Photo of rowhouses in Washington, DC
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Hope and skepticism grip city officials and community members in anticipation of Mayor Muriel Bowser’s historic $400 million investment in affordable housing.

Bowser’s fiscal year 2022 budget proposal — now being revised by the D.C. Council — would invest the $400 million in the Housing Production Trust Fund (HPTF), which distributes loans and subsidies to private developers that incorporate affordable housing into their projects. The Bowser administration promises the funding will produce 2,700 affordable units, 1,100 of which will be for the city’s lowest-income earners. However, though the HPTF is required to spend at least half of its funds on housing for extremely low-income residents, the HPTF’s records show that the District has met this goal only once in the HPTF’s existence. 

As a result, advocates and some officials are questioning whether this influx of cash to stem the housing crisis will benefit those who need it most. Consequently, At-Large Councilmember Elissa Silverman has initiated discussions to consider legislation that would address the HPTF’s transparency and accountability issues.

How does this investment align with the District’s housing goals?

 

The budget plan divides the $400 million HPTF funds: $150 million for the HPTF in the supplemental fiscal year 2021 budget to be spent before Sept. 30, and another $250 million for FY22. The plan uses funding from last year’s budget surplus as well as federal funding from the American Rescue Plan Act of 2021, meant to stimulate recovery after the economic and health toll of the COVID-19 pandemic. 

There is a backlog of project proposals submitted to the HPTF that a portion of the new funds would help put into motion, D.C. Department of Housing and Community Development Director Polly Donaldson testified during a June 22 hearing. In many cases, HPTF funds allow developers to acquire property and begin construction before other loans and financing can be obtained, which is especially important for developing low-income housing, which is not expected to generate as much of a profit.

The total investment would be four times as much as Bowser’s already historic annual allocation of $100 million to the HPTF since taking office. The funding expansion is supplemented by changes to the program written into the Council’s annual budget instructions, called the Budget Support Act, which proposes pairing the HPTF directly with the Local Rent Supplement Program (LRSP), a local subsidy program modeled after federal housing vouchers that provides monthly rental subsidies that cover the difference between the rents that extremely low-income families can afford and the actual monthly cost of rent for the unit, according to a fact sheet from the Coalition For Nonprofit Housing and Economic Development. D.C. Council’s draft budget infuses $42 million in FY21 and FY22 (though, like all HPTF funds, they are spread out until the funds expire in 2025) to spend on new LRSP vouchers and create a proposed 1,100 “deeply affordable” housing units. 

“Extremely low-income” families in these housing support programs earn less than 30% of the Area Median Income (AMI) in D.C. (MFI is used interchangeably with Median Family Income or MFI.) The intended effect of pairing LRSP with HPTF is to use government funds to support the construction and remodeling of affordable housing — and to apply additional public support to place D.C.’s most vulnerable families into those units. Owners of HPTF buildings can receive LRSP subsidy and then must charge lower rents to tenants, who pay based on income level.

So far, the D.C. Housing Authority has been solely in charge of the program, separate from the affordable housing construction and capital cost support in HPTF. The Council hopes to improve results by combining funding and administrative work for affordable housing projects into one government agency, rather than having one agency dealing with developers and building facilities and a separate department dealing with low-income housing applicants on the rent support side.

D.C. Council’s Committee on Housing and Executive Administration held a series of hearings last month to evaluate the funding proposal and consider how to maximize the funds for affordable housing in D.C. Officials and activists commended the proposed funding increase for demonstrating the District’s commitment to affordable housing, as conditions for low income residents to rent and purchase units get worse. However, many of those stakeholders expressed skepticism about the wisdom of infusing unprecedented levels of funding into a program with a record of limited accountability and transparency.

At the start of her second term in 2019, Mayor Bowser set the bold goal of delivering an additional 36,000 units of housing – including at least 12,000 units of affordable housing – by 2025.

Since setting this goal in 2019, the HPTF’s public project data shows the completion of five new housing projects with loans that closed in 2019, which produced a total of 168 units, 18 of which are deeply affordable. There are 25 projects under construction with loan closings in 2019, 2020, and 2021 that are projected to produce a total of 2,245 units, 407 of which should be deeply affordable. Another 30 projects in the underwriting pipelines have estimated loan closings between 2021Q4- 2022Q3 and are projected to produce a total of 3,432 units, 524 of which should be deeply affordable. 

