Will the Infrastructure Package Address Public Housing's Problems?

Roads and bridges get most of the attention, but America’s public housing is crumbling too, advocates told Congress on Tuesday.
by | April 30, 2019 AT 5:25 PM
House Financial Services Committee Chair Rep. Maxine Waters led a hearing on Tuesday to discuss a proposed infrastructure spending plan that includes more than $90 billion for housing. (Tom Williams/CQ Roll Call via AP)

As congressional leaders met with President Trump about infrastructure this week, housing advocates made the case on Capitol Hill that new investments in public housing ought to be included in any infrastructure package considered by Congress.

The advocates told a U.S. House committee on Tuesday that the poorest renters have fared the worst, as housing prices have climbed and housing supply has dwindled in recent years. Their situation has become more difficult because the federal government, which provides the lion’s share of money for public housing, has scaled back its funding (or at least failed to keep up with inflation) for public housing and many related programs since 2010.

As a result, public housing agencies estimate that they have at least $70 billion in unmet capital needs across the country. The huge backlog of needed repairs is a major reason why the country is losing about 10,000 public housing units every year, advocates say.

“An infrastructure spending package is an opportunity to respond,” Diane Yentel, the president and CEO of the National Low Income Housing Coalition, told the House Financial Services Committee. “Like roads and bridges, affordable housing is a long-term asset that helps communities and families thrive.”

The hearing was on a draft proposal from U.S. Rep. Maxine Waters, the California Democrat who chairs the committee. She outlined a plan that would include:

  • $70 billion for physical improvements to existing public housing;
  • $5 billion in block grants to states to construct new public housing under the national Housing Trust Fund;
  • $5 billion to help communities prepare for natural disasters;
  • $1 billion for repairs and upgrades to rural housing for low-income residents;
  • $1 billion to help Native American tribes address substandard housing on their lands; and
  • $10 billion in new money for the Community Development Block Grants (CDBG) program, which would be used as an incentive to encourage cities to drop or scale back impact fees or other regulations that add to the price of new housing.

“Our public housing system, which houses 2.6 million Americans, is … in dire need of investment to repair kitchens, elevators, baths, doors, windows and roofs,” Waters said Tuesday. “Neglecting our housing infrastructure hurts our economy. Studies have found that the lack of affordable housing hurts economic productivity and wages.”

Her plan seems designed to attract support from both sides of the aisle. Democrats generally favor the increased spending on housing programs, while Republicans praised the provisions concerning rural housing and incentives for reducing local regulations on new housing.

 

Builders Push for Looser Local Regulations

Tuesday's hearing made clear that the state of public housing was tied tightly to the overall housing market, where prices have become increasingly unaffordable for residents of nearly every income level. Only 57 percent of homes sold in the last three months of 2018 were affordable to families earning the U.S. median income of $71,900, while a third of U.S. households spend more than 30 percent of their income on housing, according to the National Association of Home Builders.

The homebuilders say there simply isn’t enough supply to meet increasing demand. Developers aren’t building more because of regulations, the lack of skilled labor, high costs of building materials and higher interest rates.

As a result, only 6 percent of unfurnished apartments finished in 2017 had rents of $850 a month or less.

“Builders and developers would be glad to serve families at all income levels if they could simply make the numbers work,” said Steve Lawson, a Virginia Beach developer who represented the National Association of Home Builders, in prepared remarks. “Unfortunately, it is impossible to build new apartments affordable to low-income families without some type of government assistance to increase equity, such as the Low Income Housing Tax Credit, or deep rental subsidies.”

Lawson said state and local governments help drive up the cost of housing with a variety of regulations, even ones intended to make housing more affordable. When jurisdictions require developers to set aside a certain percentage of units as “affordable” apartments, they drive up the cost of all the other units. That means there are few options for middle-class renters. On the other hand, when cities use “exclusionary zoning” to dictate how large single-family lots must be, or what materials those homes must be made of, they “do nothing to advance health or safety, but they substantially drive up construction costs and the price of homes,” he said.

Both the homebuilders and apartment owners complained about the proliferation of “impact fees” that municipalities charge developers when they’re building new projects to cover the cost of new infrastructure.

Cash-strapped municipalities use the impact fees because they can’t otherwise afford the new streets, sewers and other improvements that would be required to service the new developments. But in trying to address their own infrastructure funding problems, those municipalities can help exacerbate their housing affordability crisis.

“Jurisdictions facing serious deficits in infrastructure funding are increasingly looking to pass improvement costs along to developers,” said Daryl Carter, speaking on behalf of the National Multifamily Housing Council and the National Apartment Association.

“While some infrastructure enhancements on or around a development may be mutually beneficial, jurisdictions sometimes exploit developer resources -- and by extension, renter household expenditures -- making project approvals contingent on ever-increasing infrastructure investments,” he said. “This strain on project affordability is unsustainable.”

The fact that Waters’ legislation included incentives for cities to ease those restrictions won praise from some Republicans on the committee. But they also seemed wary of pouring so much money into Great Society-era programs, instead of efforts to inject more private capital into public housing.

“Do we just open up our checkbooks and start spending money? … Or do we have a new vision for what programs will work for the 21st century?” asked U.S. Rep. Sean Duffy, a Wisconsin Republican. “We have to look at the cost of regulation: local, state and federal regulation on the construction of housing. We have to work as a committee and as a Congress to reduce those costs, as opposed to some of the proposals from the Left that would ultimately increase those costs.”

Yentel, the head of the National Low Income Housing Coalition, agreed with Waters’ approach to encourage localities to drop costly regulations on new housing. But she cautioned that the focus of lawmakers should be on providing housing to the most needy.

“Using scarce federal resources on market-rate housing is misguided and wasteful,” she said. “For the most areas of the country, the private market meets its needs.”

As the committee met, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, both Democrats, met with Trump at the White House to discuss a potential infrastructure package. The Democratic leaders both previously suggested that housing should be included in that measure.

The president reportedly agreed with their call for a $2 trillion infrastructure package, but few details of what would be contained in that package and how it would be paid for emerged from the meeting.