Mayor on Housing Plan

Posted August 28th, 2014 @ 8:37 AM by

This supplements the handout I reported on yesterday. This is the briefing for the council (only David Ahrens and Anita Weier showed up, Lisa Subeck appeared at the end of the press conference) and the press conference that was held yesterday. (with BK comments)

Council Briefing
The mayor starts out by saying that the initial source of funding is borrowing, but that is not sustainable, so the other two pieces are critical. TIF dollars and Low Income Tax Credits, on the TIF dollars under state law normally what happens is the TIF district is closed out and then the principle government agencies get their share of what had been the increment. There is a provision in state law that says you can keep a district open one more year and use the entire amount anywhere in the city for affordable housing. If you look at some of the TIF districts that will close in the next 5 years, based on present values if you keep them open another year, some would get as little as $400,000 – 500,000 others as much as 4 – 5 million dollars. So this is not going to be the same amount every year, but we can smooth it out so we end up with a program commitment of about $4M a year. The other critical element is Low Income Tax Credits, there have been some impediments over the past decade, particularly since the flooding of 2008 where the state got all these tax credits and Madison really didn’t maximize and there is a couple of things we can do. THis gets into the non-budgetary aspects of the program, we have to spend a good solid 6-7 months, and there will be a resolution on this, establishing two parts, one is finding locations, perhaps as many as a dozen or more throughout the city so developers know that this would be a supportive location for partnership on affordable housing, and it gets us really good locations that will rank high with WHEDA and developers will like and maximizes our ability with WHEDA to get the tax credits. The second component part is what he calls the un-Owl Creek. To use those 4 other standards besides housing, transportation, quality childcare, healthcare and access to schools job training and so on. To make sure that we have that kind of service component at the site means we have non-profit partners, our own commitment to making this stuff work.

Ahrens says the other element in Owl Creek is the segregation, not just geographically, but economic.

Mayor says one of the things they already discussed with WHEDA is that their scoring formula, they give higher ranking to doing developments in low income neighborhoods and there is a contradiction there that if you are working for economic integration, access to everything to higher paying jobs and better transportation, and I think WHEDA understands that.

Ahrens says he just met with a developer yesterday who wants to do a 60% market, 40% affordable and got a very high score because of the mix.

Mayor says that he thinks WHEDA has rectified that after we notified them a year and a half ago after we told them it created a contradiction in goals. The really critical thing here is going to be the preparation, of finding partners, people who will use the tax credits, finding the right sites and then the partners for the 4 other service areas to make sure this works. Matt (the city’s housing guru, no clue what his official title is, but was hired about a year in after Soglin was elected) did just a marvelous job on the housing study and the report was what gave us the capability of triggering this so far.

David Ahrens says it is the best report he has seen from the city so far. Matt Wachter says thank you. Ahrens laughs and says, except it is not for color blind people.

Mayor asks if there are questions or if Jim O’Keefe (Community Development Director – over the CDBG and Office of Community Services Divisions) has anything to add.

O’Keefe wants to make sure the mayor said Low Income Tax Credits not New Market Tax Credits. Section 42. New Market is for commercial development.

Ahrens says the tax credits are highly competitive. He asks if they have $4M from TIF, how many units is that. The mayor says between 150 – 200 per year. The goal is 1,000. 1/3 are permanent supportive housing for individuals and families, 2/3 are affordable at a variety of levels to meet various needs, the definition is at 60% AMI or less.

Weier wants to make sure they are not put in low-income areas. The mayor says they could be, but we don’t want a situation where they only go in existing low income areas.

Mayor asks Natalie Erdman (Community Development Authority Director) to explain the section 8 vouchers.

Erdman says that the CDA administers a large HUD contract for housing choice vouchers where people can use their voucher and pay 30% of the income in rent, and then the difference in the landlords rent and what the tenant can pay comes from a HUD contract. It is a rent subsidy program. They also have the ability to project base the vouchers, so that is another resource that we have with the community, particularly when we are looking at permanent supportive housing for families or households that have experienced homelessness and need really heavy services. Similar to what they are doing at the Rethke property they can project base the vouchers and drive more into the transaction, because the development will get a market rent but the tenant will only pay 30% of their income. So the tenant might be paying no rent or $100 a month but the development with the project with the vouchers will be getting $600 – $1000 depending upon the unit size. They are working on aligning all the resources that the city has through the Community Development Division, our Economic Development Division with TIF, through the CDA with Section 8 to get a bigger and better amount of housing being added to the market place and also to get the services which in some cases are really needed. Not all cases, but in some cases they need the on-site management capability.

