How DC’s Affordable Housing Tools Make Projects Pencil Out

August 18th, 2016 | by Claire Zippel

With apartment buildings springing up in DC at record rates, why is none of the new housing affordable to low-income residents, unless the building receives government subsidy? A new interactive tool lets you play developer and see in a very real way how the costs of land and construction are simply too high to make rents affordable to people with low incomes. This highlights why the District needs to step in to give housing developers the additional resources they need to make decent housing accessible to the city’s lowest-income residents.

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The tool, by the Urban Institute and the National Housing Conference, allows users to adjust various inputs and costs to try to bring costs down. But it shows that even under the best circumstances, projects must set rents higher than what low-income families can afford in order to generate enough income to cover costs and provide a return on investment. The situation in DC and other growing cities is worse, because there’s more incentive to build housing for the people who want top-of-the-line amenities and can afford to pay high rents, rather than building more modest housing.

The District’s affordable housing programs work by providing subsidies that help fill that gap. The Housing Production Trust Fund provides grants and no-interest loans to help pay for land and construction costs. Another tool, the Local Rent Supplement Program (LRSP), provides monthly assistance when the rent a tenant can pay is too little to cover a building’s ongoing operating costs. A DC resident relying on average Social Security benefits, for example, can afford to pay just $370 a month in rent,[1] yet it typically costs $500 a month to keep an apartment well-maintained and in good repair.[2]

The Trust Fund and LRSP should work hand in hand to serve the lowest-income residents, who typically spend the majority of their income for rent,[3] oftentimes leaving not enough left over to pay for necessities like food and transportation.[4] Yet in part due to a lack of enough LRSP assistance for Trust Fund properties, for several years the city has not met the requirement that 40 percent of Trust Fund dollars assist housing for extremely low-income households (those with incomes below $32,000 for a family of four).[5]

To ensure that more projects serving the District’s lowest-income residents “pencil out” – where the numbers allow developers to make projects work while charging affordable rents – the Mayor and Council need to maintain the city’s substantial investment in the Housing Production Trust Fund and provide additional LRSP funding as Trust Fund units are constructed.

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[1] The average Social Security benefit received by retired workers in DC is $14,800. A one-person household at that income level can afford to pay no more than $370 a month (30 percent of income) in rent. US Social Security Administration, OASDI Beneficiaries by State and ZIP Code, Dec. 2014.

[2] Based on operating cost guidelines in the Department of Housing and Community Development’s Spring 2016 Request for Proposals.

[3] Wes Rivers, DC Fiscal Policy Institute, Going, Going, Gone: DC’s Vanishing Affordable Housing, 2015.

[4] Among the lowest-income renters, those who pay the majority of their income for rent spend less on necessities than their peers who have housing with affordable rents. Joint Center for Housing Studies of Harvard University, The State of the Nation’s Housing 2016.

[5] Department of Housing and Community Development performance oversight documents for fiscal years 2015 and 2016. See DCFPI Housing Production Trust Fund factsheet.

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