Tuesday, April 10, 2018

A Fair Housing Month Reflection.

On April 11, 1967 I landed by ship in Vietnam; a year later on the same day, 50 years ago, the 1968 Fair Housing Bill was signed into law.

Open housing wasn't an issue on the ship or in the barracks I occupied in Vietnam for 18 months, but it had been an issue in Detroit and in the 2,000+ public housing project [Herman Gardens] where I grew up. 

And even before then, during WW II, my parents lived in a whites only public housing project hastily constructed at Norwayne, near the Willow Run plant where my mom worked helping to build bombers for the war effort. [Norwayne is now on Historic Register, but I didn't see any reference to the segregated nature of project in the nomination].

I had long remembered the name of what I thought was the first black family that had moved into "the Gardens" in the late 1950's, but I recently discovered that integration had grudgingly begun earlier in some Detroit public housing projects, perhaps before even the May 1954/and May 1955 Brown vs. Board of Education Supreme Court decisions. [Website HERE for example says that the members of the singing group the Spinners lived in Herman Gardens in 1954].

I recently ran across a Detroit Housing Commission letter HERE from November of1955 that advised the Police Commissioner that two Negro families with children and headed by veterans were moving into "the Gardens".  Reading it made me want to cry, and I don't cry easily. Take a look; the "profiles" of the two families being admitted are on page 2.

During Fair Housing Month and on April 11th I will be thinking about how oblivious I was a as a kid to the segregated nature of the housing I lived in and the families who were denied housing admission to it and other public housing projects simply because of the color of their skin.  

Originally created and posted on the Oregon Housing Blog

Thursday, April 5, 2018

Oregon Rent Increase Proposed Limit PDX Example: Tenants With High Income Growth Save as Much Tenants with Limited Income Growth and Could Crowd Out Lower Income Tenants.

I constructed two tables that attempts to show what the impact of a 5% rent increase limit would be for a 2 BR Portland Metro 60% MFI LIHTC unit from FY 2015-FY 2019.  

  • For 2015 I used a starting 2015 income that was 10% less than maximum allowed ($3,000 monthly vs $3,300). That is because not all tenants are at the maximum income allowed. 
  • For years 2015-2018 I used the actual income and rent limits.
  • In 2019 I assumed a 7% growth in income and max rent which I believe is supported by changes in the ACS data already available and used by HUD as part of their income calculations. 

The first table shows the impact on a household whose income grows by 3% a year. 
The second table shows the impact on a household whose income grows by 10% a year. 

  1. Both households save a cumulative total of $1,237 because of the 5% rent increase limitation, with all of the savings coming in 2018 and 2019. 
  2. In the case of the household with 3% income growth, their share of income for rent reduces very slightly from 33% to 32.96%
  3. In the case of the household with 10% annual income growth their share of income for rent reduces much more substantially from 33% to 25.34%
  4. In 2017, 2018, and 2019 the household with the 10% income growth has income ABOVE the maximum LIHTC level used for admission. This is entirely permitted for a 100% LIHTC project and below the 140% of max permitted in a partially assisted LIHTC project; my understanding is the MOST projects have 100% LIHTC. 
  5.  If families with significant income growth get the same dollar rent reduction in rents as families with low income growth and also reduce their rent burdens substantially it seems likely that they would stay in their units longer. This could mean that over time more over income families would occupy their units longer thus reducing the availability of units for [lower income] families who are under the LIHTC income limits. 

Feedback encouraged; you can DM me at Twitter @oregonhousing

Originally created and posted on the Oregon Housing Blog

Monday, April 2, 2018

New OHCS Proposed Annual 5% Rent Increase Limit Raises a Large Number of Questions/Issues.

For the first time OHCS is proposing a rent increase limit of 5% annually for tenants in projects that OHCS finances, including LIHTC projects. Owners can appeal for increases beyond that level, according to the proposal scheduled to be considered by the Oregon Housing Stability Council at their Friday April 6th meeting. The 3 page proposal from the meeting packet is HERE and embedded below. 

