Chairperson Bowser and members of the committee, thank you for the opportunity to testify today. My name is Jenny Reed and I am the Policy Director at 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 how policies impact low- and moderate-income families.
I am here today to share concerns DCFPI has with B20-604, the “Affordable Homeownership Preservation and Equity Accumulation Act of 2013.” While well intentioned, the bill could actually accelerate the loss of affordable homeownership opportunities in DC.
The bill proposes to shorten the length of time that a home subsidized through the Housing Production Trust Fund would be required to remain affordable when re-sold, for homes in high-poverty neighborhoods. Affordability restrictions are important because they help ensure that DC’s HPTF investments help build a stock of affordable homeownership units. Short periods of affordability create the risk that subsidized homes will not remain affordable, and thus shortening the current affordability standards should be considered carefully.
Under current law, for-sale homes subsidized by the Housing Production Trust Fund ‘ including condos and single family home sales ‘ must remain affordable for at least 15 years and can be affordable for longer if the developer chooses. If the units located in a Census tract with more than 30 percent of poverty, the affordability restriction is 10 years. That means that if a homeowner wants to sell their unit before the affordability period is up, they must sell it at a price that is affordable to another low-income homebuyer. After the affordability restriction ends, the homeowner can sell it for whatever price they like, but must repay the Housing Production Trust Fund subsidy.
The proposed bill would shorten affordability periods to five years in neighborhoods considered “distressed.” After five years, a home could be sold at any price, with the initial HPTF subsidy re-paid to the HPTF. It appears that this is intended to promote home sales in neighborhoods where some homebuyers may be reluctant to locate. And since homes in poorer neighborhoods may have low market prices, a potential homebuyer in such neighborhoods may be more interested in buying an unsubsidized home without restrictions, rather than a slightly cheaper home with restrictions.
Nevertheless, this proposal would go in the opposite direction from rules in nearby jurisdictions, which have much longer periods of affordability. It would run counter to a national model for affordable homeownership ‘ known as “shared equity” ‘ that has been shown to create a balance between helping homeowners build equity while maintaining long-term affordability. And it would designate too many neighborhoods as “distressed” and eligible for short affordable housing periods.
For all of these reasons, the bill would mean that DC’s investments in affordable homeownership could have only limited effects and may not live up to their potential to create long-term affordable housing.
To read the complete testimony, click here.