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Transportation, The Hidden Cost

The metro line shutting down a couple of weeks ago caused me to reflect on a couple of things. The first is how integral the metro train is to many of us who live in the D.C. metro area. Also, I immediately recognized that the shutdown would have a disproportionately negative impact on certain workers. While many people I know had the opportunity to telework, I realized that certain workers would not have that privilege, and I could see how this shut down would have a notable impact on low-income workers. For many D.C. residents, bus is a preferred method of transportation, yet, in general, commuters living further away from downtown DC or in Maryland or Virginia have less public transportation options.

The metro train is a key source of transportation for residents who live in the area, and although the metro shutdown affected people of all income levels, those of higher incomes had greater access to transportation alternatives (such as car services like Uber or taxi cabs), are more likely to own a vehicle, or have greater flexibility to work from home than lower wage earners. However, as I looked into this matter further, I realized that the truth is that the lack of transportation is not a phenomenon that low-income people faced only during the metro shutdown, but they are at a disadvantage when it comes to transportation access all year around.

This issue of access to transportation goes hand-in-hand with access to affordable housing. Affordable housing isn’t truly affordable if a significant portion of one’s income is spent on transportation. Transportation is now being recognized as the “hidden cost” of housing. Traditionally, people have been identified as cost burdened if they spend more than 30% of their income on housing. However, those who study affordable housing and transportation have begun using a rule that “states that housing and transportation (H+T) should be no more than 45 percent of a household’s income.”

To complicate this issue, housing around metro lines is growing increasingly more expensive, due to the demand generated by the high income earners that are moving into those areas. This makes it harder to build and preserve affordable housing near metro lines, and it is contributing to price hikes of housing in these areas. This trend is pushing lower income people away from transit accessible housing, to areas where rents may be less but their transportation costs are greater. Over the years we have seen this become increasingly problematic in D.C., but it is also a problem in many other cities across the nation. At a Brookings event last month, Housing Secretary Castro spoke on this issue, stating, “We need to stop stacking and segregating poverty. Improving transportation and fair housing are keys to equality and opportunity”. Hopefully, as we continue to advocate for affordable housing options we will find innovative ways to address these two needs simultaneously.

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What Government Can Do To Close The Racial Wealth Gap

As discussed in recent blogs historically, the government has made intentional efforts to increase the wealth of certain demographics through past legislation, like the Social Security Act and the FHA, while systematically preventing other groups from gaining wealth. In addition, we have current policies in place that negatively affect minorities’ abilities to acquire wealth, such as our laws pertaining to our criminal justice system, or laws that excluded farmers from work place protections. Furthermore, we are currently in an affordable housing crisis, and some cities have called a state of emergency in regard to homelessness. It is estimated that only“65 affordable units exist for every 100 extremely low-income renters, and only 39 units are available per 100 extremely low-income renters”. Despite the lack of investment in affordable housing, for those of modest incomes the wealthiest people in this country receive the largest amounts of financial housing assistance, mostly in the form of the mortgage interest deduction. Moreover, the households with incomes of $200,000 or more receive a larger share of housing aid than households with incomes of $20,000 or less, which are disproportionately families of color. The aforementioned policies are just a few examples of government legislation that has contributed to the racial wealth gap, and has increased the wealth gap between the rich and the poor of all races.

The issue of wealth inequity in this country has been a growing topic of discussion in certain non-profit and community circles, in academia and politically. These disparities have been exacerbated due to the Great Recession. Collectively, Americans lost trillions of dollars due to the recession.  However, the effects were especially damaging to the wealth of African-Americans, whose net worth fell by 34%, and Latino wealth, which fell 15% respectively; white wealth rose 2% during that timeframe. The inability to accumulate wealth directly affects the financial stability of families and can be seen through the fact that the average white household has a little over one month’s income in accessible savings, compared with only 12 days for the average Latino household and five days for the typical African-American household. These wealth disparities are so great that it puts Latinos and African Americans in a position where the slightest emergency, or change in work schedule, could have a tremendous impact on families’ savings.  These issues need to be addressed in order to help families build wealth and become economically mobile. Currently, research is being conducted on how to decrease the wealth gap.

