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How can we increase housing options for working families?

There are many innovative housing policies that will help bring rental and for-sale homes within reach of working families. But no one policy by itself will solve the problem; a comprehensive housing strategy is needed. An effective housing strategy enables housing officials to coordinate limited resources so they are used efficiently and in a way that is responsive to local circumstances. Some communities may have a need for foreclosure prevention and neighborhood stabilization that is not being adequately addressed through existing efforts.

Others may have an ample supply of affordable homes but need to revitalize them to stimulate economic opportunity in some neighborhoods or preserve their endangered stock of affordable rental apartments. Whatever the circumstances, preparation of a comprehensive housing strategy helps avoid a haphazard approach to implementation of solutions and enables communities to address the housing needs of residents and members of the local workforce in an effective and coordinated fashion.

Elements of an effective housing strategy include: (1) a needs assessment highlighting deficits in the local housing supply and resources available to address

Carlton Court
Photo courtesy of McCormack Baron Salazar
those shortfalls; (2) overarching goals ("Increase the supply of affordable rental units") and specific objectives related to those goals ("Build 10,000 new rental units in the next 10 years"); (3) a series of well-designed and coordinated policies that address all the different aspects of the problem; and (4) a realistic timeline for implementation with benchmarks to track progress and responsible parties designated for each step. This last piece can help officials make sure development stays on track and community goals continue to be met.

Finally, as the housing crisis and economic downturn have shown, as the realities of housing markets change, policies and programs should be reassessed to assure they are appropriate for the new realities.

Click here to learn more about how to develop an effective housing strategy.

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What can state and local governments do?

Through the efforts of innovative states and localities, we've learned quite a lot about what can be done and what works when it comes to increasing the supply of affordable homes for working families. The options are many, and the goal of is to help you sort through and identify those that are best for your community.

After a detailed review of state and local housing policies, we've identified six broad roles that state and local governments can play to make housing more affordable. Because housing problems are complex, most communities with housing challenges will want to consider a comprehensive approach that includes policies within all or nearly all of these categories. Click on each category to go to the corresponding section of the policy Toolbox:

  • Expand Development Opportunities -- This includes making publicly-owned land and tax-delinquent properties available for development of affordable homes and changing the zoning rules to allow more affordable homes to be built. Communities facing disinvestment due to a rise in mortgage foreclosures can benefit from these policies to ensure that foreclosed homes are reestablished as affordable, productive properties to help stabilize neighborhoods.
  • Reduce Red Tape -- Expediting the approval process and re-thinking overly restrictive fees and regulations can create more affordable homes by reducing the time, risk, and cost of new development. These techniques can also be employed to encourage the rehabilitation and redevelopment of foreclosed homes and properties. Vacant homes have a destabilizing effect on established neighborhoods and anything that speeds the return of occupants to the homes helps stabilize the neighborhood.
  • Capitalize on Market Activity -- During times of strong housing markets, communities can tap the increased tax revenue associated with rising property values or provide incentives or requirements to include a modest number of affordable homes within new developments. Communities can ride the tide of a strong market to expand the supply of affordable homes. During times of weaker housing markets, communities can capitalize on market activity they generate through tax incentives. During these times, communities can use the policies in this section to ensure that affordable homes will continue to be a part of the local housing landscape when market-rate development resumes.
  • Generate Capital -- Promising approaches include leveraging federal funds through the Low-Income Housing Tax Credit program, which is administered by state housing finance agencies. Tax credits include a noncompetitive 4 percent credit and a competitive 9 percent credit. Other tools include issuing general obligation bonds for housing, and leveraging the support of area employers. The tools to generate capital may be impacted by an economic downturn. Programs like the LIHTC have been adjusted to account for the limited market for tax credits by allowing state agencies to convert some credits to cash. Other programs have seen funding decline because their funding is often tied to real estate activity, but these programs will likely remain valuable to incentivize or provide financing to help spur affordable housing production when the economy improves.
  • Preserve and Recycle Resources -- By recycling downpayment assistance (rather than providing grants), and using shared equity homeownership strategies, communities can help preserve the buying power of government subsidies and maintain long-term affordability. This category also includes efforts to preserve affordable rental housing -- a key policy that helps ensure housing remains affordable to working families.
  • Help Residents Succeed -- Investing in homeowner education and counseling and help families manage their credit, navigate the private mortgage market, and hold on to their homes when economic circumstances change. Tenant protection laws can be established to protect renters in the case of foreclosure and help them stay in their homes. An expanding set of tax incentives and building standards are being adopted at the state and local level to promote energy savings at home through building techniques and land-use changes that encourage energy and locational efficiency, thus reducing household utility and energy costs.
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Where do I find housing data for my community?

