Affordable Housing Reader

The Supply of Public and Subsidized Housing

Adopted by the Chapter Delegate Assembly New Orleans, Louisiana, March 24, 1991
Ratified by the Board of Directors Charleston, South Carolina, October 5, 1991

The federal government has subsidized low income housing since the mid-1930's, but the supply of such housing has consistently lagged behind the need. In fact, the production of federally assisted housing has virtually ceased since the mid-1980's. The affordability crisis resulting from this drastic reduction of assisted unit production has been exacerbated by the spiraling cost of existing housing relative to households' ability to pay.

In 1987, 23 percent of all renter households had incomes below the poverty level. Forty-six percent of these households paid over 70 percent of their incomes for housing. Two-thirds paid over 50 percent of their incomes, and 85 percent exceeded the 30 percent-of-income affordability standard.¹ In 1970 the median housing cost/income ratio for all renters was 20 percent, but by 1987, this ratio had risen to 29 percent. By 1987, almost half of the nation's 33 million renter households had housing affordability problems.

Between the mid-1960's and the mid-1980's, the federal government produced nearly 2,000,000 units of newly constructed or substantially rehabilitated low-income housing under the Section 221(d)(3), Section 236, and Section 8 programs. This housing stock now comprises much of the nation's lowest cost housing.

Many of the federally assisted and insured mortgages made under these programs may be prepaid after 20 years of the 30 or 40 year mortgage term. During the early years of the Section 8 program, HUD executed 20 year assistance contracts, renewable in five year intervals at the owner's option. In many housing markets, there are strong economic incentives for owners to discontinue the federal restrictions contained in the contracts or financing agreements and move the units to market rate rents or homeownership tenure. Clearly, conflict exists between the contractual obligations agreed to by the federal government, and the vital public purpose being served by this housing. Because a permanent resolution of this issue has yet to be developed by the federal government, local and state governments, and tenant associations and advocacy groups have had to take the initiative in the preservation effort.

In declining market areas, federally assisted housing stock is threatened by deterioration and foreclosure. Recent studies by the National Housing Preservation Task Force and the National Low Income Housing Preservation Commission agree that defaults and foreclosures may pose a threat to more units than prepayments.^2,3 In either instance, assisted residents may be displaced. An additional threat comes

from the inadequacy of the present subsidies to cover rising or unanticipated costs, so that the assisted housing is no longer economically viable at the current subsidy levels.

Because of the high cost of constructing new housing and the lack of a federal presence in assisting additional low-cost housing, it is imperative that the existing subsidized housing stock be preserved to the greatest extent possible. Planners at the local and state level must take the initiative to develop and promote creative programs that facilitate the reservation of the existing subsidized housing stock, while advocating federal policies and funding to assist in their implementation. Planners are also in a unique position to act as catalysts for community initiatives to develop new and creative approaches to the development of new low-income housing. Planners' familiarity with community needs, the development process, techniques for leveraging public and private resources, and means of encouraging citizen involvement reinforce their ability to forge the partnerships necessary to meet today's housing challenges.

POLICY IMPLEMENTATION PRINCIPLES

1. APA National should support a renewed federal presence in preserving and expanding the nation's low-income housing stock. The federal efforts should be directed toward:

Developing a comprehensive national housing policy to provide direction for all federal housing-related programs.

Renewing the federal commitment to new construction of assisted housing, particularly in areas or communities historically underserved by assisted housing programs, and where insufficient available housing stock precludes the use of rent supplement or rehabilitation programs.

Replacing with like-kind" subsidies any federal housing assistance contracts or financing instruments that expire or that cannot be prevented from being prepaid or otherwise discontinued.

Revising federal tax policies to encourage the development and retention of assisted and affordable rental housing by the private sector.

Encouraging and assisting nonprofit housing providers and resident groups in preserving threatened assisted housing.

Making adequate subsidies available to assisted housing development to prevent deterioration, default, or foreclosure.

Ensuring long-term availability of new privately owned, federally assisted housing stock through new regulatory requirements which limit owners' ability to prepay subsidized, insured mortgages or opt out of housing assistance payments contracts.

Reasons to support #1: It could be argued that a regulatory change effecting the terms of current housing contracts with private owners of federally-assisted housing would constitute an illegal "taking." Efforts should be focused on revising applicable regulations to ensure that all future new assisted housing of this type remain available for low- and moderate-income households for the duration of their original contracts.

2. APA National and Chapters should encourage states and localities to inventory existing public and assisted housing stocks, including those units threatened by deterioration, prepayment, or opt-out of assistance contracts. States and localities should , after considering their affordable housing needs and market conditions, develop action plans for the targeting of policy, regulatory, and financial initiatives addressing this issue in their jurisdictions.

Reasons to support #2: Local and state governments need to assess potential threats stock, and opportunities for its threats to the assisted and public housing preservation, given the dynamics of local needs.

3. APA National and Chapters should encourage state and local initiatives designed to preserve and expand affordable housing opportunities at a variety of income levels. These efforts could include, but should not be limited to:

Rehabilitation loans which are conditioned upon rental operation under existing federal programs or state programs for low-income households.

Property tax deferral or abatement for units serving low-income households.

Right of first refusal options for the locality , local housing authority, non-profit groups, or tenant groups at the proposed transfer of the property or discontinuance of federal assistance, or default.

Inclusionary zoning requirements mandating the production of affordable housing as part of market rate development.

Encouragement of alternative living units such as accessory apartments, "granny flats,' and single room occupancy apartments.

Commitment of local or state financial resources or other resources (such as publicly controlled sites) to foster the production or retention of affordable housing opportunities.

Encouragement of public/private partnerships and the leveraging of public resources with funding and resources from the private sector.

Examining subdivision design standards, zoning ordinances, and other regulatory or development controls for potential barriers to the production of assisted housing, and where indicated, develop specific design standards and regulations to encourage development of assisted housing, without compromising essential health and safety requirements.

Reasons to support #3: This leaves the determination of whether these barriers exist to state and local governments. it embraces the problem solving approach of the planning discipline, incorporating rational examination of the issue at the state and local level, identification of areas requiring attention, establishing goals, and developing policies and regulatory mechanisms to achieve those goals.

4. APA National and Chapters should assist in compiling and distributing information about successful public, private, and non-profit programs which have preserved or expanded assisted housing opportunities.

Reasons to Support #4: Many states and localities, as well as private industry and nonprofit groups, have acted innovatively to encourage the preservation and expansion of public and assisted housing. These programs should be documented and described for potential replication.

Note: This Policy Guide is the official position of APA. The implementation of actions called for in this PIP at the state level, however, is at the initiative of each chapter.

¹ Figures based on data in Table 4-13, American Housing Survey in the United States, 1987.

² The Preservation of Low and Moderate Income Housing in the United States of America, National Housing Preservation Task Force, 1988.

³ Preventing the Disappearance of Low Income Housing, National Low Income Housing Preservation Commission, 1988.