Affordable Housing 101 Vermont Housing Conference November 18, 2008

What is Affordable Housing? Defined as monthly housing costs not exceeding 30% of gross monthly income for rent & utilities (for homeownership it’s mortgage, taxes & insurance)  Many housing professionals consider this standard to be too high when considering the rising cost of health care, fuel, childcare Affordability is determined by:  The cost of housing  The ability of people to pay that cost Over the past decade, rents and home prices have risen faster than many Vermonters’ ability to pay, and that trend continues.  A large portion of Vermont’s workforce is employed in jobs that are necessary to the economy (retail clerks, food services, day care, social service aides) but pay only modest wages. Of the 10 fastest-growing jobs in Vermont, only one pays enough to afford a modest two-bedroom apartment.

Cost Burdened in Vermont  47% of renter households were paying > 30% of their incomes for rent & utilities in 2006  20% of renter households were paying > 50% of their incomes for rent & utilities in 2006 Fair Market Rent (FMR) for a modest 2-BR apartment in 2008 = $836  A household must earn $16.07/hour or $33,342 annually  Nearly 66 percent of Vermont’s non-farm employees, or more than 178,868 people, are employed in jobs whose median wages are below that figure Most Vulnerable Vermonters the Most Cost-Burdened  13,401 Vermonters live on SSI ($689/month in 2008);  the average FMR (fair market rent) in 2008 for a 1-Br apartment is $682 (99% of SSI monthly check)  A 2007 OEO census showed 516 homeless families, and 888 children under 18; homeless providers report the largest increases in the homeless population are families with children

Perpetual Affordability A goal of housing funders in Vermont and of Community Land Trusts in Vermont for decades This preserves the public investment, as well as ensures there will be housing available for low-to-moderate-income Vermonters in perpetuity Perpetual Affordability does not preclude housing from needing re-capitalization over time, as it ages, yet the initial public investment is still preserved and serves the community’s needs Much of the public funding in Vermont requires housing to be perpetually affordable (rather than short term)

Housing Delivery System in Vermont A network of community-based nonprofit organizations recognized as a model for the nation, including Champlain Housing Trust, Cathedral Square Corporation, Windham Housing Trust, Gilman Housing Trust, Central Vermont Community Land Trust, Regional Affordable Housing Corporation, and others Housing Vermont – a statewide non-profit which partners with local community organizations and provides development, project management and tax credit syndication expertise For-profit developers Public Housing Authorities (local and state)

Cost of Housing Development Development Costs & Sources of Income: Cost to Develop Affordable Housing in VT on average exceeds $220,000/ unit The $220,000 + per unit to develop housing comes from many sources…  Debt (VHFA, RD, HUD, Banks)  Equity (Tax Credits)  Soft Money (VHCB, VCDP, AHP, HOME, etc) grants or structured as deferred loans for tax credit projects.

Cost of Housing Development Operating Costs & Sources of Income:  The operating cost of housing (average >$450 month) covers: administration, utilities, maintenance, taxes, insurance; not including replacement reserves & debt service. Affordable housing operating costs are typically higher than market rate housing.  Tenants pay their rent from: their income, and sometimes rental assistance: Section 8, or HUD 202, or RD  In order to serve households at 50-60% of AMI with affordable rents, housing developments cannot support much debt, requiring both development subsidy (grants, equity) and operating subsidy  It is critical to have operating subsidy to serve households < 30% of AMI, and funding for services for residents with special needs

Funding Priorities for Affordable Housing Guiding Documents which outline Vermont Priorities Consolidated Plan Allocation Plan (for housing credits) Some priorities and considerations Location - village center & downtown development (non-sprawl) Mixed Income Family Housing (a higher relative documented need in most of VT) Rehabilitation & historic preservation Housing with units affordable to <30% of median income Special Needs Housing Resources well-leveraged Strong/Experienced Developer and Manager Market Study supports concept/size Financially Feasible Green Building, Energy Efficient

Resources Between a Rock and a Hard Place, Housing & Wages in Vermont (2008 Update) Directory of Affordable Housing Consolidated Plan Qualified Allocation Plan