Affordable Housing

Affordable Housing

Greenville Partnership for Philanthropy recently explored the broad topic of affordable housing in an effort to understand what programs and organizations are working to house those whose incomes are too low to afford safe, well-maintained, and conveniently-located housing.  GPP members also sought to learn ways a community can address a housing market that is squeezing availability of affordable housing for low to moderate income residents.

Sylvia Palmer has lived in Nicholtown in Greenville, SC her whole life.  Since 1901, the neighborhood of mostly three bedroom homes and apartments has been home to almost exclusively African Americans. But in the last three years, Ms. Palmer has seen her community go through dramatic changes.

The neighborhood – close to Greenville’s booming downtown– is being discovered by white families who once favored the suburbs and by Millennials craving proximity to the urban core. “I know we can’t restrict who comes in the neighborhood,” says Palmer, “but it is very difficult when you see people being displaced because they aren’t able to afford the housing (in Nicholtown).”

Greenville is not alone in its experience; communities across the nation are wrestling with gentrification, maintaining a stock of quality, affordable housing, and understanding the connections between housing and economic development. Deborah McKetty, President and CEO of CommunityWorks Carolina articulates what many are thinking: “These are some of the unintended consequences that we must collectively address as a community if we want to maintain the high quality of life that we all enjoy in this place we call home.”

An affordable housing primer

First, it’s important to define affordable housing. Ginny Stroud, Community Development Administrator with the City of Greenville, explained that housing is considered affordable if a family spends no more than 30% of their income to live there.  So affordable housing has different meanings for different families.  “But generally, when we refer to affordable housing, it usually means affordable for families in the middle or at the lower end of the income scale,” says Stroud.  Workforce housing is often used interchangeably with affordable housing because most low-to-moderate income families are working and need affordable housing.

At the center of the definition of affordable housing for most social service programs is Median Family Income (MFI) (also sometimes referred to as Area Median Income, or AMI). Stroud reports that this is used to determine the government-calculated income limits for affordable housing programs. The MFI is used to create income categories, each of which is a percentage range of MFI that’s typically based on a family of four.  As a point of reference, the MFI for Greenville County is $58,000 for 2015, which means a four-person family with a “Very Low Income” (30 – 50% of MFI) makes between $24,251 and $29,000 a year.  For them, affordable housing should cost about $600 – $725 per month.

Several federal programs are the core of most affordable housing initiatives.

The US Department of Housing and Urban Development (HUD) provides funding for the development of affordable housing, public housing, and other programs through grants to public entities; however, this funding, which is appropriated by Congress, has been consistently decreasing.

Section 8 Housing Choice Vouchers are one of the best-known HUD programs and give low-income families vouchers to help pay their rent. The program is administered in most of Greenville County by the Greenville Housing Authority (and by the Greer Housing Authority in that area). Families pay 30% of their income toward the rent cost, and the housing authority pays the difference. A family must earn 50% or less of AMI to qualify and receive assistance, and the landlord must agree to accept Section 8 vouchers and must meet certain safety and quality standards for the rental unit to qualify. Section 8 allows families to secure housing throughout the community, which theoretically creates mixed-income communities. In Greenville County, 2,748 families are currently using Section 8 vouchers, with a 2,400-person waiting list.

The Low-Income Housing Tax Credit Program is offered by the Internal Revenue Service and has grown in favor as a federal tool to address affordable housing. Stroud explains that LIHTC reduces investor tax liability in exchange for equity participation in the construction or rehabilitation of affordable housing for working families. In other words, a developer will plan an affordable housing project and apply for tax credits by the IRS through a competitive process. The successful developer will then sell these credits to investors – often banks – who use them to reduce what they owe in taxes to the IRS. The developer can then use the cash from the credit sale to build the housing complex and make rents affordable to families making 50-80% of AMI.

Public Housing is owned and maintained by the Greenville and Greer Housing Authorities and funded by HUD. Initial eligibility is based on 80% or less of MFI.  The Brook Haven and Westview communities, for example, owned and managed by Greenville Housing Authority have recently been refurbished, are well-kept, small-scale, and are home to dozens of working Greenville families. More than 2,000 families are on the waiting list for Greenville’s 395 public housing apartments.

Affordable Housing in Greenville County

Nonprofit organizations, for-profit developers, and public agencies all pay a role in creating and providing affordable housing for Greenville County residents. This housing may be owned by the resident who has the goal of home ownership, or it can be a rental unit.

Homeownership. A 2014 study by Freddie Mac found that 91% of renters believe homeownership is something to be proud of. The idea of an asset that can be customized however one wishes and passed down to one’s children is at the forefront of this belief.

Several agencies and programs provide assistance to make homeownership more affordable. Homebuyers can get down payment assistance from the City of Greenville, CommunityWorks Carolina, and the SC State Housing Finance and Development Authority. Home buyers can also get education and credit counseling from a variety of programs.  Habitat for Humanity, Homes of Hope (though its LoCAL program), and Genesis Homes also build houses and support homeowners in purchasing them affordably.  Of course, affordable homes are developed and sold for profit, with price varying by location, construction materials and style, size, and more.

Rental. The goal of homeownership has been so widely touted that we sometimes forget it’s not for everyone. Some people don’t have the interest or ability to maintain a home or yard. Some need the time to build or repair their finances. People in transition – young people starting their first jobs, those who’ve recently moved to town, those who are recently divorced, for example – may prefer renting while they determine their next steps.

