Tag Archives: affordable housing

US government thinking of renting foreclosed homes

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Different people have different opinions about what to do with the glut of foreclosures: perhaps convert them into multi-family units, bulldoze them, or donate them. It appears the federal government might try another route: renting them.

The Federal Housing Finance Agency said Wednesday it is seeking input from investors on how to rent roughly 250,000 homes owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration. All of the homes are foreclosures…

Converting the homes into rentals may reduce “credit losses and help stabilize neighborhoods and home values,” said Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie.

Homes in foreclosure sell at a 20 percent discount on average, which can hurt prices of surrounding homes.

It also might meet the growing demand for rentals. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press.

This sounds like it could turn into a large program with a lot of moving pieces. Would these homes essentially be converted into temporary public housing?

If done well, this could help deal with a rental problem. Even before the economic crisis, a number of metropolitan areas suffered from issues of affordable housing: there simply were not enough cheaper and good units available. Additionally, there was often a mismatch between where these homes were located and where jobs were located. Could renting these foreclosures be a viable solution?

How many communities would be interested in supporting a program like this? I could imagine some interesting battles within better-off suburbs. On one hand, as the article mentions, foreclosures tend to drag down home values. On the other hand, having the federal government actively involved as a landlord in more neighborhoods would make a lot of people nervous.

Problems at the DuPage Housing Authority

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As part of a story about corruption at the DuPage Housing Authority, the Chicago Tribune provides an update on the recent history of the organization:

But investigators have asked plenty of questions lately about how DuPage housing officials spend the $22 million in federal funds they get annually.

Since 2009, the U.S. Department of Housing and Urban Development has audited the DuPage Housing Authority three times, concluding the troubled agency violated numerous federal regulations and must pay back $10.75 million in misused tax money.

HUD has determined DuPage must repay that money to its Section 8 housing program because it didn’t allow competition for projects, failed to properly document whether many tenants were eligible to get subsidized rent, made inappropriate credit card purchases and, in some cases, overpaid benefits.

This is not a whole lot of federal money, particularly in a county with a population over 900,000 and a poverty rate of around 6% (this site has 2009 figures of a poverty rate of 6.5% and the 2008 Census had an estimate of 5.8%). But the DuPage Housing Authority has an interesting history. If I remember correctly from research I have done, the group was formed in the 1940s and had some federal money to work with. But by the early 1970s, the Housing Authority had not built any units within the county and HOPE, an organization now in Wheaton, sued the county for housing discrimination, primarily for exclusionary zoning practices. The court case, Hope v. County of DuPage (the 1983 version here), lasted for over a decade and here is a brief summary of the conclusion in a law textbook.  It is only within recent decades that the Housing Authority has developed units.

This is perhaps not too unusual considering the political conservatism of a county that has been solidly Republican since the the 1860s. But as the lawsuit from the early 1970s alleged, the county has continued to change: more immigrants and minorities have become residents, housing values went up, a number of communities limited construction of apartments, and there are a good number of lower-paying jobs in wealthier communities. Add this all up and there are affordable housing concerns within a wealthy county and this extends beyond the common suburban debate about “work-force” housing for essential government employees like teachers or policemen or providing cheaper housing for young graduates and/or older residents.

Update on affordable housing debate in Winnetka

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The Chicago Tribune reports on Tuesday’s meeting in Winnetka regarding a proposed affordable housing ordinance. Here is how the comments at the meeting were summarized:

Rick McQuet, a Winnetka resident, said at the meeting that the affordable housing plan is intended to help young families and recent college graduates.

“That young family was me about 15 years ago, a new degree in hand and aspirations of becoming a member of a truly great community,” he said.

Northfield resident June O’Donoghue received applause after she said she opposes the proposal because it interferes with the housing market.

“Housing is affordable to the people who can afford it. That is a simple thing,” O’Donoghue said. “I think you need a referendum for people to vote to see if they want to go through all this social engineering.”

In recent weeks, the plan’s opponents have said it amounts to “hand-outs” for people with lower income that could result in Section 8 housing, decreased property values and increased crime. Supporters have lashed out at the opposition as bigoted, arguing that the plan would allow teachers, clergy and other employees to live in the community in which they work.

Some thoughts about these comments (which may or may not represent everything that was said at the meeting):

1. The first comment I included above is interesting in that it refers to a common understanding of affordable housing in suburbs: it is not about helping the disadvantaged in society but rather “young families,” “recent college graduates,” and often elderly residents of the community. While this may be a good goal for a community (particularly if residents want their own family members in these categories to live in the community), this is a different understanding of “affordable housing.” Perhaps this is what has to be done in many suburbs order to counter the plan’s opponents who are quoted as saying this is really about helping lower-income people. But overall, there are needs for cheaper housing in society beyond people who might fit a profile of a community but simply don’t have the money.

