Getting Creative: Washington Area Municipalities Address Housing Needs While Dealing with Federal Cuts

8 min read

In the immediate Washington, D.C. metropolitan area, which has about four million people and high housing costs, local governments are using a variety of approaches to address affordable housing needs even as they differ in their priorities and available resources.

At a June conference in Washington sponsored by the Housing Association of Nonprofit Developers (HAND), officials from the District of Columbia, Northern Virginia, and Montgomery and Prince George’s Counties, Md. talked about their activities, funding sources, and challenges in trying to create, preserve, and support affordable multifamily rental housing and homeownership. One university study estimates the need for an additional 500,000 low- and moderate-income housing units in the region by the year 2032.

In opening remarks, Susan Forbes Dewey, Executive Director of the Virginia Housing Development Authority, mentioned the main challenges shared by the local governments: “Reduced federal funding and the threat of even more reductions going forward, as well as the high cost of construction in this area.”

Dealing with Funding Cuts

The panelists lamented the sharp cuts in recent years in the federal HOME and CDBG funds they receive.

“Our home ownership has really been curtailed since our reduction in CDBG and HOME funds,” said Mildrilyn Stephens Davis, Director of the Office of Housing for the City of Alexandria, Va. “So we’re concentrating on foreclosed properties and resales of properties that we had resale restricted because of previous assistance.

“Our funding sources are city money, dedicated tax revenues (from a share of real estate taxes), CDBG, HOME, and a housing trust fund that consists of developer contributions.”

Davis’ office funds homeownership activities and multifamily rental housing development. The separate Alexandria Redevelopment & Housing Authority operates public housing and administers the federal Housing Choice Voucher program. The latter is a major resource used by all the localities to subsidize rents for low-income households.

Montgomery County Department of Housing and Community Affairs Director Richard Nelson, Jr. said, “We’re doing less” because of the cuts in CDBG and HOME funds. Most of our HOME funds have been spent on special needs housing.” Nelson reported that his agency is using much of its HOME and CDBG funds to help finance the rehabilitation of group homes throughout the county.

“The real impact of the cuts has been that we’ve been able to fund fewer new projects,” said Nelson, referring to housing projects generally. “So we push some of the folks who come in to seek alternative sources to combine with ours so we don’t have to put as much in.”

Several officials indicated they rely heavily on federal low-income housing tax credits to fund the development and preservation of affordable multifamily rental housing projects.

Eric Brown, Director of the Prince George’s County Department of Housing and Community Development, said scarcer resources are “forcing a lot of agencies – and ours in particular – to start looking at how do you make up for that. And you have to be a little more creative in what you are able to do.”

Brown’s agency is asking the county for additional funds and looking to boost the volume of tax-exempt housing bonds issued by its housing authority. But perhaps more important, “We’re being a lot more strategic in how we allocate our resources” and targeting these to projects and areas “where we feel we can have the greatest impact,” he explained. This includes “looking for [development] deals that can move fast and have an impact” and focusing resources on six specific neighborhoods designated by the county executive.

Davis said Alexandria has shifted away from providing its resources to developers for new projects on a first-come, first-served basis and instead has “become more strategic in what we fund” and is “also focusing on how we can get more monies through the development process.”

In Alexandria, developers of new multifamily rental housing projects can get a density bonus in exchange for designating some of the on-site units as affordable or making a cash contribution. Davis indicated that the city has closed a loophole under which developers could achieve the higher density without claiming the bonus provision by getting the site rezoned.

In addition, the program has been modified to permit off-site affordable units or a cash contribution. Davis suggested that in the case of a luxury multifamily development, it can make more sense for the city not to have on-site affordable units and instead use the developer’s in-lieu cash contribution to support a larger number of affordable units elsewhere.

Trust Funds and Other Tools

Local officials cited various other non-federal resources and tools they are using to create and preserve affordable housing.

The District of Columbia, Alexandria, Arlington and Fairfax Counties, Va., and Montgomery County, Md. each have a housing trust fund, capitalized by one or more of the following: government appropriations, a share of real estate or recordation taxes, and developer contributions. In Washington, D.C., the local trust fund receives 15% of real estate recordation tax revenues. “Because of the booming economy here in the District it’s become a very healthy fund,” said Michael Kelly, Director of the city’s Department of Housing and Community Development.

The agency has about $287 million dedicated for affordable housing production, “of which a lot is being used to close the deals that we have in the pipeline,” said Kelly. “Mayor [Vincent] Gray has established a goal of producing 10,000 affordable housing units by the year 2020.”

Similarly, Arlington County’s trust fund, capitalized by county and developer contributions, is at a record level, said county Housing Director David Cristeal.

In addition to providing funding, he said the county is using various planning tools to preserve and produce affordable rental housing, especially along the Columbia Pike corridor, an area slated for revitalization that contains many old conventional apartment complexes that have affordable rents. The county’s goal is to preserve about 6,200 affordable units in the corridor.

Arlington County’s planning tools, said Cristeal, include:

  • An inclusionary zoning ordinance that requires developers of new housing projects to provide a share of the units as affordable or else make a cash contribution to the county’s housing trust fund.
  • Transfer development rights, which enable developers to transfer bonus densities off-site to preserve affordable apartments.
  • Permitting developers of new housing projects in the Columbia Pike corridor to utilize “form-based” code requirements if they agree to designate a certain share of on-site units as affordable. According to one industry publication, form-based code requirements “include specification of what uses are permitted in a building or place, but focus on the physical character of development, particularly how it relates to the public realm that everyone shares.”

Arlington County also has a transit-oriented affordable housing fund, capitalized with tax-increment monies, that pays for infrastructure and related costs for new LIHTC projects.

Arlington and Fairfax Counties have also provided county-owned land for affordable rental housing projects.

Leveraging of Powers and Resources

The Fairfax County Department of Housing and Community Affairs serves a county of more than one million people. The department, essentially two agencies in one, is both a part of county government and provides staffing for the county redevelopment and housing authority. Accordingly, it has broad range of powers and multiple resources (e.g., tax-exempt bonds financing, county dollars, federal housing vouchers) that can be harnessed to produce and preserve affordable housing.

“It’s been a great combination,” said Director Paula Sampson,” because the authority has great power and flexibility, such as to issue bonds, buy real estate, and take on debt. And you can bring that to the table, combined with the funding and resources that the county brings.”

Sampson expressed excitement about the recent designation of Fairfax County’s housing authority as a Moving to Work agency. “This brings to us not a lot of new money, but will allow us to reshape and reinvent our affordable housing programs as an authority,” she said. “We are able to block-grant our funds. So, for example, all of the voucher monies, public housing subsidies, capital funds can be pulled together and we can bring it back out and spend it the way that works best for Fairfax County.”

The local officials also cited other initiatives they are pursuing or exploring.

Fairfax County’s authority has submitted an application under the federal Rental Assistance Demonstration program to convert its entire portfolio of about 1,060 public housing units to assisted housing. The Montgomery County Housing Opportunities Commission, separate from Nelson’s agency, has received RAD awards to convert a total 781 public housing units.

The officials also indicated that they depend heavily on partnerships with nonprofit entities in affordable housing development and preservation and in providing services to residents, which they said is critical.

Nelson said his agency is looking at possible ways to provide “wraparound services” for the senior housing projects it has helped finance, “particularly trying to link our senior developments with hospitals and the services that emanate from them.”