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From: Cushing N. Dolbeare
Date: 6/18/2002
Time: 1:27:59 PM
Remote Name: 63.205.79.26
MHC REPORT REFERENCES TO CIVIL RIGHTS AND FAIR HOUSING:
Executive summary:
At the opening of the new millennium, the nation faces a widening gap between the demand for affordable housing and the supply of it. The causes are varied—rising housing production costs in relation to family incomes, inadequate public subsidies, restrictive zoning practices, adoption of local regulations that discourage housing development, and loss of units from the supply of federally subsidized housing. Rural areas and Native American lands present especially difficult environments for affordable housing because of the higher costs of providing infrastructure and the dearth of wellpaying jobs. And despite civil-rights and fair housing guarantees, the housing shortage hits minorities hardest of all. p. 1.
In the search for answers to these questions, the Commission held five public hearings, conducted numerous focus group meetings, commissioned papers, and solicited input on policy positions and program recommendations from a myriad of individuals and organizations. The consistent ideas expressed in these various forums were: • Affordability and lack of decent housing are a growing problem, particularly for low-income families. • Housing must be financially and physically sustainable for the long term. • Housing issues are predominantly local issues, and programs must reflect the variations from state to state and community to community. • Housing exists in a broader community context, and programs must consider the relation and impact of housing on education, economic opportunity, and transportation. • Private-sector involvement in the production of affordable housing must be increased. • Mixed-income housing is generally preferable to affordable housing that concentrates and isolates poor families. • Consistent enforcement of the nation’s fair housing laws is a vital part of making housing a part of the ladder of economic opportunity. • Congruence among existing housing programs is essential. p. 2.
This is not a report about specific funding levels, nor does it lay out quantitative goals. Instead, this report presents a new vision for the nation’s housing. The Millennial Housing Commission’s vision can be stated quite simply: to produce and preserve more sustainable, affordable housing in healthy communities to help American families progress up the ladder of economic opportunity.
To achieve this goal, the Millennial Housing Commission recommends that the links between housing and the community in which it is located be strengthened, that authority and responsibility for making decisions about housing remain in the hands of state and local governments, that the role of the private sector in producing affordable housing be enhanced, and that the goals of sustainability and affordability be placed on equal footing so that continued affordability is no longer the enemy of proper physical maintenance. All affordable housing needs to be designed, financed, and managed to be sustainable over the long term. These policy principles underpin all of the Commission’s recommendations to Congress. The recommendations made in this report also rest upon the assumption that every part of the housing, real estate, mortgage, and community development industries must operate without regard to race, color, national origin, gender, disability, family status, or religion. p. 3.
From Recommendations section:
Provide capital subsidies for the production of units for occupancy by extremely low-income households.
The most serious housing problem in America is the mismatch between the number of extremely low-income renter households and the number of units available to them with acceptable quality and affordable rents. This is a problem in absolute terms, with 6.4 million ELI households living in housing that is not affordable. And it is a problem in terms of severity, in that ELI households make up only 25 percent of renters but 76 percent of renter households with severe housing affordability problems. The median ELI household reported paying 54 percent of its income for housing in 1999. Despite persistent and growing need, it has been more than 20 years since there was an active federal housing production program designed to serve extremely low-income households, other than a relatively small effort to replace housing demolished or otherwise lost from the subsidized inventory. The primary barrier to producing new housing for these families is that the production and operating costs of units for extremely low-income households require rents that exceed the level that they can pay.
To meet the 30-percent-of-income standard, subsidies have to be high enough to cover both capital and operating costs. Thus, even though the need is generally acknowledged, the costs are formidable and require multiyear federal expenditures. Although existing programs (especially Section 8 vouchers, Section 202, and Section 811) provide useful vehicles for addressing ELI housing needs, their funding levels are sufficient to do little more than maintain the status quo. As a consequence, several sources of subsidy are often required to serve such households.
The Commission recommends that Congress address the housing needs of extremely low-income households, as presented in the section on America’s housing challenges, through a 100 percent capital subsidy for construction, rehabilitation, or acquisition of units earmarked for extremely lowincome households. This new tool would be a substantial state-allocated capital source that would eliminate the need for debt on units, which would be located primarily in mixed-income developments or neighborhoods. Rents on the units would cover operating expenses, including an adequate reserve. The Commission recommends that states work with localities to specify in a state allocation plan how this new capital subsidy tool would be used to address areas of greatest need for additional ELI production in conjunction with other production resources.
The goal of this program is to increase significantly the number of good-quality rental units for ELI households, particularly the number of units located in low-poverty neighborhoods and accessible to employment. Under this proposal, rent levels would cover operating costs—including vacancy losses and adequate replacement reserves—with a reasonable margin for sustainability.