Chances are a great deal of data already are available on housing conditions in your community, but the information needs to be pulled together to paint a comprehensive picture. The place to start is with your local housing and community development agency. Communities that receive federal dollars (often passed through the states) through the HOME or Community Development Block Grant programs (CDBG) have to submit Comprehensive Housing Affordability Strategies as part of their Consolidated Plan that include extensive data on area demographics, housing needs and the local housing supply. Other government agencies, such as the local tax assessor's office, can be a source of useful data on areas where home values are growing or declining or where clusters of
vacant properties are emerging. Local Realtors and area lenders can share data on recent home purchases for neighborhoods in your community.

Another great resource to tap is your local community college and university. In addition to faculty members who may be available to do custom analyses of census or other data; you may be able to engage the services of students in the planning, architecture or economics department to conduct on-foot surveys of neighborhood housing and building conditions.

With some official sources of data, there may be a considerable time lag between data collection and release, and you may find that some of the data are a few years out of date. That’s why it is important to go beyond official data sources to talk to those in the know – Realtors, local lenders, residents active in community groups and others. Their insights can be invaluable and they often can pinpoint problems long before they show up in the official data.

Click here for a list of housing data resources on the Internet.

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How can my community fund its affordable housing efforts?

With limited federal dollars available for housing and growing shortfalls in state and municipal budgets, most communities have to get creative. Many communities pull funding together from a variety of sources, finding private and non-profit partners to leverage their resources and make them go further.  Listed below are several ways your community can fund affordable housing:

Tap into federal funding. New federal funding through the Neighborhood Stabilization Program (NSP) is available for states and localities that have been affected by widespread foreclosures. The initial round of NSP funding, known as NSP1, was authorized by the Housing and Economic Recovery Act (HERA) of 2008. NSP1 provided $3.92 billion in grants to states and selected localities based on a formula that allocated more funding to communities that had been greatly impacted by foreclosures. In 2009, the American Recovery and Reinvestment Act (ARRA), established two additional rounds of NSP funding, known as NSP2 and NSP-TA. NSP2 will provide $1.93 billion in competitive grants to states, localities, and non-profit organizations, and NSP-TA will provide $50 million on a competitive basis to organizations that provide technical assistance to NSP grantees.

ARRA also included $5 billion in weatherization assistance for states and U.S. territories to support the installation of energy conservation materials on low-income homes.

The Consolidated Plan merges into one process and one document all the planning and application requirements of four HUD block grants that can be used for affordable housing: HOME, Community Development Block Grants (CDBG), Emergency Shelter Grants (ESG), and Housing Opportunities for People with AIDS (HOPWA) grants. These funds are provided directly by HUD to large cities and urban counties, as well as to states, who allocate these federal grant funds to jurisdictions that do not receive money directly. Communities must submit a Consolidated Plan to receive these funds. Other direct HUD funding for new affordable housing development is provided through the Section 202 Supportive Housing for the Elderly and Section 811 Supportive Housing for Persons with Disabilities programs.

Click here to view a list of resources providing more information on the Consolidated Plan.

The largest source of federal funding for new development of affordable homes is actually provided not by HUD but through the Low-Income Housing Tax Credit administered by the Internal Revenue Service as part of the tax code. There are two types of Low-Income Housing Tax Credits: 9 percent and 4 percent credits. In most states, competition for 9 percent credits has traditionally been very heavy, however the economic downturn has limited the market for tax credits and has hurt developers' existing and proposed projects. The 4 percent credit is noncompetitive, and more could be done to draw down these credits. Click here to leave this section and learn more about expanding usage of 4 percent Low-Income Housing Tax Credits.

Crawford Square
Crawford Square, Pittsburgh PA -- photo courtesy of McCormack Baron Salazar
The Rural Housing Service (RHS), an agency in the U.S. Department of Agriculture, operates a broad range of programs to support affordable housing and community development in rural areas. RHS offers both direct loans and guarantees for mortgages extended by others. Under the Section 502 program, loans help low-income families purchase or rehab homes. The agency also operates the Section 515 program which provides low-cost mortgages for property owners to develop rental housing that is affordable to the lowest income rural residents.

Generate state or local funds. In addition to federal funds, many states and localities fund housing and community development from local revenue sources such as property taxes or general city or state tax revenue -- all of which have been affected by the economic downturn. Some communities earmark money from real estate transfer taxes to finance housing trust funds that, in turn, finance the construction or rehabilitation of homes. Some float general obligation bonds or use future tax revenues (tax-increment financing) to fund new housing efforts. Others levy impact fees
on new developments as a way of funding some of the required infrastructure for new developments, including linkage fees on new commercial development.  Click here to leave this section and learn more about generating additional capital for affordable homes.