In January, the Annie E. Casey Foundation released a report listing four proposals on how to close the wealth gap. All of these suggestions have been shown to lessen the gap in the states where they were implemented. The first suggestion is making myRAs (My Retirement Account) permanently accessible through banks and employers, and increasing awareness about them. The purpose of this program is to jump-start people’s retirement savings.  These accounts would be established by employers, and would be invested in government savings bonds, so they won’t have the risk of losing principal.  Furthermore, myRAs wouldn’t require an initial fee. Another benefit of myRAs, is that if an emergency occurs, and the participates need to access the funds, they can do so risk free. Once $15,000 has been saved in the myRA, the funds must be rolled over into another account, and people should be encouraged to place their funds in vehicles where they can receive greater returns. According to the Annie E. Casey Foundation, “If everyone eligible saved the maximum, myRA could reduce the black-white wealth gap by 5% and the Latino-white gap by 7%”.

Another proposal that would reduce the wealth gap is raising asset limits for public benefit programs. Currently, people who have more than $1,000 in savings get dismissed from TANF. However, $1,000 is such a small amount; people need more money than that in their savings in order to be prepared for rainy days, or in order to make an investment that could help uplift themselves out of poverty. Consequently, this $1,000 limit creates a disincentive to earn more money or to save.Federal policy should permit program participants to have at least $12,125 in savings — the equivalent of three months’ income for a low-income family of four.” In Ohio and Virginia, where the limits were raised, there was not an increase in the number of people who tried to use TANF. Furthermore, allowing families to keep assets that provide adequate transportation and housing, as they transition out of assistance programs, and work to become self-sufficient can have a positive impact in reducing the wealth gap.

The third proposal is “building savings from birth.” This proposal recommends that the federal government establish universal savings accounts for each child that is born. A modest deposit would be placed into each child’s account upon birth, with the greatest amounts of funding given to babies from lower-income families. The goal of this program is to have a system in which money is saved for children, so once they become 18, they can use the funding to pay for higher education, training, a business or a home. This program would be costly, but “depending on funding and participation, these accounts could reduce the racial wealth gap by about 20 to 80%, it would increase the wealth among all groups, and reduce dependence on public benefits, increase consumer buying power, boost investment in businesses and homes.”

The last proposal is a concept that MANNA knows well, which is expanding access to homeownership. In order to increase access to homeownership, The Annie E. Casey Foundation recommends expanding the Family Self-Sufficiency program. The program is implemented through the U.S. Department of Housing and Urban Development (HUD). The program helps those with housing vouchers, or who live in public housing, increase their income, build assets and increase their financial stability. “Through the program, an escrow account is established for participants. As their earnings rise, they pay more rent, but the amount of each increase is deposited in their accounts monthly over five years.” At the end of the five years, the money can be used for any purpose they would like. Participants of the program also receive coordinated services, such as “child care, transportation, education, job training, employment counseling, financial literacy, and homeownership counseling, among others”. Currently, 70,000 people use the program, but 3 million people are eligible.

The policies and programs I have discussed are a sample of some of the proposals out there, that the government could use to reduce the racial wealth gap in this country. I am not suggesting that these recommendations are the cure for the gap, but they are creative ways to address wealth disparities. These are not the only potential solutions that exist, but the aforementioned programs have been tried, and have successful results. Maybe the best policy for addressing this gap isn’t one that I have mentioned. Perhaps the best policy is one that has not been created yet. However, what I can assure you is that more than one policy is needed in order to close this gap. It will take multiple well thought out policies, and time to fix this problem, just like it has taken numerous policies and centuries of inequitable legislation to create these issues.

Housing For All

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A couple of weekends ago, on March 5th, over 1,000 people attended the Housing for All Rally, which was hosted by CNHED in partnership of the Way Home Campaign. The title of the rally, ‘Housing for All’ is fitting, because everyone needs quality housing, some would even argue that housing is a fundamental right. Quality housing is important regardless of your socioeconomic status and despite the form of housing that you live in. This is why the government subsidizes housing in many different ways. This can be done through tax breaks, subsidizing land for development, distributing funds for the development of supportive housing, etc. Different forms of subsidized housing benefit different socioeconomic groups. Although the term subsidized housing is typically associated with low-income people, the government provides financial assistance to people of all economic levels, with the bulk of housing assistance given to the wealthy.

One federal program that assists higher income people is the mortgage interest deduction, which allows owners to make tax-free interest payments on their mortgage loans. This program is framed as one that is supposed to assist the middle class with home purchases. However, it is mostly beneficial to people with higher incomes. The program allows homeowners to deduct up to a million dollars in interest on mortgages, even when the loan is used to buy a secondary home. Consequently, the mortgage interest deduction can be seen as an incentive to buy expensive homes or vacation homes, and does not necessarily incentivize the purchase of reasonably priced homes for the middle class.

