Affordable Housing:
What are other communities doing?
November 8, 2005
Prepared by the Orcas Research Group
We are not alone in addressing the problem of affordable
housing for working families. Some communities recognized the problem over
twenty years ago and Vermont in
particular has taken a comprehensive approach and has made the most
headway. Most communities have taken
small steps in addressing this overwhelming problem and whereas their
individual projects have been successful they have not been successful in
solving the overall problem. San
Juan County can
count itself among these communities.
Establishing a Housing Bank places us on the right track and to date has
been our only comprehensive approach.
Nearly every community has unique
needs and limited means to meet these needs.
At least three approaches have emerged as successful.
Community Land Trusts
reduce the cost of a home to the homeowner by retaining title to the land in a
non-profit organization. Resale of the
homes is restricted to assure permanent affordability. There are approximately 200 Community Land
Trusts in the United States
providing homes to meet local needs.
Sweat Equity
Approaches like Habitat for Humanity emphasize financial responsibility and
use of community volunteers to build homes for low and very low income
families. Habitat requires homeowners to
spend 500 hours working on the project in a capacity appropriate to their
skills and ability. Habitat recently
announced that they have completed 200,000 homes worldwide.
Workforce Housing
is a relatively new focus on providing housing for working families. Many communities across the United
States have realized that it is important
for workers, especially those providing public services to live within the
community.
How do they do it? Their programs rely primarily on local
support through a variety of donations, grants, taxes, use of public land and
constructive legislation. All the states except
thirteen charge a real estate transfer tax but only a few earmark these funds
for affordable housing. According
to the Fannie Mae Foundation, twelve of the thirty seven state-level housing
trust funds are funded by real estate transfer taxes, and most of the large
funds (over $10 million in revenues) get some of their income from this
source. Four
states use funds generated from a sales tax.
Others use receipts from the general fund.
The
following states use real estate excise taxes as part of their affordable
housing programs: Colorado,
Florida, Hawaii,
Illinois, Maine,
Maryland, Nebraska,
Nevada, New
Jersey, South Carolina,
and Vermont.
Several
noteworthy examples of how other communities are working on the problem are
given below:
Vermont -- Housing and
Conservation Trust
Vermont has
one of the most progressive programs in the country for bringing housing and
land conservation together. Bringing
together housing and conservation in 1987, it succeeded in creating a public
funding source for both objectives. It
has conserved more than 333,000 acres of land including 400 parcels for
agricultural use and created over 6,600 units of perpetually affordable
housing. One principal factor was the
arrival of the Freeman Foundation. In five years from 1994 through 1998, the
Foundation poured $36 million into land conservation and historic preservation
efforts in Vermont. Last year, over 4,000 donors contributed
$880,000 in unrestricted funds. They are
also supported by between 35% and 40% of the 1.25% property transfer tax which
has provided $13M per year for the last couple of years.
There are also a number of taxes designed to limit
speculation including a capital gains tax of 3.6% to 9.5% on property not used
as a primary residence, a withholding tax to assure that out-of-state sellers
pay the capital gains tax, a land gains tax of 5% up to 80% (if the property is
held for less than four months) imposed on sale of property owned less than 6
years, and various other taxes levied to control the type and amount of
development.
The Upper Valley Housing Coalition, established in 2001, is
a good example of the new emphasis on workforce housing. This is an organization of 80 public,
non-profit and private organizations working in the home financing field,
individuals seeking housing, and employers citing the lack of housing as a
threat to their ability to compete in the marketplace as it is driving up costs
associated with recruitment and retention.
It has been a powerful force in assessing need, lobbying for favorable
legislation and raising private funds for workforce housing.
Colorado – Aspen,
Boulder
Aspen spawned an
environmental movement that led to a cap on the number of homes built each
year. As a component of that growth-management law, the county commissioners
also required a percentage of new developments be sold at an affordable rate.
Now 60 percent of any new development must be affordable or the developer must
pay a mitigation fee. Second, in the 1990s, the voters passed a 1% real estate
transfer tax to go toward buying land or homes. Third, residents passed a 0.45%
sales tax that goes to subsidized day care and housing.
To guarantee that true Aspenites
got the affordable housing, the housing authority board also created a priority
system. Both the rental units and houses in the homeownership programs are
awarded by lottery. Those working for four years or more in Aspen
have a much higher chance in the homeownership lottery than new residents. A
person with more than eight years working in town has an even higher priority.
Someone working more than 20 years has the best chance of buying a house
through the lottery. Public-safety
employees reach the highest priority level after just one year in the
community. Today Aspen has about
1,800 affordable units side by side with about 3,000 fair-market homes.
Boulder is
another Colorado town that has
experienced rapid growth, but which has been addressing affordable housing for
a relatively long time.
Thistle Community Housing was
formed in 1985 by the Boulder Housing Authority as a 501 (c)(3)
private, non-profit, charitable organization called Boulder's Best, renamed in 1988.
