The Washington Socialist <> March 2017
By John Reeder
Affordable housing and the struggle to end homelessness are intractable problems in most areas of the U.S. and particularly acute in urban growth areas like the DC Metro. Arlington is representative of what has happened--housing is more expensive and gentrified, and renters spend an ever rising proportion of their incomes on housing (housing cost burden – generally above 30 percent of income for housing is considered a housing cost burden). According to the VA Tech Center for Housing Research, Arlington has the highest median renter cost (median gross rent) of any jurisdiction in the Metro D.C. area of about $2,027 per month in the third quarter 2016; the average in the 3rd quarter 2016 for the Metro D.C. area was $1,730 a month.
I identify three aspects of the local and national affordable housing problem and one short-term solution based on my years of activism at the grass roots level in Arlington:
l. Lack of affordable housing is a manifestation of the ills of capitalism with a lack of planning and a financially squeezed working class.
2. Lack of affordable housing and homelessness have two components—lack of income for those at the bottom rung, and loss of Federal, state and local government funding for the mentally ill, disabled, and those with addiction.
3. The ruling paradigm for most affordable housing programs today is building a few expensive units operated by contractors and crony capitalists, a strategy that can never meet the needs of the millions of housing-cost-burdened Americans.
4. A short-term solution is more direct housing grants funded by local governments for those in need.
Housing affordability is rooted deeply in our capitalist economy.
The real estate industry—whether building commercial or residential space-- is built on finance and tax deals, and meeting the needs of the rich, and is prone to boom and bust. The reason most people cannot afford to pay rent in this environment is that they are low income.
The problem is NOT a lack of supply of housing: in the DC Metro area, thousands of expensive homes and luxury apartments are being built. Many of these will remain unsold and unfilled. The housing industry, with all sorts of tax subsidies and abundant funding, builds for those with high income (who themselves are subsidized through the Federal and state income taxes in the amount of over $175 billion annually). HUD spending for low-income housing assistance is $50 billion a year; thus government subsidies for housing mostly go to the rich and upper income.
Arlington has a glut of McMansions costing well over a $1 million, very few modest detached homes for sale for under $700,000. Virtually no private rental apartments are affordable to anyone in the bottom 50-percent area median income (AMI) -- those in the bottom quarter (in income) of the population. In 2000, there were 20,000 market-rate rental apartments in Arlington affordable to tenants earning 60-percent area median income (AMI). By 2015, there were 80 percent fewer—only 4,000 out of 47,000 total rental units.
Pushed out by rising rents and stagnant incomes, many working and middle class people have been and continue to be forced to leave areas inside the Beltway like Arlington. They move to “ex-urban areas,” and then commute back to jobs in the core area, thus contributing to our sprawl. Gentrification means loss of income and racial diversity in Arlington, and displaces lower income people from good schools and adjacent jobs. The ratio of Latinos in Arlington fell from 19 to 15 percent of residents during the 2000-10 decade as Latinos moved out to Prince William and Loudon counties.
Loss of affordable housing has two components—lack of income and lack of government support for the mentally ill, the disabled and those with addictions
A large portion of those facing the excessive housing-cost burden are working or retired persons whose incomes are too low. There are about 15,000 households in Arlington, Virginia who have incomes below 50-percent AMI; a single person at 50-percent AMI earns $37,000 a year (p. 36).
In 2015, there were (p. 45) exactly 137 private market-rate apartments (out of 47,000) affordable for households earning 50-percent AMI -- who ordinarily should not be paying more than $925 a month for rent (including utilities). The average rent for an apartment in Arlington in 2015 was about $1,800 a month. Thus the gap for affordable rent for a 50-percent AMI single person was about $900 per month for an average apartment in Arlington.
A significant proportion of chronically homeless individuals suffer from mental illness and addiction. Virginia, like DC and Maryland, over the past 35 years nearly emptied most of its mental institutions; Virginia ranked 29th among the 50 states with a $91 per capita mental health spending level in 2010.
Arlington County has funded mostly through local tax revenues a number of group homes for the mentally challenged and mentally ill. It funded an addiction treatment center with about 50 beds, a 50-bed residential center for psychiatrically ill seniors, and a new year-round homeless shelter for adults. However, there are long waiting lists for most facilities; for instance, a group home operated by Arlington County for mentally ill adult women with five beds has a waiting list of about eight years. Arlington’s new homeless shelter (open less than two years) is full many nights. Nearly half of the county jail inmates are mentally ill persons with no long term therapeutic place for placement.