The mortgage interest deduction isn’t the only tax deduction that higher income people benefit from as a result of owning a home. “In fact, 70 percent of the tax savings from the mortgage interest and property tax deductions accrue to the top income quintile, 8 percent to the middle quintile, and almost nothing to the bottom two quintiles”. According to available data, more than half of federal housing spending provides financial assistants to households with incomes above $100,000.  “The 5 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 20 million households with incomes of $20,000 or less, even though lower-income families are far more likely to struggle to afford housing.”

These statistics may surprise you, especially because government spending on housing isn’t typically associated with the wealthy. This disparity is in part due to the fact that there is more housing assistance available for homeowners than for renters. This is not an inherently negative thing, however, the majority of low-income people are renters, which leaves them excluded from much of the housing assistance that exists. In this country, only “65 affordable units exist for every 100 extremely low-income renters, and only 39 units are available per 100 extremely low-income renters”. Unfortunately, about only a quarter of low-income families eligible for rental assistance receives it, and waiting lists for assistance are hopelessly long or closed in many parts of the country.

This 1 to 4 ratio indicates a serious need for affordable housing in our country, and more specifically, a need for affordable housing in D.C. The rally brought together residents, council members, and the mayor, to call for rent control, ending chronic homelessness, and ensuring affordable housing. There were many powerful testimonies at the rally, but the one that stuck with me the most was given by a man who was formerly homeless. He spoke about how good it felt to finally have keys to his own place, and how a home not only protects you from the physical elements of the outdoors, but it also protects you emotionally, by comforting you, and giving you a place of solitude after a long day. In our current society, higher income earners have greater access to housing, and are given greater financial assistance in order to secure it. Now it is time that we ensure housing for all.

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Not All Policies Are Created Equal

One’s beliefs regarding why people are low wealth, low-income earners influences their opinions of how to combat poverty. When forming ideas about the causes of poverty, and the racial wealth gap, it is important to acknowledge the legislative policies that initially created this gap, and those policies that continue to expand it today.

In the last blog, I discussed how the G.I. Bill of 1944 and the Social Security Act of 1935 enabled many Whites to accumulate wealth and expanded the White middle class, while minorities were excluded from the benefits of these bills. I also discussed how redlining practices were enacted, and led to banks offering few if any financial services to minority neighborhoods and, as a result, forced those communities into economic decline. Although these laws are no longer in place today, we still have policies that perpetuate inequality, and widen the wealth gap.

Even institutions, laws and policies that appear to be non-monetary in nature have negative financial impacts on communities of color, and lead to the widening wealth gap. For example, current laws deny certain workplace protections in the farming industry, which disproportionately affect Latino children. In our criminal justice system, Blacks and Latinos are disproportionately incarcerated, and are given lengthier sentences for the same offenses committed by their White counterparts. And inequality is even seen in our healthcare system: many US southern states declined Medicaid expansion, which has a disproportionate impact on African Americans since 57 percent of the African American population lives in the south. Such policies exacerbate the disparities between White wealth and minority wealth, and end up representing a form of structural racism.

Unfortunately, the aforementioned policies are not the only ones that contribute to wealth disparities in this country. Inequities can be seen throughout our society, especially in the housing and lending arena. In recent years, banks have been sued for predatory, race-based lending practices, and more and more articles are being released about Blacks and Latinos being discouraged from moving into White neighborhoods, even when they are better qualified financially than their White peers. It is amazing that 82 years after the Federal Housing Administration implemented redlining (which ended in 1968) there is still discrimination in our housing market. This discrimination occurs, despite the fact that we know that exclusion in the housing market has accumulative effects.

When home values and residential patterns are dictated by race, minority communities suffer, and they are left with “fewer sources of family wealth, as well as fewer investments in, and limited services”.  As a result of how our tax system is constructed, local property taxes help fund primary education; consequently, minority communities, which tend to have homes of lower property value, often see a negative effect on school quality. The quality of schools affects students’ likelihood to matriculate to higher forms of education, which reduces their chances of obtaining a high quality job, and accumulating wealth (in which they are already likely to be generations behind). The effects of current laws and policies, in part, explain why White households hold nine times more wealth ($110,637 on average) than households of color ($12,377 on average). It is clear that discriminatory policies have a negative cyclical effect on minority communities. They create inequality, which leads to the lack of opportunity, which in turn leads to more inequality and greater wealth disparity.

