Are we stimulated yet?

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We know the stakes are big – nearly $800 billion in stimulus money, more than $80 million headed to Oregon for housing and community services alone, just over $4 million pledged to Portland for homelessness prevention, with potentially more waiting in the wings. And the winner is…

“We’re like, the envelope — please!” says Beth Kaye, the public affairs manager for Portland’s Bureau of Housing and Community Development. “There are many different funding sources and many different processes and many different funding formulas… So we’re waiting.”

They’re waiting for the 50-plus spigots of funding open up and begin the flow of relief into Multnomah County and all government agencies and organizations within as part of the American Recovery and Revitalization Act. The act authorizes $13.6 billion for public housing and homelessness prevention programs, organizations and agencies nationwide. Oregon’s piece of that pie is believed to be just over $82 million (although some estimates have been closer to $100 million) some of which will trickle down from the federal Department of Housing and Urban Development (HUD) to Portland, Multnomah County and local organizations by early April.

In the world of affordable housing, the emphasis for using this infusion of cash rests on two main components: Preserving the thousands of affordable housing units that are at risk of disappearing over the next five years and resuscitating the low-income housing tax credit market for new development.

And that might seem like a bunch of bureaucratic numb speak, but in translation it means stable homes, and for Dan Steffey, that means better health, more economic potential, and the foundation for real stimulus. Steffey is the vice president of development at Guardian Management in Portland. His company develops affordable housing across five states throughout which the funding climate has been, in his word, “brutal.”

“We have a huge problem,” Steffey says. “We have all of these properties around the state that are at risk of being lost. We have an economy that’s in peril, and will be further exacerbated if we lose these housing resources… Not long ago, a coalition came together across central Oregon and found that 6,000 to 8,000 jobs in Central Oregon were going unfilled because the workers for those jobs couldn’t find affordable places to live. So unless you address the housing needs of the entire community from the lowest income to the upper income, you’re not going to have a stable and vibrant economy.”
Once upon a time, the federal government was in the housing business. It built and supported public and affordable units for the working poor, disabled and elderly. Today, affordable housing gets built largely by private and nonprofit developers using tax credits, which are purchased by private entities, usually corporations, to offset the tax obligations of profits. When the profits disappeared, so did the tax credit market, and with them the leading funding stream for low-income housing projects. Love them or hate them — and developers and advocates line up on both sides of that debate – they are the most important levers in creating affordable housing.

Subsequently, in order for low-income housing to remain viable economically, housing subsidies, often in the form of project-based Section 8 vouchers, were contracted for the life of 30- to 40-year mortgages through the Department of Housing and Urban Development. That was in the late 1970s and early ‘80s, a critical time for Oregon in particular because that’s when the state really began to grow, and there was not a lot of public housing already in place as there was in other, older cities on the West Coast, says Kaye.

Now, 30 years on, those contracts are now slated to expire on an estimated 80 percent of the state’s privately owned federally subsidized rental housing – nearly one-quarter of which are in Portland. The subsidies are necessary to make operating and maintaining the building’s financial feasible. Without the subsidy, the incentive is to convert the properties to market-rate housing or even condominiums (markets where buyers are at the ready with funding) taking the affordability of the units, and the rent subsidies, out of the community.

“We’re facing now the big wave of these properties expiring through 2011,” said Rob Prasch with the Network for Oregon Affordable Housing, a coalition of 21 member banks that fund affordable housing. “When you combine those properties with other types of Section 8 properties, or mortgage insurance programs or the rural properties, you get into 7,000 units that could be losing their subsidy.”

While the spending and formula details of the stimulus package remain unclear, the state’s housing funding agency, Oregon Housing and Community Services, has secured private monies to provide immediate loans for buying up expiring properties. The MacArthur Foundation awarded OHCS $5 million to purchase low-income rental buildings that are timing out of their HUD rental subsidies. And Portland is one of only 12 cities across the country to receive the funding. The state’s stimulus package has also put $2 million toward preservation efforts.

