We Can Do Affordable Housing

Affordable Housing is core to upward mobility. It is fundamental to a healthy community that has family stability, thriving diversity, and a region that attracts rather than repels people. It is a glue that keeps people here, engaged, and thriving.

Charlotte, North Carolina:

A little over a year ago, Foundation For The Carolinas issued a challenge to the local business community: Raise $50 million in private funds by the summer of 2019 to match a voter-approved affordable housing bond. This month, the city received a combined $13 million in commitments from Atrium Health and Fifth Third Bank for the Housing Opportunity Investment Fund. 

A separate gift was announced by David and Scott Brooks, owners of Brooks Sandwich House. This gift will donate 3 acres of land in east Charlotte to be used to build 18 to 24 Habitat for Humanity townhomes. Managing the fund is the Local Initiatives Support Corp., a national organization (with a local chapter) that seeks to create economic opportunity in communities. They estimate that this $50 million fund can support around 1,500 units of housing. Additionally, LISC and Atrium will work together to provide services such as health screenings to the residents of these affordable housing units.

Others entities involved include Crescent Communities, Wells Fargo, Bank of America, Barings, and Ally Financial and Lowe’s Home Improvement

Some Statistics that Show the Need in Charlotte, NC

Charlotte, NC, and Mecklenburg County are very attractive and successful places to live and do business. Along with that success comes the challenge of maintaining affordable housing options for our workers making 30-120% of median income.

The Charlotte MSA currently has a deficit of about 21,000 units for 50% AMI (area median income) and under. On top of this, the situation is getting worse. Over the past 10 years, we have built an average of 312 units of new affordable housing per year. Naturally occurring affordable housing is being lost, replaced by new projects or renovations with rent increases as high as 30-40%. These systematic changes are driving many renters to travel greater distances to find affordability.

Approximately 18,000 of our apartments are more than 40 years old. The useful life for a stick-built apartment project is about 60 years.

Charlotte’s affordable housing problem is estimated at 22,000 to 34,000 units. As part of the affordable housing campaign, Mayor Vi Lyles and city council members have supported tripling the amount of biennial affordable housing bonds to $50 million from $15 million.

Voters passed the bonds last year and now advocates, including Marsicano, want to see $50 million become the new standard in subsequent bond campaigns.

Here are my ideas for the people involved in this effort. Your goal is to create innovative, sustainable, and affordable housing for every family in the Charlotte region. Period. No caveats.

  • Let’s break down barriers, create bold ideas and approaches and unleash the capacity of the private sector to build more affordable housing in our region.
  • A key measure of what we value as a city and county is how we treat those in need.
  • Affordable housing is an essential element of family stability and creates the opportunity for economic mobility and advancement.
  • A holistic affordable housing model is needed that can give residents access to public safety, employment, healthcare, transportation options and education. Think communities – not just houses.
  • Have a bias toward mixed income, conducive to life communities.
  • Create a housing system that maintains quality places for individuals and families to live including permanent deed restrictions to preserve the land for current and future affordable and workforce housing.
  • The private marketplace, faith community, public and non-profit sectors and corporate philanthropy, working together, can tackle these challenges. A successful strategic model requires engagement, collaboration and creative effort from our entire community.

Take Note LISC and City officials – Five Tactics to be Successful. 

These are not new ideas as many come from other reports such as The Evergreen Task Force – they now take political will to implement. They take a region that cares. These following ideas are ranked order or urgency.

