DC HOUSING LEGISLATION Revised May 24, 2001 The good news is that there are four bills that bear on affordable housing before the Council. Last year at this time affordable housing was not an issue as far as our elected city officials were concerned. These legislative proposals represent good first steps. They will not solve the crisis in affordable housing, but at least they move the city (slowly) in the right direction. What is lacking in the bills is: (1) recognition of the rapidity with which the city is losing affordable housing; (2) priority for low-income renters who are the most vulnerable; (3) the notion that affordable housing should be located throughout the city, creating a truly integrated, diverse community; (4) realistic income guidelines that distinguish DC median income from that of the higher surrounding metropolitan region AMI; and (5) a sense that this is truly an ongoing problem for which our local government will have to shoulder a bigger part of the financial burden. And it would be so nice if our Mayor and Council Members would work together on this serious issue instead of giving us overlapping and competing proposals... There follows an analysis of three of the pending bills and recommendations that we think would move the city closer to the goal: quality affordable housing for all in our city. Additional sources of analysis and recommendations are listed at the end. (The fourth piece of legislation, Mr. Catania's HomeStart Improvement Amendment Act of 2001, Bill #14-184 has not yet been scheduled for hearings.) Bills 14-167, 14-177, and 14-183 will be discussed at a hearing on June 11, 10:00 AM - , at the Council Chambers, 441 4th Street, NW. It is a joint hearing of the Committee on Economic Development (Brazil, Chair) and the Committee on Finance and Revenue (Evans, Chair). To testify, call Barry Kreisworth at 724-8792. Bill # 14-167 Housing Preservation, Rehabilitation and Production Omnibus Amendment Act of 2001. This is Mayor William's legislation, introduced by Council Chair Linda Cropp. Title I - Due Process Demolition. This provision would enable the Mayor to demolish unoccupied buildings that are unsafe or a blight on the neighborhood, to recover costs, and to acquire, develop, or sell the property in due time. There are, for the most part, adequate safeguards written into it, but the process should be opened to the public so that the safeguards will be exercised, if necessary, to salvage usable buildings for other purposes, such as rehabbed housing, shelters, etc. We support this provision, providing that the notices required to be given to interested parties (e.g., the Historic Preservation Review Board) are made also to the public. Title II - Government-Support Housing Accommodations Conversion. This section is meant to confront the reality that federally-assisted, privately-owned, multifamily rental housing (Section 8) that subsidizes low- and moderate-income families will expire over the next 4 years, allowing rents to revert to market rates. Its intention may be good, but it does little to maintain the existing supply or to help tenants buy their buildings. To accomplish the latter purpose, this title would have to be amended to (1) translate the AMI (area median income -- a HUD standard for the whole metropolitan region) to the significantly lower DC median; (2) increase the notice period to twelve months; (3) increase relocation support to include full moving costs and apartment and utilities deposits; and (4) if tenants choose to buy the building, the city would have to provide a sharp increase in technical, legal, organizational, and financial assistance to support the tenants' efforts. ( Otherwise the tenants' first right of refusal is an empty promise.) We do not support this title. Mr. Catania's proposal (Bill # 14-193, see below) is more promising. Title III - Targeted Historic Housing Tax Credit. Resident homeowners making less than 120% AMI ($99,360) would receive income-tax credit for up to $50,000 over 5 years for comparable investment in restoring the residential portion of an historic home within specified historic districts (excluding Georgetown and Dupont Circle), and may sell and transfer the credit to a subsequent buyer. The total amount available in any one year would be capped at $1.25 million. This encouragement of preservation is laudable, but the AMI should be lowered to 80% of AMI or the true median income of DC residents, the tax credit and the annual cap should be lowered so that the program does not contribute to a drain on resources need for housing for even needier citizens. A residence requirement of 5 years prior to application should be added, and transfer of credits through sale should not be permitted. (The aim should be stable neighborhoods as well as restored housing.) Only with these additional conditions met, can we support this title. Title IV - Low-income, Long-term Homeowners' Protection. This provision would give low-income (less that 60% AMI) homeowners who have lived in their homes for 10 years or more a tax credit by limiting real-estate tax increases to 5% per year, if the property is their primary residence. We favor this title. Title V - Modification of the Housing Production Trust Fund. This is the most important of the Mayor's proposals. It would provide a committed stream of public funds (15% each of the Real Estate Transfer Tax and the Recordation Tax, or about $12 million per year at current property sales levels) for the Fund to build, buy, or rehab