Testimony of Jenny Reed, Policy Director, at the FY 2012-2013 Performance Oversight Hearing for the Department of Housing and Community Development

   Chairman Bowser and members of the Committee, thank you for the opportunity to speak today.  My name is Jenny Reed, and I am the Policy Director of the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents. 

    I am here today to testify on two Department of Housing and Community Development (DHCD) managed programs; the Housing Production Trust Fund and Inclusionary Zoning.  These two programs are crucial affordable housing tools, but a lack of transparency in the Trust Fund and implementation problems with IZ raise concerns.  With a severe affordable housing storage in the District, we look forward to improvements in these two programs.

 The Housing Production Trust Fund (HPTF) is DC’s main source for affordable housing construction, renovation, and tenant purchase.  Since 2000, the HPTF has supported the construction or rehabilitation of over 7,500 affordable units across every Ward in DC.  In recent years, funding for the HTPF has dropped significantly (see figure 1), a result of both budget cuts and the real estate market crash ‘ the HPTF is supported by 15 percent of DC’s deed recordation and transfer taxes, which dropped sharply in the downturn. 

   As the Trust Fund went through its rapid decline in resources, tens of millions of dollars of affordable housing projects were stuck in the development pipeline.  It is our understanding that DHCD has largely been able to work through the backlog and fund many of these projects at this point.   However, DHCD hasn’t produced a HPTF report since the fourth quarter report of FY 2011, so we do not have a way of knowing what the resources in the HPTF look like for this fiscal year and the next fiscal year. 

   The health of and resources within the HPTF are a crucial piece of solving the affordable housing problem in DC.  The reports produced by DHCD help provide transparency of the HPTF and allow the Council and the public to see: what resources are available, what projects continue to be committed/obligated in the pipeline, if the fund is oversubscribed ‘ meaning it has more obligations than resources ‘ and what the picture of available funds in the coming year looks like. 

    The transparency of the HPTF throughout the year is especially important for tenant groups wishing to utilize DHCD’s first right purchase program.  As the TOPA (Tenant Opportunity to Purchase) process is triggered by sales of buildings throughout the year, it is important for tenants to know if funds are available and how much.  There have been instances where a tenants’ group has not pursued the First Right purchase program because it did not think there were funds in the HPTF, when in fact there were. 

   DC’s Inclusionary Zoning (IZ) program is also a critical housing tool.  IZ helps to build moderate income housing throughout the District by requiring developers to include affordable housing in new housing developments in exchange for the right to build more densely than allowed by standard zoning rules.  IZ was implemented right as DC’s housing market crashed.  As a result, only 24 IZ units have been produced to date, although 900 are now in the pipeline.  According to the Office of Planning, IZ is creating new affordable housing in neighborhoods where affordable housing is hard to come by ‘ Dupont Circle, Adams Morgan, 14th Street Corridor, and Shaw. 

 However, IZ implementation is running into problems that are reducing its efficiency.  We appreciate that DHCD is committed to addressing these growing pains and that they have been meeting with stakeholders’ including DCFPI ‘ to work through these issues.  Some of the current areas that DHCD is working to improve include increasing staffing , contracting with community-based organizations to  recruit and manage IZ’s homeownership units, and working to improve IZ’s administrative regulations to more efficiently and effectively match applicants to available IZ units.

We think that these fixes, along with others, will help the IZ program run more smoothly and ensure its success as an important affordable housing tool.  We look forward to working with DHCD as it continues to make these improvements and are glad that they are willing to reach out and work with community members. 

         Thank you again for the opportunity to testify. I am happy to answer any questions.