Altogether, DHCD would be on track to finance 5,843 housing units between 2019 and the third quarter of 2022: 5,405 will qualify as affordable but only 949 will be deeply affordable. This would be 45% of the way to Bowser’s goal of 12,000 units of affordable housing by 2025 with only 2 years left. According to these projections, the total production of deeply affordable housing would constitute 16% of total production. 

[Read more: Can the mayor deliver on her call for equitable distribution of 12,000 new affordable housing units by 2025?]

DHCD’s and Bowser’s prediction for this investment, released in the May 24 announcement, is that the $400 million$400 million will produce 2,700 affordable units — with up to 1,100 of them being deeply affordable — over the next 2 to 3 years. This would put the District 68% of the way to Bowser’s affordable housing goal.

Even if D.C. achieves 12,000 affordable housing units by 2025 it would not meet even half of the need identified by a recent Urban Institute report. D.C. needs to add 55,600 units by 2030 renting for less than $800/month to help existing extremely low-income residents and to house people currently experiencing homelessness, the report concluded.

“It’s a really significant investment, so I think we have reason to be optimistic, but cautiously optimistic,” said Eliana Golding, a policy analyst for D.C. Fiscal Policy Institute, a progressive think tank.

According to Golding, the gap between the existing need for affordable housing and the projected performance of the HPTF is especially evident in the DHCD’s existing track record of meeting the statutory requirement for producing units that serve extremely low income residents. 

A 2018 D.C. Fiscal Policy Institute report found that it would take $2.6 billion over 10 years  in construction costs alone to meet the District’s affordable housing goals — more than double the mayor’s annual investment.

“We know that in order to actually meet the need for affordability, we’d need to direct $250 million in the trust fund per year,” Golding said. The report also showed these construction costs would need to be paired with an additional $762 million per year for maintaining the units and keeping the rent affordable once they are built. If such investments were made each year, housing would be the biggest line item in the city’s budget, $200 million more per year than even the Metropolitan Police Department.  

No accountability for extremely low-income residents

 

The requirement Golding referred to is a stipulation in the HPTF law that “at least 50% of the money disbursed from the fund during a fiscal year shall be for the purpose of assisting in the provision of housing opportunities for extremely low-income households, including maximizing the possibility of home ownership.” This statute requires half of the HPTF’s money to go towards households that make 0-30% of the AMI—the extremely low-income level. It previously required 40% of all funding go toward these households but was updated in 2019 to respond to the growing housing crisis.

In practice, however, despite Mayor Bowser’s repeated commitments to affordable housing since taking office in 2015 — and the over $1 billion invested in affordable housing since then — the previous 40% requirement was only met once (according to a D.C. Fiscal Policy Institute analysis) and the 50% mark has never been met since its addition. 

A 2018 audit found that only 19% of rental units produced or preserved by the Trust Fund between 2001 and 2016 were affordable to families making 30% or less of the AMI. In written responses to oversight questions from D.C. Council earlier this year, DHCD said only 18% of funds for FY20 went to projects that would house extremely low-income families, and the agency projects only 27% of funds for FY21 will fund deeply-affordable units. 

Table courtesy of the D.C. Council Committee on Housing and Executive Administration’s FY22 budget draft report

“[The extremely low-income’ bucket] is where the highest, most acute need for affordable housing is,” said Beth Mellen, supervising attorney at Legal Aid Society of D.C. where she heads the Housing Law unit of the Eviction Defense Project. “Those are the residents who are most likely to be spending half or more of their income on rent and are being crushed by the rent burden they live with.” 

People living on minimum wage often need deeply affordable housing, according to Christy Respress, the executive director of Pathways to Housing D.C.  The 0-30% of AMI category is not exclusive to people on zero income or who rely on benefits such as SSI (Supplemental Security Income). “We are not producing anywhere near enough deeply affordable housing to end homelessness in the city unless we take advantage of these opportunities right now to leverage these federal funds,” Respress said.

Over the past several years, while DHCD has struggled to meet the HPTF’s statutory spending requirements for the 0-30% AMI level, it has consistently spent a disproportionate amount on housing at the 31-50% AMI and 51-80% AMI level, typically significantly exceeding the law’s requirements for both.

