Creating a More Balanced and Community Driven Affordable Housing System

Building an affordable housing strategy that is responsive to community needs and market driven

As we begin a new year, MACDC plans to be working on a wide cross section of housing issues. Our goal is to create an affordable housing system that is better able to meet the diverse needs of our residents and communities. This will require both more money and more flexibility. In a series of articles to be published in early 2016, MACDC is articulating some its thoughts about how we do this. The first article talked about how we can grow the resource pie – the first and most essential step to meeting growing demand for affordable housing. In the second article, we talked about how to lower operating costs so that we can use our limited subsidies more efficiently. In this article, we talk about how to deploy our resources in a more balanced way that enables us to better respond to local market contexts and to community driven priorities.  Our fourth article will address how to create affordable housing that can serve a broader range of income levels.

Article #3: Creating a More Balanced and Community Driven Affordable Housing System

Every community requires a diverse array of housing to meet the needs of its current and future residents.  Neighborhoods must have housing at a variety of price points, as well as rental and homeownership opportunities, housing for seniors, families and young adults, and large and small multi-family buildings, along perhaps with some single family homes and two or three-family homes. And we must build new housing, while maintaining and preserving the homes we already have developed.  These incredible housing pressures are further compounded by the constant shortage of funds required to meet the needs of each neighborhood and town in the Commonwealth.  (See the first article in this series to learn about our efforts to correct that shortage).

At present, well over 90% of our affordable housing dollars are used either to preserve our existing affordable housing or to produce new rental housing through the low income housing tax credit program (LIHTC).  The LIHTC program is fairly flexible – allowing developers to work with local stakeholders to meet local demands, but tax credits have their limitations.  LIHTC projects offer rents designed to serve a narrow income band, generally between 50 and 60 percent of the Area Median Income (AMI). Families that earn slightly more are ineligible and families that earn less can only afford the rents by paying over 30% of their income or by using a rental subsidy.  To be sure, many lower-income households do use rental subsidies, so they can live in tax credit properties, and this further underscores the limitation of the tax credit program’s design.  Moreover, LIHTC projects tend to be 25-50 units in size, or larger, and of course they only offer rental housing opportunities.  In recent years, due to rising construction and operating costs, an increasing percentage of the state’s housing bond resources are now being used to fill financing gaps in LIHTC projects, leaving less and less for other housing priorities.

The LIHTC program will remain at the core of the affordable housing sector for the foreseeable future.  It is a proven tool for producing high quality, well designed affordable rental housing.  In our next article in this series will talk about ways to improve the LIHTC so it can help produce rental housing for a broader range of incomes. In the meantime, MACDC, is advocating for new programs that will complement the tax credit, and enable the affordable housing field to be more responsive to local needs, desires and markets. These programs are very much in line with the Baker Administration’s stated approach of designing state programs in response to local needs and opportunities.

MACDC is advocating for the following:

  1. Community Scale Housing Program – We are very pleased that the Baker Administration has embraced our recommendation to create a new Community Scale Housing Program that will provide funding for smaller rental projects between 6 and 20 units in size. Such projects are too small to use the LIHTC program, and, therefore, have become very difficult to finance, even though they offer many benefits.  These projects are often a better fit in urban, suburban and rural communities and can be easier and faster to build with fewer transaction costs.   They also can be developed at lower total costs – sometimes as much as $50,000 to $100,000 less per unit than larger, more complex rental projects.  We hope to see a new program launched in the coming months.
  2. Acquisition/Rehab Program:  During the foreclosure crisis, the state partnered with the Massachusetts Housing Investment Corporation to use federal Neighborhood Stabilization Program money to provide funds to nonprofit and for-profit developers to acquire foreclosed properties, renovate them and put them back on the market. The program was very successful, but ran out of money when the Federal Stimulus funds were depleted.  Massachusetts still has many vacant or dilapidated properties that could benefit from such a program. We need to re-allocate some of our existing resources (and create new resources) to support such projects, so we can revitalize housing markets in our Gateway Cities and other weaker markets that are still struggling to recover from the foreclosure crisis.  These projects often can be completed at a lower cost than new construction and they have the added benefit of eliminating or rehabilitating blighted properties.
  3. Housing Rehab:  For many years, CDCs, cities and others have operated housing rehab programs that provide zero or low interest loans to homeowners, so they can fix up their properties; in 2014, CDCs improved 380 units.  These programs can advance many important policy objectives: housing code compliance, improved energy efficiency, lead paint abatement, blight reduction, and allowing seniors to age in place. Federal cuts to the Community Development Block Grant (CDBG) Program and the HOME Program – and the prioritization of other housing needs – have prevented the increase in funding necessary to address the growing needs of an aging housing stock and an aging population. MACDC believes these programs are vital to our neighborhoods and communities and should be given greater priority.  One immediate focus for MACDC is to reinvigorate the Get the Lead Out Program that provides deferred loan payments to income-eligible homeowners that want to de-lead their homes. The program used to make 200+ loans per year, but in recent years that number has fallen to less than 40 loans per year. We are working with MassHousing and the Department of Housing and Community Development (DHCD) to review program guidelines, assess administrative challenges and ensure funding levels, so that this program can effectively address the ongoing scourge of childhood lead poisoning.
  4. Slowing displacement in hot markets: Three of our members are experimenting with programs to buy properties in strong markets as a way to slow displacement and gentrification and to ensure some homes remain affordable to families and working people.  Allston Brighton CDC, Somerville CC and Metro West Community Developers are each developing different models tailored to its local market for acquiring existing housing stock and removing it from the speculative market.  We need to be open to creative ways to buy affordability in existing properties at a wide range of price points. In short, we need to encourage this sort of innovation and support expansion if particular models prove viable. 
  5. Homeownership Development – Throughout the recession, DHCD did not fund homeownership development due to the weak homeownership market and the need to prioritize rental housing. In 2014, DHCD re-opened its “homeownership round” for the first time in many years and approved five projects.  DHCD is currently evaluating the progress on those projects before deciding whether and how to move forward.  While rental housing should always be the priority, it is certainly appropriate to spend 5 to 10 percent of our resources on homeownership projects that can help achieve one of two core policy goals.  First, homeownership is key to stabilizing and strengthening housing markets in neighborhoods with low homeownership rates.  In these neighborhoods, homeownership programs can put blighted properties back on the tax rolls and increase economic diversity at a lower per-unit subsidy level than rental housing.  Second, homeownership programs can open up access to otherwise exclusive communities where working people are priced out. The significant racial disparities in mortgage lending recently documented by the Massachusetts Community & Banking Council reinforce the need for new affordable homeownership development.

Housing advocates are generally able to unify around campaigns to increase funding for affordable housing. It is understandably much harder to build unity when it comes to allocating scarce resources across many important priorities.  We cannot avoid these tough questions and conversations.  Choices must be made.  As community developers who pride ourselves on engaging and empowering local residents, we need to make sure those choices reflect what we hear from community leaders about what our neighborhoods need to thrive.  Ultimately, a balanced and community-driven housing agenda requires a diverse set of tools and programs to be successful.