Mobilize non-traditional partners. Faced with shrinking budgets, some communities are leveraging support for affordable homes in other ways. For
example, when employment markets are strong and affordable housing is lacking, employers face the problem of attracting and retaining workers. During these times, communities can engage employers by helping them implement employee benefit programs that provide homeownership counseling and financial assistance for downpayments or rent. Many communities work with foundations or other nonprofits able to commit resources for specific housing projects and programs in the community.

Click here to leave this section and learn more about leveraging employer commitment to affordable homes for their workers.

Use existing resources creatively. Communities can figure out ways to stretch their resources to go further. One strategy, implemented with great success in some jurisdictions, is recycling downpayment assistance. Instead of cash grants to families, downpayment assistance is structured as forgivable loans or as silent second mortgages that are repaid when the home is sold or refinanced and the money goes back into a pool to assist other homebuyers. To further extend and enlarge the buying power of public subsidies, in some places, communities receive a share of the price appreciation upon the sale of a home, in addition to their initial investment. All are ways to ensure limited money can reach more families. Click on one of these links to leave this section and learn more about recycling downpayment assistance and shared equity homeownership.

Recognize it's not all about money. Not all housing initiatives require money. Communities can enact policies that provide incentives to the private market to create more housing. Donating public land or facilities for conversion to homes by private or nonprofit developers is one option. When land costs are taken out of the development financial equation, affordable housing can often become feasible. Making the permitting and approval process less time consuming can help builders and owners move forward with plans to build or rehabilitate homes. Rezoning parts of the jurisdiction for housing, increasing allowable densities, or implementing inclusionary zoning policies are other possibilities that do not require dollars per se. Click on one of these links to leave this section and learn more about strategies for reducing red tape, expanding development opportunities or inclusionary zoning.
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How do we ensure that "affordable housing" stays affordable?

The public invests considerable resources creating affordable rental and for-sale homes for working families. Because public resources are limited, communities have a vested interest in ensuring that these homes stay affordable over time. For rental developments, policies to maintain long-term affordability include covenants requiring that new affordable developments remain affordable in perpetuity (or for as long as possible), together with realistic funding structures that make it possible for owners to make good on this promise. It is also important to put policies in place to preserve the affordability of existing affordable rental developments in danger of leaving the affordable inventory. To leave this section and learn more about the preservation of existing affordable rental homes, click here.

For for-sale homes, communities can adopt shared equity homeownership policies, such as community land trusts or shared appreciation mortgages. Shared equity homeownership represents a unique approach to affordable homeownership. Under this approach, a state or local government provides funding to help a family purchase a home. In return for this investment, the government entity shares in the price appreciation of that home. The public's share of the home's appreciation may be used in two ways; it can either be returned to the government in the form of a cash payment that can be used to help another family, or it can stay with the home, reducing the cost of that home for the next family.

By sharing the gains in home price appreciation with the public investor, shared equity homeownership results in substantial benefits now and for years to come. Homebuyers benefit from a substantially lower home price and the opportunity for significant home equity gains. Local communities benefit by retaining vital workers who otherwise couldn't afford to live in the communities they serve. And, by ensuring that the public's investment keeps pace with the housing market, shared equity strategies allow governments to help generations of families achieve homeownership with a single initial investment. Click here to leave this site and view Shared Equity, Powerful Results: Helping One Generation of Homeowners After Another, the Center for Housing Policy’s suite of materials on shared equity.

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How do we provide housing for those with special needs?

Some members of your community have needs that go beyond just shelter. Community members with such special needs may include people who are homeless or are at risk of homelessness, as well as those who have left other systems of care without a place to live, such as young people aging out of foster care or people leaving jail or prison. Others, such as the elderly, may have chronic, disabling health conditions. Still others may suffer from mental illness, HIV/AIDS, and/or substance use issues. In addition, some people face substantial barriers to housing stability because of domestic violence or other trauma.

Different approaches have been used to meet the special needs of individuals and families. One option is to provide counseling and other services to families who live on their own. Another option is to bring individuals together to an affordable development that offers specialized services. Many communities have had success building and funding supportive housing – the combination of permanent, affordable housing with services such as education, job training, medical and psychiatric assistance – that help people with special needs live more stable, productive lives. Proponents of supportive housing point out that, despite higher up-front costs to provide supportive housing, it may be cost-effective for a society as a whole. A study of more than 4,000 people with severe mental illness in New York City found that considerable cost savings result when these individuals are provided with stable, supportive housing as compared to leaving them stuck in the revolving door of high-cost crisis care, prisons, and emergency housing. Investing in a long-term solution can produce positive results for people with special needs and their communities. Click here to leave this site and learn about supportive housing.

