New Housing Trust Fund a Small Step Against Growing Affordability Gap

Leah Binkovitz | @leahbink | May 11, 2016

Image via flickr/Joe Wolf

Image via flickr/Joe Wolf

Nearly every metro area in the country is facing an increasingly desperate picture of housing affordability.

But now, there’s some good news: a new federal program that funds housing for extremely low-income households is being hailed by advocates as a smart way of addressing the problem.

The bad news: once the funds are distributed this summer, it’s unlikely there will be enough to close the affordable housing gap plaguing many states.

Texas would need roughly 600,000 new affordable units to close the gap for households living at 30 percent of the median area income or less, according to advocates’ estimates. In the Houston area alone, some 139,000 units are needed, according to estimates from the National Low Income Housing Coalition. That’s a number unlikely to be changed dramatically by new funds headed Texas’ way from the U.S. Department of Housing and Urban Development’s newly launched National Housing Trust Fund.

The fund was created in 2008 as part of that year’s Housing and Economic Recovery Act. The idea was to fund the program using some of the revenue from Fannie Mae and Freddie Mac’s new business. But when the programs were put into federal conservatorship, contributions were temporarily stopped, and the effort ground to a halt. In December 2014, the Federal Housing Finance Agency announced the start of contributions to the fund, and this year marks the first year those funds will be distributed to each state. After years of waiting, advocates are eager to put the dollars to work.

“In Texas, there is a massive shortage of housing that is affordable and available for extremely low income households,” said William Livesley-O’Neill, communications director for the Texas Low Income Housing Information Service. “Houston has one of the highest, just by pure numbers, of missing affordable units.”

Because of the shortage, many people in Texas are spending more than 30 percent of their income on housing, the amount widely viewed as the threshold of affordability.

Among those who earn 31 percent to 50 percent of area median income, 80 percent are spending more than the “affordable” amount on housing. That rate rises to 91 percent for the category of residents considered “extremely low income,” according to the National Low Income Housing Coalition.

The feds awarded Texas nearly $4.8 million from the permanent trust fund this month. Only New York and California got more, at $7 million and $10.1 million, respectively, under the formula that weighs relative cost burdens and affordable housing shortages. “This year was not quite as big as people were hoping,” explained Livesley-O’Neill, but funding is expected to grow in the future.

While he welcomed the news of the fund, he said it’s nowhere near enough to close the housing gap.

Across the country, communities are experiencing a shortage of affordable housing. In San Francisco, for example, the typical renter can only afford roughly a third of the city’s available units, according to a recent study from New York University’s Furman Center. In that study of the country’s 11 largest metro areas, Houston and Dallas were actually among the most affordable to the median renter household. But even there, the outlook for the least well-off isn’t great amid rising inequality.

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“At a national level, aside from the housing trust fund, there’s not really good news,” said Tory Gunsolley, CEO and president of the Houston Housing Authority. While places like California have faced huge affordability housing gaps for years, Gunsolley said, Houston is relatively new to the problem. “We’re at the very beginning of that curve, so today we don’t have robust public support for increasing affordable housing and the resources it requires.”

Houston gets little help from the state either, which recently put limits on rules known as inclusionary zoning, which mandate a certain percentage of a development be affordable units. The city can negotiate with developers, but their participation is voluntary. And though there are exceptions within the state ban, they aren’t often utilized. “The vast majority of all the new housing that is being built is all targeted as luxury housing,” said Gunsolley, “so that’s not affordable for extremely low income families or even low income families.”

Houston’s tax increment reinvestment zones supply a significant chunk of funding for affordable housing projects in the city, but, Gunsolley said, the city needs to create more ways to support affordable housing. “They need to be local solutions,” he said.

Still, the money from the feds’ housing trust fund will provide some assistance. “It’s certainly not nothing,” said Livesley-O’Neill.

“It’s a very tiny amount compared to the need,” said Isabelle Headrick, executive director of Accessible Housing Austin!, which provides and advocates for housing for low-income people with disabilities.

Under the new program, the vast majority of funding — about 90 percent — will go toward building or renovating new rental units, while the rest can go toward homeownership for first-time buyers. Rents in the new units will be affordable to people making roughly 30 percent of the area median income, but for those making less, the housing costs will be more than 30 percent of their income. Even the Housing Trust Fund’s own list of frequently asked questions acknowledges, “many people [who] the NHTF is intended to serve will not be assisted because the rents will be more than they can afford.”

That’s why Livesley-O’Neill would have liked specific funding dedicated to affordable housing units for households making 15 percent of the median area income or less. And, he said, he would like to see longer limitations on how long a property must remain affordable.

After the Texas Department of Housing and Community Affairs receives the money, groups like the one Headrick runs will compete for funding. Headrick said the trust fund has the potential to help a wide variety of people, from the homeless, to the disabled, to the working poor. “One of the things I’m advocating for is that mission-driven, smaller nonprofits have access to these funds,” she said. In order for that to happen, Headrick said, many of the typical costly application requirements, like market studies, environmental reviews and schematic designs, would have to be suspended. Those steps can add up-front expenses many groups can’t afford. “On my application for a 27-unit project, I spent at least $25,000 dollars,” she said of a past project.

Advocates are also pushing for the projects to have as few hurdles as possible for potential renters and dispersed in areas with features like well-rated schools, public transportation access and job centers close by.

Gunsolley knows just how challenging that can be. For the first time ever, the Houston Housing Authority is building an affordable housing development in what’s considered a “high-opportunity” area, meaning it has all the things that attract people to neighborhoods: safe neighborhoods, good schools and plenty of employment opportunities. Gunsolley said unsurprisingly, it’s been met with resistance. “By and large, all of the arguments they raise are classic NIMBY arguments,” he said. “The research that has come out over the last year as well as the Supreme Court ruling have made it really clear that the best model, the best place to put [affordable housing] would be in a good neighborhood in terms of outcomes for the people who live there.”

A 2015 Supreme Court ruling declared that any housing policies that steered minorities to low-income areas, intentionally or not, were racially discriminatory and illegal. It was a victory for housing advocates who say clients still face a litany of barriers, including discrimination based on conviction history or credit rating that end up concentrating poverty even further.

“As much as the state can help make this housing low barrier,” said Livesley-O’Neill, “that will be extremely beneficial.”

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Leah Binkovitz

Leah Binkovitz is Senior Editor with the Kinder Institute for Urban Research.

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