The plan seems to play to this more suburban understanding of affordable housing:

The proposed plan would apply to new developments, in which 15 percent of owner-occupied units must be affordable to households earning at least $75,000 per year, while 15 percent of rental units would be affordable to those earning at least $45,000. Current residents and senior citizens would receive priority, the plan says.

According to the Census, the 2009 median household income was $49,777 so the part of the plan for people making at least $45,000 is still drawing from near the top 50% of American incomes.

2. “Social engineering” is always an interesting term to think about. In finishing my taxes for this year, I was reminded that our tax code is riddled with all sorts of “social engineering” in terms of promoting or incentivizing certain activities. We as Americans value homeownership so we have a home mortgage interest deduction (which some argue should be taken away). We give deductions for giving money to charities. Is all social policy “social engineering” or just policies that some people don’t like?

Battle in Winnetka over affordable housing plan

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The community of Winnetka, Illinois is a northern suburb of Chicago that is quite wealthy: the Census says the median household income is $201,650 (in 2009 inflation-adjusted dollars). The Chicago Tribune reports on a recent debate over a plan to introduce affordable housing to the wealthy suburb:

Winnetka’s plan calls for a land trust to provide for-sale and rental property to those who make far less than the median household income of $201,650.

Under Winnetka’s proposed plan, owner-occupied units must be affordable to households earning at least $75,000. Rentals must be affordable to those earning at least $45,000 or more. Current residents and senior citizens would receive priority.

A lot of suburban communities talk about affordable housing but few propose plans like this. It would be interesting to know how the local government was able to even put this plan forward.

The plan itself describes the change that has occurred in Winnetka over recent years as the community has become even more exclusive:

Over the past several decades, Winnetka has become less diverse in age and income, and it contains a more transient population, according to the plan. The report states that Winnetka lost much of its housing market diversity with the demolition of older, smaller homes that were replaced with larger, more expensive houses. Between 1980 and 2000, the village also lost 262 rental units — a 38 percent reduction — due to the conversion of downtown apartments into commercial offices.

Between 1990 and 2000, the number of homes valued at less than $500,000 declined to 975 from 2,004, according to the report.

“Winnetka’s housing stock increasingly serves only one kind of resident — a family at the peak of its earning years and with school-age children,” the report states.

It sounds like teardowns have become quite an issue.

There has been some vocal opposition to the plan:

“There is plenty of affordable housing in neighboring communities,” said Carry Buck, chairman of WHOA, or Winnetka Home Owners Association. “Most people in Winnetka are conservative and they do not want more involvement from government.”

In a 25-page publication mailed to Winnetka residents last week, the homeowners association called the village Plan Commission’s proposal un-American, predicting it will lower property values, attract criminals and force residents to subsidize those who rely on “hand-outs.”

While this language might be more blunt than what one might typically find in such NIMBY debates, there are plenty of suburbanites who hold such views. Anything that might lower property values or might detract from the community that they bought into is seen as a threat.

The Tribune story suggests that an interfaith group is on the other side of the debate:

The lightning rod for complaints is the Interfaith Housing Center of the Northern Suburbs, a Winnetka-based nonprofit that supports the plan. The center, which advocates for fair and affordable housing and investigates housing discrimination complaints, is accused by WHOA of infiltrating village boards and commissions with “social engineers” who depend on federal funding.

Interfaith’s executive director, Gail Schechter, described the opposing arguments as absurd.

“Social engineering is what got us to look the way we do,” she said. “The way Winnetka looks today is not just pure market forces.”

Sociologists would tend to fall on this side: the suburbs were not just created by people voting with their dollars and feet. Rather, the whole suburban system is upheld by a massive system of government policy (building highways, promoting homeownership, tax breaks or incentives for developers and those with financial resourcse) and cultural values (emphasis on the single-family home and automobiles, an anti-urban bias, a desire to move away from problematic areas, etc.).

It will be interesting to see how this plays out. In my own research on suburban communities, I found such open debates (where each side clearly lays out their intentions and/or fears) to be relatively rare. Additionally, such debates are rarely just about particular development proposals; rather, they are about the broader character of the community. Here, it sounds like the debate is also about the image and status of Winnetka: is it just a upper-class suburb or should it be something different?

A-Rod real estate tax flap tied to incentive to construct affordable housing

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It appears that a number of luxury housing owners in New York City, including Yankees’ star Alex Rodriguez, are getting a major real estate tax break. While this is creating a stir, there is more to this story: these luxury units are getting a tax break because the developers have promised to build affordable housing elsewhere in the city.

Rodriguez and all the residents of his posh high rise will get tax breaks for 10 years under the city’s 421A tax abatement program. Luxury developers get tax breaks in exchange for making sure affordable units get built elsewhere. Rodriguez is one of some 45,000 New Yorkers who have scored the tax break.