Disparities and Poverty

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The issue of race-based income and wealth disparity in the United States is ingrained in our history. As the country continues to progress, and select groups see large financial gains over generations, other groups have been systematically left out. There are countless numbers of nonprofits and government programs that exist to give aid to those who are impoverished in our country. However, many of these services simply help people get by. The big name government assistance programs in particular i.e. TANF, EITC, and SNAP are able to aid millions of Americas, but none of them deal with the issue of wealth building, and some even have asset limits in regards to how much you can have in savings and still access the programs. Furthermore, when there are budget cuts to these programs or people no longer qualify due to their incomes, or they have exceeded their time limit, they are left to struggle. Our current method of addressing income disparities do not provide a plan to enable recipients to become economically mobile.

It is important that we discuss the root causes of poverty, so we can learn how to combat it. There are two mainstream explanations for poverty. The first one is the idea that people are impoverished due to decisions they have made (i.e. teenage pregnancy or due to cultural attitudes, a lack of value placed on work or education). The second common explanation states that poverty is caused by forces beyond people’s control (i.e. a poor job market or disadvantages due to intergenerational poverty) (Darity et al 2013). These two viewpoints are quite different, and you can probably imagine how one’s beliefs regarding the causes of poverty could impact their perception and attitudes towards those who are impoverished. However, what these explanations fail to address is the role that the government has played in causing some communities to become disadvantaged, and in exacerbating the race wealth gap.

Savings and homeownership are two factors that contribute to income and wealth. However, African American, and Latino families are behind white families in both of these categories. 71% of whites own their homes in the U.S., compared to 41% of blacks and 45% of Latinos. “In addition, African Americans (38 percent) and Latinos (35 percent) are over twice as likely as whites (13 percent) to hold no financial assets at all and to have no or negative net worth” Based on your beliefs about poverty, and its root causes, you may have some assumptions regarding why such disparities exist. However, it is important to look at these inequities through a historical lens as well.

There are numerous federal, state and local policies that have been enacted with the distinct purpose of increasing the wealth of white Americans, and leaving minorities economically and socially immobile. Some policies included the Social Security Act of 1935, which enabled several states to deliver more adequate assistance to the elderly, those with disabilities, and dependent children. The act also provided maternal and child welfare, public health, and the administration of unemployment compensation laws, but it intentionally excluded farmers and domestic workers from its provisions with the purpose of denying aid to African Americans who commonly held those positions. The GI Bill of 1944 is also on this list. This piece of legislation offered college tuition and low-interest home loans to millions of veterans after WWII. The bill is praised for expanding the middle class. However, the majority of the African Americans who returned from the war were denied the benefits offered in this bill. Not only were they denied the free education and affordable housing, but white only suburbs were created, and white flight began in the cities. Meanwhile, the Federal Housing Administration started the practice of redlining which prohibited banks from offering mortgages and other financial services based on race. This prevented communities of color from purchasing and selling their homes, and starting businesses. As a result, certain minority communities went into economic decline.

When addressing the wealth and income gap between various racial groups, it is important to look at the policies that have caused damage to communities of color and evaluate what new policies and programs can be enacted in order to repair them. The effects of past policies, especially those related to housing still exist, and not just symbolically or as relics of the past. Certainly the racial demographics of today’s neighborhoods and the amount of wealth one’s family has accumulated over generations has been heavily influenced by past legislative decisions however, discriminatory policies still exist today. Stay tuned for another blog post or two on this topic, looking at current day discriminatory policies as well as policy solutions to address the racial wealth gap.

Ensuring Affordable Housing, Ending Chronic Homelessness, & Building a DC where all Residents Thrive

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The Washington region is home to some of the wealthiest counties in the country; however, there are many households that are struggling to get by on minimum- or lower-wage jobs.  Despite these income disparities, Washington, DC is a city with one of the highest costs of living, which makes finding quality, affordable housing difficult for many residents. Thanks to passionate residents, housing advocates, and elected officials, housing issues are in the spotlight, and some of our housing concerns are currently being addressed.

Homelessness can stem from various causes, such as “insufficient income, the loss of a job or health insurance, rising rents, physical and mental disabilities, and domestic violence.” People become especially vulnerable to these conditions when there is a lack of affordable housing and permanent supportive housing options. For most people, homelessness only lasts for a few months or less, however, there is a small percentage of the homeless population that experience homelessness for years.

