Community Service Society proposes operating subsidies to make rent "truly affordable"

The reason we have to ask "Affordable for whom?" so often is that the main housing subsidy tools in New York and everywhere are structurally designed to help people who make $40,000 a year and up. New rent assistance/operating subsidy tools are the way out of this box. https://t.co/F1EIOXsr9k

— Tom Waters (@slowboring) November 29, 2018

In late November, the Community Service Society (CSS) released a new report, MAKING THE RENT TRULY AFFORDABLE: Why Operating Subsidies Belong in New York City’s Affordable Housing Toolkit, by Nancy Rankin and Oksana Mironova.

The report (in PDF, and at bottom) cites widespread "housing hardships among low-income New Yorkers—like falling behind in the rent, doubling up with other households, and facing threats of eviction—that force families to make difficult trade-offs and can be precursors of homelessness."

The solution, according to CSS, is to refocus the city's affordable housing plan. While Mayor Bill de Blasio's plan has affordable housing one of the signature initiatives of his administration. To date, his Housing New York plan has financed 109,767 units, including 34,482 new units, towards a goal of preserving/building 300,000 affordable units by 2026, only about 20% are targeted to the lowest-income households.

That means those struggling on the open market have little left over for essentials like food, utilities, and transportation.

To reach more households considered (by the federal Department of Housing and Urban Development) "extremely and very low income" (under $46,950 for a family of three), either rent subsidies, such as federal Section 8 vouchers, must be expanded, or a new source of operating subsidies must be found. The public money makes up the gap between what the tenant can pay and the cost of operations and maintenance. (See tomorrow's post for more on that.)

And, according to a survey, most New Yorkers "across income groups favor investing more in rent assistance over more tax breaks for developers or additional homeless shelters." That certainly makes sense, as spending on shelters is notoriously high, and such shelters inevitably offer a stopgap.

The possibility of subsidies

Other than an inadequate pool of federal Section 8 vouchers, and a limited program for some shelter residents, there is no on-going rental assistance program for tenants that also serves as an operating subsidy for landlords, according to the report.

Without a subsidy, deep affordability (targeted to households below 30% of Area Median Income, or AMI) is difficult to achieve, the report states. (Note: only a tiny fraction of affordable units in Atlantic Yards/Pacific Park were to be rented to households with incomes between 30%-40% percent of AMI, but actually some tenants with vouchers or other subsidies now live in the units.)

The report considers operating subsidies "a glaring omission from the city’s housing toolbox." It cites a proposal by Comptroller Scott Stringer (more on that tomorrow) to invest $125 million a year in operating subsidies, plus $375 million a year to build deeply affordable housing, ideally using city-owned land and relying on not-for-profit developers, thus saving money.

The money would come from replacing the existing mortgage recording tax with a real property transfer tax that takes a more progressive approach.

The cost of current practices

The report points to the significant costs of current practices:

Both of these approaches are quite costly. Developer tax breaks are hidden, because they do not appear as a line item in the budget. Yet they cost the city a significant amount in lost tax revenue every year. For example, 421-a, the city’s largest real property tax expenditure program, cost the city $1.4 billion in fiscal year 2018. The spending on shelters has reached $1.8 billion in 2018, and is expected to rise as the city continues to create additional shelters.

It's not clear from the report how to compare, for example, the number of households who could be helped by Stringer's plan with the commensurate savings in spending. In other words, how many families would be helped by the new program, and thus how much spending would be subtracted from the shelter system?

But the report, and survey within it, makes the case that it's far better to prevent the problem than to react after the fact.

Making the Rent Truly Affordable, Community Service Society by Norman Oder on Scribd