affordable housing for both renters and homeowners. It would add units to the existing supply and begin to address displacement or loss of units. We enthusiastically endorse this title, but it should be strengthened by specifying priority for low-income rental housing (i.e., commit at least half the funds each year to rental housing) and by increasing the per cent of real-estate and recordation tax going to the fund from 15% to 50% over 3 years. (Twelve million dollars a year is simply not enough to stay ahead of the problem.) And, to keep the operation open and responsive to changing needs, the legislation should also require full annual disclosure of all income and expenses and creation of a citizens' advisory council with tenants and low-income homeowners on it as well as bankers and builders. Title VI - Tax Abatement for New Residential Developments and New Homeowners in Enterprise Zones. This title offers tax abatements (50%-100% of any increase in property taxes) to encourage builders to include affordable units in residential projects. The amount and duration of the abatement varies with location, per cent of units committed to affordable housing, and the number of years owners agree to stay in the program. Another provision gives a five-year benefit to any homeowner who builds or rehabs a home in an enterprise zone as a primary residence. (An enterprise zone is a particular neighborhood designated by the city under HUD programs for special development efforts.) These benefits are based on the assumption that these projects will attract high-income earners who contribute to the tax base. We appreciate the need to do that and the fact that some provisions would apply city-wide, but we think the incentives, being only a percentage of tax increases, may not be incentive enough in hot markets to slow gentrification. And it would also provide a subsidy for the market-rate units (80% or more) in the downtown developments. There is no reason why the inclusion of affordable units should not be required of all developers, as in Montgomery County - with benefits for the developer in the form of inclusionary zoning variances instead of taxes, which the city should be collecting from these developments to fund education, health, and other services. We have real difficulty backing these provisions as currently written. Another provision of this title would reward any homeowner, who rehabs housing for him/herself in an enterprise zone, with a 50% tax credit of any real-estate tax increases for 5 years - regardless of the income of the potential occupant. (Its intent is similar to Mr. Catania's Bill #14-183, Section 201. See below.) For us to endorse this provision it would have to include an affordability requirement and preference for those living in the neighborhood. Otherwise it could be an incentive for displacement. Title VII - Modification to the Homestead Program. This is largely a technical improvement in the process. It establishes a revolving Homestead Repayment Fund into which all Homestead Loan payments would be made to fund future program loans, and it allows multifamily Homestead properties to be developed as rental housing if there are no proposals for condominiums or cooperative housing. We support this provision. Title VIII - Acquisition and Disposal of Abandoned and Deteriorated Properties. This title would authorize the Mayor to acquire and demolish, renovate, or dispose of abandoned or deteriorated properties, including possibly occupied buildings. It was drafted to correct imperfections in last year's law and is seen by the Administration as protecting tenants' rights. However, we think the definitions of what may be torn down are still too broad, and could still result in displacement of tenants for whom there is no other decent affordable housing available. We think the city should not be allowed, except under extreme threats to health and safety, to remove residents from their homes until such time as the city can guarantee displaced low-income tenants real alternative housing. So we oppose this title unless it is written to exclude occupied buildings. Title IX - Rules, Fiscal Impact, and Effective Date. Standard statement of compliance with the law. BILL #14-183 Home Start Financial Incentives Act of 2001. Introduced by Catania and Cropp, Evans, and Schwartz. Co-sponsored by Allen, Ambrose, Chavous, Graham, and Orange. Title II - Real Property Tax Abatement. Section 201. Qualified Improvements to Residential Property. This bill would freeze the assessed value of residential property in Revitalization Zones for five years and give an occupying owner a $50 property tax reduction for each $1,000 spent on "qualified" improvements, up to a maximum of 50% of the taxes imposed the previous year. If the reduction exceeds the limit it can be carried forward over 5 years. (This is comparable to the second part of Title VI of the Mayor's Bill #14-167. See above.) Although this proposal would attract investment into Revitalization areas, there is no limit on income, and it is not likely that low- and moderate-income owners could take advantage of it, and there is no limitation on income, so there is a real danger that it would encourage displacement. Low-income first-time owners already get a five-year property tax exemption, so the biggest benefits would be for owners who do major renovations in the grand older houses of Columbia Heights and Shaw. We cannot support this without an income limit that assures these benefits only to