While the percentage of HPTF funds allocated for deeply affordable units has been ticking upwards, many members of the public who testified at various D.C. Council budget hearings this summer noted DHCD’s failure to meet its own priorities for those between the 0-30% AMI and called for transparency as to why the promise of affordable housing in the District is not being fulfilled. 

DHCD Director Donaldson said at a June 22 hearing that it is difficult to direct HPTF funds to deeply affordable housing in part because DHCD has had trouble in the past ascertaining how much of the budgeted funds are available for each income bracket. Since LRSP, the local voucher program targeted at the same group, has been fully administered by the D.C. Housing Authority, the department has never had a specified amount of LRSP funding to pair with its development projects and guarantee they remain affordable. Donaldson expressed certainty that the proposed shift of LRSP funds to DHCD in the Budget Support Act would help them better support residents who earn 0-30% AMI. 

Lack of transparency: What projects receive funding?

 

Even with DHCD’s improved ability to ascertain operating funds for affordable housing, uncertainty remains as to whether the agency will meet its goals for 0-30% AMI households, according to Maya Brennen, housing advisor to At-Large Councilmember Elissa Silverman. She said DHCD struggles both with these challenges unique to the LRSP and HPTF programs, as well as larger systemic issues in affordable housing production. 

Brennen said it is unclear whether LRSP subsidies to landlords are adequate to cover upkeep normally paid for by rent from tenants or whether the rents currently covered by the subsidy set tenants up for subpar living conditions over time and make partnering with the program attractive to private landlords.

“The real question to us is whether there’s enough money baked into this budget proposal for LRSP operating subsidies,” said Mellen from Legal Aid Society of D.C., “since it is the crucial element in making HPTF properties accessible to extremely low-income residents.” According to Mellen, this question is not answerable based on the information DHCD has reported.

On the HPTF side, Brennan questioned if the funding is competitive: whether the D.C. government is receiving high-quality applications from many developers of deeply-affordable units or if there are very few private sector groups willing to put together plans in which most of the new units would be deeply-affordable. It is important to know if these programs deal with constraints beyond program structure that drive costs up with subsidies not keeping pace, such as zoning rules and extremely expensive land and materials.

Golding of the D.C. Fiscal Policy Institute pointed out that the public does not have the necessary information to answer those questions. “There isn’t a lot of transparency surrounding the process that DHCD uses to select the projects that it gives funding to,” Golding said, referring to the scoring process that DHCD uses to select HPTF projects from a host of proposals. 

After the projects are scored, the DHCD director has ultimate discretion over which projects are selected, meaning that projects that are scored highest are not always chosen for funding. This unstructured process is not a major concern for Golding, who said flexibility can be beneficial in preventing all accepted projects from being geographically concentrated in one single area. 

DHCD publishes publicly available quarterly reports on the selections they make. “What these reports don’t provide,” Golding said, “is justification for those decisions or specification on which projects weren’t funded.” Without this information, assessment of the HPTF’s operation is difficult.

Council considers transparency and accountability legislation

 

In 2019, Councilmember Silverman proposed legislation to improve access to information about the types and locations of proposals that are seeking or have received HPTF resources. “In the hearings, we heard from folks that it’s one thing to know about what’s getting resources, but it’s just as important to get information about the projects that don’t get resources — and why,” said Brennan, the councilmember’s housing advisor.

The bill did not make it out of D.C. Council’s housing committee, but Silverman’s office is optimistic about future consideration. “We were working to get it prepared to go to markup, and then the clock ran out, while trying to work on all the other housing needs during the pandemic,” Brennan said. 

The “clock” she referred to was the end of the previous D.C. Council term in December 2020. The legislation would need to be re-introduced to move forward, which Silverman’s office has been preparing for through conversations with constituents, other councilmembers, and DHCD. 

The legislation would mostly be a copy and paste of the original Housing Production Trust Fund Transparency Amendment Act from 2019, modified to address concerns expressed during the original hearings over the necessity of requiring justifications for why each proposal is or is not selected to receive funding. Brennan said having this information publicly available would help determine what’s being done and what still needs to be done to provide housing for extremely low-income residents.

“The $400 million is a tremendous amount of money, and to not have any information about how the RFP decisions are being made and why projects are being selected is not in the best interest of the District,” said Golding, the D.C. Fiscal Policy Institute analyst.

