With the number of deeply subsidized public housing apartments frozen at current levels, other resources are needed to create housing for families who can’t afford to pay market rents. Fortunately, federal initiatives such as HOME, CDBG and the Low Income Housing Tax Credit program provide capital dollars needed to acquire, rehabilitate and construct new affordable housing. Many states and local municipalities also supplement these dollars to spur affordable housing development. But these subsidies alone can’t create new units of housing for extremely low-income families. Serving these families requires ongoing operating subsidies as well.
Why is project-basing important to capital development?
Capital subsidies allow developers to reduce the amount of debt they need to borrow in order to acquire or build new housing. When owners don’t have big debt payments, they can keep rents low for families with low incomes. Covenants attached to these subsidies protect the affordability of the housing for years and often decades, even when nearby market rents skyrocket. As a result, low-income households continue to enjoy the same access to strong communities as affluent households with good access to amenities, schools, jobs and services.
Unfortunately, buying down debt with capital subsidy doesn’t go all the way in providing affordability to extremely low-income households (those below 30% of Area Median Income). The incomes of these households are so low that the rents they can afford to pay aren’t even enough to cover the basic operating costs of subsidized rental housing. Developers and owners who want to serve extremely low-income households need additional operating or rental subsidies to cover these costs.
Because Housing Choice Vouchers (HCVs) pay the full difference between the rent that a low-income person can pay and the market rent on a unit, they go a long way in covering the costs of housing operations, even in housing with rents affordable to extremely low-income households. But developers cannot build buildings for extremely low-income families in hopes that some of them will have tenant-based vouchers. Capital investors will not support a project that intends to serve extremely low-income households unless they can be assured that a subsidy will be in place to pay for the building’s operations and ongoing capital repairs. By project-basing vouchers and attaching them to buildings, Public Housing Agencies (PHAs) can provide the assurances that developers and funders need to create affordable housing for extremely low-income families and individuals.
How do project-based vouchers spur the development of supportive housing?
Attaching vouchers to buildings also supports the creation of supportive housing for extremely low-income households who need supportive services in order to remain in housing. Project-basing helps owners and service providers serve highly vulnerable people by pairing subsidies with services. When large percentages of units or entire buildings are assisted, service providers have economies of scale in their service delivery and are able to assign staff to work on-site, which provides enhanced opportunities for engagement. Having a regular staff presence also helps to create positive milieu in buildings and reduces some formerly homeless individuals’ tendencies to isolate in their new apartments.
How can PHAs strengthen their work by project-basing to create supportive housing for the households who need it most?
PHAs that project-base a portion of their HCVs enjoy many benefits of their investments. Project basing vouchers for supportive housing accomplishes many PHA goals while serving the same number of low-income households as tenant-based vouchers.
PHA Benefits
- Leverages hundreds of thousands, often millions, of additional dollars into a PHA’s community.
- Significantly enhances a PHA’s network and reputation as a powerful community investor.
- Puts PHAs at the table as a funder of affordable housing, which can create opportunities for PHAs that choose to develop housing.
- Creates economies of scale in service delivery by pairing housing with on-site services.
- Aids in deconcentration efforts when used to create subsidized units in low-poverty neighborhoods.
- Contributes to unit goals under local Plans to End Homelessness.
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