Ahrens says he thought they were really tapped out on Section 8 housing, that there are long lists. Erdman says they just had a one month period where they could apply for housing choice vouchers and there were 7400 people who applied, by lottery they picked 3,000 people to come in and get screened to be on the waiting list and they would be available for the next housing choice voucher, but HUD allows them to take from the total allocation of 1800 vouchers, they can project base some of them instead of handing them out to people on the list. The CDA has chosen to do that when they are trying to get more than just an affordable unit, but trying to get services associated with it or hard to find (3-bedroom or 5 bedroom)

Ahrens asks of the 1800 vouchers, what percentage of those. Erdman says there is a limit of 10 or 20% of the vouchers. We’re not near that limit at this time.

Mayor asks who is working on drafting the resolution that they need. O’Keefe says that initially they are going to try to accomplish that through a competitive request for proposals process and that resolution has been approved (holy shit, I wonder if the sponsors knew that was what they were doing, as it was entirely unclear there was this bigger plan – I bet the resolution might have looked differently if they did!) and we are on the verge of being prepared to release that first RFP and they will do that process on an annual basis to get the developments with the amenities that the mayor has described and try to align that as much as possible with the WHEDA tax credit application process so that we are reinforcing one another.

Erdman says additionally they have the office of real estate services working with us where we are targeting certain areas where we have good services – grocery, schools, transportation. They are starting to look at locations where if they could option a site in that area and they are specifically targeting areas for families for permanent supportive housing where there are services near term. She thinks that list can be developed over the longer term for the wider range of things, in the future we could say to nonprofits and developers here are some potential sites.

Ahrens asks about the funds for the Affordable Housing fund, is that just from borrowing? Mayor says that is how they will kick start it. O’Keefe says that they will draw on what remains of the Affordable Housing Trust Fund which is a resource that has been stagnant for a period of time (Cuz they broke it in 2009 with their crazy re-write they jammed through under Mayor Dave) and this is a replacement of that fund with a little more flexibility and assurance that funds will continue to flow into it, unlike the current trust fund (again, way to go Mayor Dave, they used to put $400,000 a year into the fund until your administration killed that too). He says that will be $1.5M in 2015 (I think there is $3M in the fund). Erdman says that then there will be GO borrowing also, to supplement that fund, and some TIF funds.

Ahrens asks if there has ever been an examination of the fee, a per unit fee for market rate homes that could then be reallocated to this kind of fund (that is done through the county and they could do that). O’Keefe says that it is interesting that you ask that because they had the conversation with the city attorney as recently as yesterday about that and alternatives, so we are looking into other possibilities. O’Keefe says they don’t want to do anything that is going to stymy or discourage market rate development. (Sigh . . . really, $10 or $20 per home won’t stymy development, hell, $100 per home wouldn’t do that!) Ahrens says there is a price point where you can probably get in a few $1000 per price point, his bigger question is if that is allowable. Mayor says you have to be careful because you could be moving towards inclusionary zoning (which created 40 units, before Mayor Dave killed that too!) Lots of talking, discussion of impact fees and their discussion with the city attorney where some things were too close to inclusionary zoning, but Erdman says that there were some things that came out of that meeting that they will research to find additional ways to make affordable housing more economic.

Weier asks Erdman if they have a list or are making a list of the areas, Erdman says they don’t have a list they have searched through multiple locations for the second phase of permanent supportive housing and as of yet have not been successful in finding a site. Wachter says that WHEDAs target census tracts just came out 5 days ago so they need to look at where WHEDA wants it. Weier asks for a copy of that map. Can’t hear as media enters the room

