Photo by Tatiana Brown

This article was first published by www.thedcline.org on March 12. 

The D.C. Fiscal Policy Institute, a progressive think tank, argues in a new report that the District needs to double its yearly investment in the Housing Production Trust Fund in order to account for rising construction costs and the affordability crisis faced by the District’s poorest residents. 

Since 2015, Mayor Muriel Bowser has allocated $100 million per year to the fund, the city’s main source of money for creating and preserving affordable housing units. The Housing Production Trust Fund also gets money from the District’s recordation and transfer taxes. 

With $200 million in dedicated annual funding, the D.C. Fiscal Policy Institute says, the District would be able to expand on the number of units it produced in 2015 — when the available $100 million could have created and preserved as many as 1,140 units based on an average per-unit loan amount of $72,500, according to the report. Today, the $100 million commitment is enough to fund just 710 units based on an updated per-unit cost of nearly $120,000, the report says. 

Ahead of Bowser’s planned unveiling of the fiscal year 2020 budget on March 20, the mayor’s office did not respond to a question about whether the mayor would consider adding $200 million to the fund next year. However, in her March 18 State of the District address, Bowser pledged a more modest increase to $130 million for the trust fund in fiscal year 2020. 

But in a statement, Deputy Mayor for Planning and Economic Development Brian Kenner said the administration will “ramp up our production and preservation of affordable housing to better meet demand,” citing the second-term agenda Bowser described in her Jan. 2 inaugural remarks. 

“That means producing 36,000 total units of housing in D.C. alone — including at least 12,000 affordable units across the income spectrum, and 240,000 units across our region,” Kenner said. “This will involve taking a fresh look at all affordable housing tools, planning strategies and funding sources.” 

A spokesperson for at-large D.C. Council member Anita Bonds, who chairs the Committee on Housing and Neighborhood Revitalization, said in a statement Tuesday that she has “long advocated” dedicating $200 million or more annually for the trust fund. 

“She is keenly aware of the rising construction costs and realizes that if the District is to meet its goal of preserving and creating 12,000 affordable units by 2025, the city would need to spend around $1.4 billion, that is at the estimated cost of $120,000 per unit,” says the statement from her office.  

In its annual report for fiscal year 2015, the D.C. Department of Housing and Community Development reported that loans and cash expenditures from the fund created or preserved 1,342 rental and for-sale units. The 2015 report is the most recent annual report available online. 

In fiscal year 2018, the city spent $167.6 million from the fund to help produce or preserve 1,641 housing units, according to the 2018 Comprehensive Annual Financial Report. Kenner’s statement referenced delivery of more than 7,200 affordable housing units in Bowser’s first term. 

The D.C. Fiscal Policy Institute’s proposed funding increase would keep pace with the rising cost of construction and additionally help the 27,000 households in D.C. that “spend more than half of their income on housing.” (In fact, $230 million would be needed to fully support them, the report said.) 

“Given these needs, funding the Housing Production Trust Fund at $200 million would ensure that the city produces more new affordable units than in 2015 — rather than losing ground — and would bring D.C. closer to a 10-year plan to meet its housing challenges,” wrote Doni Crawford, the author of the report released on March 10 

Crawford proposes finding the additional money in the city’s $4.06 billion general fund. In addition, the report calls for the District to do what some advocates have suggested in recent years amid a period of economic prosperity for the city as a whole: use the budget surplus to ease the housing crisis. In fiscal year 2018, the District used $40 million from the $200 million budget surplus to bolster its cash reserves — a savings measure mandated by the mayor and council in 2010, the report said.  

“This rule will ease when 60 days of operating reserves is reached — we’re currently just two days short,” Crawford wrote. Once that mark is achieved, the District will have enough cash on hand in its “rainy-day fund” to operate the government for two months in the event of an emergency or economic downturn, fulfilling a longtime goal set by city officials but criticized by those who say the money is needed for pressing needs. 

But lawmakers may be hesitant to dip into the reserves after Chief Financial Officer Jeffrey DeWitt announced last month that the District lost $47 million in revenue due to the partial federal government shutdown. That news in part led council members to shelve a property tax cut last week.  

Yet the D.C. Fiscal Policy Institute argues that “savings is important, but it is even more imperative that we … invest some of the surplus in more affordable housing for the people hurting most.”  

The think tank’s report notes that black residents have experienced a particularly steep climb toward economic recovery since the Great Recession of 2008. In the District, 88 percent of extremely low-income and rent-burdened households are headed by a person of color, a previous report from the institute found. 

The report comes amid discussions on other aspects of the Housing Production Trust Fund. Last month, at-large member Elissa Silverman and five other council members co-introduced a bill that would provide more transparency into decisions on which projects get funding. One provision would require the District to release information about a bidder five days after it applies for a grant or loan from the fund. Anita Bonds, chair of the Committee on Housing and Neighborhood Revitalization, co-introduced the bill but has not yet scheduled a public hearing. 

The Housing Production Trust Fund was established in 1988 by D.C. Council legislation. Since 2002, part of its annual funding has come from 15 percent of the revenue from real property transfer and deed recordation taxes, the report said. This dedicated funding source is subject to fluctuation, however, because it’s dependent on the real estate market.  

The report suggests a “mansion tax” that would raise the taxes for the “wealthiest households” on real estate transfers and properties. Real estate transfers and property in the District are currently taxed at a flat rate. The institute published a separate document in February on the suggested mansion tax. 

The March 10 report said a hike on wealthier households could “generate $74 million in revenue, some of which could be used for the production and preservation of affordable housing in areas of higher opportunity.”