The Future of Affordable Housing Investment


October 24, 2018 / Key takeaways of the City First Community Development Finance Impact Forum/ Blog

Coffee & Conversation

Brian Argrett, President and CEO, City First Bank

The purpose of this event is to bring together frontline changemakers in affordable housing. We would like you to leave this event more informed, driven, and connected to address the need for affordable housing. We also want you to come away with ideas to take back to your organization that can be implemented. It’s also important to keep in mind that economic disparities overlap with racial disparities.

Who is in the room? Researchers, practitioners, foundations, policymakers, advocates, and builders.

Polly Donaldson, Director, DC Department of Housing and Community Development

Our mission is to produce and preserve opportunities for affordable housing and economic development and to revitalize underserved communities in the District. This involves producing and preserving the supply of quality affordable housing, increasing home ownership opportunities, and revitalizing neighborhoods. Part of our work involves encouraging private investment in affordable housing. We have a staff of 180 people and a $250 million budget.

What drives you to be involved in housing? This stems from my commitment to create a fair and equitable society. Earlier in my career I worked as a teacher in Latin America. I moved back to Baltimore to work on Barbara Mikulski’s campaign. I was looking for opportunities to be more engaged in my community and got involved in housing homeless families during the crack epidemic in DC. My greatest learning has come from working as part of a coalition and experiencing how advocacy can build the political will to address the need for affordable housing.

What’s the continuum of affordable housing? The affordable housing continuum goes from emergency and homeless housing to affordable housing and home ownership. We need to address the whole continuum and not just one segment of it. We need to end homelessness in our community.

Which is the most difficult segment to work on? The most difficult segment to work on is creating permanent housing for people who are homeless. This is challenging because affordable housing requires heavy subsidies to cover the costs. Creating pathways to the middle class is also challenging as the cost of housing rises.

  • What is exciting and scary about The Opportunity Zone Program? The Opportunity Zone program was created as a tax benefit not as a housing program. Although this program offers an opportunity to access additional resources to help construct housing units to help meet the Mayor’s goal of 10,000 units, there is not a lot of control over where investments will be made. It’s important to be intentional in terms of outreach and market opportunities.
  • How will Amazon HQ2 impact DC if this city is selected? Regardless of what happens with Amazon HQ2, DC will need to increase the supply of housing as more jobs are created. We need a regional effort to increase the supply of all kinds of housing, including affordable housing.
  • What did you bring back from the High-Cost Cities Forum? We’re making an aggressive effort to address the need for affordable housing, but we also need to be creative. I learned that DC is investing more per capita than other cities in affordable housing. DC is also the only city that is using the Tenant Opportunity to Purchase Act. Boston is using incentives to engage communities in affordable housing.
  • What’s the one thing you’d like us to know about being Director that is unique? I have a great staff that contributes to being a high-performing agency. Within the past year, we got $168 million in affordable housing projects out the door. I’m fortunate in being able to use the resources that have been allocated for affordable housing. I also appreciate being able to advocate for affordable housing. The DC Government is a proactive force in addressing the need for affordable housing.

Data Presentation

Ed Lazere, Executive Director, DC Fiscal Policy Institute

  • This presentation focuses on the 2019 DC budget and implications for housing.
  • Homes and neighborhoods are important for our psychic well-being.
  • The Mayor has ramped up DC’s investment in affordable housing. However, the government needs to do more to meet the enormous need for affordable housing. The problem is that families are being squeezed. Families of color are the most economically stressed. People who are low-income are paying more than half of their income on housing, and the number of these families is growing. Over 60% of families who are below 30% of the annual medium income are spending more than half (and as much as 80% in some cases) of their income on housing. These families are struggling to meet the rising costs of housing.
  • A lack of affordable housing creates stresses not only related to housing, but also for food security, health care, and protecting families. Housing instability also has a negative impact on children. They experience behavioral and academic challenges, which makes it harder for them to graduate from school and get good paying jobs. The reverse is also true when affordable housing is available.
  • The 2019 DC budget that was adopted in June includes $300 million for affordable housing. The problem is that the challenges of affordable housing are so great that we’re not making a dent in addressing this need. $1 billion is needed to meet the need for affordable housing, which includes construction subsidies and rental assistance.
  • To address the need for affordable housing we need more government financing, construction subsidies, and rental assistance for low-income families.
  • We also need a paradigm shift in how we think about affordable housing. Family stability is tied to housing stability. Funding for affordable housing lags behind other key community priorities, such as schools (about $1.6 billion), public safety (about $800 million), and public works (about $600 million). An investment in housing needs to match what the city spends on these priorities.
  • We created an interactive map for every affordable housing project over the past four years in DC that is under construction or in the pipeline. Key findings of this map are that affordable housing resources need to be invested throughout the city and resources are not reaching families with high needs.