Most affordable housing programs in urban areas are operated by crony contractors and crony capitalists
The ruling paradigm for affordable housing in the United States today is to build new apartments. While it would appear that building new units would reduce the gap of needed affordable units, this supply approach cannot work because these units are simply too expensive to build and operate and too few in number. Political leaders like to cut ribbons on new buildings, and reward political contributors (nonprofits, banks, landowners and construction companies).
Affordable housing programs that engage in building new apartments are a type of public works. However, localities engaged in public works often enter into corrupt relationships with contractors who are the political sponsors of the city council or mayor. The scarce dollars available for housing assistance are captured by insiders and cronies in this form, and these projects do not provide effectively lower rents for the many lower income renters.
Arlington spends about 40 percent of its local housing assistance funds to subsidize production of new units or to rehabilitate existing units. Arlington privatized most of its housing assistance programs, including its homeless shelters, and subsidized housing units. Arlington County spent $38 million of its local revenues in FY 2017 for housing assistance; the main program ($14 million in FY 2017) is the Affordable Housing Investment Fund (AHIF) that finances subsidized units owned by private corporations and nonprofits. The total number of these subsidized committed affordable units (“CAFs”) in Arlington is about 6,500 today.
In the past two years, new CAFs in Arlington have cost around $400,000 each, requiring about $125,000 of local county funds. Because these funds are loans and have to be repaid, and construction and operating costs of private contractors are high, rents charged on the CAFs tend to be excessive, generally around $1,400 a month or higher in Arlington. Most tenants generally have incomes of 60- to 80-percent AMI. For every million dollars spent for new CAFs, only about eight units are built, and the county has been able to add fewer than 280 new units annually. CAF rental units are available for only a contracted period of 30-60 years.
Rents charged for CAFs are below prevailing market rents, and, while the new units are attractive and recent, they are not free to the tenant, and in essence provide a subsidy of less than $400 a month per household. Construction of new units takes three to over five years; adjacent neighborhood groups often oppose new construction for many reasons, including bias and discrimination. Over the past five years, Arlington County has built most new units in the county's lowest income area, furthering housing and public school segregation.
Most of the AHIF funds go to a handful of organizations that have strong political connection with the elected members of the Arlington County Board. The county government does not engage in arms-length bidding for new projects, and, unsurprisingly, new apartment costs turn out to be excessive.
In response to Arlington’s affordable rental problem, the Arlington Green Party advocated establishing a public housing authority through two voters’ referenda that both were defeated by voters on a 2-1 margin. Greens believed that a well-run authority (modeling Fairfax County’s) could have built and run low cost apartments, could have centralized housing programs and cut operating costs, and could have provided more accountability. Unfortunately, Arlington’s political establishment and its cronies were threatened by the referenda, and secured defeat.
The most pragmatic, short-term way to address affordable housing is to directly give tenants housing grants
Arlington County in FY 2017 provided $10 million from its local tax revenues for housing grants to very low income persons earning under 20-percent AMI. In FY 2015, it gave out an average $600 a month grant to about 1,300 households, all of whom were over 65 years old, disabled households or a parent with a minor child. The average income for disabled and senior households was $14,000 a year, and $26,000 for a family with a child. There are also about 1,400 other households earning about 30-percent AMI in Arlington who received a separate Federal HUD housing choice voucher (Section 8). There are no federal funds available to expand HUD grants, and an intolerable waiting list.
The local housing grants are administered by the Arlington Department of Human Services in a cost effective and transparent way—grants go directly to the landlord, and tenants are required to periodically update their incomes. The staff who also administer TANF and SNAP benefits can quickly and efficiently distribute funds to tenants across the county. Tenants are not required to live in CAF units nor are identified.
Providing housing grants is far more effective than building new subsidized units. Every million dollars spent for housing grants funds a $600 monthly grant to 138 households earning less than 20-percent AMI. The total rental reduction for the 138 households is nearly one million dollars (since administrative costs are low). Every million dollars on new construction builds eight new subsidized units for households mostly earning above 60-percent AMI; at about $360 per month lower rent, the total rent reduction for these eight households is $35,000 a year.
Ideally, the burden of financing housing grants should fall to the Federal Government, but this is unlikely under Trump and a Republican Congress. In the meantime, local governments should use their local tax revenue dollars to expand or institute housing grants by both shifting local tax revenue away from futile new construction, and to increasing tax revenues for the grants.
John Reeder is a Green Party housing activist in Northern Virginia.
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