Silverman is also considering separate legislation to enforce accountability to income targeting requirements. “Each year that DHCD did not fulfill the HPTF requirement to target 50% of funds for families with incomes of 0-30% AMI, Mayor Bowser waived the targeting requirement.” This new legislation would instead require DHCD to request a waiver from D.C. Council, a process that would include public testimony to justify themselves, and receive the council’s explicit approval.

“If the council determines they haven’t given a good reason for not meeting the income-targeting requirement, they would need to make changes,” Brennan said. “In the meantime, folks can contact our office with feedback, questions, and concerns about these pieces of legislation.”

Racial equity is needed

 

During the June 22 hearing, Ward 4 Councilmember Janeese Lewis George said DHCD must infuse a racial equity lens in HPTF administration, since the District’s housing crisis “disproportionately affects Black and brown communities.” According to a 2018 D.C. Fiscal Policy Institute report, the District’s severely cost-burdened and extremely low-income renters — those who would qualify for an LRSP subsidy and HPTF housing units in the 0-30% AMI category — are overwhelmingly people of color. Ninety-one percent of residents in such households are African American, and 10% are Latino (of any race).

Director Donaldson said in her testimony at the same hearing that DHCD would hopefully meet the needs of this group by intentionally scaling the amount of money in LRSP to reach the income requirements for the 0-30% AMI, which they did for the first time in this proposed budget. Now that DHCD has their own money for LRSP allocations to pair with the HPTF, they have been able to ascertain the necessary amount of funding supposedly needed to target those areas. 

Donaldson provided a table at the hearing to show the breakdown of LRSP investment for the next few years, supposedly scaled to meet the HPTF’s statutory requirements by intentionally calculating the necessary funds to operate those affordable units after they are constructed.

 

FY21-25 increases in LRSP Budget funding

Screenshot of Donaldson’s PowerPoint presented to D.C. Council on June 22

Golding, the D.C. Fiscal Policy Institute policy analyst, said the LRSP funding is an improvement for the program but the information for its budget plan still lacks transparency. “DHCD has not put out a robust explanation of how these calculations [were made] and what numbers they’ve used to reach these estimates,” she said. “I trust they did them, but I think they should be made public so the council has the ability to analyze them and ask questions.”

What does all this mean for the $400 million?

 

Considering the potential impact this drastic increase in funding could have on making affordable housing more accessible, many stakeholders throughout the budget hearings wondered about the timeline for spending it. 

Every bill gets two votes in D.C. Council before being sent to the mayor for her signature and then going through Congress — since D.C. is not a state — for what is usually passive approval. The final vote on the Local Budget Act for FY22, which determines how much money the HPTF and other programs receive, is Aug. 3. The final vote on the Budget Support Act, which includes the changes to the rules about the Local Rent Supplement Program and DCHA, is Aug.10.

At the June 22 hearing, At-Large Councilmember Anita Bonds, who chairs the housing committee, noted that most of this expanded investment in the HPTF is composed of federal funds from the American Rescue Plan Act of 2021. She asked whether DHCD would be able to sustain this level of investment past fiscal year 2022. 

Donaldson said in her June 22 testimony that a lot of the federal funds being used for this expansion have expiration dates as far as 2025. While it is all allocated in the FY21 and FY22 budgets, the HPTF money will be dispersed throughout FY23, FY24, and FY25. D.C. Council’s current draft budget would allow DHCD to spend $8 million, $16 million, and $37 million on LRSP in those same fiscal years, respectively. 

The reason the HPTF was deemed the appropriate vessel for these funds has to do with the requirements of the American Rescue Plan Act. According to Brennan, the housing advisor for Councilmember Silverman, members of the council who are trying to find money to end homelessness generally fight for greater LRSP funding or permanent supportive housing funding. But the federal relief money cannot go towards a solution with a “consistent need,” such as a housing voucher. Unsupported funding for LRSP would put voucher recipients at risk after the federal money runs out in 2025. According to Brennan, it is a question of raising revenue. With the additional funds spent on producing and preserving affordable housing, it will be up to the mayor and the council to invest more LRSP funds to match what the HPTF supports in FY23-FY25, and beyond.

It is still unclear whether the District will work to maintain this higher HPTF budget long-term. 

“The question is whether the District will pivot to make these historic levels of investment ongoing,” Golding said. “I think we’ll need to raise more revenue for that to happen. If we’re going to sustain this level of investment in the future, we’ll need to raise some more revenue.”