Playing Matchmaker Between Local Government and Affordable Housing
By: Dean Porter – LinkedIn
Many communities struggle to meet housing needs for low and moderate-income citizens. Tim Klont (pictured above), Assistant Vice President for the Federal Home Loan Bank of Chicago (FHLBC), is committed to changing the status quo.
Tim oversees the distribution of nearly $22 million in grant funds to support affordable housing throughout Illinois and Wisconsin. Tim has a understanding of affordable housing from the local government side, having served as the Neighborhood Reinvestment Specialist for the City of Tempe, Arizona (1999-2003).
I interviewed Tim on the obstacles to affordable housing development, as well as examples of successful local government initiatives and partnerships that help meet community housing needs. Why should you care? Tim’s insights are valuable for local governments desiring to understand and address current and future affordable housing issues in their communities.
(Editor’s Note: My summary of our discussion includes quotes that have been paraphrased in some cases, as well as my own insights in italics.)
Q: Many communities recognize the importance of affordable housing, locally, challenges such as politics and funding can get in the way of meeting local housing needs. Can you speak to some examples of these issues?
A: Local government is very accessible [to the public], which can be a double-edged sword. When I worked for the City of Tempe (Arizona), I would get calls from local neighborhood groups all the time about affordable housing developments. Many homeowners vote – and elected officials pay attention to them. Because elected officials listen to voters, this could have a disparate income on renters who don’t vote; and most affordable subsidized housing is rental housing.
The implication of Tim’s statement is local government officials face a delicate balance between meeting the needs of all residents, versus concerns of those most engaged. Klont also noted that the majority of funding for affordable housing comes from the federal government and very few communities have other dedicated funding sources beyond federal programs.
Q: Communities face challenges in where to locate (site) affordable housing. Can you speak to some of these issues?
A: NIMBY (Not In My Backyard) issues and lack of available land are both key challenges. Each community faces these issues. A couple of things to keep in mind to address this challenge include making sure all affordable housing in a particular community isn’t [concentrated] in the same place. The reason this happens is that usually there are certain areas of a community with less opposition to affordable housing and cheaper land. This contributes to the concentration of affordable market rate and subsidized housing.
Fair housing advocates argue for the citing of affordable housing in areas with more opportunities and higher property values (which, as Tim noted is more difficult). Granted, there are many benefits of citing affordable housing in higher income areas. However, affordable housing built with Low Income Housing Tax Credit investment and other subsidies can help revitalize areas that currently suffer from blight and low quality housing. In many cases a high quality affordable housing development can improve the quality of housing for current residents and help build a positive perception of a neighborhood.
Q: Is their a story that demonstrates the challenges of creating affordable housing.
A: Tim told me about a project located in the Chicago suburban area. The project would provide a home for formerly homeless individuals with mental illness. The project received a grant from the Federal Home Loan Bank of Chicago (FHLBC), which was conditional upon the project receiving an allocation of Low Income Housing Tax Credits (LIHTCs) from the Illinois Housing Development Authority. The tax credit allocation would allow the developer to pool investment capital from investors interested in reducing their tax liability.
Tim stated that in order to build the project the developer needed to get land rezoned. The zoning authority opposed the rezoning, as the project was unpopular with local homeowners. As a result of the zoning denial, the proposed project lost its tax credit allocation (zoning approval is necessary to receive the credits), and then subsequently became ineligible for FHLBC funding. This put the project on hold, but it didn’t ultimately kill the project. The developer decided they liked the site and wanted to build in the community and filed a fair housing discrimination lawsuit. The developers and the Village eventually came to a settlement and the project is currently moving forward.
This situation demonstrates potential legal backlash when communities oppose affordable housing. Fair housing lawsuits are a worst case scenario for communities as well as developers and local residents (since the cost of pursuing a suit spends valuable dollars that could be used to meet affordable housing needs). In some cases, an affordable housing project may not be a good fit for a particular site, but local government officials can avoid legal challenges or backlash by sitting down at the table with developers and advocates to find mutually beneficial ways to meet affordable housing needs.
Q: Can you give some examples of successful local government initiatives promoting affordable housing?
A: The City of Tempe, AZ [Tim’s former employer] is a case study on challenges of creating affordable housing. Tempe is a landlocked city, redevelopment and reinvestment are the only ways to create affordable housing. It’s also a relatively expensive community which makes it difficult to create affordable housing opportunities, due to the cost of acquiring property for development and redevelopment.
Tim mentioned a few city initiatives in Tempe that he worked on to make homeownership more affordable and improve neighborhoods.
Prior my tenure with the City of Tempe, the city had resources for homeownership rehab – but these resources by definition went to existing homeowners [in other words, the only people who could apply for the funds where those who already owned homes and wanted to rehabilitate or repair them]. The funds did not open up homeownership opportunities to new people. We worked to solve this by creating a down payment assistance program. The program provides grants of $5,000 to $10,000 to prospective buyers who are financially ready for homeownership, but do not have enough up front cash to afford a down payment. Funding sources for the program include the Community Development Block Grant (federal housing funds), HOME (federal housing funds), and city discretionary funds.
Tim noted that many communities may be able to support low and moderate income buyers with down payment assistance programs. This program also helped Tempe increase its homeownership rate while meeting the housing needs of low and moderate income residents.
Tim also mentioned a local Community Land Trust (CLT) he worked to start in Tempe as a potential model for supporting affordable homeownership. CLTs typically support affordable homeownership through a dual ownership model – the CLT owns land (which appreciates in value) in perpetuity, and sells homes to buyers. In doing so, CLTs are able to keep homes affordable in the long term.