The MHC recognizes that, without additional assistance from other programs or sources, rents would exceed the 30-percent-of-income standard of affordability. Nevertheless, rents would still be lower than what ELI households typically pay?and for far better housing. As proposed, the program would only serve ELI households willing and able to pay more than 30 percent of their incomes for rent, as the overwhelming majority now does. Vouchers or other assistance would, however, be necessary to enable the very lowest-income households to pay even rents that cover only operating costs.
With a capital resource dedicated specifically to production of extremely low-income units, states could choose to apply the funds directly to mixed-income developments or in conjunction with financing through other resources, including the rent-restricted units financed with tax-exempt bonds or the Low Income Housing Tax Credit. States could also allocate the capital subsidy to local jurisdictions, including housing authorities, to supplement HOME funds and other resources. To enable states to apply the subsidy to meet a variety of situations and ELI needs, eligible uses should include new construction, preservation, and acquisition with or without rehabilitation.
Specifics of the proposed program include: • Administration. The state credit agency, usually the state HFA (or a local agency if the state decides to delegate this authority), would allocate the subsidy—probably in combination with other available subsidies, although this would not be a requirement. It would also provide oversight, assuring that the proposed development meets an identified need for ELI housing and that it observes targeting and fair housing requirements. • Mechanism. The program would provide additional capital funding for the units to be designated for ELI occupancy so that they would have no debt service costs, with rents reduced accordingly. • Income mixing. The program would generally target 20 percent of units in new developments for ELI occupancy, although the state credit agency would have flexibility to determine the appropriate share on a property-by-property basis. State credit agencies could also allocate funds for preservation and acquisition with or without rehabilitation in mixed-income neighborhoods or as part of a revitalization plan. • Rent level and affordability. Minimum rents would be consistent with sustainability, assuming zero debt service. The developer would propose sustainable ELI rents, which the state credit agency would approve. The originally approved rents would be adjusted annually based on an inflation index.5 Since sustainable rents for the units would normally exceed the 30-percent-of-income standard for extremely low-income households, owners/developers and state credit agencies might pursue additional subsidies (such as thrifty production vouchers,6 real estate tax abatements, HOME grants, or foundation grants) to reduce rents to more affordable levels. In addition, the units can and should be actively marketed to housing choice voucher holders. • Occupancy. Only extremely low-income households could occupy the housing unless available units outnumbered applicants. In that case, the remaining units would be available to households at or below a designated income level up to 40 percent of AMI. • Neighborhood standards. Low-poverty neighborhoods might be defined as all census tracts except Qualified Census Tracts, or as those with a poverty rate below, say, 20 percent. The standards for inner-city areas could differ from those for suburban or rural areas. State credit agencies could have limited flexibility to approve extremely low-income units in developments outside low-poverty census tracts, particularly in gentrifying neighborhoods or those with active revitalization programs under way. pp. 35-36
Facilitate strategic community development:
….The Commission recommends creation of a new, more potent community development tool that builds on the lessons of successful projects while unifying funding and regulations. This proposal would allow state governors to reserve up to 15 percent of their federal block grant funds (including TANF, CDBG, HOME, Workforce Investment Act (WIA) funds, Social Services Block Grants, Child Care Block Grants, and transportation funding) to support comprehensive redevelopment projects sponsored by local governments, including consortia of local governments in rural areas. Localities wanting to undertake such projects would apply to the state for funding through programs already administered at the state level. A consolidated program review and decision/award process for all identified programs would follow. The locality could also earmark 15 percent of the funds it receives directly from the federal government for these initiatives. Indeed, one of the factors a governor should consider in approving a request is whether the locality is willing to use its own funds to support the undertaking.
The application for consolidated funding would include a comprehensive plan approved by the appropriate local officials. The plan should include census data on the neighborhood, annual milestones and quantifiable results, description of the public participation process that produced the plan, and evidence supporting the need for a comprehensive approach. This plan would suffice for the federal planning requirements for funding streams such as HOME, CDBG, and WIA. The locality would prepare annual reports for the governor describing project progress and also supply an independent third-party evaluation. All documents would be available to the public.
