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The St Louis Contrarian

Providing Independent and Intelligent Insight on St. Louis Public Policy Issues

Archive for the category “low income housing tax credits”

Vouchers and Housing Policy

Research clearly shows that poor people who move to a more affluent neighborhood do better in life. Unfortunately most affordable housing in St. Louis and elsewhere is constructed in lower income neighborhoods. HUD, under the Obama administration had tried to address this problem.

Up until now, Section 8 fair market rents were set for an entire metropolitan area. Therefore the rent structure in Wellston was the same as in Ladue. On an initial limited basis, HUD is changing the policy and determining fair market rent by zip code, therefore allowing higher rents in more affluent areas. Where tested, the concept has seemed to work.

To be sure, the policy has detractors. Housing authorities complain the policy is too bureaucratic. Housing practitioners are concerned that the policy if fully implemented would drain inner city neighborhoods of population and good tenants. These are both valid issues, but I believe the policy should be tried. The Trump administration unfortunately is eliminating the new rule that would implement it. Written by Paul Dribin

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NIMBY in Webster Groves

Lutheran Senior Services a great senior housing provider had proposed constructing a 50 unit tax credit affordable housing project on their campus in Webster Groves, where I live, a suburb of St. Louis. The community once again reacted harshly, opposing the project for all the usual reasons, noise, density etc, even though it would be part of an existing campus and hardly noticed. In 2004 I was hired by Lutheran Senior to help develop a 202 low income senior project with the same results. People in our community attend church on a regular basis but don’t seem to get the message. Written by Paul Dribin

Do We Have an Affordable Housing Crisis in St. Louis?

The answer to this question is how you structure the problem. The National Low Income Housing Coalition has done the most work of any organization on this issue on a national level. They pose the problem by taking the median rental rate in the community and factoring in the minimum wage income. Not surprisingly they concluded that virtually now where in the United States is housing affordable.

There are several problems with this approach. The minimum wage is not a good indication of a community's earning capacity. Many minimum wage workers are students, part time workers, and those new to the work force. Many live with parents or double or triple up. Also most minimum wage workers don't remain at that pay level for a long time, as they move up the ladder. The minimum wage was never intended to be a living wage, rather just a starter for low skilled workers. Many minimum wage workers also work 2 or more jobs.

A better gauge of housing affordability is the relationship between the median income and the median rent. This gives us kind of an average, not perfect, but much better. Let's look at some numbers as a point of comparison:

St. Louis Metro Area

Median Income- $52243 for a family of 4 in the City of St. Louis
Median Rent -2 bedroom- $1291
Therefore the monthly median income of $4354 can afford a monthly rent of $1306 at the 30% threshold. This represents 100.01% of the median rent.

One may conclude that on the whole rent is affordable in the St Louis area for the median household.

Boston
Median Income-$67846
Median rent-2 bedroom-$3166
Therefore the monthly income of $5654 can support a monthly rent of $1696 at the 30% threshold. This represents 54% of the median rent.

The Boston market on the whole is not affordable.

This approach seems to be useful in making comparisons among communities. It also does not relieve our community of our responsibility to provide affordable housing. After all, median income is a statistic. There are thousands of people in our metro area who cannot afford the median rent and do not have access to adequate rental housing.

Written by Paul Dribin

Another Good Guy-Carl Lang

Today I am writing about a great guy and great real estate attorney, Carl Lang. I have known and worked with Carl for many years. He and his son David are very prominent in doing affordable housing, market rate housing, and Low Income Housing Tax Credit projects. He is extremely knowledgeable and has a quality I really like, he does not over lawyer. He is now Managing Partner at Rosenbloom Goldenhirsh. Written by Paul Dribin

DeSales Community DevelopmentĀ 

Kudos to this organization. This organization led by TomPickel has been around since the mid seventies. They have accomplished major housing and redevelopment work in the Fox spark and Tower Grove East neighborhoods of St Louis. They have rehabbed houses provided property management and health services.   Written by Paul Dribin. 

State tax credits

The post had a good article yesterday about the issues surrounding state tax credits.   Nothing new was really covered. The credits are too expensive but they are the only tool for doing affordable housing. The article correctly demonstrated that investors will not participate in programs with high levels of uncertainty.   It also shows that development in St. Louis is very difficult and requires government supports. 

Possible Effects of Tax Reform in Missouri on Affordable Housing and Community Development

Governor Greitens has tasked a committee with looking at Missouri’s tax structure and making recommendations for change. Of particular interest to the committee and the state tax credit incentives. Here is a quick summary of recommendations as they effect housing related tax credits:

1. Low Income Housing Tax Credits- Missouri has a state affordable housing tax credits that supplements the federal credits. The credits once allocated can be used for 10 years and can be used for acquisition and new construction, or acquisition and rehabilitation. The committee recommended 1) A restructuring of the credit as a soft loan. These loans could be repaid, extended, or forgiven. 2)A $50 million annual cap which would cut funding by over 50%. 3)Creation of a tax credit clearing house to buy up existing credits. 4)The funding would be subject to annual appropriations.

Comment. Obviously utilizing a lower cap would limit the number of deals that can be supported. In addition,because the annual appropriations process is so crazy in Missouri, there would be no predictability about funding. Investors would either choose not to participate or significantly increase their fees.

2. Historic Preservation Tax Credits-These credits provide incentives to developers to maintain and rehabilitate historic buildings and neighborhoods. The recommendations are: 1)Combining the Historic Preservation Credits with the Brownfield credits. 2)The combined program would have a $50 million cap. Presently the Cap for the two programs is $150 million. 3)The funding would be subject to annual appropriations.

Comment-Once again the annual appropriations process provides for a high level of uncertainty. Lowering the Cap would also limit the number of deals.

Final Comment- These programs are critical to redevelopment and housing, particularly in St Louis. They have provided huge amounts of economic development to cities and built large numbers of affordable housing units. The trouble is they are very expensive. The development community needs to come up with alternative methods for doing community development that does not break the bank.

Low Income Housing Tax Credits

Low income housing tax credits are the primary source of construction and rehabilitation for affordable housing projects. The program has been around since the eighties and is an effort to get private sector involvement in the affordable housing development business. The program uses the equity generated from the sale of tax credits to create low debt on affordable housing projects, thereby supporting lower rents. (This is a vast oversimplification but sufficient for this discussion.)

The program has accomplished much but has significant limitations. It is neither efficient or effective. Let me explain.

The program is not efficient for two reasons. First it is excessively complicated, involving arcane aspects of tax law, legal issues, accounting etc. It is an extremely difficult program for a newcomer to enter. Second, and related, the administrative costs are extremely high. Too much of the money does not go directly to housing but lines the pockets of developers, consultants, syndicators, accountants, attorneys, etc.

Second, the program is relatively ineffective. It does not house the low income people who need it the most. Someone must be able to pay a decent rent to afford the program. Homeless or very low income people cannot participate.

Politically this is not the best time to address the need for a new affordable housing program but the community needs it. The National Affordable Housing Trust Fund is a start but its resources are limited for now. We need a simpler more efficient and effective affordable housing program.

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