It is important that we advocate to ensure affordable housing, to end chronic homelessness, and to build a DC where all residents thrive. However, under current conditions, as long as working people are unable to find affordable places to live, homelessness will continue to be an issue, and this shouldn’t be the case.  According to the Urban Institute, “increasing the supply of affordable rental units and permanent supportive housing would reduce homelessness in the region”. Correspondingly, these are the types of housing supports that we have been continuously fighting for in the District. Last year, housing advocates fought for $100 million dollars to be put into the Housing Production Trust Fund, and this was one of the issues that we rallied behind at last year’s Housing for All Rally. The mayor listened, and that amount was allotted into the fund.  As a result of those efforts, last month, the mayor announced that she will be using nearly $82.2 million dollars from the Trust Fund to take on 12 affordable housing projects. The plan is to preserve 466 units of affordable housing, while producing 338 new units. This development will take place in most of the wards, and they will house approximately 1,760 DC residents.

Strides are also being made towards ending chronic homelessness. Just a couple of weeks ago, the Mayor announced her plan to close DC General, and replace it with eight new family shelters that are to be developed by 2018. The goal of these shelters is to be clean and safe neighborhood-based facilities that have accommodations for children. Furthermore, these shelters are expected to help improve the lives of those living there by providing residents with resources such as housing assistance, and job placement to help them overcome homelessness.

Neither the aforementioned 12 affordable housing developments nor the eight new homeless shelters will be enough to end homelessness or DC’s affordable housing crisis. However, they are signs that our voices are being heard, and they will make a difference in the lives of thousands of DC’s residents. However, we have to continuously advocate for a full continuum of housing, from supportive housing up to homeownership. It is important that we all come out to this year’s housing rally on March 5 so the Mayor can see that housing is still important to us, and that it is necessary in order to build a DC where all residents thrive.

D.C.’s Road to Providing Safe, Quality Shelters for Its Homeless

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The issues of homelessness have been in the spotlight this past week, both on the local and national level. There has been media attention around the President’s final budget proposal, in which it is anticipated that he will propose to allocate $11 billion in funding to address homelessness among families over the next 10 years. Also, this past week, Mayor Bowser announced her plan to close D.C. General hospital, and to replace it with eight smaller homeless facilities in each ward. Meanwhile, in the housing advocacy world, CNHED and its affiliate organizations are planning our annual Housing for All rally.

If society’s job is to support and protect its most vulnerable populations, then ending homelessness should be a constant societal goal. This issue is especially pressing during this time of year, when temperatures dip below freezing. One way in which D.C. tries to help its homeless population is through the right-to-shelter law. This law requires the city to provide “temporary emergency housing” to anyone who seeks it when conditions are forecasted to reach 32 degrees or below. Under the Bowser administration, the right-to-shelter has been extended to a year-around policy. Her administration believes that year-round access to shelter, “Would not only help individuals and families facing a crisis regardless of the time of year, but also start chipping away at the flood of demand for shelter that occurs once hypothermia season begins.”

On any given night, there are 7,784 homeless persons in the District of Colombia, this includes those living in shelters, in cars, on the streets or in other circumstances in which they are without a home. It is imperative that we find solutions to this crisis. Hopefully, replacing D.C. General will soon be a part of this solution. Closing D.C. General is about improving the lives of the families that live in the shelter. The shelter is home to 260 families, including around 400 children.

D.C. General is known for being “too big, too old and physically detached from the services and supports that individuals experiencing homelessness need.” Some residents have described it as being unsanitary, with litter on the ground, people tossing used baby diapers out of the windows, and adults using drugs outside. The restrooms are reported as being nasty, and combine that with the infestations of roaches, mites and bed bugs, it’s no surprise that residents, especially children, often get sick and contract skin infections. Despite these deplorable conditions, maintaining the facility is pricey.

It is reported that staff cleans the bathroom every two hours and there are exterminations twice a week, and despite the seemingly neglected nature of the building, $1 million is spent monthly on its upkeep. City officials and homeless advocates both attest that D.C. General “has never been properly maintained because most saw it as a Band-Aid for the city’s homelessness problem.” The facility was first used as a temporary shelter on cold nights in 2001, when the family shelter, D.C. Village, became overcrowded.  However, the site has only gone downhill from there, and the D.C. Department of Human Services and the contractor running D.C. General report that at this point the facility cannot be fixed.

Given the current climate around homelessness, and the urgency of the condition at D.C. General, the mayor’s proposed plan could not come soon enough. The goal is for these neighborhood-based facilities to have private rooms that are safe and clean. There will be spaces for the children, where they can play and do homework, and there will also be services that are proven to help families get back on their feet, such as housing assistance and job placement. However, not all of the development details are ideal.