Press Conference
Mayor says they will have an unveiling of the capital budget at a subsequent date, but there is one portion of the capital budget that has been the subject of tremendous amount of important discussion in recent years, they recently had a report on the status of affordable housing in Madison prepared by Matt Wachter of their staff and he wanted to highlight something very distinctive and very new for our community in terms of a commitment over 5 years to create hopefully close to 1,000 new units of affordable housing. He wants to give a lot of credit to the city staff for working on this and developing something that he really believes will work. Before he goes into the details, lets just reflect over the past 40 years or so which is the failure of despite having such a mobile society, the failure of having an effective national housing policy, we have seen each subsequent decade go by since the 1980s the number of homeless individuals and families in our cities and towns has heavily increased and the number of cities and towns now addressing these issues needs to grow. There is no question that housing is essential to creating a safe community. There is no question that housing is essential for a healthy economy. There is not question, as we have heard, that housing is first if we are going to make and build neighborhoods which every household, every family that participates in the joys of living in our community. Despite the fact that we have seen significant cut backs in federal housing programs and community development block grant funding, we think we have come up with a mechanism which will work and provide opportunity which he will get into in a moment. The new Affordable Housing Trust Fund (I don’t think he meant to says “trust”) will be funded in part through some general obligation debt, but the new and innovative part of the fund is going to occur with the closing out of TIF districts and will be matched with tax credits and it would be that our hope that with an average of $4M a year, using some of the mechanisms he described and some others they can create 150 – 200 units. Normally at the end of a TIF district is closed at the end of its life and those tax dollars would go the the city, the school district and the county and would now show up on their tax rolls. Under Wisconsin law we can hold a TIF district open another year and use all those monies anywhere in the city for affordable housing. Some of those TIF districts will only have 4-500,000 dollars available, others will have millions, but it will be enough to meet their budget goals of $4M in trying to create close to 200 units per year. The other thing that is critical about the program is that we know for successful households we much address 5 critical areas, housing is first, but there is transportation, quality childcare, healthcare and education, job training, employment component. We are not going to just build more units, but in each instance we will fashion programming to ensure that whoever lives in these units will have support in these other critical areas, this is more than just housing, it is a premise that housing has to come first and then has to be complimented with other services that will give us the social cohesion and kind of neighborhoods and opportunities for families that we so badly want for every Madisonians. There are more technical details that needs to be worked out, but he will answer questions.

Q: The first project is on the east side, Rethke?
A: That is an example of a project already under way and will serve as a model for what they hope to see citywide, they are looking to identify and locate about a dozen sites throughout the city, sites with great trasnportation, access to quality child care, healthcare, jobs and schools and then work with the private sector, like they did with the Rethke project, and turn that into a model for affordable housing. In the meantime, he hopes they will continue to see more and more market housing come on line so they can accomplish two things, to get us two things. A higher vacancy rate, get us closer to 5% and second take pressure off the rental market by increasing supply.

Q: Affordable housing, what does that generally mean? What incomes?
A: We are working in general at 60% or lower of the AMI, they are looking at the median income for Dane County, taking 60% of that and that is the target for folks that would be eligible, once we are there, our goal is that no one would pay more than 30% of their household income for affordable housing. Mayor asks Erdman if she has anything to add. Erdman says that they would like to see a mix of 60% but also get units down as low as 30% AMI or 50% AMI, so they are also looking at increasing those numbers for those families that are very housing challenged. Mayor says they will have other partners, with the VA as they attempt to address the challenges of veterans, with agencies and professionals that work with substance abuse, when we talk about health we are talking about mental health as well, we are talking about being complete in addressing these challenges.

Q: This is ambitious, 200 units a year, right? That is reasonable do you think?
A: Mayor says he is convinced this is what Madison wants, if you look at what the City Council has said and done, if you look at all of the supportive agencies concerned about housing and the questions of equity in our community, he thinks this addresses what may well be the highest priority, of the people in this community. And yes, it is ambitious and it puts a tremendous amount of pressure on city staff and support agencies, it makes demands of others within our community, but if we are serious of taking on the challenges of equity and housing, here is a big part of the solution.

Weier says her concern is that when they target areas it is not areas that they have a high concentration of low-income housing. Mayor says yes, one of the areas of this discussion is that we are going to see the housing development take place throughout the city and break away from the notion that all this type of housing needs to be in existing low income areas, one of our goals is to achieve economic integration, then low income housing needs to be mixed in with middle income housing (ahem, the much maligned inclusionary zoning)

Ahrens says one of the key points here is that this is from poor people, this is for people at 60% AMI, area median income in the county is $60,000, so this is 60% so that is $38,000 so you could have a first or second year teacher in the Madison School District who would qualify for this program, but that person now is really locked out fo the housing market and they are paying 50% of their income on housing, this relieves some of that enormous burden who are working middle class people for which housing has become unaffordable, it is really to break through this malfunction of the housing market.

Q: You see any trouble selling this with the Common Council? This will be part of your capital budget, right?
A: If anything, I am often times reluctant to predict what the city council will do, but in this instance, I will presume, the response will probably be “do more”, I think this will be welcomes and the council may well try to raise the bar.

Q: Do you agree with that David?
A: Depends up what else is in there. These first parts always look great.


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