By
Robert O’Malley
 |
| Residents outside the AHP-funded Unity Village development
in Portland, Maine. |
Over the course of the last 40 years, Conrad Egan
has seen close-up the gradual transformation of affordable-housing
design and financing in communities across the country. In the
1960s, the primary developer of affordable housing was the U.S.
Department of Housing and Urban Development (HUD), says Mr. Egan,
president and CEO of the National Housing Conference. Back then,
HUD was developing hundreds of thousands of units of housing per
year.
By 2006, however, that number had dipped dramatically. “At
the state and local levels, the Feds are viewed as less and less
of an important partner,” says Mr. Egan, who worked for HUD’s
Model Cities program in the mid-1960s. “The federal government’s
role has shrunk significantly.”
Part of a trend to downsize the federal government and put more responsibility
for housing in the hands of local communities, the drop in federal
funding left many localities scrambling to find new solutions to
their housing needs. “This was an unfortunate turn of events
because we need a strong federal role,” says Mr. Egan.
Although the reduction of federal housing dollars during the 1980s
and 1990s meant less support for affordable housing, the reduced
federal presence was accompanied by at least one positive development.
“As the federal share diminished, local creative solutions arose,” adds
Mr. Egan. “It forced the locals to step up and do more. There’s
much more vitality and commitment now at the state and local levels.”
Much of that vitality has been generated by the emergence of highly
skilled nonprofit community development corporations (CDCs) in neighborhoods
across the country. “In the past, many CDCs were bit players,” says
Nicolas Retsinas, director for the Center for Housing Studies at
Harvard University.
“But now they often have leading roles.”
In addition to CDCs, local housing
authorities, for-profit developers, and partnerships between for-profit
and nonprofit developers all play an important role in developing
new affordable housing in New England communities. “CDCs have
been a pivotal linchpin for neighborhood revitalization,” says
Mr. Retsinas, “but not every community has a CDC.”
Accompanying the increase in local control is the recognition that “place
matters” and that “what works in one community may not
work in another,” adds Mr. Retsinas. The changed attitude has
led to more diverse housing and greater attention to design.
“In the past, affordable-housing developments often were very large
and not well constructed,” says Aaron Gornstein, executive director of
Citizens’ Housing and Planning Association (CHAPA). “The design
and quality of affordable housing have improved dramatically. The housing is
more compatible with the surrounding neighborhoods and is typically mixed-income
housing.”
Occurring almost simultaneously with the emergence of highly skilled
CDCs was the development of Low Income Housing Tax Credits as a primary
source of funding for affordable housing. The tax credit program
has financed thousands of affordable units since its inception in
the 1980s.
But while the tax credit program has been successful in developing
housing for the higher-income segments of the low-income population,
it has been less effective in providing housing for the most needy
residents. “I don’t think we know how to finance homes
for the very low-income households,” says Mr. Egan. “When
we do mixed-income housing we really don’t reach down that
far on the income scale. I think we’ve figured out better how
to provide housing for moderate-income households using Low Income
Housing Tax Credits.”
In recent years, rapidly escalating housing prices have put added
pressure on very low-income households. Although lack of affordability
has become a problem for even higher-income residents, the affordability
issue is especially acute for very low-income residents.
A recent Harvard University housing study shows that 70 percent of
the lowest quintile of renters is spending over 50 percent of their
income on housing. This is happening, says Mr. Retsinas, at a time
when the region continues to lose low-cost housing through conversion
to market-rate housing.
Today’s developers are relying on a wide range of funding sources
to build affordable housing in New England, including Low Income
Housing Tax Credits, Historic Tax Credits, HOME funds, and Community
Development Block Grants. For the last 15 years, the Bank’s
Affordable Housing Program (AHP) has also played a key role in helping
build new housing in New England communities.
“The AHP has been an essential ingredient — a gap filler — for
many developers,” notes Mr. Gornstein. “But it’s only one
piece of the puzzle. It needs to be used with other combinations of resources.”
And while the AHP has exceeded the expectations people had for it
when it was developed 15 years ago, Mr. Retsinas suggests that the
program could become even more effective by “leveraging more
private sector investment” for the construction of affordable
developments.
In Massachusetts, notes Mr. Gornstein, a significant portion of new
affordable housing is being built by private developers through Chapter
40B, which enables local zoning boards of appeals to approve affordable-housing
developments under more flexible rules if at least 25 percent of
the units will be affordable to residents at no more than 80 percent
of the area median income.
And in 2004, the Massachusetts legislature adopted another measure
to make construction of affordable housing more palatable to local
communities. Chapter 40R allows communities to create special overlay
zoning districts that allow construction of new housing on small
lots provided that at least 20 percent of the units in the districts
are affordable. “More Massachusetts cities and towns are willing
to increase density in certain parts of their communities,” notes
Mr. Gornstein.
Mr. Retsinas and others believe that restraints on supply have been
the primary cause of the region’s inflated housing costs. Causes
for the shortage include resistance to new housing based on the belief
that it will attract unwanted low-income people to the community
or lead to more traffic and higher property taxes. Mr. Retsinas says
housing construction is also becoming more expensive because many
people are demanding more from it.
While many proposed affordable developments have been opposed by
at least a segment of the community, a CHAPA poll shows strong support
across the state for affordable housing. “Local politics is
driven by who shows up at the meetings — by the loudest voices,” says
Mr. Gornstein. “When there is a proposal it’s often
the abutters that oppose it.” T |