Initially, there was public debate about the mayor’s plan not offering private restrooms for all of its families. Some view private restrooms as a way to provide dignity and safety to the residents, while others see it as an unnessary cost. Nevertheless, City Council still approved the Mayor’s plan to move forward with the smaller sites. Now that the Mayor has revealed the locations for these 8 shelters, there is public debate about the locations, and the lack of transparency in the decision making process. Some of this dissatisfaction is rooted in NIMBYISM, while part of it may stem out of genuine concern for the wellbeing of the shelters’ residents. Almost everyone can agree that closing DC General is necessary. Hopefully the Mayor can develop a compromise, or get the support she needs to begin development soon. It is important that the new shelters rectify the issues at DC General, because providing housing for the homeless is important, but ensuring that the housing is livable and creates pathways towards mobility is equally important.

 

 

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The Elderly Deserve Affordable and Accessible Apartments

Large numbers of elderly, ages 50-64, are transitioning from homes to apartments. Some are making this move due to financial constraints, while others see apartments as the best option for their current lifestyles. As of 2005, households aged 50 and above now make up more than half of the growth among the renter population. This demographic of renters are predicted to continue to grow as they age into their 70s and beyond. Despite the steady increase of the elderly’s presence in the rental market, many apartments are failing to meet their needs in regards to affordability and accessibility. More than half of the growth in elderly renters stems from the decline in homeownership due to the recession and foreclosure crisis. The homeownership rate amongst 50-64 year olds between 2005 and 2013 decreased five percentage points ; this is greater than the national decrease in homeownership during that same time frame.

There are various reasons why some elderly people choose to move to apartments. Some move because staying in their homes has become too costly. Others move because apartments are easier to maintain, they are usually single story units which make them easier to get around in, and often times they have easy access features such as walk-in showers. Despite these benefits, the elderly still face some hindrances as they enter into the apartment rental market. In many cities, like DC, the cost of apartment rentals are skyrocketing and an increasing number of renters are becoming cost-burdened. High rents especially affect the elderly, who often have greater financial difficulty than the general population. Over half of renters aged 65 or older are cost burdened, which means they spend 30% or more of their income on housing. Furthermore, “the number of severely rent-burdened seniors, spending more than half their income on housing, increased by 34 percent, from 1.4 million to 1.8 million” between 2005 and 2014 – 43 percent of these seniors survive off of Social Security income alone. This financial strain is difficult for the elderly, who need their finances to cover healthcare, transportation, food, and in some cases, retirement savings. Although rents are increasing across the U.S., social security payouts will not increase this year, which increases their need for affordable rentals.

Although the easy-access design is what attracts some seniors to apartment rentals, few rentals actually have all of the amenities seniors need in order to maintain independent lifestyles. There are five basic universal design features that benefit senior citizens, which are “no-step entry, single-floor living, wide hallways and doors, electrical controls reachable from wheelchair height, and lever-style handles on doors and faucets”.  However, less than 1% of apartments actually have these features. Newer apartments are most likely to offer these accommodations, yet only a few of them do. Additionally, newer rentals tend to be more expensive, and lower-income households with disabilities are less likely to afford them. Luckily, there is a program available to DC residents who would like to stay in their homes, but need accessibility accommodations.

The District of Columbia Office on Aging (DCOA), in collaboration with the Department of Housing and Community Development recently launched the Safe at Home Program, to provide our elderly and disabled population with accessibility adaptation grants, which they can use for home modifications, in order to increase the accessibility of their homes.  This program can lend a tremendous amount of aid to disabled and elderly residents who would like to stay in their homes. However, there have to be resources available for those whose best option is to move to an apartment.

The development of affordable housing benefits everyone and now we are seeing just how important it is to seniors. Renters 50 and over now comprise a third of the renter population, and renters 40 and over represent half. It is clear that now is the time to make sure that we have a sufficient amount of affordable and accessible apartment rentals. Whether this is by developing affordable units specifically for seniors or increasing the number of handicap accessible units in new developments this is certainly an affordable housing issue that can’t be ignored.

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DC’s Home Loan Assistance Program, Love it or Hate it

It is my observation that a lot of people have opinions about DC’s home loan assistance program, HPAP, but few people are actually knowledgeable about the program. As a result, there is a lot of misinformation, misinterpretation, and misunderstanding about the program and the people who qualify for an HPAP loan. In order to address this disconnect, I have taken the time to compile a list of opinions and beliefs about HPAP, and I will briefly address them with facts.

1. One opinion about HPAP is that the government should not make it easier for low income households to purchase homes they can’t afford.

Recipients of the HPAP program go through a stringent credit check, and home buyer education programs. They qualify for their first trust mortgage without HPAP, but they need help to be able to afford the full cost of the home including downpayment and closing costs. In short, HPAP helps residents afford their home, and get assistance from a zero interest second mortgage.