low-, moderate-, and middle-income owners. Section 202. Affordable Multi-Family Housing Property. In any dwelling of five or more units, 20% of which are occupied by families earning 40% or less of the AMI and is covered by a Section 8 contract, the owner can receive a property-tax abatement if he/she makes $10,000 worth of improvements in each of the units and agrees to renew the Section 8 contract. The benefit increases with the length of commitment: 50% of the tax for a one-year renewal, 75% for 5 years, and 100% for 10 years. This could keep some buildings, whose contracts would otherwise expire, in the program and help save at least some of this important source of affordable housing, while getting owners to fix up their properties. Our concern is that the incentive will not be enough in hot real-estate markets and that we'll see a further "resegregation" of the city by class, as affordable housing is concentrated further in Wards 6,7, and 8. The only way some owners might stay in the program in up-scale neighborhoods is if the city is prompt and vigorous in its reassessment of these buildings as they go to market rentals. The legislation could also be a windfall for some landlords who will stay in the program anyway because their buildings cannot attract lucrative market rates, but the trade-off, if it works, would be the mandatory landlord investment of $10,000 per unit. The Mayor's staff opposes this section and says that it would amount to DC subsidizing HUD. Mr. Catania's staff says that's not the case. He's talked to building owners who say this would be an incentive to put money into repairs and stay in the program. Only if this difference can be cleared up and only if we are convinced that timely, market-savvy assessments and really tough code enforcement would ameliorate our concerns, could we endorse this section. Title III - Income Tax Credit Section 301. First-Time Homebuyers. This would allow anyone who is eligible for DC's (federal) First-Time Homebuyer's Credit also to get a DC income tax credit of up to $5,000 (over two years) against DC property tax. We cannot support this Section. It would provide too big a benefit to homeowners, when it is renters who need the most help. Section 302. Employer Homeownership Assistance Program. This provision would give tax benefits to employers who assist employees who are first-time buyers with down-payment and/or settlement costs. Employee-Assisted Housing (EAH) is a great concept that should be encouraged in the city, especially for low- and moderate-income workers who could not otherwise afford to live in the city where they work. Fannie Mae, which has been pushing the concept, argues this benefit is good also for the employer who offer it. We support this provision, but it must be restricted to low- and moderate-income families, should give priority to helping current DC residents buy their homes, should limit the employer's tax reduction to 50% of the amount of assistance actually given to each employee ($5,000 maximum), and should be made a pilot program, available for only two years until employers get the idea. Title IV. Homestart Ownership Counseling. This provision requires the Mayor to establish a homeownership counseling service (information on credit, management, predatory lending, taxes, etc.). We can understand the need for strengthening the District's current program run by non-profit organizations that contract with the city, but we are not persuaded that it needs to be replaced by one run directly by the Administration. BILL #14-177 Abandoned Property Rehabilitation Incentive Act of 2001. Introduced by Chavous and co-sponsored by Ambrose, Evans, Fenty, Graham, and Mendelson. This bill would provide financial incentives to DC residents to purchase abandoned single-family and duplex dwellings at reduced cost (by exempting them from 50% of any tax liens, penalties and interest due on the property), providing that the new owners rehab the property within 6 months and live in it for a year thereafter. This legislation could complement the Mayor's efforts to take title to and put abandoned and derelict properties to constructive community use. We support this bill, with these important conditions added: The rehabilitation period should be extended to 18 months, the new owner should be required to live in it for 5 years, and this legislation should be accompanied by the Council's adoption of the Rehabilitation Code of the International Residential Code (modeled after the New Jersey and Maryland "smart codes" and recently jointly promulgated by the BOCCA and Southern States, the two major national building codes associations). This is the intent, we believe, of Mr. Catania's other bill, #14-184, now before the Council. Without these changes in the rehabilitation codes, the average homeowner and small not-for-profit companies cannot afford to rehab individual buildings. For assistance in understanding these bills, we are deeply indebted to Bob Pohlman of the Coalition for Non-Profit Housing and Economic Development, Sczerina Perot of the Washington Legal Clinic for the Homeless, Scott Barkin of the Mayor's Office of Economic Development, Randall Kelly of Nickerson and Peabody, and Linda Bumbalo of Council Member Catania's office. Pohlman and Perot have done their own analyses of these legislation proposals, which can be had by contacting them respectively at (202-745-0902) and (202-872-1494). Questions about this document can be addressed to Janet Brown at 202-332-0789 or by e-mail to