Buyers of properties for low-income rents often have to secure multiple funding sources, often a dozen or more, to make them economically feasible, and that takes significantly more time than standard acquisitions. Prasch says the majority of the MacArthur funding, along with additional support by Oregon foundations, will come in the form of acquisition loans to buyers to expedite the purchasing process. The low-interest loans will then be repaid when traditional tax credits and other long-term funding sources are secured. The goal, says Prasch, is to secure the properties for another 20 years with Section 8 contracts.

In another a win for housing advocates, the state Legislature passed the bill clearing the way for a document-recording fee to generate sustained revenue for affordable housing projects and preservation. And the National Housing Trust Fund, established last year to secure and preserve low-income housing, got a $1 billion nod from President Obama in his budget proposal. The fund has never been funded before.

“But there are still many more buildings than we have capital to preserve right now, and it’s going to be a scramble to keep these properties affordable, and to keep these federal subsidies, Kaye says. If the buildings are not preserved for affordable housing, the subsidies leave the city. “The Section 8 would last only as long as the people do.”

Regardless of how the stimulus money is ultimately distributed, tax credits remain the single most important generator of money for affordable housing. But the federal act does include some changes to the program. Congress approved $2 billion in gap funding to help buy buildings, along with the option for states to unload their unusable tax credits by exchanging them for 40 cents on the dollar. That money will go to fill the estimated $10 billion equity deficit in 2009 due to the collapse in the tax credit market.

It will also get projects that are, in the parlance of the day, shovel-ready. Prasch says if the tax credit market gets the relief it anticipates, projects that have been waiting for the funding could start construction within six months.

Locally, Portland is on track to receive $4 million for rapid rehousing of people affected by the recession, says Kaye. But the city has yet to hear what regulations apply on how that money can be used, says Kaye.

Neighborhood Stabilization Program is actually getting its second infusion through the federal stimulus plan, the first wave of funding having come through in the fall. This is expected to bring in nearly $10 million to the state to enable municipalities to buy foreclosed properties, rehabilitate them and offer them for sale through low-interest loans to families and individuals. But it hasn’t hit the ground yet.

“There is a lot of sorting out that needs to happen,” says Julie Massa, Portland Policy coordinator for Oregon Opportunity Network, a housing advocacy coalition. “There was the first round, and then the second, and the second round undid some of the benefits of the first. So the state is trying to figure out how to make them mesh.”

This is in addition to the city’s entitlement for emergency shelter, which last year was $450,000. Still, the city’s Bureau of Housing and Community Development could be losing up to 20 percent of it’s funding, which was in the form of one-time monies from the city that are not expected to return when the mayor releases his proposed budget in April. Sam Chase, City Commissioner Nick Fish’s chief of staff, says they are still seeking full funding for homeless and housing programs through the BHCD.

“At the same time agencies are reporting unprecedented need,” says Kaye. “More families where there are two parents and they’re both working, but they’re homeless, they’re hungry… There is more money coming. We’ve never had enough money to meet the demand. It’s needed. Will there be more? Only Congress and the president will know.”

Oregon’s $175 million state stimulus bill, which became law on Feb. 5, has little impact on housing agencies because it focuses on infrastructure and public works projects tied to specific agencies or institutions, such as the Department of Corrections and each of the state’s colleges, universities and community colleges. Housing and homeless services are not included in the package. The state bill is intended to put 3,000 Oregonians back to work upgrading and repairing buildings and equipment.

If it were in his control, Steffey said he would use the federal stimulus money to do what it’s intended to do; generate investments in more housing, particularly in rural areas where comparatively small projects, which are harder to fund, can have a major impact on a community.

