When Affordable Housing Bypasses the Poor

Originally published in The American Prospect on May 19th, 2016.
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It’s no secret that finding safe, affordable housing has become a major challenge for millions of Americans. The U.S. homeownership rate has neared a 48-year low, and declining vacancy rates have sent rents soaring. According to Harvard’s Joint Center for Housing Studies, the situation is particularly stressful for low-income renters: The number of vacant units with rents under $800 dropped by more than 12 percent between 2013 and 2014. Just a quarter of low-income families eligible for federal rental assistance even receive it.

As the obstacles surrounding housing affordability continue to mount, new research and legal developments have also invigorated discussions of fair housing. The Fair Housing Act, which bars housing discrimination and requires recipients of federal funds to promote housing integration, was bolstered by a 2015 Supreme Court decision stating that housing policies that reinforce segregation—regardless of policymakers’ intent—must be avoided. Shortly thereafter, HUD released a new federal rule that provides communities with tools to ensure they meet their fair housing obligations.

Amidst this housing policy landscape comes a provocative new report from the Institute of Metropolitan Opportunity (IMO), a research and advocacy organization associated with the University of Minnesota, which looks at what they call a new category of subsidized housing—one catering to whiter and comparatively more affluent people than the typical residents of affordable developments. IMO says that while many of these projects, which rely on federal Low Income Housing Tax Credits (LIHTC), may advance public policy goals like historic preservation and economic development, they also worsen racial and economic segregation and likely violate fair housing laws. Coining these developments Politically Opportune Subsidized Housing—or “POSH”—IMO suggests that affordable housing development can create segregation not only within and between communities, but also within the subsidized housing system itself.

The report focuses primarily on the Twin Cities—the most segregated predominately white metropolitan area in the United States—but the authors also explore how similar subsidized development projects have proliferated around the country. While many of these projects are marketed specifically to artists, using a special exemption that developers lobbied for from Congress during the recession, other similar projects target teachers and veterans. Such projects carry decided political appeal, as millions of middle class families struggle with housing costs, too.

But these POSH units, which come with a host of fancy amenities, are extraordinarily expensive. In the Twin Cities, IMO finds the average per-unit total development cost of a POSH project to be $347,500, compared to $266,000 per-unit for traditional subsidized housing. For POSH projects specifically designated as artist housing, per-unit costs can reach as high as $670,000. POSH projects are, they say, likely the most expensive subsidized housing developments in Minnesota’s history.

The residents in POSH housing also look quite different than those who live traditional subsidized housing. While over 70 percent of residents in Twin Cities Low Income Housing Tax Credit projects are nonwhite, more than 65 percent of Twin Cities POSH residents are white. In some buildings, the resident percentages top 80 and 90 percent white.

IMO suggests that these POSH projects may violate federal fair housing laws. Some artist housing, for example, imposes screening mechanisms, many of which could create discriminatory hurdles for low-income minority applicants. IMO quotes a legal aid attorney saying, “You have to try really, really hard to find 80 or 85 percent white people in the poor population of Minneapolis. You have to have a really good sorting system.”

The rental prices within POSH buildings are also prohibitively expensive for many low-income renters who rely on federal housing choice vouchers. While LIHTC-funded units have to accept voucher holders, many buildings are priced at such a level that they often preclude voucher holders from even applying. And this is on top of steep application fees required by some POSH landlords—costs generally unassociated with traditional subsidized housing.

With HUD and the federal courts now beginning to crack down on fair housing violations, the future of POSH projects may be murky. Last week, news broke about a groundbreaking fair housing settlement that could dramatically alter affordable housing construction throughout the Twin Cities. The settlement requires St. Paul and Minneapolis to thoroughly review their fair housing performance and take steps to address any documented problems. This comes on the heels of a similar fair housing agreement signed in Baltimore County, aiming to address decades of housing discrimination. The county will, among other things, expand affordable housing and relocate 2,000 families into areas of higher-opportunity.

The IMO document “is a very important and powerful report,” says Elizabeth Julian, the president of the Inclusive Communities Project and the former Assistant Secretary of Fair Housing and Equal Opportunity at HUD. “I would say this is one of those truth-to-power kind of pieces; it takes everyone out of their comfort zone which unfortunately is what has to be done because we have become way too comfortable with our segregated state.”

When I asked Julian if she thought the POSH projects violated fair housing laws, she said that it would be up for a judge to decide, but that she thinks “what’s happening here just cries out for some fair housing advocacy and attention.”

The POSH developers defend their housing policies. “Our projects are diverse, racially, ethnically, age-wise, income-level and they are very reflective of the communities in which they’re located,” says Melodie Bahan, the vice president of Communications for Artspace, a leading national developer of subsidized artist units. Noting that the report fails to sufficiently distinguish between nonprofit organizations like Artspace, and for-profit companies, Bahan says her organization would never charge application or holding fees for units, and would never try to convert the buildings into market-rate rentals once their affordability contracts have ended. “Artspace has never done that, never intends to do that. We are committed to providing sustainable affordability for artists,” she says.

The IMO report acknowledges that subsidized housing construction is often the only lever communities have to support economic development within neighborhoods targeted for revitalization. But concentrating large numbers of poor racial minorities together, they say, often depresses neighborhoods further.

“There’s nothing wrong with public policy that wants to use subsidized housing money to leverage economic development,” says Julian. “But it can’t perpetuate segregation, that’s the key. If you say we’ve got to perpetuate racial segregation in order to achieve these other benefits—well that’s not a deal that can be made.”

The kinds of projects highlighted in IMO’s report began to appear several decades ago, but the authors say that the “pace and scale” of their development has quickened. Indeed, the kind of teacher housing development the Prospect reported on in November is also spreading more rapidly. IMO claims these kinds of construction projects create politically palatable opportunities, which helps to explain why local officials have been eager to give their stamp of approval, despite their high costs. Similar POSH projects have opened up in St. Louis, New York, and New Orleans, among other cities. “After all, Minneapolis and Saint Paul are not the only cities experiencing an influx of young white residents, nor are they only places with empty former commercial or industrial space in need of conversion or reuses,” the IMO report states.

“For a long time cities have tried to use affordable housing funding to solve problems that aren’t about housing—in this case those problems are historic preservation, supporting the arts, and revitalizing city centers,” says Will Stancil, an attorney at IMO and one of the report authors. “These new developments have started cropping up because cities and developers have figured out that repurposing funding gets a lot easier when you stop worrying about causing segregation or trying to serve the neediest people. But these aren’t tradeoffs we can make.”

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