Affordable Housing Isn't Cheap: The Status of and Need for Dedicated Local Revenue for Affordable Housing Production and Preservation in the Washington, D.C., Region

Press Release Washington Area Jurisdictions Could Begin to Address Affordable Housing Need New Report Calls for Dedicated Local Funding for Affordable Housing

UPDATE: Affordable Housing Funding Wins Big Across Northern Virginia. A convergence of groups advocating for dedicated funding for affordable housing in Northern Virginia has won unprecedented commitments from the governments of Fairfax, Arlington, and Alexandria. For more information, see the May, 2005 issue of Intersect

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A new study released this week, Affordable Housing Isn't Cheap: The Status of and Need for Dedicated Local Revenue for Affordable Housing Production and Preservation in the Washington, D.C., Region, shows that only a few of the region's governments are providing significant and stable local funding for affordable housing. This basic policy could be adopted in many jurisdictions as housing values rise, affordability decreases, and property tax revenues climb. The report concludes that of Fairfax, Alexandria, Arlington, and Loudoun choose to dedicate 2 cents per $100 of assessed value of their real estate tax rate revenue, they would be on par with D.C. and Montgomery County in terms of local revenue dedicated for affordable housing per year per capita. If they committed 1 cent of their real estate property tax revenue, they would be below the regional standard. Prince George's County, due to limits on its property taxes, would need to find greater revenue streams from other sources. "Dedicating a local source of funding for affordable housing is often times the first and most basic step a jurisdiction can take to address its affordable housing need," noted Cheryl Cort, Executive Director of the Washington Regional Network for Livable Communities (WRN), the sponsor of the report. "We need to directly reinvest revenues from this booming real estate market back into affordable housing. This is an important opportunity to enable families to live in the communities in which they work," she said. WRN compiled the report to document the region's gaps in local funding for affordable housing, and to recommend amounts and sources of funding so local governments can take more decisive steps to address the crisis. Regional Affordable Housing Need The report found that housing prices are increasingly out of reach for low- and moderate-income families across the Washington, D.C., region. Housing supply has not kept up with job growth, wages have not kept up with the rising price of housing, a majority of low-income families pay more than 30 percent of their income on housing costs, and a majority of the units that low-income families can afford are occupied by higher income households that could afford more expensive units. "As housing costs increase in the inner core jurisdictions and the local governments fail to respond with appropriate policies, families with modest incomes get pushed farther from their jobs," said Cort. WRN's previous report, The Affordable Housing Progress Report: What the Washington, D.C., Region's Jurisdictions Can Do to Combat the Crisis, found that a housing trust fund, with a dedicated revenue source, is a leading tool in a larger affordable housing strategy. Dedicated funding provides a reliable source of support for quality affordable housing to those families most in need. The dedication of local revenue towards affordable housing is a significant regional trend that represents a strong first step for many jurisdictions in addressing a growing housing affordability problem, the report concludes. "Stronger commitments to housing trust funds could prevent the displacement of hundreds or thousands of residents and create affordable homes for low-income people throughout Northern Virginia," said Jon Liss, Executive Director of the Tenants' and Workers' Support Committee. Dedicated Funding for Affordable Housing Around the Region Montgomery County, Md., is the only jurisdiction in the region to have a dedicated local revenue source committed to affordable housing. The District of Columbia has the revenue source and amount identified and promised by law, but the specifics of the funds flowing yearly into the Housing Production Trust Fund remain dependent on the vagaries of the budget process. Arlington County, Va., has a semi-dedicated source of local revenue going into its Housing Investment Fund. Its local revenue commitment to affordable housing has remained consistently high over the 15-year existence of its Housing Investment Fund, but it is not dedicated. Fairfax County, Va., and the City of Alexandria, Va., have affordable housing trust funds that have relatively small, non-dedicated sources of revenue. Therefore, the amount of public funds invested into affordable housing is variable and dependent on yearly budget allocation decisions and other contributions. Prince George's County, Md., and Loudoun County, Va., representing the lower and higher ends of the region's housing price spectrum respectively, do not have affordable housing trust funds. There has been a promising trend during the budget season this spring in Northern Virginia. Fairfax, Arlington, Alexandria, and Loudoun are all considering substantial increases in commitments to affordable housing trust funds. Recommendations The report recommends that all local jurisdictions should match the District of Columbia and Montgomery County, Md., in their local revenue commitments to affordable housing on a per capita basis. In particular, the report recommends that Fairfax County dedicate approximately $30 million per year to its Housing Trust Fund. If the money is used strictly for preserving and acquiring affordable homes so they are not converted into market rate units, a $30,000 per unit subsidy is commonly required. Therefore, the $30 million per year investment to the Housing Trust Fund would, at $30,000 per unit, preserve or produce approximately 1,000 affordable homes per year. This number of housing units roughly matches the need based on projected job growth in Fairfax County. The City of Alexandria should dedicate approximately $5.5 million per year to its Housing Trust Fund. The $5.5 million per year investment to the Housing Trust Fund would, at $30,000 per unit, preserve or produce approximately 200 affordable homes per year. This number of new housing units approximately matches the need based on projected job growth in Alexandria. Prince George's County create a Housing Trust Fund and dedicate approximately $15-35 million per year Loudoun County create a Housing Trust Fund and dedicate approximately $8.6 million per year Arlington County should increase its local funding commitment to the Affordable Housing Investment Fund to $12 million per year, and dedicate the revenue source. The $12 million per year investment to the Housing Investment Fund would, at $30,000 per unit, preserve or produce approximately 400 affordable homes per year. This number of housing units matches the County's goal of committed affordable units per year. The District of Columbia should continue to provide the Housing Production Trust Fund with its promised-by-law yearly revenue of 15 percent of the real estate transfer tax and recordation fee, which will be over $40 million for FY05. Montgomery County needs to continue its commitment to the Housing Initiative Fund, now at $18.1 million per year.