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What strategies work best in rural areas and weak markets?

Housing needs are not confined to "hot" markets, coastal areas or urban landscapes. Housing needs are more pervasive, affecting families in all types of markets and in many regions throughout the country. In weak markets or in rural areas, home prices and rents are lower, but affordability still is an issue when low wages and salaries are insufficient for families to live in their homes without spending an excessive portion of their income. Some housing may be dilapidated because weak market conditions discourage their owners from investing in upkeep and maintenance. And, today, some communities have been particularly hard hit by foreclosures among homeowners.

Strategies to deal with these problems will differ from place to place, but much can be done to address these problems. Resources available nationwide, such as Low Income Housing Tax Credits and financing programs of the Federal Home Bank system, as well as state allocations of funding through the Community Development Block Grant and HOME programs, can be used to create more affordable homes in rural areas. The Rural Housing Service (RHS), an agency in the U.S. Department of Agriculture, operates the Section 515 program which provides low-cost mortgages for property owners to develop rental housing for the lowest income rural Americans. The agency also administers the Section 502 loan program to help low-income families purchase, build, repair, or renovate homes. Funds also may be used to refinance debts when necessary to help families avoid losing a home. Country Lane
Country Lane, Lakeville MN -- photo courtesy of LHB Inc.

To promote homeownership, many rural communities have had great success with the Self Help Opportunity Program. This program enables low-income participants to build their own homes, usually working together in groups on their neighbors' houses at the same time. Homebuyers use their own "sweat equity" to reduce the cost of their homes. Habitat for Humanity has successfully applied the self-help housing model throughout the country, and in the process become one of the nation's largest home builders. Many communities work closely with Habitat and other self-help housing developers to provide free or low-cost land and other support. Click on one of these links to leave this site and learn more about affordable housing in rural communities or to learn about Habitat for Humanity.

Early intervention, including financial counseling and emergency loans and refinancing can help families forestall foreclosures on their homes. Click here to leave this section and learn more about ways to help residents avoid foreclosure and equity loss. Other topics addressed by that are of particular interest in weak-markets include: strategies for dealing with vacant and abandoned properties and strategies for incentivizing market activity through tax abatements and tax increment financing.

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Where can I learn more about affordable housing solutions?

You've come to the right place! is a guide for policymakers and practitioners who want to create more affordable housing opportunities in their communities. We present solutions -- do-able, proven solutions -- that are working in states and localities around the country. We lay out more than 20 specific programs and policies organized into six overall strategies -- and explain the details in plain English so that you can adapt these ideas for your community. Furthermore, we've culled through and summarized dozens of print and online resources so that you won't have to. Where to start? We suggest beginning with building a comprehensive housing strategy for your community and then moving on to policy Toolbox.

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How does the government support homeownership?

A number of different government subsidies are designed to reduce the costs of owning a home. The largest is the federal income tax deduction for mortgage interest. To obtain the benefits of the mortgage interest deduction, families have to make enough money to justify itemizing their deductions on their tax returns (as opposed to taking the standard deduction). For this reason, many working homeowners do not receive the benefit of the deduction.

However, these families may be eligible for other forms of government support for homeownership. State or local policies to reduce the cost of homeownership include: below-market interest rates on mortgages from a state or local housing finance agency; downpayment assistance to help families afford the costs of private-market homes or programs to fund the construction of homes that sell for a reduced cost. Working families also benefit from homeownership education and counseling, which can be helpful in navigating the homebuying process. By using shared equity strategies, communities can ensure that a single investment in affordable homeownership can help one generation of homeowners after another.

The government also began providing additional support to first-time homebuyers in the form of a tax credit beginning in late 2008. The Housing and Economic Recovery Act of 2008 included a $7,500 tax credit for first-time homebuyers. This tax credit was increased to $8,000 as part of the American Recovery and Reinvestment Act of 2009, and HUD subsequently announced that qualified borrowers could immediately apply the $8,000 towards their downpayment and closing costs. In addition, several states and localities have also established comparable first-time homebuyer tax credit or bridge loan programs.

The federal government also provides support for homeownership through foreclosure prevention and housing market stabilization programs. In early 2009, the Obama Administration initiated the Making Home Affordable (MHA) Program. MHA is a comprehensive plan to stabilize the U.S. housing market by assisting 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures. The program provides detailed guidelines for loan modifications and refinancing by authorized servicers and covers loans issued by five of the largest servicers, as well as those owned or securitized by Fannie Mae or Freddie Mac. All in all this program covers over 75 percent of all home mortgage loans in the U.S., although the actual number of loans being modified is much more limited.

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