NoVA on $32,000 a Year

Housing costs are extremely high in our area, and the abundant supply of older, affordable rental units built in the ’40s and ’50s has almost disappeared from our landscape as thousands of units have been renovated and converted to higher rents, or demolished and replaced with new luxury units. No where is this more evident than in the walkable neighborhoods of our inner suburbs near community amenities, job centers and transit routes. So how does anyone – let alone a family – live on $32,000 a year in NoVA? And what about families who earn less than that? Many of these households are employed in jobs that are critical to our local economy, but they can’t afford to live in the communities where they work.

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$32,000 is the annual income for a household earning 30% of our area’s median income (the area median income in NoVA is $108,000). If you earn $32,000, your rent should be $815 a month to be considered affordable, allowing income for food, transportation, and medical expenses. However, a cursory review of local apartment listings and search engine sites shows only a tiny percentage of units affordable at these levels.

Developing or preserving housing for extremely low income households is a real challenge for the region. The housing needs analysis undertaken by local jurisdictions for their Affordable Housing Master Plans recommends that thousands of new units for extremely low-income families are needed. And as we look at the projections for future job growth, the greatest employment gains are in the retail, hospitality and health care sectors – jobs that pay lower wages. So what options are available to encourage production of units for lower-income households?

Can’t We Just Build Less Expensive Units?

Development costs such as land acquisition, engineering studies and architectural drawings, legal and accounting fees, the site plan approval process, financing fees and construction costs are the same whether you’re building a luxury condo or housing that’s affordable. Include local requirements for underground parking, green building, adequate open space and development budgets escalate quickly. If the average annual cost to maintain and operate one affordable rental unit is approximately $7,000, and the rental income doesn’t cover those expenses, you don’t have a viable project. Lenders won’t make loans for proposals that don’t ‘pencil out;’ some sort of gap financing or subsidy is needed.

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Tools at Our Disposal

There are federal housing programs that focus on extremely low-income households, but the resources for these programs are shrinking, and their future in this new Administration and Congress is uncertain.

Housing Choice Voucher. The most effective tool is the housing choice voucher (HCV), the federal government’s major program for assisting very low-income families to afford decent, safe housing in the private market. A housing subsidy is paid to the landlord directly by the voucher administrator on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. But as rents have continued to rise – and as wages have remained flat – the number of families who need rental assistance has increased significantly, and the HUD budget appropriation for vouchers has not kept pace with the need. The shortage is so dire, that the waiting list for HCV in Alexandria was closed in 2011, in Arlington in 2012, and in Fairfax County in 2007. Currently, there are hundreds of local families on the waiting lists, and it can take anywhere from 5-10 years to secure a voucher.

Public Housing Authorities (PHAs) Both the City of Alexandria and Fairfax County have public housing authorities. The mission of the public housing program is to provide safe, decent, and affordable rental housing to low- and very low-income families, the elderly, and persons with disabilities. These PHAs also administer the HCV program in their jurisdictions. Housing authorities receive operating and capital subsidies from HUD to cover ongoing costs. They are responsible for general property management, ongoing program compliance, and, in some cases, providing supportive services to residents.  However, as is the case of the HCV program, federal appropriations have not kept pace with the maintenance and operational needs of public housing, and Alexandria and Fairfax County PHAs are struggling to fill the financial gap for maintenance and operations of these properties.

Arlington does not have a public housing authority, but they do have a housing grants program that provides rental subsidies. This income-eligible program serves Arlington renters who are elderly, low-income families with children under 18, and renters with physical or mental health disabilities. In the past five years the annual appropriation for housing grants has increased to address the growing need; in FY17 the County Board allocated $9 million for this rental assistance program.

National Housing Trust Fund The National Housing Trust Fund (NHTF) was enacted as part of the Housing and Economic Recovery Act of 2008, and is a dedicated fund intended to provide revenue to build, preserve, and rehabilitate housing for people with the lowest incomes. These funds are made available through an annual assessment of proceeds from Fannie Mae and Freddie Mac. In April, 2016 HUD announced that $174 million would be allocated in the first round of funding. Virginia received $3 million to be awarded by the Department of Housing and Community Development through a statewide competitive process. However to be a meaningful resource, future funding will have to increase substantially.

Through the low-income housing tax credit program, the region is making modest progress in creating affordable units for households who earn 60% of the area median income. Those jurisdictions that have inclusionary zoning programs are adding additional units for the workforce – those earning 80-120% of the area median income – from for-profit developers. Adopted land use tools such as increased density and reduced parking requirements for affordable housing proposals also help reduce development costs as do developer contributions to local affordable housing trust funds.

However, those households in the extremely low-income category rarely benefit from these policies, programs or tools – their jobs just don’t pay enough for them to afford those rent levels. As a result, they are either severely rent-burdened, living in overcrowded or unsafe conditions, or commuting extremely long distances to work. One proven best practice is the creation of a local rental subsidy program that would in effect stretch the impact of the federal housing choice voucher program to more families. Providing rental subsidies for a percentage of units within new or preserved affordable housing would create more mixed income communities and begin to address this growing need. As vital employees in our region’s economy, it is in our economic best interest to adopt the financial and regulatory tools to increase the supply of housing for these extremely low income households.