2. Some people have concerns about HPAP that stem from The Washington Post’s 2012 article. The article states that “Nearly one in five buyers participating in the city’s 35-year-old loan program for first-time homeowners is behind on mortgage payments, city officials said — a default rate at least three times higher than the overall rate in the region. Nearly 50 buyers have received notices of foreclosure in recent years, while more than 50 others have struggled with homeowner association or utility liens.”

It is likely that those statistics are inflated and misinterpreted. The Washington Post’s article, criticized HPAP for having a 1.8% foreclosure rate. However, FHA and Fannie Mae foreclosures on loans originated during the same timeframe are significantly greater than that, and reflect home buyers with higher incomes and greater household assets than the typical HPAP borrower. Furthermore, this less than 2% foreclosure rate is small compared to the District’s overall foreclosure rate of 8.5%.

In addition, the Post’s critiques of the program are misinformed. A lot of HPAP issues had to do with the HPAP loan servicer, not the HPAP borrower. At times, the loan servicer was late in sending out notices to inform people that it was time to begin repayments on their loan, and when notices were sent out, they didn’t have any mention of HPAP on them, so homeowners believed that the notices were a scam. There have also been instances of the servicer marking HPAP borrowers delinquent when they were in fact not delinquent. The attention regarding this issue misrepresented HPAP borrowers, and their ability to pay their loans. As a result, these matters have been brought up in numerous public hearings and meetings, in order to resolve these claims and address HPAP servicing issues.

3. There is also a concern of moral hazard in regard to HPAP. There is a fear that the easier we make it to borrow, the more people will borrow and the more difficulty they will have paying back bigger loans.

HPAP Chart

However, this isn’t necessarily the case. There are currently price caps created by HPAP ratio calculations and compensating factors; the maximum a person is able to borrow at this time is $50,000. HPAP allows people with the lowest incomes to borrow the most money because they have less money to begin with, and need more assistance to purchase their home. Currently, the City Council, along with raising the maximum loan amount to $80,000, is asking DHCD to come up with a different HPAP repayment plan for the lower income borrowers. Practices of other high-priced cities with larger purchase assistance amounts suggest that deferring repayment of purchase assistance loans until future resale or responsible cash-out-refinance is the best way to go.
The chart above outlines income, the maximum HPAP loan amount that income qualifies for and the potential maximum cost of a home; these numbers are based of a 38% housing to income ratio and a 5.5% interest rate assumption. If an HPAP loan plus someone’s own savings allow them to get a conventional loan (which provides a lower interest rate and no mortgage insurance), they will be able to responsibly afford a higher priced house. Per the chart above, there are limits to how much people are allowed to spend on their new home, set by HPAP guidelines and tightened private lending standards. Recipients don’t have the option of borrowing all the money they want.

4. Based on some people’s understanding of HPAP, they believe that in 5 years when the down purchase payment assistance loan comes due it will be unlikely that a household making $42,800 or as much as $50,000 will be able to afford a $248,255 house (in reference to the chart above).

This line of reasoning is incorrect. HPAP buyers start paying on their mortgage, insurance and any homeowner’s fees from day one. Also, when someone is purchasing using HPAP, most are also receiving a 5 year tax abatement, which is calculated in the original ratios for their first trust mortgage. So their ratios actually start off much lower than what HPAP allows, putting them in a place to afford their future property taxes (which will be lower due to the DC Homestead Deduction, which lowers someone’s tax assessed home value by over $72,000) and their HPAP payment.

Furthermore, under today’s underwriting guidelines, HPAP underwriters calculate the total monthly debt which includes: repayment to HPAP in year 6, the mortgage, taxes, insurance, and other monthly debts. If that total monthly debt exceeds the qualifying ratio (43% of the applicant’s monthly income of today’s salary) then the contract will most likely be denied. 43% is industry standard and is a ratio most lenders use. Since 2012, nonprofits, lenders, and real estate agents that have clients working with HPAP have advocated for changes to the program to ensure families are not placed in homes they cannot afford, including restructuring HPAP loan repayments for borrowers with lower incomes.

5. Another question that has arisen regarding HPAP recipients is how will they be able to afford maintenance of their home?