“I’d get these folks together and say we’ve got this crisis, let’s determine whether or not it makes sense to issue public bonds. To jawbone the business community into buying these credits, to use the economic stimulus money in a targeted way that meets some of these housing challenges. Because right now, across the nation, there are literally thousands of tax credit projects that are stalled in the drop in equity and the unavailability of debt. If you fired these things off tomorrow, and many are shovel-ready, you’d have thousands of jobs, doing something that would leave behind a lasting legacy that would serve both the economic and social needs of our country, and I believe if you got that level of attention focused on it, that there are businesses that would be willing to step up and take a piece. And we could come up with a program that would make a serious dent in the housing needs of our state.”

While the stimulus is a welcome piece of relief, it is not enough for Portland to build its way out of the housing and homeless crisis, Kaye says. However, she adds, it is a good sign that HUD’s budget has increased under Obama’s proposal to just over $47 billion.

“I don’t think we’re going to be able to use this money to address some of the root causes of homelessness,” Kaye says. “It isn’t going to let us address health care reform, the money is not going to address the fact that our economy has changed, and that many family-wage jobs have been outsourced. It’s not enough money to affect a new fundamental issues in affordable housing finance which is the collapse of the tax credit market.”

The Housing Authority of Portland – which has a year-long waiting list of people needing to get into affordable housing – stands to receive $6.27 million in public housing capital funding, which will flow directly to the agency on April 10, says Shelley Marchesi, the spokeswoman for HAP. The funds, Marchesi stressed, are “not intended to supplant, but rather supplement capital work underway.

“We’re feeling extremely encouraged with what we’re seeing from the [Obama] administration,” says Marchesi. “I’ve not seen HUD ever communicate as quickly or directly in my seven years with HAP.”
That’s a boon for HAP, which has a deferred maintenance backlog of over $50 million and has dealt with years of being shortchanged by the federal government on reimbursement for public housing costs.

“We have been receiving between $4-4.5 million a year as a capital grant, and with our backlog you can see the inadequacy of that,” Marchesi says.

HAP’s situation is more stable than that of other entities because, according to Marchesi, “We did not face a budget year this year where we had to lay off the same way other public entities have. We went through a lot of tightening, including significant layoffs, three or four years ago. So we’re stable now.”

Stability is nowhere to be found in Multnomah County’s budget process. At a standing-room-only March 2 community budget forum at the county’s East building in Gresham, County Chair Ted Wheeler addressed the county’s staggering shortfall – $36.5 million in the 2010 fiscal year, which will grow to $45.9 million in FY 2011 – and acknowledged the ever-changing numbers and inevitability of 12 percent general fund budget reductions across all departments.

“There is no Band-Aid approach here,” said Wheeler to the crowd of well over 100 residents. “Some services will cease to exist.” Which services, however, were still unknown, as the department managers had not yet submitted their recommendations to the commissioners.

Mary Li, the county’s School and Community Partnerships manager, said she and other managers were still unsure as to how the county’s proposed cuts would be offset by federal stimulus funds.

“We just don’t know at this point,” Li said, adding that she couldn’t discuss the cuts her department was considering before they are submitted for review on March 13.
“It’s not worth the heartache it could cause people,” said Li, “and might give some people a false sense of security. The numbers will change, especially in (the commissioners’) executive budget,” which will be proposed by Wheeler on April 23.

Li could say with certainty that her department would reap the benefits of federal HUD money – to the tune of $2 million – for weatherization of low-income housing.
“We’re looking to double the size of our weatherization program with these funds,” said Li.

Li addressed the fears she’d heard from some residents that the stimulus funds would be used only to backfill, or compensate for budget cuts.

“I don’t think it’s financially possible for (the funds) to just be backfill,” said Li. “The budget cuts we’re facing are from the general fund, but this is federal money. We can’t take it up for backfill,” as there are specific instructions as to how and where the funds can be appropriated.

Multnomah County residents have instructions and recommendations of their own. At the community budget forum, attendees were asked to write their budget recommendations on giant Post-It notes, which were then stuck to the walls. A sampling:

“Provide mental health supports in housing.” “More partnerships/agency collaborations.” “Do not abandon the most fragile and problematic of our citizens.”

by Joanne Zuhl and Rebecca Robinson

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