“I think it’s outrageous,” Lewton said.

When Rodriguez’s moves into his $6 million, five-bedroom penthouse his tax bill will be $1,150. In contrast, Stephen and Phyllis Franciosa pay $3,100 in taxes one their one-family home in the Pelham Bay section of the Bronx…

The councilman said the law needs to be changed because this year alone the program will cost the city $900 million in lost revenue.

A-Rod’s taxes are so low that if he paid the going rate his tax bill would be 50 times higher. He should get such a break when he faces the Red Sox pitching staff.

City officials claim the tax breaks on Rodriguez’ building helped build over 575 units of affordable housing in the Bronx.

This is not an uncommon tactic for communities to encourage affordable housing: grant some tax breaks in exchange for the builder or developer constructing some units of affordable housing. It is often a struggle to get developers and builders to construct affordable units on their own as profit margins are lower. So communities have searched for incentives that would still allow builders to make their money while also providing for the public good.

In the long run, will this story simply be commentary about how the rich and famous get to play by different rules (and New York loves to pick on A-Rod) or can there be a reasonable discussion about how cities go about promoting affordable housing? I am guessing that the first option will easily win out. Why can’t New York news organizations go to those 575 units of affordable housing in the Bronx and talk to the other people who benefited from this tax break?

Lake Forest debates affordable housing

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Lake Forest, Illinois is one wealthy suburb: according to the latest Census estimates, the suburb of 18,757 people has a median household income of $139,765 and owner-occupied homes are worth a median value of $900,000. The Chicago Tribune reports on some recent arguments over a small affordable housing project in the suburb – note, the suburb currently has about 7,188 housing units and one existing affording housing project with 5 units:

Five years ago, Lake Forest created an affordable-housing plan, acknowledging that high property values in the community were shutting out some seniors, families and education and health care workers, people who are “part of the fabric of daily life in Lake Forest,” from homeownership.

Almost two years ago, the city began working with the Lake County Residential Development Corp. to come up with a plan to construct affordable housing on less than 3 acres of city-owned land.

Last month, the City Council voted down the Settler’s Green project and directed its housing trust to modify the plan, which would have brought one market-rate and 15 affordable single-family rental homes to the northwest corner of Everett and Telegraph roads. In doing so, Lake Forest walked away from $6 million in Illinois Affordable Housing Tax Credits.

On one hand, it is good that the community is thinking about this issue. On the other hand, when push comes to shove in terms of approving even a small project on just 3 acres of land with 15 affordable housing units, people do not want the project. Additionally, the affordable housing project seems to have been aimed not at lower-income or minority residents but rather at “some seniors, families and education and health care workers.”

Some other figures suggest that Lake Forest needs more than just 5 units of affordable housing – there are plenty of workers in the area who make little money but need housing:

Last year, in a presentation to the Metropolitan Planning Council, Morsch noted that more than two-thirds of the work force in Lake Forest, Highland Park, Northbrook, Deerfield and Highwood earns less than $50,000 a year, meaning they can afford only 3 percent of the local housing stock.

It would be easy to categorize this as another case of NIMBY where citizens in the well-off community just don’t want land to be used in a way that is inconsistent with what already exists. But, this is not just an issue in Lake Forest. There are some deeper issues involving social class and race embedded in this issue of affordable housing in the suburbs.

Another consequence of financial crunch: public housing repairs

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The New York Times reports that public housing repairs have fallen even more behind due to the financial crunch affecting many governmental bodies: “Public housing is falling apart around the country, as federal money has been unable to keep up with the repair needs of buildings more than half a century old.”

While the story goes on to address particular cases in Baltimore and New York City, it’s hard to know from the story about how much of an issue this is. How much worse is the issue compared to five years ago? The only figure cited about a national figure for repairs was derived from a 1998 study. In Chicago over the last few decades, public housing repairs were frequently behind and more funding was requested even when economic times were good.

Keeping the elderly in their hometowns

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The USA Today reports on efforts by communities to help the elderly grow old in their hometowns. These communities have built “villages” where services for the elderly are coordinated. According to the article:

More than 50 villages in a neighbor-helping-neighbor system have sprouted in the past decade from California and Colorado to Nebraska and Massachusetts. They are run largely by volunteers and funded by grants and membership fees to provide services from transportation and grocery delivery to home repairs and dog walking…

AARP research shows that 90% of people want to grow old in their home and community.

This would seem to be wise for communities: the elderly know many useful things about a community, have made many connections among residents, and can teach and mentor a younger generation. Communities and suburbs without elderly residents are missing a key piece of their own social fabric.

In the Chicago area, when suburbs talk about “affordable housing,” they are not always talking about housing for low-income residents. They are often referring to programs that would help the elderly remain in places where costs of living make it difficult for residents to live on limited incomes.