The Rise, Fall

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The Rise, Fall Resurrection of Affordable
Housing Policy in the United States in a Post 911
World

• by
• Michael Stegman,
• MacRae Professor of Public Policy, Planning, and
  Business
• University of North Carolina at Chapel Hill
• Presented at National Affordable Housing
  Conference
• Affordable HousingMaking it Happen
• Innovations in Policy and Practice
• Sydney, Australia
• June 21-23, 2005

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Summary of presentation

• The historical setting
• The housing situation today
• The US Affordable housing delivery system
• The special role of non-profit and
  community-based organizations
• From Affordable Housing Programs to Affordable
  Housing Partnerships
• The evolution of American Social Policy from
  Income Maintenance to Asset Development, and the
  role of homeownership.

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1. The Historical Setting
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Five housing policy transitions

• From a high Federal budget priority to a low
  Federal priority
• From production subsidies to demand subsidies
• From deep production subsidies to shallow
  subsidies
• From a focus on poverty/welfare, to a focus on
  working families
• From a historical focus on rental housing to a
  fixation on homeownership

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Housings fall from budgetary grace

• In less than a generation, subsidized housings
  share of new federal spending commitments
  declined by 80, from about 5 of total federal
  budget authority in 1976 to just 1 in 2000, and
  holding at that level today.
• Housing has even lost ground within low income
  portion of the federal budget.
• Since 1976, housing assistances share of the
  federal budget targeted to the poor fell from
  more than 36 to less than 7.
• Today, the national cost of wage supplements to
  working poor delivered through a refundable tax
  credit exceeds the cost of the entire federal
  affordable housing budget.

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Guns vs. butter is once again an issue as housing
budget gets squeezed
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Most federal housing spending is through the tax
system, and benefits the nonpoor
Billions of dollars
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Historically, direct public expenditures favors
rental housing
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Tenant-based rental assistance has replaced new
production as federal housing strategy
Source See Table 6
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Shallow subsidy units are also replacing deep
subsidy units as we tear down obsolete public
housing, with affordability implications Net
Change in Project-Based Inventory, U.S.
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2. The Housing Situation Today
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From 1997-2003, the number of low- and
moderate-income working families with critical
housing needs increased 67 percent, to 5 million.
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Critical housing needs moved to the suburbs
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3. The U.S. Affordable Housing Delivery System
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The Two-part federal housing assistance
systemPart I -- affordable housing finance

• Direct Assistance
• Community Development Block Grants
• Categorical Funding
• Tax Expenditures
• Direct Loans and Loan Guarantees

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Part II regulatory regime is as important as
direct federal finance of affordable housing

• Government Sponsored Enterprises (GSEs)
• Affordable housing goals for Fannie Mae Freddie
  Mac
• Regulation of financial Institutions
• Community Reinvestment Act (CRA)
• Home Mortgage Disclosure Act (HMDA)
• Fair housing
• Consumer protection and disclosure
• Fair Credit Reporting Act
• Truth in Lending Act
• Homeowners Equity Protection Act

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4. The Special Role of Non-profit and
Community-Based Organizations
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The philosophical roots of housing-based
community development

• CDCs took on housing in the belief that restoring
  housing would stabilize the population, restore
  the functioning of the housing market and
  reestablish the market for commercial activity
  that would, in turn, support new businesses to
  fill vacant lots and boarded up storefronts.
• Avis Vidal, 1997

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Dedicated federal funding for CDCs and
non-profits sprinkled throughout housing budget
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Despite Prominence, Capacity of CDCs to Produce
at Volume is Still Limited
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In Keeping with their Historical Missions,
Nonprofit Sponsors more likely to develop in
poorer more racially concentrated neighborhoods
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5. From Affordable Housing Programs to Affordable
Housing Partnerships
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Creative finance is critical to maintaining
affordability
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It Takes a Village to Produce Affordable
HousingThe Cape Cod Commission, MA
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Dakota Crest Apartment Homes, Reno, NV48 unit
rental community a joint venture by for-profit
developer, Rural Properties, Inc., and
non-profit, Community Services Agency, in
partnership with the City of Reno and the Bank of
America Community Development Bank
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Crawford Square Pittsburgh, Pennsylvania

• Size 18.5 acres
• Retail/commercial None
• Residential Garden stack and townhouse units,
  1-,
• 2-, and 3-bedrooms
• Housing price mix ranges from 350
  1,190/month
• Percentage of affordable units Approximately 50
  
• of all unit types are affordable. Affordable
  units have
• rents based on 50 or 60 of the HUD table of
  median
• income levels. Rents are set at 33 of the 50 or
  60
• as determined by metropolitan area income levels.
  