Since that time, Thistle has grown from one 19 -unit apartment complex
for disabled residents to a total of 639 homes. 566 of these homes are
permanently affordable rentals and 73 are community land trust homeownership
homes. All Thistle housing is permanently affordable, requiring little
additional subsidy over the lifetime of each home. Thistle
pays for the housing it creates with a combination of state, local and private
grants and by taking advantage of the low-interest bond market.
The Flatirons Habitat for Humanity affiliate was founded in
July of 1993 and serves the
Boulder
and Broomfield region. They have
built more than 37 homes in partnership with local families in need of decent
and affordable housing and have recently completed eight of fourteen homes in
their latest project. They plan to begin building nine additional homes in 2006
at a site in north Boulder.
The Boulder Affordable Housing Alliance completed fourteen
permanently affordable homes in 1997, but seems to be inactive since then.
Florida
Florida makes
the most extensive use of real estate excise taxes for affordable housing of
any state. Florida
was having difficulty implementing affordable housing programs at the local
level until an organization called 1000 Friends of Florida stimulated the
development of a coalition at the state level in 1991. The coalition included the Florida Home
Builders Association, Florida Association of Realtors, Florida Association of
Counties, Florida League of Cities, Florida Legal Services, Department of
Community Affairs, Florida
Housing Finance Corporation, Florida Impact, Florida Catholic Conference, and
the Florida Housing Coalition. Their bill became the William E. Sadowski Act of 1992. It raised the state's real
estate transfer tax (called the documentary stamp tax) by a dime, from 60 to 70
cents per $100. That increase was directed 30 percent to the state
housing finance corporation, and 70 percent to be divided among the housing
trust funds of 67 counties and 48 cities (the ones eligible for federal
Community Development Block Grants). In 1995 another 10 cents per $100 of
the revenue stream would be re-directed to the housing programs.
The bill was successful because it spelled out a very
specific program – the State Housing Initiative Program – that explained
exactly how the money would be used. Each member of the coalition got
some benefits and made some compromises in crafting the program's guidelines.
For example, 65 percent of the money must go to homeownership programs – this
was a compromise between the Realtors' goal of 100 percent and the low-income
advocates' goal of no more than 50 percent. The home builders got a guarantee
that 75 percent of the money would go to construction-related activities, and that
participating local governments would expedite the permitting process for
affordable housing. The low-income advocates got a requirement that
at least 30 percent of the money would go to housing for very low-income people
(under 50 percent of median income) and another 30 percent to low-income (under
80 percent of median), with the remaining available for projects for people up
through moderate and middle income (under 120 percent of median).
No exemptions to the tax at all were included – The prospect
of negotiating them was far too complicated, and would've become a real “sticky
wicket.” So the coalition steered clear.
Since then, 1000 Friends have implemented a variety of programs
supported by both private and public sources.
Massachusetts – Nantucket, Martha’s Vineyard and Cape
Cod
At one point, Nantucket was the
whaling capital of the world and the whole region depended on the fishing
industry into the 20th century.
When fishing declined, the destiny of the region diverged due to the
unique attributes of each. The isolation
of Nantucket (30 miles from the Cape)
delayed development until a real estate boom in the 1960s brought the island
out of recession. There followed a very
rapid build out with little concern about zoning or affordable housing. Today, Nantucket
affordable housing projects are playing a desperate game of catch-up. With little land available, these projects
concentrate primarily on donated land or on land owned by the state. A fledgling Habitat for Humanity project has
built one home on leased land and a few “surplus” homes have been
recycled. A project to provide rental
housing for teachers has constructed 22 units on school land, far short of the
56 teachers identified as “in urgent need.”
Overall, Nantucket has waited until too late to
implement solutions.
Martha’s Vineyard is in even worse
shape. Servicemen stationed at the air
base on the island during WWII brought back stories of the beauty of the island
and its popularity increased rapidly. Closer
to the Cape than Nantucket and
near northeast population centers contributed to the very rapid growth of the
island. Now, the island workforce is
largely composed of workers who commute to the island via the ferries and air
transport. The island economy depends
heavily on tourism including a heavy influx of day trippers during the summer
that swells to 100,000 or more. Like Nantucket,
Habitat for Humanity has a modest presence that has produced a few houses over
the past two years, but falls far short of the need. An Island Affordable Housing Fund has been
established, but has only succeeded so far in salvaging four houses that would
have otherwise been demolished. A new
project to build 10 houses has been started.
A few affordable rental programs have also been started. Otherwise, the story is the same as for Nantucket
– too little too late.
For Cape Cod, there is still
hope. The
Cape Cod Times featured a penetrating series of reports in 2000, “Crisis at our
Doorstep,” which helped to educate the public on the issues. The 15 towns in the area are essentially
built-out and prices have increased by 19% per year since 2000. Like our own community, young families can no
longer afford to live there and its year-round population of people aged 20 to
34 dropped 22% since 1990.
There is now a
dedicated effort to manage growth. The
Community Preservation Act (CPA), enacted in 2000, provides funding for land
protection, affordable housing and historic preservation projects. The CPA has
two financing components: it enables towns to levy a property tax surcharge of
up to 3%, in addition to imposing a $20 statewide deed recording fee, which
raises approximately $26 million annually. The recording fee is used to match
funds raised by communities through the local property tax surcharge.
