Bowser announces surge of affordable housing funds in next year’s budget

Mayor Muriel Bowser announced Monday that the budget she will propose to DC Council this week will include $400 million for the Housing Production Trust Fund (HPTF), DC’s primary program for building affordable housing.

The investment, which is four times what the mayor’s office has historically allocated for HPTF each year, will allow DC to produce 3,000 more affordable homes, Bowser said.

$150 million of the funds will be in Bowser’s supplemental Fiscal Year 2021 budget, with another $250 million in FY2022. Bowser announced that the budget will also include Local Rent Supplement Program vouchers. That will ensure that half of the homes built using FY22 dollars are affordable for residents making less than 30% of the Median Family Income, she said.

“We know, especially as the median income has gone up in our city, not all affordable housing is created equally,” Bowser said.

In 2019, Bowser set a goal of building 12,000 new affordable homes by 2025 in an effort to address widespread affordability challenges in the District. That goal is still a long way off — Deputy Mayor John Falcicchio said 2,558 units have been built so far. The 3,000 homes made possible with this funding could get DC to a little less than half of that goal.

Polly Donaldson, Director of the Department of Housing and Community Development, said the influx of funds could help “clear the clog” in the project pipeline, helping to move forward eight HPTF-funded projects that are “stuck.”

DC Council will review and make changes to the budget after Bowser introduces it Thursday, and Falcicchio implored the Council to make sure this funding survives the process.

What is the Housing Production Trust Fund anyway?

DC has a number of tools at its disposal to build and rehabilitate affordable housing. But its biggest contributor by far is the HPTF, a dedicated funding pool used to help finance affordable housing construction and rehabilitation.

According to the website for the Department of Housing and Community Development (DHCD), which runs the trust fund, the HPTF has produced more than 6,000 affordable housing units since 2015 — that’s more than half of all the units completed in the District in that time frame, according to DC Open Data.

Housing trust funds aren’t unique to DC. The funds are used all over the US as a way to dedicate public money to affordable housing construction while taking that allocation out of the annual budget process.

A 2016 report by national organization Community Change’s Housing Trust Fund Project found more than 770 such funds across the US at the local, state, and national level.

“They exist because community organizers, housing advocates and elected officials alike have agreed that a permanent stream of revenues for affordable housing should be a public priority,” the report says.

DC’s HPTF was created in 1988. Most of its funds go to multifamily projects, including new construction as well as rehabilitation projects, with at least half typically going to rental housing. The fund also pays a much smaller amount for a single-family rehabilitation program.

Developers, both for and non profit, apply for funds and their proposals are ranked based on factors like affordability and access to transit. The funds can provide a variety of things including gap financing, help with acquisition costs or pre-development, or loans or grants for some housing services.

Its most steady source of funding is 15% of deed recordation and transfer taxes — in Fiscal Year 2020, that amounted to more than $60 million.

As evidenced in today’s announcement, the mayor can also transfer money from DC’s general fund to the HPTF; she’s done so to the tune of about $100 million per year.

Playing catch up

Here’s where Housing Production Trust Fund dollars are supposed to go, by law:

• Half of spending each fiscal year has to serve households making less than 30% of the area median income (AMI);
• 40% of spending should serve households between 30% and 50% AMI;
• And the rest can serve those making up to 80% AMI.

But Street Sense reports that DC has only met those goals once in the last five years. In Fiscal Year 2020, the HPTF only allocated about 18% of its funds on housing for households below the 30% AMI threshold, DHCD reported to the DC Council for its latest performance oversight review hearing.

DHCD acknowledges that’s a problem, but says in order to build more 30% AMI units, it needs DC to pay for operating subsidies through the Local Rent Supplement Program to make them feasible.

Bowser’s commitment to providing rent supplement funds could make it possible for the HPTF to finally meet that obligation. Falcicchio said the plan is to add about $42 million in additional rent supplement funds over three years.

Another notable issue with HPTF’s record: the program hasn’t had a lot of success getting geographic diversity in its housing projects.

Bowser’s overall housing goals from 2019 are split up by planning area, with more aggressive affordable housing goals in planning areas that don’t have a lot of affordable stock to begin with. The idea is to promote mixed-income communities and counter economic and racial segregation. But so far, HPTF hasn’t met those goals in all areas, with many projects concentrated in wards 7 and 8.

Monday’s announcement was held in front of Spring Flats, a mixed-income affordable and senior housing development under construction in Petworth with 185 affordable units. Donaldson said Spring Flats will put enough units in the pipeline to put the Rock Creek East planning area, which stretches east of Rock Creek Park north of Petworth, only a few hundred units shy of its 2025 goal.

But just across the park by Rock Creek West, the picture isn’t looking as sunny. That historically exclusive area has the highest affordable housing goal, but has made the least progress — according to DC’s housing tracker, 0% progress in fact (not a typo). Since 2015, just 53 affordable units have been built in Ward 3, all thanks to Inclusionary Zoning.

Asked about whether there is a plan for ensuring next year’s HPTF investment is used partially in areas like Rock Creek West, Bowser said the District needs developers to propose projects.

“We don’t make the projects, sometimes we give nudges,” Bowser said, adding that there is hope that the recently passed Comprehensive Plan will help that effort. She also added that building affordable housing in high-cost areas can cost more per unit.

“We have to be willing to have the public get involved in an affordable housing project that costs more,” Bowser said. “So there are all those intricacies.”

Correction: An earlier version of this article incorrectly stated that the $400 million investment in the HPTF will be in FY2022. $150 million of the funds will be in Bowser’s supplemental Fiscal Year 2021 budget, with another $250 million in FY2022. The article has been corrected and updated to reflect the change.