Panel: The Future of Affordable Housing Investment

Carl Hairston, Executive Vice President and Chief Lending Officer, City First Bank

  • This panel will discuss best practices and lessons learned in affordable housing.

Tyrone Garrett, Executive Director, District of Columbia Housing Authority

  • Not everyone looks at affordable housing the same way. How do you look at it? Affordable housing is typically viewed as serving the lowest income residents whose annual income is up to $40,000. Our agency provides public housing to people with a broader income range. It’s important to have another program, like home ownership, for people to move on to as their income rises when they no longer qualify for public housing.
  • Is public housing still relevant? Yes! The problem is stabilizing the current housing stock and building more units at the same time.
  • What are the misperceptions of public housing and the people who live there? Many residents are college educated, have children and work in the service sectors. These individuals fall into the category of workforce housing rather than public housing.
  • How can developers work with the DC Government? Preserving affordable housing requires partnerships. We work with co-developers to create new housing. We can do some projects on our own, but we need partners for others. We need subsidies to construct and preserve housing, which is the biggest challenge we face.

Arthur Fleming, Senior Vice President, Director of Community Investment Services, Federal Home Loan Bank of Atlanta

  • Not everyone looks at affordable housing the same way. How do you look at it? The Federal Home Loan Bank reviews eligibility for financing based on 80% or below the annual median income. If this conversation hasn’t already happened, DC needs to discuss how to brand affordable housing.
  • What feedback do you have for the audience? The Federal Home Loan Bank is not a federal agency and doesn’t provide home loans. It provides liquidity to banks so that they can provide capital to their customers. We’re a $56 billion institution. We deliver equity through an affordable housing program that creates shared prosperity for banks and communities who receive dividends.
  • Where does equity come from? The answer is government, but there are finite resources. We need to go beyond federal appropriation for affordable housing. We need a source of revenue that is a continuous revolving source. We need to be creative in generating equity, such as interest bearing bank accounts that can go into a trust fund. Another source is foundation funds. The government can make it easier for foundations to support affordable housing. The problem is that there are several government departments to work with to obtain funding. There is an opportunity for city agencies to streamline funding structures and come up with one portal to access funds.
  • How can we approach the Opportunity Zone Program for affordable housing? Local governments can create their own Opportunity Zone pools in which they act as an agent. They can do this on a lower-cost basis than other agents for the taxpayers in their area. Local governments can create their own fund instead of only reacting to this situation.
  • Are there any factors that should be put out for discussion and elevated as a priority? Since the Community Reinvestment Act was passed there has been tremendous growth in capital and development of private sector institutions. Whatever rules are being promoted for affordable housing we need to continue to build upon established institutions. We need smart institutions and smart people to solve a complex problem.

