Biden Admin Memo: RI Can Build 731 Units of Public Housing“It’s time for the Rhode Island political system to build housing for the most low-income Rhode Islanders. That doesn’t mean we should let up on affordable housing. But it does mean we can finally build housing for the poor, too.”
Published on September 20, 2021
By Senator Samuel Bell
For years, advocates for low-income Rhode Islanders have called for more low-income housing to be built in our state. But to the extent that any state investments have been made, they have been to subsidize luxury apartments, workforce housing, and affordable housing. Affordable housing, I believe, does help address the housing crisis, but by nature it is targeted at the lower middle class and working class, not the very poor. Affordable housing is, essentially, price control. Typically, an affordable housing unit has its rent set so that it will be “affordable” to a family making 60% of area median income, with “affordable” meaning that the family pays 30% of their income on housing. For ownership units, typically the price is set to be affordable to a family making 80% of area median income. For most of Rhode Island, 60% of area median income works out to $46,740 and 80% works out to $62,300 for a family of three. Most affordable housing is subsidized by affordable housing developers selling federal LIHTCs (Low Income Housing Tax Credits) to wealthy and corporate interests looking to pay less in federal taxes, typically banks. After sale costs, in today’s market, developers tend to wind up getting about 93 cents for every dollar in tax credits they sell. These programs are capped under federal law, but Rhode Island typically does not hit the cap. For instance, as of 2018, Rhode Island fell into the group of states using only 50%-74% of the cap for LIHTCs through the all-important PAB channel, the same category as Alabama.
Of course, those 60% and 80% of area median income numbers are just for units funded by the federal LIHTC program. In Rhode Island’s state programs, we have typically aimed to help slightly wealthier families. For instance, for the state housing bonds, we set a higher limit of 80% of area median income for rental units and a full 120% of area median income for ownership units. For most of Rhode Island, that 120% number works out to $93,400 for a family of three. In the recently passed budget bill (page 6 of Article 14), we capped rents for homes built by the new housing line item at 80% of area median income for both rental and ownership units.
The housing crisis is real for the lower middle class. Despite their flaws, affordable housing programs do help a lot of Rhode Islanders. But they do very little for the poor. And that’s a problem because poor people exist, poor people are human beings, and they need a place to live just as much as everyone else.
So for many years, advocates have been calling for building more actual low-income housing units. Low-income housing in America works very differently. In a low-income housing unit, residents pay just 30% of their income, no matter how low their income is. To make the math work, the federal government provides ongoing subsidies to cover the rest of the costs. There are three main kinds of truly low-income housing units in America: public housing, Project-Based Rental Assistance, and Section 8 Housing Choice Vouchers. However, we are told, these programs are capped by federal law, and there’s nothing we can do to expand them. So, we are told, all we can do is focus on building affordable housing for the lower middle class, workforce housing for the middle middle class, market rate housing for the upper middle class, and luxury housing for the rich. And hope it trickles down.
The thing is, it turns out that’s not quite true. According to a new memo the Biden Administration put out, Rhode Island can, in fact, build 731 units of public housing.
Known as the Faircloth limit, the limit on the number of public housing units was set in 1998 by the same infamous Clinton-era law that gutted America’s Aid to Families with Dependent Children welfare program. In practice, however, many public housing authorities are still below the limit, largely due to destruction of units, and across Rhode Island, there are 731 units that can be legally built. Because these limits operate on a town by town basis, different communities have different amounts of available public housing to build, but the statewide number is 731.
Once the units are built, they will qualify for ongoing federal subsidies (the national average per unit subsidy is $745/month), bringing new dollars into the state economy. Because of high construction costs and significant ongoing maintenance and operational costs, some additional funding is typically needed to get the units built, but the new federal funding stream will substantially defray the costs. That’s where the state government should step in.
Although there have been concerns about federal rules preventing the use of outside funds, the Biden administration’s memo announced a new program to blast through that excuse. The way it works is that public housing authorities can convert their public housing units into project-based rental assistance units. This program typically comes with a larger and more stable ongoing subsidy, and it removes restrictions on sources of funds. With this approach, public housing authorities can actually use LIHTC funds to cover the gap, allowing the public housing to be built without any state subsidies at all. The downside of this program is that it allows privatization of the units, and it can be associated with worse conditions for tenants as a result. But there’s no need to privatize it at all. The public housing authority can continue to be the landlord, just with the units under project-based rental assistance instead of public housing.
There may be more good news coming for public housing advocates. In the House markup of the proposed Democratic federal budget reconciliation bill, $80 billion of grants will be made available, which housing authorities can use to build new units exempt from the Faircloth limits. This bill hasn’t passed yet, but if it does, Rhode Island public housing authorities should be ready to aggressively pursue these grants to build as many new public housing units as possible. This will be especially important in Providence, where there are only a handful of units available to build without hitting the limit.
With this new memo, the excuses are gone. It’s time for the Rhode Island political system to build housing for the most low-income Rhode Islanders. That doesn’t mean we should let up on affordable housing. But it does mean we can finally build housing for the poor, too.
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