GRITtv: A Vision for Social Housing

Time did not permit me to elaborate Housing First!'s vision of housing policy. Below is a background paper illuminating that vision for New York State at a time of massive unemployment and severe financial distress. For further information, contact David Muchnick at housingfirst@aol.com

BRIEFING PAPER FROM HOUSING FIRST! (c) Housing First!, August 2009
THE ADDITION OF $500 MILLION IN STATE FUNDING FOR AFFORDABLE HOUSING

At a time of protracted unemployment and fiscal duress, New York State faces the daunting challenge of finding a strategy for maximizing job creation and economic growth while minimizing immediate impacts on the State budget. To this end, and while simultaneously addressing the worsening needs of the state’s residents and communities for affordable residential infrastructure, State capital programs for affordable and supportive housing are now more important than ever.

The addition of $500 million in State funding for affordable and supportive housing in FY2010-2011 will be the cost-effective keystone of an economic growth strategy that will create thousands of jobs, leverage billions of dollars in new private investment, and help thousands of New Yorkers find apartments and homes they can afford.

THE $500 MILLION INITIATIVE in FY2010-2011

Advocates from across the state have reached consensus on a $500 million addition to the State budget for affordable and supportive housing in FY2010-2011. The consensus responds to a diversity of local and regional needs from renovation and preservation of vacant or occupied small homes to the new production of multi-family apartment buildings.

The $500 million aggregate includes realistic and necessary minima for existing programs. They reflect continuing unmet annual demand for these program funds. They would fund projects that are well within the capacity of the State agencies and affordable housing community. And, they will enable the agencies and the legislature to make program adjustments if necessary (such as increasing per-unit/per-project caps).

As presented in Table 1, the consensus proposes:

■ $391 million for the state’s five primary capital programs, Housing Trust Fund ($171), Affordable Housing Corporation ($70), Homes for Working Families ($30), Homeless Housing Assistance Program ($70), and Mitchell-Lama Preservation & All Affordable Housing ($50)
■ $99 million for targeted programs including Public Housing Modernization ($30), HOPE/RESTORE ($10), Rural Area Revitalization ($12), Main Street ($14.5), Access to Home ($14.5), Infrastructure Development ($10), and, Urban Initiatives ($8)
■ $10 million for non-capital programs that are necessary to make the capital and targeted programs work in many parts of the state, namely Neighborhood and Rural Preservation programs ($6) and Rural Rental Assistance ($4)

HOUSING PRODUCTION & PRESERVATION

Assuming the additional $500 million were used in accordance with recent practices at the State housing agencies, we estimate that the new funding could:

■ produce and preserve nearly 16,000 units of affordable and supportive housing, including

■ 9,300 new and/or rehabilitated multi-family units done by HTF, AHC, HWF, HHAP, and HFA (Mitchell Lama preservation or All Affordable) – overall, with an average capital subsidy of $38,000 per unit, an average cost per unit of $226,500, and a total development cost of $2.1 billion
■ 625 new and/or rehabilitated single-family houses done by AHC – with an average capital subsidy of $28,000 per unit, an average cost per unit of $240,000, and a total development cost of $150 million
■ 5,900 small homes that are renovated, repaired, and/or made accessible by AHC, RESTORE, and Access to Home – with an average capital subsidy of $7,100 per unit, an average cost per unit of $11,000, and a total development cost of $66 million

Distinguishing among multi-family production, single-family production, and home improvements and renovations is necessary to estimate the economic impacts of the initiative. (The estimates are described below and specified in Table 2. Units were not estimated for Public Housing Modernization, Main Street, Urban Initiatives, and Rural Area Revitalization.)

ECONOMIC STIMULUS

Using the methodology described below, we estimate that production and preservation of these 16,000 units would:

CAPITAL INVESTMENT

■ launch $2.4 billion in total development
■ leverage $1.9 billion from other sources (Table 2)

JOB CREATION

■ create 16,800 local jobs in construction and supporting businesses during the construction period (including 8,700 construction jobs) (Table 3)
■ sustain nearly 3,900 local jobs annually, or 151,000 local jobs over the term of the financing, due to consumer spending by residents of the units (Tables 4 & 5)
■ yield a cumulative impact from construction plus residency of 168,000 local jobs (Table 6)

WAGES & BUSINESS INCOME

■ generate upwards of $877 million in local wages and business income during construction
■ sustain $226 million in wages and income yearly, or $8.8 billion over term of the financing, due to consumer spending by resident of the units
■ yield a cumulative impact of $9.7 billion in wages and business income from construction through residency