The required home inspection, which is performed by a HUD-certified inspector, is meant to minimize the risk of an HPAP buyer purchasing a home that will need any upfront maintenance work after purchase. The future cost of maintenance is discussed in the required HPAP 8-hour education course and many HPAP buyers come in with and build savings to cover the cost of maintenance over time. Just like all homebuyers, regardless of income, there are issues out of people’s control that may lead to financial hardship, but that doesn’t mean qualified and educated buyers should not be allowed to purchase a home. At a certain point, HPAP buyers may accumulate equity that they choose to use to help with the upkeep or upgrade of their homes.
 
6. It has been argued that HPAP is a great program, but at the end of the day, it won’t make a big difference.
In response to this belief, I would assert that the program certainly makes a difference to the over 13,500 that have purchased homes with HPAP loans and those that would like to purchase and stay in DC. Also, homeownership has been proven to reduce the wealth gap; If public policy successfully eliminated racial disparities in homeownership rates, so that Blacks and Latinos were as likely as White households to own their homes, median Black wealth would grow $32,113 and the wealth gap between Black and White households would shrink 31 percent, while median Latino wealth would grow $29,213 and the wealth gap with White households would shrink 28 percent. Homeownership allows people to gain equity, which they can use to better their family; students from low- and middle-income families are much more likely to enroll in college when their families experienced gains in housing wealth. Lastly, the ability of one first-time home owner to purchase has the power to change the lives of a family for generations and generations to come; children of homeowners have a 6% greater likelihood of completing a post-secondary education and are 9% less likely to receive welfare benefits between ages 24 and 28.
 
7. An additional misconception about the HPAP loan is that it is forgiven over five years.
However, in actuality, the loan is deferred for five years so people do not have to make their first payment until the sixth year and then they have 40 years to pay it off. There is discussion about going back to a structure when lower income folks with higher loan amounts won’t pay the loan back until they resell in the future – thus ensuring there is not a monthly payment burden on them.

8. Some people around the District hold the belief that HPAP has been an abject failure, because there are sellers that refuse to take offers made with HPAP due to the amount of time and money it may take to work through the HPAP process.
I would agree HPAP has administrative kinks that need to be worked out, but it is far from being a failure. So far, there have been over 13,500 homes purchased through HPAP. MANNA along with CNHED and other housing organizations and advocates have submitted recommendations to DHCD about ways that the program can be improved. It is true that one of the biggest deterrence from people selling to those with HPAP is that there was a second inspection, and it was costly for the seller, and for that reason, sellers were hesitant to sell to HPAP buyers. However, thanks to the advocacy work of the aforementioned groups, that second inspection is no longer required.

9. In conclusion, some people view HPAP as DC simply throwing more money at a problem.

Although it may be easy to jump to this conclusion, I believe that DC is actually promoting a solution rather than simply throwing money at a problem. All of the money lent through the pro-gram gets repaid and relent to new first-time buyers. HPAP is one DC program that addresses the affordable housing crisis. I will admit that HPAP alone won’t solve our affordable housing drought, but it is a step in the right direction towards addressing many of the issues in DC. Homeownership leads to greater educational attainment for homeowners and their families, a reduction in crime, increased political participation, increased family wealth and better physical and mental health. These are things that we would all like to see in DC, and increasing access to homeownership through HPAP is one solution to addressing many of the economic and social problems that exist in the District today.

Health and Housing

House-health

A recent blog posted by the National Low Income Housing Coalition (NLIHC) stated that subsidized housing improves conditions related to child and family health outcomes. This post references a study published in the recent issue of Housing Policy Debate titled “Development of an Index of Subsidized Housing Availability and its Relationship to Housing Insecurity.” This study specifically discusses health benefits as they relate to low-income people who move into subsidized rental homes. NLIHC summarized the health component of the study by highlighting the fact that having a sufficient amount of subsidized housing available reduces housing insecurity. Housing insecurity generates a host of problems, which lead to negative health outcomes.

The study reveals that overcrowding and multiple moves are both products of housing insecurity, and are “known predictors of poor child and family health outcomes.”  Additionally, subsidized housing in most municipalities have safety and sanitary requirements, which enhance their health benefits. Poor housing quality is associated with injuries, chronic illness, contaminated water supply, poor waste disposal, and infectious disease that can be an effect of overcrowding, as well as rodent and insect infestations.

This study is relevant to the work that we do here at MANNA. By developing affordable homes for-sale, and rental properties, we are reducing housing insecurity in DC, and deterring overcrowding. There are numerous benefits to homeownership and quality housing. Here at MANNA we like to boast about how homeownership enhances people’s lives. Some of the benefits that we often talk about include greater educational attainment for homeowners and their families, a reduction in crime, increased political participation, and family wealth. I am constantly surprised by the benefits that are attributed to homeownership, and now we can add better health to our list.