Charlotte’s been funding affordable housing this way for 20 years. Is it working?
Charlotte’s Housing Trust Fund, the city’s largest investment to address one of its most unrelenting issues, turns 20 this year.
Despite a massive investment of nearly $219 million — put toward 139 projects over two decades to build or save affordable housing in Charlotte — the need keeps growing.
This is especially true for residents with the lowest incomes.
While the need is greatest at the lowest end of the income spectrum, more than half of the housing created or preserved by the trust fund is intended for those earning at least $35,400 a year (or a household income of $50,520 or more for a family of four).
The most recent Mecklenburg housing data estimates there is a 23,022-unit gap in rental units affordable to people at or below 30% AMI, meaning $25,250 household income for a family of four, or $17,700 for a single person.
That means most of those lowest-income households are “renting up” and paying more than they can afford.
Since 2002, the trust fund has supported the creation or preservation of 10,818 affordable housing units and 888 shelter beds. And despite that massive investment, the need for more affordable units is substantial and dire.
Which prompts the question: what do the next 20 years of affordable housing policy in Charlotte — including its signature tool, the trust fund — look like?
Advocates, developers and those in city government paint a picture of a more diversified use of the fund, with emphasis on preserving older affordable apartments at risk of getting flipped by developers. Many say a $50 million bond — an unprecedented sum for housing when it was first pitched — is no longer enough.
History
For most of its history, the housing trust fund went toward subsidizing newly-built apartments. It’s also funded new homeless shelters, senior apartments and a small number of for-sale homes.
The biggest jolt came in 2018, when city leaders asked voters to increase support by approving $50 million in bonds over two years rather than the original $15 million every two years.
The bonds have been popular with voters, passing with 2-to-1 margins or greater in 2018 and 2020. Developments getting trust fund money have also benefited from the private Charlotte Housing Opportunity Investment Fund, which was raised in an effort to match public dollars on housing projects.
An analysis of Housing Trust Fund projects by the Charlotte Observer show:
- While the largest deficit of affordable housing is for households with the lowest incomes, the largest share of units supported by the trust fund (nearly 4 in 10) have been priced for families earning 60% of the area median income. That’s $35,400 for one person or $50,520 for four people.
- Meanwhile, units priced for 30% AMI households represent just over one-third of the permanent housing supported by the fund, not including shelter beds built.
In parts of west and north Charlotte home to city council districts 1 and 3, there have been 6,336 units approved with trust fund money. That’s nearly eight times as many the two districts with the fewest approved. There are a combined 800 units in south Charlotte’s Districts 6 and 7, according to the city’s housing dashboard.
Half of the projects funded have been for newly built multi-family apartments, while a small but growing share are acquisitions and renovations of naturally occurring affordable housing, or NOAHs.
Challenging to build
Housing advocates and some on city council alike have long pushed for more 30% units, but developers say that is difficult without a lot more money.
These deals funded with housing trust fund money, as well as state low income housing tax credits, often follow a similar pattern: a mix of units priced for households between 30% and 80% of the area median income, with higher income renters helping developer profit margins and offset lower rent units.
And rising costs, especially during the pandemic, have made it harder than ever to close deals, developers say.
Increased land prices, as well as higher construction costs — upward of 20 to 30% annually in recent years — “have made our projects nearly unfeasible,” said Julie Porter, president of the nonprofit affordable housing developer DreamKey Partners, which frequently works with the trust fund.
“We’re in an environment right now where costs have never been higher and projects are more difficult,
she said. “Probably the most difficult they’ve ever been to build.”
Nonprofit developers like her organization are going to need more money, she said, including a higher per-project allocation from the trust fund than the roughly $2 to $3 million that has been traditionally allowed, as well as more land donations and grants to bridge the gap.
Historically the trust fund has gone toward new construction, mostly multi-family and senior apartments. But those deals, which can take upward of two years to build, aren’t moving fast enough to address the shortage along.
More recently the fund has expanded its scope to include supporting the purchase and renovation of what are called Naturally Occurring Affordable Housing, older apartment complexes with lower rents. These NOAH buildings are prime targets for developers looking to buy, make small improvements and raise rents.
Supporters of pursuing NOAH deals say that while new construction is built, Charlotte is losing just as many or more affordable units when older buildings are not preserved. Those properties are often less expensive and can be remodeled faster than new construction can be built.
Mark Ethridge leads Ascent Housing, which has gotten a little more than $14 million from Charlotte’s housing trust fund to acquire six NOAH properties totaling just under 1,000 units, with a goal to add another 500 this year.
“We’re never going to make progress on our housing crisis” without preservation, he said.
More low income housing
For years housing advocates have pushed for a greater share of trust fund units to be priced for the lowest income residents.
Housing attorney Ismaail Qaiyim, who is policy and political education committee chair for the Charlotte Housing Justice Coalition, said there hasn’t been enough housing built for the poorest residents with trust fund money.
“It’s a political question of whose interests really matter,” he said. “Is it the interest of poor Charlotteans or working class Charlotteans or corporate developers?”
He’d like to see the fund’s use expand help neighborhoods or smaller community groups buy land or property to preserve for affordable housing. He encouraged thinking outside of construction entirely, such as using funds for eviction prevention and legal representation to keep people in their homes in the first place.
‘50 isn’t enough’
Given the steep deficit, there is serious conversation about whether the $50 million sought in 2018 and 2020 should be increased. City Manager Marcus Jones hinted at this in September, saying the previous amount “may not be enough” in the future.
District 2 Council member Malcolm Graham, a Democrat who chaired the city’s pandemic housing recovery task force, said in an interview he would support a discussion about raising the bond amount, as well as more a general review of the trust fund for program improvements.
With increased land and construction costs, as well as expected interest rate hikes, Ethridge said more money is needed just to keep pace with the current number of units funded per year, much less gain ground.
“Fifty (million dollars) isn’t enough,” he said.
But how much is enough?
Porter said she “wouldn’t be surprised” to see it increased to $100 million.
Charlotte wouldn’t be alone in putting up big numbers for housing. Austin’s mayor recently proposed a $300 to $500 million bond for housing, meant in part to address the city’s skyrocketing home values. Atlanta is also in the process of borrowing $100 million in bonds for affordable housing.
Council member Ed Driggs, a Republican representing District 7, says $50 million “is really a drop in the bucket in some ways” compared with what will produce enough housing to address the market’s shortfall.
Still, he sees other areas that need city investment such as sidewalks, road safety and other infrastructure.
“So I argued that I didn’t know whether investing $50 million in order to achieve a certain amount of relief from the housing side was the most productive thing,” he said. “We can’t afford to get too far behind in terms of the city’s basic infrastructure investment needs. That’s the tension there.”
The earliest voters could see the city’s ask for another round of housing trust fund borrowing is this November — whether that’s for $50 million again or a different amount.
New leaders
These decisions come as Charlotte will make two big hires that will shape its affordable housing future.
First is a director of housing and neighborhood services, recently vacated by Pamela Wideman, who retired in December after leading the department since its creation in 2017.
Wideman oversaw allocations for the housing trust fund, as well as a number of other programs including code enforcement and the city’s mortgage assistance program.
Charlotte is also searching for a planning director, to replace Taiwo Jaiyeoba, who is now the city manager in Greensboro. That new leader will lead the city’s implementation of the ambitious 2040 plan and unified development ordinance, which will govern how the city grows for the next two decades.
This story was originally published January 26, 2022 at 6:00 AM.
%20Cropped.jpg)