#133 Jan/Feb 2004

Making Progress in the Preservation of Affordable Housing

During the last six months of 2003, one could easily make the case that the nation’s entire domestic priorities were summed up in five words: “Prescription Drug Coverage for Seniors.” […]

During the last six months of 2003, one could easily make the case that the nation’s entire domestic priorities were summed up in five words: “Prescription Drug Coverage for Seniors.” The average reader of the nation’s leading newspapers could be forgiven for believing that Congress and the Bush Administration were completely occupied by “Medicare reform” and the hunt for Saddam Hussein. Budget matters were ignored almost entirely. Indeed, Congress decided to put off this year’s budget for the time being, reckoning that the average constituent is simply not that concerned about the Department of Housing and Urban Development’s annual appropriation.

Of course, Congress’ lack of focus on housing and community development issues does not mean these concerns have escaped the average American. In two recent surveys, Americans indicated their support for affordable housing. According to a National Association of Realtors survey in September 2003, roughly two of every three Americans say they are concerned with the cost of housing in their area. More than 70 percent indicate they would like to see government place a higher priority on making housing more affordable, with 82 percent indicating they support the construction of more affordable housing in their communities, as long as it fits in with the area. A separate poll conducted for the National Low Income Housing Coalition and released in June 2003 reflects these same results – with 76 percent of all respondents expressing concern about the lack of affordable housing and 82 percent of voters saying it was important that Congress provide adequate federal funding for housing for low-income people.

Indeed, notwithstanding the mainstream media’s lack of attention, two affordable housing preservation initiatives demonstrate considerable interest in the issue. First, for many years preservation advocates called for the adoption of a so-called “exit tax relief.” In November 2003 their efforts were finally rewarded by the introduction of the Affordable Housing Preservation Tax Relief Act of 2003, H.R. 3485. Congressmen Jim Ramstad (R-MN) and Benjamin Cardin (D-MD), well-respected members of the House Ways and Means Committee, introduced this long awaited measure in response to the concerns expressed by advocates and owners in their districts. This introduction is a critical step in helping to preserve hundreds of thousands of apartments that currently serve very low-income elderly people and families.

More than a year before the introduction of H.R. 3485, the Millennial Housing Commission issued its findings. One of its central recommendations was the adoption of a “preservation tax incentive” that would provide owners of subsidized, multifamily homes a tax benefit if the ownership of the property were turned over to new, socially motivated owners – those who intend to do more than turn a profit. The Congressionally appointed, bipartisan commission was charged with identifying, analyzing and developing recommendations that highlight the importance of housing; with improving the housing delivery system; and also providing affordable housing for the American people, including recommending possible legislative and regulatory initiatives. The commission held public hearings throughout the U.S. before issuing its final report and found that owners of subsidized housing were often “trapped” in their current investments because capital gains on “depreciation” made it impossible for the seller to come up with sufficient tax to pay upon transfer. As a consequence, many properties were not being transferred until the owner died, at which time the tax was eliminated for the heirs.

The problem is that the affected properties were no longer being maintained properly because the tax benefit had eroded. Rather than provide complete tax relief for the current owner, the commission proposed that the tax relief be applicable only if there was a public quid pro quo. A state housing finance agency would have to first determine whether a new owner would keep the housing in decent shape – and affordable. Moreover, the new owner would need experience in owning and managing affordable housing. The recommendation was adopted in full by the introduction of H.R. 3485. Remarkably, just one day after the bill’s introduction, as if to punctuate the need to preserve existing affordable housing, the John D. and Catherine T. MacArthur Foundation announced a 10-year, $50 million effort to promote the preservation of existing affordable housing. Through the foundation’s initiative, national and regional nonprofit organizations that own and operate large rental housing portfolios across 25 states will receive $35 million in grants and low-cost loans. The funds will be used to acquire, refinance and renovate rental housing that might otherwise become too expensive or run down to remain available to low- and moderate-income households. Another $10 million in low-cost loans will help specialized lending intermediaries finance transactions for these and other nonprofit owners. A final $5 million in grants will support research, policy analysis and public education on the supply of affordable rental housing and develop strategies to address them.

Jonathan Fanton, president of the MacArthur Foundation, believes that “[t]hrough this initiative, the foundation expects to directly support the preservation of 100,000 existing affordable rental units in urban, suburban and rural markets.” At a time when rental housing is taking a back seat to homeownership initiatives across the nation, it’s good to be reminded that renters are people, too. As Fanton stated, “Virtually all of us, at one time or another, have relied on rental housing, and for millions of people affordable rental housing is a necessity.”

In 2004, the mainstream media will undoubtedly be focused on the elections and foreign affairs. Nonetheless, it’s good to know that outside of the headlines, progress is being made in affordable housing preservation.


  • One City: Newark, NJ

    January 1, 2004

    Newark’s children are more likely to fail in school and suffer from health problems than children living elsewhere in New Jersey.Photo courtesy of Kerrie Ocasio/ACNJ Every day Gerard Joab receives […]

  • A Changed Block: Hillside Ave., Newark

    January 1, 2004

    When I decided to move to Newark a year ago my expectations weren’t all that high. I had heard and read about Newark’s poverty and downward economic spiral, the lack […]

  • CDCs in Gentrifying Neighborhoods

    January 1, 2004

    When community development corporations were created in the 1960s, their biggest challenge was assisting in the revival of neighborhoods that were physically and spiritually scarred by vacant land, abandoned buildings, […]