Tori Dillinger, Administrative Assistant
Today, we will focus on the lack of affordable rental housing and how HOPE and others are seeking to address it.
First, we will look at the problem. According to HUD, families should spend no more than 30% of their income on housing. In Evansville this means the average renter can afford about $674 a month. Meanwhile, the average rent for a two-bedroom apartment is $769 per month. Below is a graph showing the gap between what different groups can pay and the average cost of housing.
This mismatch of incomes and rents puts a financial strain on families. The National Low Income Housing Coalition (NLIHC) estimates that in Indiana there are only 77 available and affordable rental homes for every 100 low-income families. This means around a quarter of low-income families have no choice but to pay more than they can afford for rent. More affordable rental options are needed.
The problem is the rent working-class families can afford is not enough for developers to cover their construction costs. Subsidies are needed to make affordable housing projects viable. Subsidies can be given to either renters or developers.
Subsidizing renters is the idea behind the Housing Choice program. Under the program low-income renters only pay what they can afford. The government then pays the rest of their rent up to the fair market rent. This means landlords make enough to cover costs, but renters don’t pay more than they can afford. However, this program has always been overburdened and has only grown more so.
The other option is to decrease construction and operation costs. The goal is to lower these costs to the point where affordable rents will make up the difference. Usually affordable housing projects are overseen by a non-profit organization.
As things stand now, the backbone of affordable housing development is the low-income housing tax credit (LIHTC). The government awards tax credits to organizations for housing projects. Organizations then sell the tax credits to investors who get to write-off the expense from their taxes. It is thanks to LIHTCs that HOPE is going to build 30 affordable rental houses and a 30-unit multi-family building.
Other sources of possible funding include donations, loans, and grants. These may be private or through the government. All funding sources are combined until the out-of-pocket cost for developers is low enough they can recoup the cost through affordable rents.
Usually non-profits hire a housing developer to design and build their housing. There are actually a number of housing developers specializing in affordable housing.
In summary, the affordable housing crisis is a growing problem. Multiple groups working together are required to address it. Thankfully, there are organizations like HOPE of Evansville that are making it work.
The Urban Institute has an interactive tool that explains the difficulties of building affordable housing in more detail. Click here to check it out.