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Report: D.C.’s affordable housing funds aren’t going as far as they were just a few years ago

Higher construction costs have significantly increased what it takes to create affordable housing in D.C.

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For the past few years, the District has ensured that its primary affordable housing fund has received $100 million in annual investments, the highest amount among U.S. cities on a per capita basis. That infusion, bankrolled by real estate deed recordation and transfer taxes as well as yearly budget appropriations, has also been the most D.C. has ever put into the fund.

But a new report finds that higher construction costs over that same period have dulled the ability of the District’s Housing Production Trust Fund (HPTF) to help produce affordable units at a time when they are sorely needed. Released on Monday by the D.C. Fiscal Policy Institute (DCFPI), a left-leaning think tank, the report says the same HPTF investment of $100 million in D.C.’s upcoming fiscal year 2020 budget would yield roughly a third fewer affordable units than those yielded in fiscal year 2015, which ran through September 2015.

Graph showing lower housing yields for D.C.’s Housing Production Trust Fund at $100 million of investment per year
DCFPI

That’s because the per-unit subsidy costs of both new-construction and preservation projects have swelled, according to DCFPI. The local think tank examined data compiled by the D.C. Department of Housing and Community Development (DHCD), which manages the HPTF. DCFPI reports that between fiscal years 2015 and 2019, the current fiscal year, the per-unit HPTF subsidy for new-construction projects involving affordable units more than doubled, spiking 127 percent. That for preservation projects increased 21 percent over the same time.

“The weighted average per-unit loan amount has risen 60 percent since 2015, from $72,500 to nearly $120,000,” DCFPI explains, noting that this amount “assumes 40 percent of units are new construction and 60 percent are preservation.” “Affordable” units are those set aside for households making 80 percent of the area median income (AMI) or less. In the D.C. area, the AMI for a four-person household is currently $117,200, so 80 percent of that is $93,760.

DCFPI

Because of these higher costs, D.C. would have to invest more than $150 million in the HPTF next fiscal year to match that fund’s 2015 output, writes Doni Crawford, an analyst at DCFPI. And to meet the housing needs of D.C.’s more than 40,000 “extremely low-income” families—those who make less than 30 percent of the AMI—officials would have to ensure that $230 million a year makes it into the fund over the next decade, DCFPI has previously estimated.

Asked about the report, D.C. Mayor Muriel Bowser’s administration provided a statement pointing to her “unprecedented investments” in the HPTF over four consecutive municipal budgets. Brian Kenner, Bowser’s deputy mayor for planning and economic development, said: “Thanks to such efforts, we’ve delivered more than 7,200 units of affordable housing. She’s clearly said there is a need to do more, and for [her second] term she’s charged us to ramp up our production and preservation of affordable housing to better meet demand.”

Kenner says the District aims to produce 36,000 additional units of housing over the next several years, “including at least 12,000 affordable units across the income spectrum and 240,000 units across our region.” A spokesman for At-Large Councilmember Anita Bonds, who chairs the D.C. Council’s housing committee and has sway over both the HPTF and DHCD, says in a statement that Bonds has “long advocated for an annual commitment of $200 million or greater” to the trust fund. “She is keenly aware of the rising construction costs and realizes that if the District is to meet its goal of preserving and creating 12,000 affordable units by 2025, the city would need to spend around $1.4 billion”—or the estimated $120,000 per unit—he says.

Bowser is poised to submit her proposed fiscal year 2020 budget to the Council later this month. Then, during the spring, Council committees will mark it up prior to voting on it.

In recent years, the HPTF has faced scrutiny over how it is administered and how its coffers are spent down. The D.C. Auditor found that tens of millions of dollars in HPTF funding had likely been wasted between 2001 and 2016. The fund provides gap financing to developers in exchange for housing protected by affordability covenants and priced below the market rate. In fiscal year 2018, the District allocated more than $167 million in HPTF money to projects.

This post has been updated with comment from Bowser’s administration and Bonds’ office.