  1. Everything you do is with an eye to community, not just housing.  Build communities for and with community residents. Build smart communities as designated by leaders around the world.
  2. Be trustworthy! Do what you say you will do. Be transparent. Be inclusive. Take the city into account in everything you do. Populate your organization with local people who have lived here – want to live here. Remember that expertise is only one component of your work.  Your work can change the culture of our region.
  3. Form an Affordable Housing Action Team charged with implementing an overall strategy to address affordable housing issues and publish an annual “State of Housing Report.”
    • Develop a process in consultation with other stakeholders, such as the Housing Advisory Board, for implementing an overall strategy to address the affordable housing issue.
    • Conduct research and coordinate an annual “State of Housing Report” for Charlotte.
    • Serve as a resource to educate and inform elected officials on the issue.
    • Meet frequently in the community on implementing the strategic plan, share ideas and pursue innovation.
  4. Create coordinated policies and a proactive program to identify land/building sites and obtain appropriate zoning and restrictions for these sites to be available to affordable developers to achieve sustainable progress.
    • Identify/create and own a growing number of land sites, proactively zone them for the appropriate use/density, and then lease /restrict the sites solely for affordable housing purposes on a long-term.
    • Use land currently controlled by the City of Charlotte, Mecklenburg County, CMS, CATS, Charlotte Water, among other entities; there is a tremendous amount of excess land that could be used for affordable housing without affecting the primary use of the land.
    • Wealthy individuals/foundations are a source for land, especially if the city can create better tax write-offs for the market value of the lease.
    • Create standard documentation that has design approval, restrictions and other controls.
    • Get sites shovel ready; make this preparation work a priority.  Rezone quickly when needed.
    • Work with the development community on acquisitions of NOAH, putting the land lease/land control concept and restrictions in place on desirable sites;
    • The City of Charlotte and Mecklenburg County have several in-process initiatives to streamline processes and make improvements to accelerate affordable housing production – keep up this work! Get the city and County to support you today! 
    • Eliminate rezoning filing fees and eliminate other permitting fees for projects that include certain levels of affordable housing.
    • A significant number of our affordable projects will use tax exempt bonds coupled with 4% tax credits, the requirements of issuers and the NC Housing Finance Agency are also a big factor in the cost of a project.  Reduce these costs. The Agency produces annually a qualified allocation plan (QAP) that sets the requirements for unit sizes, cabinet space, etc. for all tax credit projects, and these need to be more representative of the urban conditions we have in Charlotte. Seek reductions in the costs/fees and simplify review processes at all levels of the bond issuance process.
    • NC State Level Legislative/Regulatory Initiative Consideration should also be given to a comprehensive review of state-level impediments to the provision of affordable housing. This review would include elimination/modification of problematic legislative and administrative rules and regulations.
    • Acquire and Preserve Naturally Occurring Affordable Projects (NOAH). Acquiring existing projects whose rents are in the 30% – 120% median income range is an immediate and less expensive way to preserve mixed income housing.
      • Address deferred maintenance, renovations required to sustain building quality;
      • Use deed restrictions to maintain affordable rents;
      • When possible, set rents for a broad range of incomes to promote mixed income housing and use income restrictions to ensure the proper use of those units;
      • Manage the property for the remainder of its useful life and then look to pursue substantial renovations or the development of a new affordable project on the site.
  5. Maintain your fund with continued fund raising.
    • The fund may buy land and lease it to projects, or alternatively provide loans or equity to projects as needed.
    • Other cities have had great success with various funding and development models, which can serve as models for your work.  Study other cities.
    • Raise social impact capital to provide debt, equity or mezzanine capital to fund both new construction of affordable housing and to fund the acquisition and rehab of Naturally Occurring Affordable Housing (NOAH).
    • Capital could be deployed through several vehicles:   Opportunity Zones; National REITs (Real Estate Investment Trust); Local Social Impact Equity Fund – A local private equity fund; CDFI’s – Community Development Finance Institutions provide equity and debt products with flexible terms and lower interest rates.
    • Expand Use of Creative Financing Tools such as TIF/TIG & Create Debt Service Funds and Other Vehicles:
      • A Debt Service Reserve Fund If we can reduce the costs for an affordable project, then the funds required from your fund will be reduced, allowing more projects to be funded. One alternative to lowering a development’s debt service cost would be the use of a “Debt Service Reserve Fund Makeup” (DSRF). This DSRF would operate like a credit enhancement for projects, allowing lenders to offer lower rates and more flexible terms.
      • The City of Charlotte would fund the debt service reserve to provide a loan guarantee for city approved low/moderate income housing projects in exchange for deed restricted affordable housing units.
      • A draw on the DSRF to cover a payment default would become a subordinate project loan, supported by a lien that the City could use to recover any unreimbursed draw from sale or refinancing proceeds.
      • Synthetic Tax Increment Financing North Carolina local governments, including the city and county, have for several years issued debt to assist the development of projects based on tax increment resulting from the development. Ten million dollars in new construction might produce $120,000 in new tax revenue to the city and the county.
      • At the city’s borrowing cost, that amount might be leveraged into a $1,500,000 contribution to the project, in return for covenants as to low and moderate income set asides.
      • Working Capital Reserves – Some projects require working capital reserves that must be funded with cash or a letter of credit. If the city were to fund the working capital reserve, this would operate as a subordinate loan to the project, as described under the Debt Service Reserve Fund Makeup discussed above.
      • The city funds and your fund might operate as a revolving fund so that as working capital reserves were released on one project and returned to re-loan the funds to a new project.
  6. Create a More Personal and Understandable Conversation about Affordable and Workforce Housing
    • Conversations about affordable housing and workforce housing are confusing. Even the definitions are widely misunderstood. In addition, the conversations are often very sterile, using terms unfamiliar to anyone but experts.
    • Create a new, more personal approach that talks about the residents – home health care workers, residents, retail workers, construction workers, etc.
    • Create an overarching marketing/communications strategy. Use the State of Housing report each year to “launch” the overall communication strategy.
    • Develop a powerful presentation and materials:
      1. Tells the story of workforce, affordable, and social housing;
      2. Includes a very personal approach, using Charlotte people;
      3. Make this presentation available to anyone who wants it;
      4. Work with the media to use the desired language. 
      5. Create an active web page & social media approach for this          conversation.
    • Engage young people – market to younger citizens who do not have the resources now to contribute but will in the future. 
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