A $38 million HUD loan fund will finance affordable housing preservation in DC

DC has secured funding to preserve hundreds of affordable housing units, thanks to a loan program from the Department of Housing and Urban Development. The $38.8 million in financing through HUD’s Section 108 loan guarantee program will be used for affordable housing preservation projects that DC has deemed worthy of funding but didn’t previously have money for.

“As we continue through our response and recovery, this funding will allow us to double down on our ongoing housing efforts, protect DC’s stock of affordable housing, and give more Washingtonians a fair shot,” Mayor Muriel Bowser said in a press release.

Jenny Schuetz, a housing policy researcher at the Brookings Institution, said the funding is a positive step in an environment that focuses more on building than maintaining.

“Public debate focuses mostly on the need to build additional subsidized housing, but it’s equally important to make sure the current stock remains in good physical condition and financially sustainable,” Schuetz said.

Facing stubbornly high housing costs, in 2019 Bowser announced an initiative to build 36,000 housing units by 2025, including 12,000 affordable units.

But bolstering affordable housing also includes preserving existing affordable units that are at risk of being lost, either because they need rehabilitation or have expiring affordability covenants — DC needs to preserve about 6,000, according to Bowser’s housing order.

The Section 108 program offers a way to help bridge that gap. Through the program, HUD gives jurisdictions access to financing with low interest rates and flexible terms, which can then be loaned to third party projects.

DC’s application specifies that it will use the financing to provide loans for the preservation of housing for households earning up to 80% of the area median income. Developers can use the HUD funds for the acquisition or preservation of multifamily units.

DC plans to start by funding projects that the Department of Housing and Community Development approved in a 2019 proposal round, but didn’t have funding for: for instance, $21.5 million could fund five preservation projects encompassing 270 affordable units.

Next on the list would be projects that were waitlisted in the 2019 round because of funding limitations. “As part of this recent RFP round, there were numerous projects that were waitlisted that may have otherwise been brought into DHCD’s pipeline if not for the COVID-19 pandemic and its effect on available resources,” the application says.

The loans will also rehabilitate owner-occupied affordable housing and other existing affordable properties “that typically have difficulty securing competitive financing terms from the private market.”

Schuetz said given the increased affordable housing needs due to the COVID-19 pandemic, focusing on maintaining affordable housing stock is more important than ever, saying: “Letting existing properties fall into disrepair is like punching a hole in the bottom of a bucket and then wondering why the water level keeps dropping.”