Testimony of Jenny Reed, Policy Analyst, DC Fiscal Policy Institute, at the Public Hearing on B18-050, “The Mixed-Income Housing Amendment Act of 2010,” District of Columbia Committee on Economic Development

Chairman Brown and members of the Committee, thank you for the opportunity to speak today.  My name is Jenny Reed, and I am a Policy Analyst with the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents.

DCFPI supports the addition of an affordable housing requirement to any public land being disposed for residential development.  In a high-cost city such as Washington, DC, affordable housing is hard to come by.  To make matters worse, the District is losing thousands of affordable units every year.   In fact, a recent DCFPI report, which I have attached to me testimony, noted that the District lost over one-third’or 24,000’of its affordable rental units from 2000 to 2007.[1] Therefore, it is critical that the District use all of its available resources’including its public lands’to leverage more affordable housing.

Bill 18-050, “The Mixed-Income Housing Amendment Act of 2010″ takes the important step of adding an affordability requirement to publicly disposed lands.  This could result in many benefits for the District including; adding affordable housing to high-cost areas of the city, and creating more mixed-income communities across the District.   In my remaining testimony today, I want to outline suggestions DCFPI has for strengthening the legislation.

Increase the affordable housing set-aside from 20 percent to 30 percent.  Public land is a very valuable resource.  The Council has previously recognized the importance of preserving a public benefit to disposed public land by requiring an affordable housing set-aside for properties in the Anacostia Waterfront Initiative.   By increasing the affordable housing set-aside in B18-050 to 30 percent, the requirements would be consistent with the affordable housing set-asides in the Anacostia Waterfront Initiative and it would strengthen the development of affordable housing in the District.

The affordability of the units should be increased to lifetime of the units.   Any development built with public subsidy (including land) should provide benefits to residents in that community for the lifetime of the development.  Any affordable housing also built with the same public subsidy should provide the same length of community benefits.  Therefore, the units should remain affordable for their useful life.  If the affordability were not extended to the lifetime of the units, the District would need to put in additional subsidy or create additional affordable units in order to avoid losing those affordable units the public subsidy created.

While almost everyone agrees that rental units should have lifetime affordability, there is a range of opinions on what the length of affordability on homeownership units should be.  DCFPI feels that there should be a balance that will allow the homeowners to gain some equity in their home while also preserving that home as an affordable unit when the time comes for the family to sell.  DCFPI published a paper that showed that both permanent affordability and equity gain for homeowners that want to sell is possible.  This paper is attached to my testimony.

The land value should be the public subsidy offered for affordable housing development.  The value of the public land being sold should be the first subsidy that is offered to a developer to subsidize the affordable units.  The cost of building the affordable units into the development should be subtracted out of the land value before any other subsidy is considered.  In addition, the value of the public land should be determined by an independent third party and that value should be release when the request for proposals (RFP) is issued.

The levels of affordability should be altered so that affordable housing can be provided to DC’s very low-income residents.   The set asides for the affordable rental units should be changed to offer:

• 15 percent of the set-asides for those making 30 percent or less of area median income (AMI) which is roughly $30,810 for a family of four and,
• 15 percent set-asides for those making 60 percent or less than AMI, roughly equivalent to $61,620 for a family of four.

Affordable rental units are especially needed for DC’s very low-income populations.  In fact, over 26,000 households are on the waiting list for the DC Housing Authority’s affordable housing programs, the majority of which serve DC’s very low-income residents.  A recent DCFPI report indicated that 62 percent of households with incomes under 30 percent of AMI pay more than half of their income on housing.[2] This is classified by HUD as a serious housing affordability problem.

For homeownership, DCFPI recommends that the set-asides for affordable units be changed to offer:

• 15 percent set-asides for those making 60 percent or less of AMI which is roughly equivalent to $61,620 for a family of four and,
• 15 percent set-asides for those making 80 percent or less of AMI, roughly equivalent to $82,160 for a family of four.

Affordable homeownerships units are difficult to build for those earning less than 50 percent of AMI.  There are groups that are capable of building affordable homeownership units for less than 50 percent, but the majority of developers cannot.  If a group can build affordable homeownership units for residents earning less than 50 percent AMI, it is our suggestion that these groups be given preference when the land is disposed.

Thank you for the opportunity to offer testimony, I am happy to answer any questions you may have.

[2] DCFPI, February 2010