Governors would have limited waiver authority to facilitate the blended use of funds within the general purposes and intent of each program. For example, in lieu of compliance with four or five income-targeting requirements, an application might suggest a uniform eligibility standard. A broader definition of eligible uses for one program might be proposed to fill funding gaps in the comprehensive plan. Basic federal standards such as civil rights could not be waived, but reporting requirements might be consolidated into a single report. Unless the responsible federal agency objected within 30 days of receiving the request, the waiver would go into effect. pp. 44-45
Provide capital subsidies for the production of units for occupancy by extremely low-income households. The most serious housing problem in America is the mismatch between the number of extremely low-income renter households and the number of units available to them with acceptable quality and affordable rents. This is a problem in absolute terms, with 6.4 million ELI households living in housing that is not affordable. And it is a problem in terms of severity, in that ELI households make up only 25 percent of renters but 76 percent of renter households with severe housing affordability problems. The median ELI household reported paying 54 percent of its income for housing in 1999. Despite persistent and growing need, it has been more than 20 years since there was an active federal housing production program designed to serve extremely low-income households, other than a relatively small effort to replace housing demolished or otherwise lost from the subsidized inventory. The primary barrier to producing new housing for these families is that the production and operating costs of units for extremely low-income households require rents that exceed the level that they can pay. To meet the 30-percent-of-income standard, subsidies have to be high enough to cover both capital and operating costs. Thus, even though the need is generally acknowledged, the costs are formidable and require multiyear federal expenditures. Although existing programs (especially Section 8 vouchers, Section 202, and Section 811) provide useful vehicles for addressing ELI housing needs, their funding levels are sufficient to do little more than maintain the status quo. As a consequence, several sources of subsidy are often required to serve such households. The Commission recommends that Congress address the housing needs of extremely low-income households, as presented in the section on America’s housing challenges, through a 100 percent capital subsidy for construction, rehabilitation, or acquisition of units earmarked for extremely lowincome households. This new tool would be a substantial state-allocated capital source that would eliminate the need for debt on units, which would be located primarily in mixed-income developments or neighborhoods. Rents on the units would cover operating expenses, including an adequate reserve. The Commission recommends that states work with localities to specify in a state allocation plan how this new capital subsidy tool would be used to address areas of greatest need for additional ELI production in conjunction with other production resources. The goal of this program is to increase significantly the number of good-quality rental units for ELI households, particularly the number of units located in low-poverty neighborhoods and accessible to employment. Under this proposal, rent levels would cover operating costs—including vacancy losses and adequate replacement reserves—with a reasonable margin for sustainability. The MHC recognizes that, without additional assistance from other programs or sources, rents would exceed the 30-percent-of-income standard of affordability. Nevertheless, rents would still be lower than what ELI households typically pay?and for far better housing. As proposed, the program would only serve ELI households willing and able to pay more than 30 percent of their incomes for rent, as the overwhelming majority now does. Vouchers or other assistance would, however, be necessary to enable the very lowest-income households to pay even rents that cover only operating costs. With a capital resource dedicated specifically to production of extremely low-income units, states could choose to apply the funds directly to mixed-income developments or in conjunction with financing through other resources, including the rent-restricted units financed with tax-exempt bonds or the Low Income Housing Tax Credit. States could also allocate the capital subsidy to local jurisdictions, including housing authorities, to supplement HOME funds and other resources. To enable states to apply the subsidy to meet a variety of situations and ELI needs, eligible uses should include new construction, preservation, and acquisition with or without rehabilitation. Specifics of the proposed program include: • Administration. The state credit agency, usually the state HFA (or a local agency if the state decides to delegate this authority), would allocate the subsidy—probably in combination with other available subsidies, although this would not be a requirement. It would also provide oversight, assuring that the proposed development meets an identified need for ELI housing and that it observes targeting and fair housing requirements. • Mechanism. The program would provide additional capital funding for the units to be designated for ELI occupancy so that they would have no debt service costs, with rents reduced accordingly. • Income mixing. The program would generally target 20 percent of units in new developments for ELI occupancy, although the state credit agency would have flexibility to determine the appropriate share on a property-by-property basis. State credit agencies could also allocate funds for preservation and acquisition with or without rehabilitation in mixed-income neighborhoods or as part of a revitalization plan. • Rent level and affordability. Minimum rents would be consistent with sustainability, assuming zero debt service. The developer would propose sustainable ELI rents, which the state credit agency would approve. The originally approved rents would be adjusted annually based on an inflation index.5 Since sustainable rents for the units would normally exceed the 30-percent-of-income standard for extremely low-income households, owners/developers and state credit agencies might pursue additional subsidies (such as thrifty production vouchers,6 real estate tax abatements, HOME grants, or foundation grants) to reduce rents to more affordable levels. In addition, the units can and should be actively marketed to housing choice voucher holders. • Occupancy. Only extremely low-income households could occupy the housing unless available units outnumbered applicants. In that case, the remaining units would be available to households at or below a designated income level up to 40 percent of AMI. • Neighborhood standards. Low-poverty neighborhoods might be defined as all census tracts except Qualified Census Tracts, or as those with a poverty rate below, say, 20 percent. The standards for inner-city areas could differ from those for suburban or rural areas. State credit agencies could have limited flexibility to approve extremely low-income units in developments outside low-poverty census tracts, particularly in gentrifying neighborhoods or those with active revitalization programs under way. pp. 35-36