State and Local Affordable Housing Issues

Background

State and local governments play essential roles in expanding affordable housing options for older adults and protecting their rights. All states and the District of Columbia have housing finance agencies (HFAs) that issue tax-exempt bonds to finance mortgages for the construction of affordable single-family and multifamily housing. A number of HFAs and state units on aging have special programs to develop congregate housing and assisted living residences. They provide home-repair services and reverse mortgages for older homeowners. In addition, 47 states, the District of Columbia, and more than 690,000 localities have housing trust funds that support a wide variety of housing activities. These include new construction, home repair, and rental rehabilitation.

States have planning and service-provision authority for cities and counties. This can have a profound effect on the livability of local communities. But inconsistency among agencies remains a significant problem. These agencies have a diverse and sometimes complex set of highly competitive funding streams and eligibility criteria. They oversee various activities, including housing, transportation, and social services. And they often perceive themselves as having dissimilar constituents. Moreover, they solicit community participation differently.

State and local use of federal housing assistance—state and local governments play an important role in setting priorities: They coordinate policy and administer federal housing programs like the Home Investment Partnerships Program (HOME).

State and local governments analyze older adults’ housing needs under federal consolidated planning regulations. They then develop strategies to coordinate various housing and social services. They identify regulatory barriers and develop action plans to improve housing conditions. Priorities guide funding allocations for key federal housing and community development programs. These include HOME, Community Development Block Grants, and the Section 202 Supportive Housing for the Elderly program. States are also responsible for allocating federal low-income housing tax credits to meet critical rental housing needs.

Protection of renters using federal housing subsidies—many state and local governments have recognized the need to assist recipients of federal rental assistance who may have difficulty obtaining affordable rental housing. Statutes designed to protect people from discrimination based on their source of income (e.g., Social Security, Section 8 vouchers, other benefits), have increased the ability of renters to locate housing, though disparate treatment of these people continues.

Rent control—rent control laws limit how much property owners may charge for renting out real estate. Studies show that rent control increases disparities in rent burdens over time and does not offer a long-term solution to affordable housing. Rent control does not effectively solve the affordable housing problem in many parts of the country. But in some cases it may be desirable for state and local governments to retain existing rent control ordinances for a limited time. This is an appropriate strategy for areas with severe housing shortages. It also is appropriate for areas where development pressures result in the significant loss of affordable units.

Use of funds for other purposes—states at times receive new funding from an outside source that is intended for housing purposes. Although the state may face budget shortfalls or have other needs, diverting such funds to cover other costs leads to negative consequences, as it reduces the ability of states to meet crucial housing needs.

State and Local Affordable Housing Issues: Policy

Housing trust funds

In this policy: LocalState

States should establish or expand existing housing trust funds and development banks for low-income housing services (such as home repair, rehabilitation, rental assistance, and new construction of affordable housing), and they should prohibit the use of such funds for other purposes. The funds should promote housing options in livable communities, including locations near transit, and the use of universal design, visitability, and inclusive design features.

Use of affordable housing funds for other purposes

In this policy: LocalState

Funding from trust funds, legal awards, settlements, or new federal programs that is dedicated for the creation or preservation of affordable housing should not be used to replace existing funding sources and should be used only for their intended purposes.

Surplus government properties

In this policy: LocalState

Local governments—through public housing authorities, other agencies, or partnerships with nonprofit entities—should convert or develop suitable surplus public properties into housing for the above-mentioned vulnerable populations as part of a strategy to protect and preserve housing options for them in the long term.

Surplus state, county, municipal, school district, and military properties should be prioritized for development or conversion into housing for families of low incomes, homeless people, older adults, and people with disabilities. Converted properties should be properly tested for toxic substances, which must be abated to a safe level before the sites are used for housing.

Rent control

In this policy: LocalState

If state and local governments enact legislation to end rent controls, they should provide a transition period during which rent increases would be limited and should continue rent protections for households with low incomes.

Existing rent controls should be reviewed frequently to evaluate their effectiveness, including the extent to which they create disincentives to affordable housing and maintenance. Such controls should also permit a reasonable return to owners, minimize disparities in rent burdens among households, and prevent exploitation of such controls by those who do not need this assistance.

Real estate and property taxes

In this policy: LocalState

Programs should be established that minimize tax burdens on older low-income property owners and renters (who pay property taxes indirectly). Programs that establish tax credits and other assistance in order to provide relief to low-income older taxpayers can help them stay in their homes.

Municipalities should consider providing property tax exemptions for nonprofit-sponsored, affordable rental housing and LIHTC-funded properties for the duration of their compliance periods.

State and local financing for affordable housing

In this policy: LocalState

State and local governments should encourage development of housing for people with low incomes through state tax credits and the use of state bond proceeds and redevelopment funds.