Several nonprofit organizations and for-profit developers
are using funds made available through this act to close the affordability gap.
According to the Cape Cod Commission, a combination of state, federal and local
funding made over 600 affordable housing units available in 2004 and more are
under construction.
Cape Cod, Massachusetts,
has been a battleground over real estate transfer taxing authority. The fight
began in November 1996, when 80 percent of all registered voters in Barnstable
County turned out to pass a
home-rule petition requesting from the legislature the authority to levy a real
estate transfer tax. Proceeds were to be used to establish a land bank which
would fund open space acquisition. The measure won with 55 percent of the vote
and special enabling legislation was approved that allowed 15 Cape
Cod communities to impose a 1 percent tax on the sales of homes. The tax was to
be paid by the seller. The legislature then overrode a veto by the governor and
sent the issue back to Cape residents for a second vote.
Faced this time around with well-organized and well-financed opposition from
the state realtors association, the measure was defeated. Nantucket,
with a 2 percent tax on transfers, and Martha's Vineyard
are currently the only communities in the state that have been given the
authority for such a program.
Rhode Island - Block
Island
While conservation efforts have been relatively successful
on Block Island with over 40% of the land area preserved largely due to the
only real estate excise tax (3%) in the state of Rhode Island, affordable
housing progress has been contentious and has had limited success. (We note that to protect middle-income,
first-time homeowners, the first $75,000 of the purchase is
exempted from the real estate excise tax.)
The 1991 State Housing Act requires that 10% of housing units be
affordable. There has been some
quibbling over whether the act intended this to apply to all housing units
(approx 1600) or only year round occupied housing units (approx 470). To date, 46 units have been made
available. There are also issues of
whether or not these units can be used for seasonal employees. The New Shoreham Housing Trust Fund Act of
2002 implemented a Housing Trust that is supported by “monies from the town
treasury, room or house rental taxes or fees, contributions, loans, grants,
gifts, bequests.” An attempt to include
a property transfer tax for housing was defeated in the state. The primary income to the Housing Trust is a
tax levied on summer rental of houses of up to 1%. Revenues amount to approximately $75K per
year. The Housing Trust has since
encountered difficulty collecting the tax.
Wyoming – Jackson
Hole
In the mid to late 80’s, Jackson’s
popularity began to increase. It was frequently identified as a premier resort
destination with tremendous opportunities for 2nd and 3rd homeowners. As the
gateway to two internationally renowned parks, and surrounded by federal land,
only 3 percent of the land in Teton County
is available for private development. By 2002, the imbalance of supply and
demand drove land prices up by 780%. In 1986, the median price of a home was
within reach of the median income. By 1987, land prices in Teton
County began to rise at a rate ten
times faster than salaries were increasing. In the period between 1986 and
2002, wages rose approximately 6% each year while home prices increased 14%
annually. Today, home prices are nearly three times what a working family can
afford.
In 1990, the Jackson Hole Community Housing Trust was formed
by a small group of local people who realized that economic changes in the
valley were making it impossible for working families to buy a home. The Housing Trust has made 84 permanently
affordable homes available since 1995 for low, moderate and middle income
families.
The Teton County Housing Authority was created to provide
housing opportunities to people employed in Teton
County who make less than 120% of
the median income. Homes are deed-restricted for a 20 or 30 year period for each
owner and remain restricted for that period to income/asset qualified and
county - employed persons. The primary source of support for the Housing
Authority is a sales tax increase enacted in 2001 providing over $9M per year.
Habitat for Humanity of the Greater Teton Area has built 8
homes that are sold at cost with a no-interest loan to low-income families.
Kitsap County
Consolidated Housing Authority
One of the more noteworthy county efforts in Washington
State is Kitsap Counties
Consolidated Housing Authority. Kitsap’s program focuses on mutual self-help and
counseling. It is primarily funded
through USDA and is similar to the Homes for Islander’s group here in SJC. This program allows income eligible
applicants the opportunity to own their own home by participating in groups of
8 to 12 to build each others homes with lots of help and training from
KCCHA. Generally they anticipate 10 to
12 months construction time. Each week each Building Group Member household is
responsible for 30 hours of productive labor, but they can use volunteers to
help with some of those hours. Mortgage (principal and interest) payments are
based on income, not the current market interest rate, and therefore are
generally more affordable for families and individuals with income at or below
80% of the county median income as determined by HUD. Homeowners may sell their new homes any time
after completion, but must pay back the subsidy. The longer they own the home, the less subsidy they have to pay back. They must then wait three years before
applying again. The family cannot have
owned real property in the past three years or own a mobile home. Over 700
homes have been built in Kitsap and neighboring counties since 1973. The primary disadvantage of their program is
that homes do not remain affordable and a continuing source of support is
required to replace homes that are eventually sold at market prices.
This report is prepared by the Orcas Research Group, November 8, 2005. Comments and constructive criticism are welcomed
at org@rockisland.com.