Testimony at the Agency Performance Oversight Hearing on the Department of Housing and Community Development on Transparency and Reporting

Good morning, Chairperson Bonds and members of the Committee. Thank you for the opportunity to speak today. My name is Eliana Golding, and I am a policy analyst at the DC Fiscal Policy Institute (DCFPI). DCFPI is a non-profit organization that promotes budget choices to address DC’s racial and economic inequities in the District of Columbia, through independent research and policy recommendations.

Today I would like to focus my testimony on transparency and reporting requirements for the Housing Production Trust Fund.

The fiscal year (FY) 2022 budget’s historic investment of $250 million into the Housing Production Trust Fund (HPTF) could, if well-targeted and -monitored, help the District make great strides in alleviating its affordable housing crisis. It is essential that the Department of Housing and Community Development (DHCD) deploy these resources according to statutory requirements to address DC’s most urgent housing needs.

Creating and preserving truly affordable housing is critical to disrupting historical harm and advancing racial equity in the District. The enduring legacies of structural and individualized racism—such as racist zoning and residential segregation, redlining, restrictive covenants, practices barring Black people from federal employment, and access to Homestead and New Deal programs, among others—denied Black families equitable access to housing and employment and continue to harm all communities of color today. Nearly 90 percent of extremely low-income, severely rent-burdened households in the District are headed by a person of color and most of them are Black.^[1] Addressing housing instability for these families is particularly important as rapid gentrification and the alarming rate of displacement puts at risk the economic security and the culture of historically Black neighborhoods.

Maximize Strong Investment in HPTF by Meeting Required Income Targeting

In recent years, DHCD and affordable housing advocates and developers have identified two main drivers behind the agency’s historic failure to meet the HPTF’s statutory requirements: first, the under-resourcing of operating subsidies through the Project and Sponsor Based Local Rent Supplement Program (PS LRSP), which allows developers to offer affordable rents, and second, that lawmakers failed to appropriately align the budgeting mechanism for PS LRSP with the HPTF’s consolidated request for proposals process.

In the FY 2022 Budget Support Act (BSA), lawmakers included changes to the funding mechanism for PS LRSP, allowing the agency to have certainty about how much money is available for new units. During the FY 2022 budget hearings, DHCD testified that, because of the change in the funding mechanism, the size of the annual increase in PS LRSP budget can be scaled to provide adequate operating subsidies for units that have already received funding and units that the agency expects to come on-line in the coming years. In other words, DHCD believes that the $42 million allocated to PS LRSP over the current financial plan will be sufficient to allow the agency to meet the HPTF’s statutory requirements.^[2]  DCFPI looks forward to hearing updates from DHCD about whether the agency was able to meet the statutory requirement in FY 2021 and if they expect to meet the 50 percent requirement in FY 2022—and if not, why the agency failed to comply with this requirement.

Transparency on Barriers to Meeting Required Income Targeting

During the FY 2021 performance oversight hearings and FY 2022 budget oversight hearings, members of this committee and other members of the Council asked DHCD many questions about why they had been unable to meet the statutory requirements for affordability. DHCD’s director spoke about the difficulty of balancing the agency’s many priorities when making HPTF funding decisions. Some of the reasons that DHCD gave for the failure to meet the 50 percent target included not only the need to change the PS LRSP funding mechanism, but also their concern about geographically concentrating affordability and the lack of project applications for projects including deeply affordable units.

The conversation during the FY 2022 budget oversight hearings made clear that there is a significant lack of transparency that is preventing the Council from accessing important details as to why DHCD has been unable to meet the District’s affordability targets. From the advocate’s perspective, and to many members of the Council, DHCD has not provided adequate or detailed enough information about the factors that the agency uses to make funding decisions through the consolidated Request for Proposals (RFP) process. The Council, and the public, should have access to that information. If the Council had more insights into HPTF financing decisions, they would be able to make more informed budgeting and legislative decisions that advance the District’s affordability goals.

We look forward to hearing from DHCD during the upcoming performance oversight hearing for government witnesses about the agency’s progress, including whether the change made in the BSA to better time PS LRSP funding has been successful. Additionally, given that the Chief Financial Officer will automatically deposit a significant portion of the sizable FY 2021 budget surplus into the HPTF at the end of this month, we also look forward to hearing that DHCD will advocate for PS LRSP to receive a proportional boost in funds during this year’s budgeting process.

Impose Reporting Requirements to Ensure that HPTF Meets the District’s Need

For the sake of transparency and accountability, and most of all to ensure that HPTF dollars are meeting the District’s most urgent needs, we urge the Committee to schedule hearings for and enact bills B24-0458, the Housing Production Trust Fund Income Targeting Accountability Amendment Act of 2021, and B24-0459, the Housing Production Trust Fund Transparency Amendment Act of 2021. These bills would require rigorous reporting both about the RFP application process and the outcomes of DHCD’s funding decisions regarding specific projects. Such reporting requirements would not only help DHCD meet statutory requirements for affordability, they will also help Council understand where in the RFP process adjustments need to be made in order to support projects with deeply affordable housing in order to meet the District’s long-term affordability goals.

For example, B24-0459 requires that RFPs include the specific criteria by which DHCD will evaluate each project in order to make recommendations to the Director. The bill also requires the Director to issue written justification of any additional criteria or use of discretion that the Director used to make those decisions. These additional reporting requirements will help both the Council and the public to understand how DHCD is using District dollars and hold the agency accountable to its affordability commitments. Transparency and accountability are essential to tackling the District’s ongoing affordability crisis. We urge the Council to pass these two bills.

Thank you for the opportunity to testify and I am happy to answer any questions.