Dear Mayor and Council Members,
Austin Housing Coalition (AHC) is reaffirming its unwavering support for the Affordability Unlocked program that was adopted in May 2019 by the Austin City Council. Since adoption, the Neighborhood Housing and Community Development Department has certified 26 projects in all city districts, while 46 applications were filed to use the program. This could potentially create 2,700 new housing units, 2,300 of which will be affordable[1]. Considering that most of these affordable units will be created without any public subsidy, the program is proving to be a key means of achieving the city’s affordable housing goals and expanding rental and homeownership opportunities.
Affordability Unlocked supports the development of affordable housing by requiring that all program participants set aside at least 50% of the units at income-restricted affordable rent or purchase levels. By reducing City restrictions and easing development burdens, developers are incentivized to create affordable units in exchange for increased entitlements. As seen by the influx in applications from not only mission driven developers, this policy is working well to significantly increase the pipeline of affordable units, including much needed homeownership units at or below 80% MFI coming onto the market without public subsidies.
Affordability Unlocked is critical for leveraging existing subsidies to expand the number of affordable housing units that can be built and to support the work of mission driven developers. However, the use of the Affordability Unlocked program is also becoming a key way for the City to support the creation of affordable housing without providing public subsidies. The applications for the program demonstrate that traditional market-rate developers are being incentivized to participate, creating affordable units funded solely through increased entitlements. While Affordability Unlocked can be used for developing either homeownership or rental housing, a significant portion of applications appear to be on the homeownership side. Considering the Austin Strategic Housing Blueprint (ASHB) established a goal of ensuring that 25% of all homeownership units are affordable to households earning at or below 120% MFI across all Council Districts[2] and the ASHB Implementation Briefing Book highlighted the need to increase affordable housing units for ownership at or below 80% MFI[3], the need for affordable homeownership City-wide is clear.
Previously, Community Development Corporations (CDCs) and other affordable housing providers have played a key role in providing affordable homeownership opportunities in Austin. Currently, CDCs and other nonprofit developers are not provided adequate public resources to greatly increase homeownership opportunities, even though community members continue to stress the need to prioritize affordable homeownership, particularly in gentrifying neighborhoods. There are very few mechanisms for reaching this goal outside of the $28 million Acquisition & Development Homeownership Program Bond Dollars, which are insufficient to fulfill the stated homeownership goals. Although Affordability Unlocked is key to allowing affordable housing developers to leverage other subsidies to build a greater number of affordable units, the participation of for-profit developers in the program can play a critical role in expanding affordable ownership opportunities. Without the participation of market rate developers, vastly increased resources would be needed for non-profit developers alone to meet our City’s stated goals and to address the need for affordable homeownership units.
Affordable housing, including homeownership, is viewed as a crucial tool for supporting anti-displacement initiatives by stabilizing households in their communities. Housing opportunities created through the Affordability Unlocked program can serve households that currently are locked out of the housing market, as homeownership opportunities are very limited. The UT Uprooted Report identified the need to create new affordable housing options that serve current and future vulnerable households in gentrifying neighborhoods as a key anti-displacement goal. Affordability Unlocked can play a key role in creating affordable housing opportunities in neighborhoods threatened with gentrification and helps stabilize them. Particularly, by incentivizing traditional market-rate developers to participate in the program, ownership opportunities can be expanded for households earning 80% MFI and below without providing additional subsidies.
There has been criticism that the requirement of providing units for ownership at the 80% MFI level is not always appropriate, however the 80% MFI is an upper limit only. In reality, most qualified ownership applicants will make somewhere between 60-80% MFI. This is due to the fact that it is difficult to qualify buyers at exactly the 80% program limit. Providing homeownership opportunities for families earning between $58k-$78k means serving families who will otherwise be unable to buy a home anywhere in the City, particularly within the central core. At this time, leveraging the creation of market-rate units to provide affordable housing is the most successful and least costly way to generate affordable homeownership opportunities. Encouraging homeownership units that are targeted to households earning 80% MFI and below ensures that rental housing is not the only affordable housing in our City.
If homeownership is to be targeted to deeper levels of affordability, it is necessary that developers, whether mission driven or not, are provided subsidies. There is a limitation on the number of units and level of affordability that can be achieved through leveraging market-rate units only with enhanced entitlement. Adding some subsidy to assist Affordability Unlocked housing could achieve deeper levels of affordability through the policy. This approach, combining Affordability Unlocked with some subsidy, is already being used by nonprofit developers in order to serve households at even lower MFIs.
The Austin Housing Coalition reaffirms its unwavering support of the Affordability Unlocked program. Affordability Unlocked is critical to supporting the work of mission driven affordable housing developers by allowing them to leverage subsidies in creating more units. It is also proving to be a critical and successful means to expanding affordable housing development even without additional public subsidies. City Council may consider implementing a subsidized buy-down program or expanding homeownership assistance programs to provide opportunities to ensure the program serves residents who have lower MFIs. Overall, the program is allowing Austin to further its affordable housing goals and create much needed units of affordable rental and homeownership for our community.
[1] Jared Brey, Waiving Regulations for Affordable Housing Shows Results in Austin, https://nextcity.org/daily/entry/waiving-regulations-for-affordable-housing-shows-results-in-austin
[2] City of Austin, Austin Strategic Housing Blueprint, page. 16
[3] City of Austin, Austin Strategic Housing Blueprint Implementation Briefing Book, page. 72