On a community level, rentals also have the potential to both boost a neighborhood and prevent its gentrification. Don Oglesby with Homes of Hope points out that a well-constructed and well-maintained rental home with carefully selected tenants can be the first step in turning a blighted neighborhood to a brighter future. And should a neighborhood become so appealing that its homes become unaffordable to those with lower incomes, rentals owned by a nonprofit such as Homes of Hope ensure that there will continue to be a place for diverse incomes in the community.

Greenville County has a variety of organizations providing affordable rental housing. Allen Temple CEDC, Genesis Homes, Greenville Housing Authority, Greer Housing Authority, Homes of Hope, Nehemiah, Neighborhood Housing Corporation, and United Housing Connections all have affordable rental housing central to their missions. In addition, for-profit developers make use of the aforementioned Low Income Housing Tax Credits to create affordable rental housing.  And select landlords in Greenville County accept Section 8 Housing Choice Vouchers, which make their rental property affordable. Many families find housing that is affordable to them just by searching in areas of the county that are lower cost. Unfortunately, “affordable” rental housing available on the market that is not supported by a subsidy such as a Section 8 voucher or grant funding can be of very poor quality since it doesn’t need to meet safety or cleanliness standards.

Challenges in affordable housing

In spite of the array of organizations, programs and funding sources to promote affordable housing, it’s becoming increasingly difficult for Greenville’s low- to moderate- income families to find a place to live.

The popularity of the Greenville housing market is one of the biggest drivers. With Millennials’ interest in downtown or near-downtown rental units, landlords who previously accepted Section 8 vouchers are now finding they can command full-price rentals without having to meet Section 8 standards.

Ivory Mathews, Executive Director of the Greenville Housing Authority, says, “Over the last 18 months, we’ve lost 454 housing units that previously accepted Section 8 vouchers, and families with vouchers find it difficult to find affordable units within the voucher payment standard as rents continue to increase in the Greenville market.” Over the next two years, GHA plans to build 434 new housing units, but this addition won’t even be able to bring availability up to what was lost through Section 8.

The desirability of land suitable for multifamily development is also making LIHTC projects harder to accomplish. One developer active in the Greenville area, NHE Inc., has a strong track record of building and managing attractive and welcoming communities in the Southeast. “The IRS requires that projects supported by the tax credits be located near jobs, entertainment, schools, and in areas near access to transit and sidewalks: in other words, all of the same attributes that make a market-priced apartment desirable,” says Taylor Davis, President of NHE, Inc. “So we are seeing other developers purchase land for lucrative multifamily construction that would have been a good candidate for LIHTC. And a tax credit project isn’t feasible when competing with market-priced projects.”

Gentrification – a renewal of a neighborhood that comes with an influx of higher income residents who displace the previous lower-income residents – is also taking place in neighborhoods in the City of Greenville. For homeowners, the inability to pay taxes or keep up with house payments can lead to foreclosure or seizure. Too, some homeowners are offered cash for their homes by developers, and these prices are often perceived as too good to refuse. And tenants can find themselves with an eviction notice once their landlord feels he or she can sell or redevelop the property for a much higher price than the renter is paying.

“NIMBYism” (an attitude of “not in my backyard”) can thwart the development and implementation of affordable housing. All of those involved with affordable housing in Greenville County said this is a significant issue for their work. “People often have an image in their mind of a multistory tenement in Chicago or New York in the sixties – maybe something they’ve seen in a movie – and they assume this is what we mean when we talk about an affordable housing project,” says Stroud.

Rob Villa, also with NHE Inc., reports that he’s been in meetings with hundreds of angry residents regarding a development proposed in their neighborhood who can’t understand the concept of affordable housing.  “I explain that the prospective residents are employed, just like them – they are teachers, first responders, people who work in their own companies. I explain that we are required by the government to meet higher standards than other rental properties or we will be penalized,” he says. “But people just can’t get past fear and the idea that it will be a slum.”

Tools to promote affordable housing

Several promising tools exist in Greenville County, and many more have been tested elsewhere in the nation. Many people are familiar with opportunities to donate to Habitat for Humanity, Homes of Hope, and others to support home development for families in need. However, individuals and organizations can also invest – with the expectation of a return – with Homes of Hope, Genesis Homes, and Soteria. These Community Development Corporations – CDCs – can give a tax credit to the investor, and as the new homeowner or renter pays the CDC for their home, the CDC can pay back the investor with interest. CommunityWorks Carolina is a CDFI – a Community Development Financial Institution – in which an individual or organization can invest money, and this money can then be used to make a low-interest loan or provide downpayment support to a new homeowner. These financial partnerships may be a more sustainable way for community members to help provide affordable housing than charity.

But there are numerous other interesting approaches. Several that have received attention:

Inclusionary housing, which incentivizes or requires developers to set aside a certain percentage of units for affordable housing.

Revolving loan fund, which can provide gap financing as developers or current homeowners create or refurbish housing units.

Land trusts, in which the land is owned by the trust but leased to a homeowner who can construct a house on it which he or she will own in perpetuity.

Next Steps

So, how does Greenville make the most of our existing assets and consider innovative approaches to ensure that our residents can live in homes that are safe, clean, conveniently located and affordable?

Housing advocates note three items we need as a community:

Housing asset map – What is our current stock of affordable housing? Where is it? How does availability and pricing compare with income levels in Greenville County?

Vision for Affordable Housing – What are our community’s goals for affordable housing? How do we engage a broad cross-section of the community in developing this vision?

Plan for Affordable Housing – What steps can we take to fulfill our community’s vision for housing? What innovations have other communities used to address the issue, and with what success?

For information on the Greenville Partnership for Philanthropy, contact Katy Smith at kat[email protected].