• Percentage of market rate units 50

• Major sources of funding Sun America Affordable
• Housing Partners, Urban Redevelopment Authority
  of
• Pittsburgh, Pennsylvania Housing Finance Agency
• (HOME), Local leader consortium, Department of
• Community Affairs, Local Foundations
• Role of public money Federal low income housing
  tax
• credits, HOME Funds

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Winchester GreensChesterfield County, Virginia

• Size 80 acres
• Retail/commercial 3,500 sq. ft. leasing office,
  3,000 sq. ft. bank
• Residential 222 two- and three-bedroom townhouse
  apartments,
• 12 two- and three-bedroom garden apartments, and
  105 senior
• housing apartments
• Other 13,400 sq. ft. childcare center (serves up
  to 140 children).
• 3,000 sq. ft. neighborhood center
• Housing price mix Townhouses are between
  665-765/month.
• Market Square (the senior housing) apartments
  are between
• 425-525.
• Percentage of affordable units 25 Section 8
  voucher holders.
• The senior housing in Market Square is available
  only to people
• whose income is no more that 25,000/year. The
  average income
• of the residents is 15,000/year.
• Percentage of market rate units 75

• Major sources of funding US Dept. of Housing and
  Urban
• Development, Chesterfield County Community
  Development
• Block Grant Office, Jackson Foundation, Dain
  Rauscher, Inc.,
• Wachovia Bank, Local Initiatives Support
  Corporation
• Role of public money HUD grant, federal low
  income housing
• tax credits, Community Block Grant (from
  Chesterfield County)
• Construction cost 32 million

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Mixed income HOPE VI public housing, St. Louis
product of public housing funds, tax credits,
private mortgage, corporate donations, private
equity
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Robert Thomas enjoys the view from the back deck
of the newly opened apartment building for
seniors at Capitol Gateway Estates, the first
phase in the HOPE VI housing project that
replaced the notorious East Capitol Dwellings.
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6. The evolution of American Social Policy from
Income Maintenance to Asset Development, and the
role of homeownership
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Growing national support for more asset-based
social policies

• in a global economy, your economic health and
  security is measured by what you own in addition
  to what you earn. Despite the growing
  importance of wealth, a stark gap has opened
  between those who have it and those who dont.
  The bottom 90 percent of Americans earn 60
  percent of all income, but own less than 30
  percent of net worth and less than 20 percent of
  financial assets. These Americans are being left
  behind as the economy apportions more and more of
  its rewards to owners of wealth.
• Former Senator Bob Kerrey (D-NE)

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Demographic market forces join to create
business opportunities for mortgage providers
household wealth through homeownership

• Access to Mortgages on the Rise
• 1993-2003, mortgage loans to Hispanics grew 6x
  faster, Asians 4x, and blacks 2x faster than to
  whites
• Loans doubled to LMI buyers while rising 88 to
  higher income
• Compelling business case minority share if
  population up from 17 in 1980 to 26 in 2000,
  and will be 34 by 2020
• 12 million black Hispanic households who enter
  market next 15 years will account for 80 of all
  first-time homebuyers.

• Home Equity is a Wealth Equalizer
• Lowest income quintile, median net wealth in 2001
  was 68,000, compared to 500 for renters
• Among those owners, home equity accounted for 80
  of net wealth
• From 1989 to 2001, ratio of median wealth of
  blacks to all U.S. households rose from about 9
  to 22 as black homeownership rose from 42 to
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• But minority homeownership rates still 25
  percentage points behind whites.

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Housings critical role in household wealth
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To be continued in Financing Affordable Housing
Session
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For more information on todays presentation

• Center for Community Capitalism web site
  www.ccc.unc.edu.