The proposal raises a large number of impact, transparency, and process questions and issues, including these:
  1. When will the new rule go into effect? Since the effective date for the HUD FY 2018 income limits was April 1, 2018 can we assume the proposed rule does not impact rents that do not exceed the allowable maximums that result from those new income limits?  IF the rent increase restrictions apply to projects 45 days after April 1st-or May 15th/16th, does that provide owners enough time to understand and generate a complete package of information necessary to request a rent increase? 
  2. IF an owner wants to adopt up to a 5% increase, AND if that rent is within the maximum rent permitted by the relevant current fiscal year HUD income limits, does a rent increase of 5% or less require any submission/notice to OHCS?  
  3. If allowable rents are restricted at a specific project, will income restrictions match the restricted rents for new tenants (as well as existing tenants)?  If not then new tenants at maximum incomes could pay less than 30% of income at admission. 
  4. Will the rule require administrative rule making and an opportunity for public comment?
  5. What are the planned public disclosure provisions for requests, processing times, and approvals?  Should performance measures be adopted to track this activity?
  6. Which specific OHCS programs are subject to this rule?
  7. How many total projects and units are subject to the rule? (OHCS table HERE shows 28 pages of just LIHTC projects, at conservative count of 40 per page, that would be in excess of 1,000 projects?). 
  8. Does OHCS have the staff capacity and the skills to handle rent increase requests every year from all of the projects subject to this rule? Will an increase in admin fee be required to pay for the extra costs of rent reviews? 
  9. Do owners have the staff capacity and the skills to generate budget based rent requests annually?
  10. Will a new 5% annual rent increase limit decrease the value of tax credits to investors and thus increase the need for additional public gap financing?
  11. What are the standards/metrics that will be used to make rent increase determinations? For example, what updated market data will be use to determine comparable rents?, what is a reasonable reserve for replacement level, and how will capital needs be determined? What specific exhibits will be required to submit a rent increase request? 
  12. Are their new or existing mechanisms to insure that increased project income from increases in median income levels stay with the project to benefit the tenants?
  13. How will the public, and existing or prospective tenants know the maximum rent they can be charged at an individual project? What rent limit will be used for prospective tenants or existing tenants who want to move into a larger bedroom sized unit/ the same bedroom size but in a different floor or building?
  14. 100% LIHTC projects-Over income tenants and rent equity issues: I assume that the vast majority of LIHTC projects have 100% LIHTC assisted units. After the first year annual recertification with third party documents my understanding is that there is no effective restriction on the income of these tenants (even if they self certify and disclose higher incomes). 
  • Does imposing a 5% annual cap increase the likelihood that over income tenants will continue to occupy (for years) units intended for lower income families? [Staying in a unit with a annual rent increase limit would be more seemingly more attractive than competing NON LIHTC units without annual rent increase restrictions]. 
  • IF the income of these post year 1 tenants increases more than 5% [or the approved rent increase %], the share of their income for rent will decline, and perhaps below 30% . In contrast, a low income voucher holder paying 30% of their income for rent could end up paying a greater percentage of income for rent. 
  • For 100% LIHTC projects how will OHCS measure rent burdens as part of the evaluation process for rent increase requests? 
  • With new income averaging rules will there be any effective limit on future incomes for long term LIHTC residents in 100% LIHTC projects?  

Originally created and posted on the Oregon Housing Blog 

Friday, March 30, 2018

Increased Income Limits from HUD Could Increase Feasibility of Portland Inclusionary Housing.

One beneficiary of increased HUD income limits could be the developers/owners of projects participating in the Portland inclusionary housing programs. 

Below is a table that shows the increase in the increase in max rent levels that would be permitted for units with income restriction at 80% of MFI for the Portland metro area. 

Max rents possible increase by $94-$134 depending on bedroom counts.  For this post I am focusing on a 2 BR unit. The table shows that for 2 BR units:
  1. The maximum allowable rent (including utility allowance) would increase by $121 from $1,345 to $1,465. 
  2. Assuming this is NOT higher than the street rent for the project this would mean that a developer could realize additional income of $1,452 per year for a 2BR unit reserved for a tenant with income below 80% MFI.  Note that this requires NO additional effort or investment from the developer/owner.  
  3. Capitalized at 6% an increase of income of $1,452 per year would mean the value of the unit increased by $24,200.  So if 20 units were reserved at 80% MFI the value of those 20 units increased by $484,000 just because of the change in HUD income limits. 
  4. In addition, the pool of eligible renters for the unit is expanded. For a 3 person family at 80% of MFI (the occupancy standard for a 2 BR unit) the eligible income increased by more than $4,800 (unrounded, from $53,784 to $58,608). 
  5. NOTE: I expect HUD income limits for the Portland metro will continue to increase NEXT year, so the max rents and increase in values for 80% MFI units will NOT be limited to just this year. 

Created and originally posted on the Oregon Housing Blog.

HUD FY 2018 Median Family Incomes Out, Portland Metro Median Family Income UP $6,700/ 9%; Biggest % Increases in 3 Counties Outside of Portland Metro.

This is the first of a series of posts related to the HUD publication of FY 2018 income limits on March 31st (6 months after the start of the fiscal year, but whose counting?). 

These income limits are the base used to establish eligibility at admission, and in some cases, maximum rent levels for a number of HUD and non HUD housing programs, including the LIHTC, single family and multifamily bond programs, and local inclusionary housing programs. 

In subsequent posts/tweets I will highlight specific program impacts, including changes in maximum rents. 

As I anticipated in prior tweets, the growth in median family incomes is substantial for the Portland metro area; the Portland HUD median family income grew by $6,700 /9.0% from $74,700 to $81,400. 

The statewide HUD median family income also grew a hefty $5,300/8.2% to $69,900.

But the HIGHEST % growth occurred in Josephine at 15.3% and Marion and Polk at 15.2%.

I have prepared a PDF file HERE and embedded below which shows the median family income changes for Oregon counties. Note that not all counties saw increases, Corvallis and Douglas both saw decreases.  

To view the specific calculations for an individual area, you can go to the HUD web page HERE and use the pull downs to find the county or metro area of interest. 

Originally created and posted on the Oregon Housing Blog.