Highlights of Raleigh’s 2022 Annual Affordable Housing Report
During the City Council work session held on October 18, 2022, City staff presented the City’s Annual Affordable Housing Report. Here a few takeaways and notable items from the Council work session.
As indicated in the slides below and described in more detail in the complete Affordable Housing Report, Raleigh City Council and staff should be credited for not minimizing the housing affordability challenges the City faces. They also deserve credit for effectively tracking key data, using that data to analyze what is happening to housing affordability across the City and taking action to address the problem. The affordability crisis has been developing for years and as noted in RaleighForward’s recent post, the current City is using nearly every financing and regulatory tool available under North Carolina law to help secure housing for every resident. Unfortunately, it will take time for these reforms to take root and ultimately bear fruit.
But these tools only address the supply-side of the housing affordability issue. Reducing the regulatory burden associated with permitting and building new housing helps increase supply. Regulatory reform also lowers housing costs by reducing delays and permits the construction of more types of housing in more places across the City. Raleigh’s recent $80 million affordable housing bond (the first since 2011’s $17.5 million) will help increase supply by financing new housing construction, land acquisition, as well as the acquisition NOAHs. Beyond supply, bond revenue will help with neighborhood stabilization by keeping some homeowners in their homes through home repair and rehabilitation programs, first-time homebuyer assistance and expansion of the Small-Scale Rental Development Pilot Program.
However, what is often overlooked in the housing affordability discussion is the need for more permanent subsidized affordable housing for residents making less than 50% of the Area Median Income (currently $42,800 for a family of 2). Regulatory reform and bond financing adds to the supply of all types of affordable housing, but only a small percentage goes to fund permanent subsidized affordable housing. Unfortunately, the federal government no longer prioritizes financial support for building and operating new public housing. Similarly, the North Carolina General Assembly has not historically provided cities with consistent or predictable financial support for building and operating permanent subsidized affordable housing.
That forces local governments like Raleigh to figure out how to generate additional revenue to build and manage permanent subsidized affordable housing. Currently, the primary model for building new affordable housing is Low Income Housing Tax Credits (“LIHTC”) that combine mixed income housing and tax credits to build rental units. Though popular, this program’s success is constrained because demand for affordable housing far outstrips the tax credits available and does not produce nearly enough housing for very low income residents. Even when there is money available to build new affordable housing, it takes permanent financial subsidies to manage and maintain affordable housing for those only able to pay below-market rents (typically residents making below 50% of AMI).
Without a vast expansion of the LIHTC program, local governments need a predictable, stable source of additional revenue dedicated solely to building (or acquiring) and operating permanent subsidized affordable housing. Unfortunately, North Carolina law severely limits funding options for local governments interested in building and operating permanent subsidized affordable housing. Here is an interesting article discussing a range of funding options that could fund permanent subsidized affordable housing. If the NC General Assembly continues to pay financial incentives for companies to locate here, it should also consider helping cities build and operate more affordable housing through a predictable budget allocations program or by authorizing more local revenue options tied to the economic activity induced by those incentive programs.
2. In 2016, the City of Raleigh established a goal to create or preserve 570 affordable housing units per year for 10 years, with a grand total of 5,700 units by 2026. Since FY15-16, the City has added or preserved 3,028 units.
3. The City is projected to spend the following amounts on housing affordability initiatives and programs over the next 5 years:
4. For fiscal year 22-23, the City is focusing on the following priorities:
Here are a few additional spending highlights from the work session relating to the City’s ongoing efforts to address housing affordability:
Funds from the 2020 Affordable Housing Bond are largely being targeted toward the planned Wake Bus Rapid Transit (“BRT”) corridors as part of the City’s Equitable Development Around Transit framework to ensure that current residents in the BRT corridors are not priced out and that other low-income residents can afford to move closer to transit. To work toward this goal, the City has carved out several funding buckets:
Transit-Oriented Site Acquisition ($16 million) to acquire sites near transit to develop new and preserve existing affordable rental housing.
Rental Gap Financing ($24 million) to fund affordable rental developments within 1⁄2 mile of the BRT lines and other frequently serviced bus routes.
Home Rehabilitation ($6 million) to rehabilitate homes owned and occupied by low-income households within transit corridors to help mitigate displacement and facilitate aging in place.
Homebuyer Assistance ($6 million) to help first-time homebuyers purchase homes in transit corridors.
The City has committed $4 million in Transit-Oriented Site Acquisition bond funds to seed the Wake Affordable Housing Preservation Fund. The Preservation Fund is a revolving loan fund, made up of public and private dollars, that will provide developers with loans to preserve existing affordable housing. The City’s funds will be targeted within 1⁄2-mile radius of the BRT corridors and other frequently serviced bus routes.
Beyond spending, the City is working to enhance the permitting process for affordable housing projects. Earlier this year, Council directed City staff to develop an accelerated permitting process for affordable housing projects. In response, staff developed an Affordable Housing Advocacy Team to expedite the permitting process. Here are the elements of the program:
These are the elements and benefits of the program for “private” affordable housing projects:
There are several affordable housing projects that are working through the pilot Affordable Housing Projects Advocacy Team program:
The work session also included a discussion about single-family homes being purchased by large institutional investors and entire neighborhoods being built for rent by institutional investors. Here is some of the information staff presented on the topic:
The other topic that Council asked about was the status of Naturally Occurring Affordable Housing (“NOAH”) in Raleigh. Click this link for information about how the HOME rent limits noted below are defined and established by HUD:
One of the points staff made about the slide below was that the “losses” of NOAH were not necessarily the physical replacement of an existing structure. Much of the “loss” related to purely economics because rents increased across the City, so some property owners may have made modest repairs/upgrades to their properties and simply raised rents to the point they are no longer considered “affordable.”