STATE & LOCAL REVENUES

■ produce $79 million in taxes and other revenue for the State and $92 million for local governments during the construction period
■ sustain nearly $34 million in taxes and other revenue yearly for State, or $1.3 billion over term of the financing, from residents of the units
■ sustain $39 million in taxes and other revenue yearly for local governments, or $1.5 billion over term of the financing, from residents of the units
■ have a cumulative yield of nearly $1.6 billion in taxes and other revenue for local governments from construction through residency
■ have a cumulative yield of nearly $1.4 billion in taxes and other revenue for the State from construction through residency

COST-EFFECTIVE & FISCALLY-RESPONSIBLE

We ask that decision-makers, budget-makers, and other readers suspend the inclination to dismiss the $500 million initiative automatically in light of the State’s severe fiscal distress.

For, the initiative does not immediately cost the State $500 million. It does not depend on the state’s receipts of taxes and other revenues. And, it may have a minimal-to-no adverse impact the State’s cash-flow needs. Because of the benefits described above, we ask others to join us in an open-minded evaluation of the net real cost of the initiative.

Because the $500 million will be bonded, the immediate gross annual cost of the initiative would be the debt service on the bond. For the sake of simplicity, assuming one self-amortizing bond could be issued for $500 million at 5.35% for thirty years, the immediate, annual cost to the budget – at this time of distress – would be debt service of about $33.5 million. Over thirty years, the full-term cost of the initiative could reach $1.0 billion.

Against these immediate and full-term costs, there are potentially substantial revenues and cost-savings that could offset in part, and perhaps in whole, the debt service costs. These include:

■ the estimated $79 million in taxes and other revenue the State could receive during the construction period
■ the estimated $34 million in taxes and other revenue the State could receive yearly from residents of the units
■ the estimated cumulative yield of nearly $1.4 billion in taxes and other revenue the State could receive from construction through residency
■ the State’s share of the $16,300 per-unit, per-year cost-savings on services for homeless people who obtain supportive housing (including Medicaid, crisis, emergency, substance abuse and others) – for every 156 of the 1,560 HHAP units in the development portfolio which go to homeless people, the cost-savings could be $2.54 million a year; if all 1,560 HHAP units went to the homeless, cost-savings could be an estimated $25.4 million a year
■ the State’s share of the approximately $100,000 per-person, per-year cost-savings on nursing home expenses for senior citizens and persons with a disability who are able to leave, or avoid, nursing home placements and return to, or remain in, their homes due to renovations and adaptations through Access to Home, RESTORE, and other renovation efforts – for every 100 of the 3,750 Access to Home and RESTORE units in the development portfolio which serve these people, cost-savings could be an estimated $10 million a year

In sum, these (and other) potential revenues and cost-savings suggest the possibility that the bond may more than pay for itself.

Even without any offsets, the $500 million initiative is a highly cost-effective job creator.
The costs per job-created would be:

■ $5,980 per job for the 16,800 jobs created during the year of construction at a cost of $33.5 million in debt service
■ $59,500 per job for the 16,800 jobs created during the year of construction at a cost of $1 billion in debt service over thirty years
■ $5,950 per job for the 168,000 jobs created and sustained during construction and through residency

By any of these measures, the $500 million initiative compares favorably with job-creation spending on other essential infrastructure and economic development projects.

In conclusion, the Briefing Paper’s estimates demonstrate a more-than-reasonable probability that the bonding pays for itself (and perhaps more) from the revenues and cost-savings the State could receive each year.

Consequently, the proposed addition of $500 million for affordable and supportive housing preservation and development in the State FY2010-2011 budget is fiscally responsible. It should not be dismissed reflexively because of the State’s immediate budget distress. We ask budget- and decision-makers to keep an open mind, to seek their own and other estimates, and to allocate scarce state resources so as to optimize job and housing creation, potential revenues and cost-savings.

No less of an effort should be undertaken given ... the state’s losing 235,900 private sector jobs since 2008 ... the state’s unemployment rate nearing 9% ... unemployed state residents numbering more than 850,000 ... homeless families reaching record numbers .... millions paying more than half their incomes for housing ... and, the still persistent demand for affordable and supportive units.

With these givens, it is incumbent on budget- and decision-makers to find a way to make the additional $500 million the centerpiece of an economic growth strategy to save and create jobs and homes for New Yorkers.

METHODOLOGIES & TABLES 1-6 ARE NOT INCLUDED IN THIS COMMENT.

For additional policy statements from Housing First!, go to http://readme.readmedia.com/hfirst