Affordable Housing Efforts Should Focus More On Middle-Income Families, Developers And Experts Say

As the need for more affordable housing remains a top concern of DC officials, those responsible for building and financing affordable housing say more of an effort should be made to help the city's working poor, who find themselves shut out of the middle class. They worry President Donald Trump's policies could make it more difficult for this population to afford housing. 

Mayor Muriel Bowser has placed a focus on affordable housing, pledging $100M annually to tackling the crisis, but some say it is not enough. 

Menkiti Group CEO Bo Menkiti, one of the District's top affordable housing developers, praised Bowser's commitment in devoting resources to affordable housing, but he said those dollars would be more efficiently spent if channeled toward the working poor.

Spending hundreds of thousands on the homeless can quickly get too expensive without producing lasting results, he said. But giving a boost to those on the cusp of the middle class can make a big difference.

"What are we doing to help the single mom with four kids holding down a job and trying to make ends meet?" Menkiti said. "That's not our focus today, and in some ways we miss out on the productivity of that person. We have to think about where is the most efficient use of our dollars. It can be more efficient to put dollars at the tipping point."

Menkiti said more of a focus needs to be placed on creating mixed-income communities, rather than clustering low-income residents away from market-rate properties. His vision of a thriving city includes diverse neighborhoods with a mix of income levels, something he said is difficult to create under existing policies.

"The financing options available tend to structure themselves for stand-alone affordable housing buildings," Menkiti said. "The structure of how we finance affordable housing does not lend itself to affordable housing being blended into the neighborhood."

The lack of financing options for middle-income residents, and for creating mixed-income communities, is not just a problem seen by developers like Menkiti. DC Housing Finance Agency executive director Todd Lee shared this view and advocated for a new financing tool to address the problem. 

"We don’t build middle income housing and workforce rental housing in the city," Lee said. "Part of the reason is you can’t get the numbers to work. There’s no vehicle we have to make the numbers work, such as a middle income tax credit."

Lee said he would support a tax credit that targets people making between 60% and 100% of area median income. These residents cannot afford the rents for new luxury product coming onto market, and they are not served by the Low-Income Housing Tax Credit. This would have to be done on the federal level, Lee said, and while he has heard it discussed before, it is generally less politically feasible than the LIHTC.

The 30-year-old LIHTC program has bipartisan support, and while Lee does not think the new administration will reduce the number of tax credits available, he said cutting corporate tax rates will bring down demand for the credits and lower their value. With uncertainty around the administration's tax policies, Lee said he is already seeing investors shy away from using the credits to invest in housing.

Montgomery Housing Partnership president Robert Goldman also sees the value of tax credits dropping, and he fears it might not bounce back.

"We worry that the tax credit market has dropped 20% due to uncertainty over where will tax reform end up," Goldman said. "That’s a 20% cut in money going to housing developments, and it could be permanent." 

To combat this, Goldman hopes the number of tax credits can be increased. He supports a Senate bill put forward by Sen. Maria Cantwell (D-Wash.) and Sen. Orrin Hatch (R-Utah) that would expand the LIHTC program by 50%, a move he said would be beneficial to affordable housing development.  

Beyond the effect of tax reform on the LIHTC market, Lee is also concerned about the Trump administration's commitment to affordable housing. He points to the executive order the president signed on his first day rolling back an Obama administration policy that reduced the annual premium homebuyers pay on their mortgages.

"I was very surprised that, with all we have going on in the world, he chose to focus on that as one of his first executive orders," Lee said. "It will definitely impact the ability for low- to moderate-income potential homebuyers to afford a house. Every basis point counts." 

Menkiti also worried that the Trump administration would not put a priority on solving urban housing issues, noting that the mortgage premium rollback and other deregulation will hurt people trying to get into the middle class.

"Probably the most at-risk population is that middle tipping point," Menkiti said. "Deregulation of mortgage lending will have a disproportionate effect on access to credit in low- and moderate-income areas."

The Trump administration has "signaled a lack of interest in ensuring moderate-income Americans can access capital to buy their homes," Menkiti continued. "The focus will be on reducing regulation on banking and mortgages, which, if not done thoughtfully, could take us back to a subprime crisis."

Menkiti, Lee and Goldman will discuss these issues at Bisnow's Sixth Annual DC Region Affordable Housing event on Feb. 9.