Enterprise also has been working to help housing advocates shift the narrative away from consumer choice – that is, differences in affordability, quality and access indicate that the housing market is working as it should — and help audiences understand these differences are not an inherent or even an inevitable feature of market. One key element of this effort is highlighting the systems that create and enable inequality in housing to show that systems often determine outcomes.

Q: Would you like to share any resources (links to papers, reports, websites) that might be helpful to housing advocates, developers and policymakers?

A: I encourage housing stakeholders to sign up for Enterprise’s daily  daily Community Developments newsletter (using this link) and bi-weekly Capitol Express newsletter (using this link) for the latest updates on news and regulatory activities impacting affordable housing and community development. The research reports that I have mentioned earlier and additional publications are available on the Enterprise website, and advocacy tools and tips can be accessed on our website, the ACTION Campaign website and the HOME Coalition page.

Ben Brown

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