What Happened?
Cities worldwide are combating sprawl and homelessness through increased investment in affordable housing projects.
The Need
According to the National Alliance to End Homelessness, while unemployment rates dropped significantly over the past few years, the national homeless rate has declined just 2.3 percent. Research indicates the number of people at risk of homelessness is still above pre-recession levels and the number of low-income people living in doubled-up situations with family and friends is on the rise:
- 7 million people were living with family and friends in 2013, up 67 percent from 2007
- 4 million poor households paid more than 50 percent of their income on housing in 2013, up 25 percent from 2007
- On average, 154,000 homeless individuals were unable to find beds available to assist them
Increases in rent are outpacing low-income earning growth, which is threatening the financial stability of many Americans. This underscores the need for more affordable housing options to prevent low-income renters from becoming homeless.
Austin
In Austin, Texas, a push to create equitable affordable housing across the city is fueled by tax credits. Affordable housing developers rely on state tax credits to attract private sector financing for projects. In fact, the Texas Department of Housing reports tax credits account for 70 percent of development costs for affordable housing campaigns, Next City reported.
In Austin, and many cities across the country, for profit and nonprofit developers apply for housing tax credits through the state Department of Housing, which are funded through the U.S. Treasury and overseen by the IRS. If an applicant acquires tax credits from the state, it can sell them to an investor who will provide fund construction costs in return for equity in the development project, Next City reported.
When the housing project is finished, the developer and investor submit costs to the IRS to receive tax credits. Because they invested in affordable housing, the investors will receive a dollar-for-dollar credit on federal tax liabilities for the next 10 years, Next City reported.
New York City
The NYU Furman Center recently studied New York City’s affordable housing strategy and theorized the economic potential of a mandatory inclusionary zoning policy coupled with additional city subsidies. Currently, New York City has a voluntary inclusionary zoning policy that allows developers to build bigger buildings in certain parts of the city if affordable residential units are provided. The researchers argue a mandatory inclusionary zoning policy with additional subsidy would catalyze the construction of affordable housing units in both high-rent and low-rent neighborhoods.
Singapore
First launched in 1960, Singapore’s Housing and Development Board was able to rehouse 400,000 residents within five years. In 1968, Singapore introduced a measure allowing individuals in public housing to use government pensions to buy residences. Today, nearly 90 percent of Singaporeans are homeowners and more than 80 percent live in government-built residential units, CityLab reported.
El Paso
The Housing Authority of the City of El Paso recently completed a rental assistance rehabilitation project that includes $250 million in initial public-private investment that is expected to reach $1 billion over the next five years. Representing 30 percent of the housing authority’s housing units, the rental assistance demonstration project is using private financing to rehab and replace deteriorating residences to meet current and future housing demands. The project utilizes housing tax credits and bonds to secure private sector financing.
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