Christopher Miller, Senior Director, Housing Investment Platform, District of Columbia Housing Finance Agency

  • Not everyone looks at affordable housing the same way. How do you look at it? DCHFA exists to preserve affordable housing, which is based on 60% or below the annual median income. We’re looking at affordability outside of this bucket to include people, like civil servants, who make too much to qualify for affordable housing, but can’t afford to purchase a home. Sometimes people in a lower income band are working harder than those who earn more. We need to give examples of what jobs fit each income range to qualify for workforce housing.
  • What is your approach to equity? The Housing Investment Platform makes affordable housing simple and easy to understand for developers. We created a fund to co-invest in emerging developers for workforce housing that targets people who earn 60%-120% of the annual medium income. We partner with emerging developers by putting up the majority of equity capital. We build town homes, condos, and nontraditional housing.
  • How can we approach the Opportunity Zone Program for affordable housing? This program is an opportunity and a threat. It’s a tax program first and a tool for development second. Opportunity Zones could be helpful for projects that are mixed use or mixed income. A challenge is that there doesn’t seem to be regulations for affordable housing. The opportunities are wide open, which is a threat. Opportunity Zones could incentivize land speculation, which could increase the cost of land that is being looked at for affordable housing.

Brian C. Athey, Esquire, Managing Partner, Congressional Capital

  • Not everyone looks at affordable housing the same way. How do you look at it? My real estate lending company works West and East of the Anacostia River. Borrowers go to where there is need and opportunity. The simpler and easier the DC Government can make affordable housing the more money will be made available for projects.
  • What is your approach to equity? I form relationships as a lender. I focus on established relationships and track records. I help borrowers who are early developers before they borrow from a bank. Economics are a barrier for affordable housing development. Programs can reduce these barriers for developers who want to do the right thing.
  • How can we approach the Opportunity Zone Program for affordable housing? I see it as an opportunity to help fund affordable housing deals. It can help fund projects in which investors are incentivized for having a long-term vision.
  • How can we make the Opportunity Zone process better? I view this program from the perspective of a small developer. The process needs to be simple and straightforward to incentivize their participation. My message to the government is to put more money in, do more programs, and make it simple and easy to participate. Tax credit programs are too complex.

Jim Knight, Executive Director, Jubilee Housing Washington, DC

  • Not everyone looks at affordable housing the same way. How do you look at it? We work with people who are 30%-80% below the annual median income. Most people in affordable housing units are working in minimum wage jobs.
  • We need to come up with a message that will be well received by DC residents to create the will for affordable housing. Everyone needs affordable housing. A danger of providing workforce housing is valuing people based on what they earn versus the work they do. A question to consider is how many units the city needs at each income level.
  • What are the misperceptions of public housing and the people who live there? We need to be careful about over-prioritization. We need to maintain public housing as an option for people who need it.
  • What challenges do you face as a nonprofit developer? Our biggest challenge is acquisition costs. We’re able to find first and second position mortgages, and we have better balance sheets due to the amount of funds invested. To address this challenge, we created our own acquisition fund that funders can invest in with a 2% return once other funds, such as new market tax credits and grants, are brought in. This fund has been successful in helping us move faster on housing projects. We work in mixed income neighborhoods, which is not easy and takes a lot of partners to do affordable housing. Getting program funds helps, but we still need to fill the gap by raising funds from the community.
  • What would you change about the process as a nonprofit developer? The challenge of doing affordable housing in a higher income neighborhood is that it’s too expensive to buy land, which doesn’t take into account the amenities that exist there. The process creates an incentive to do affordable housing where land is the cheapest. There is also a need for educational benefits alongside affordable housing. Education, health, and housing are intertwined.
  • Are there any factors that should be put out for discussion and elevated as a priority? This is a pivotal time for the city to address the need for affordable housing. We have the potential to take the next step. Let’s get to $1 billion quickly because we have the capacity to use it.
  • Why isn’t there more investment in nonprofit developers? What type of investment is needed to strengthen the capacity of nonprofit developers? We need talent that understands how to use sophisticated investment tools. My request is that philanthropists invest in the recruitment and retention of this talent.

Key Takeaways:

  • Addressing the need for affordable housing requires a much greater investment of capital than is presently available and needs to be flexibly deployed to include construction subsidies, rental assistance, housing preservation, etc. Affordable housing is needed throughout the city.
  • Affordable housing needs to be approached from a community perspective that takes into account education, healthcare, and workforce development.
  • Affordable housing needs to take into account a wider range of incomes since there is a segment of the population who don’t qualify for public assistance, but cannot afford to buy a home. There is also a need for housing programs that help people transition from emergency and public housing to home ownership.