When the DC Auditor’s Office released its report on the District’s Housing Production Trust Fund earlier this week, the headlines started rolling in right away. City Paper called it “damning.” Think Progress spoke of “astonishing failures.” But a deeper dig into the report’s talking points reveals that the truth in this case is a good bit less sensational than promised.
Where it misleads
The Housing Production Trust Fund is DC’s number one source of affordable housing dollars, and it has a hand in the construction of the vast majority of the District’s affordable homes—more than 10,000 such homes in the past 15 years, according to the audit. The trust fund is legally required to be used as gap financing, meaning that it can fund no more than 49% of any unit’s cost. This allows the fund to do significantly more work and touch significantly more projects than if it were the sole funding source for every unit it produced.
Given the variable level of funding each project receives, plus the fact that the size of DC’s investment in affordable housing is unrivaled in the US, it’s almost impossible to compare what the District is doing with other cities. But that’s exactly what this report tried to do.
The audit found that the trust fund’s average subsidy per unit was $61,700—a number that doesn’t seem bad compared to the District’s median home value of more than $550,000. But the report instead compared that number to Philadelphia and Seattle’s trust funds, which the auditors determined spend only $21,190 and $36,000 per unit respectively.
Even without comparing the size of the funds being managed, these numbers don’t take into account different amounts of federal funding, different income levels being served, or the vastly different markets that they’re working in (Philadelphia’s median home value is a full $400,000 lower than DC’s). Nevertheless, that $61,700 per unit and its comparison to other cities has been presented as the end-all-be-all in determining the fund’s efficiency.
Another point that the audit and its media coverage have overblown is the state of the fund’s revolving loans. All the money that the trust fund sends out is structured as a loan, set to be repaid based on a project’s cash-flow or the expiration of its affordability covenants.
The audit notes that in the past four years, only 4% of the fund’s resources have come from loan repayment. But as the Department of Housing and Community Development’s (DHCD) Director Polly Donaldson has noted, delayed repayment is a key feature of the fund, not a flaw. Deferred loans allow smaller developers and non-profits the time they need to repay District funds. To put it another way, it’s no wonder this audit’s 15-year scope didn’t capture 40-year loans.
The revolving loans have also caused a flap with the somewhat inexplicable revelation that almost all of the fund’s long-term loans have been written off as unrecoverable. While repayment of 40-year loans on affordable housing projects may not be 100%, it’s certainly not going to be zero.
Finally, the audit causes confusion by not specifying the administrations responsible for some of its worst findings. For instance, while it’s a serious problem that DHCD had to give back $16 million in federal funds, it’s also important to note that that bungling came under a previous administration. It’s certainly not the sort of thing that should keep Councilmembers from investing more in the trust fund now.
Where it shoots straight
The report is certainly helpful in some areas. It’s no secret that administrative costs for the trust fund have been too high, and the audit also points out a few instances in which small amounts of money were spent on non-housing projects, like bicycle education. Those issues are real, and they need to be addressed.
The report also points out that the trust fund hasn’t been meeting its legal requirement to spend 40% of its funds on very-low income residents, those making less than 30% of the Area Median Income. It’s an important problem to address, one that has come up frequently in Council hearings over the past few months.
The trust fund is already doing better than it seems, however, when other programs are taken into account. While trust fund income limits may not be low enough to meet requirements, those units are often cross-paired with rent supplement programs that serve residents under 30% AMI. Because those units require so much funding to produce and operate, it often requires more than one source of subsidy.
The real take-away
At the end of the day, the lede is buried, both in this post and The Washington Post. The Housing Production Trust Fund has produced or preserved more than 10,000 affordable homes over the past 15 years. That’s over 10,000 families who would otherwise almost certainly be rent burdened—if they managed to stay in DC at all.
There’s certainly room to improve the trust fund. But that improvement has to come in the context of the incredible work the fund has done and continues to do. Otherwise, this audit will cause more harm than good for the families it hopes to serve.