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The St Louis Contrarian

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

Archive for the category “new housing”

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

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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

Tiny Houses

There has been much publicity lately about so called tiny houses which are generally about 250 square feet and can be purchased for about $50000. These houses are not for everyone but I think they are a great idea. They are energy efficient, and get people into the housing market who would not otherwise be eligible to participate. They may be perfect for single individuals or couples.

As of now community planning and zoning requirements to not allow for houses this small and they are being sited in mobile home parks or other unrestricted areas. I have never lived in a residence this small but people all over the world do. Our communities should give it a try. Written by Paul Dribin

Urban Development and Privilege

Much has been written recently about the concept of white privilege. I  find the term somewhat offensive because it makes people defensive. Nevertheless, the concept is true

There are a couple areas of middle class privilege that contribute negatively to the well being of communities.   The first is the mortgage interest deductions. This deduction primarily helps higher income people, and artificially drives up the price of housing. Working class people who do not itemize are hurt. This by the way is the biggest housing subsidy. A tax credit targeted to working class people would be more effective

A second set of privileges cover zoning and planning laws in our communities. These laws tend to zone out smaller and more affordable housing and Multifamily housing. I am not talking about housing homeless people but teachers social workers, nurses etc.    

The results of these policies are unnecessary segregation , a lack of mobility, and urban decline.  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.

St. Louis North Side Development

The plans for St. Louis North Side Development have been ongoing for some time. Paul McGee is the developer behind the project that has created its’ share of controversy. Mr. McGee has purchased a number of properties on the north side in support of this project. Some of these properties have not been well maintained. Other concerns have surfaced about the lack of citizen participation in the process etc.

The Post-Dispatch today published a story that indicated more tax credits have been granted. It seems this project is taking forever to actually get off the ground. What complicates things more is that the federal Geospatial Project is an important part of the Northside Redevelopment project. This Geospatial Project is extremely important to St Louis, generating jobs and neighborhood development.

I am a fan of Paul McGee, because I have spent time with him and shared his vision. He is interested in transformation for communities and could certainly have spent his money on easier projects. It would be nice to see something actually happen on the northside. Written by Paul Dribin

Segregation in Affordable Housing

The New York Times recently ran an article which was very thoroughly documented and described how Low Income Housing Tax Credit projects almost always were located in a racially segregated and economically depressed area. The city described was Houston but the facts could apply to almost any United States location. Projects located in depressed census tracts provide much worse outcomes for the residents than those that are not.(Although the sample size of projects located in higher income areas is very small). Here is a link to the article: https://www.nytimes.com/2017/07/02/us/federal-housing-assistance-urban-racial-divides.html?smprod=nytcore-iphone&smid=nytcore-iphone-share

Certainly in some situations building LIHTC projects in economically deprived areas might make sense if part of a major redevelopment project. Most often, the projects are located in those areas because of NIMBYISM or developer decision making.

I am not confident these situations can ever be changed. Higher income neighborhoods will almost never support the construction of low income project in their midst.

A solution to the problem would be something I frequently recommend; an income approach to poverty which provides everyone with a guaranteed minimum income which would be used to support housing as well as other critical programs. New housing would be constructed in response to the demand created by this source of income. FHA would beef up its’ mortgage development program providing a strong vehicle for the construction of new housing. Developers using this program would need to set aside 10% of their units for affordable tenants. Direct construction subsidies would still be available for special needs housing.

We need to overcome the inertia in housing policy caused by the greed of developers of the status quo.

Beyond Housing

In writing about great organizations in St Louis Beyond Housing is probably the best. They have been in business for years and fully realize that community development must be comprehensive and is hard work. 

They are focused on Pagedale  and the Normandy School District. Their projects include housing development and rehab,homeownership training, foreclosure prevention,and economic development. They have brought a movie theatre, grocery store, and bank  to the area. They have created the 24:1 imitative which is bringing the smaller communities together to meet common goals.

Their leader is Chris Krehmeyer a talented, passionate, and caring individual. I am proud of their work

The Big Idea

I am repeating an idea I have expressed in previous blogs because I believe it is so important. The idea is that low income people would be significantly better served by a guaranteed income rather than construction of affordable housing. I am writing this for the following reasons:

1. Too much of the money spent on affordable housing is siphoned off to third party people and does not directly benefit the low income resident.

2. Construction is just too hard to get right. Studies have shown that very little affordable housing is build outside areas of concentration of poverty. Research again shows that low income people concentrated in poverty stricken areas have much less chance to improve their lives.

3. Income supplements largely eliminate the stigma attached to affordable housing. People could rent where they liked, use funds for a downpayment on a house, or make the normal market choices that other people do.

4. Desegregation would be easier.

5. The program would benefit more people than a construction program.

6. The program would provide benefits to more landlords and developers. Why? Because if implemented on a full scale the funds generated would provide tremendous demand for an increased number of apartment units. Apartment developers could feel confident there units could be leased.

I have a couple qualifiers to go along with the positive points:

1. These funds should not discourage employment. I would see them as a supplement to low wage jobs and not a substitute for employment. Someone who worked would actually be better off.

2. There still need to be construction programs to target special needs populations-persons with disabilities,elderly, and homeless people.

3. There needs to be a strong mortgage program in place to support the increased housing development. The FHA multifamily programs are potentially excellent, they need to be streamlined and simplified.

I am not confident that my concept will be enacted any time soon. I do think it is one of those rare ideas that can unite progressives and conservatives.

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