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We Built That

Home Fund would shore up urgent affordable housing needs

By Tim Johnson · Wednesday, September 5, 2012

Will those fortunate in Bellingham open their wallets to help the less fortunate?

A national debate on the role of the private versus the public sector—an ethic of You’re On Your Own (YOYO) versus We’re In This Together (WITT)—comes down to a vote in Bellingham this November. Bellingham City Council placed a referendum on the ballot, asking voters to tax themselves to create a fund to improve housing options for lower-income families and returning veterans.

If approved by voters, Proposition One would create through a property tax levy the Bellingham Home Fund, a trust that could build or improve up to 1,300 affordable homes. The city levy is expected to raise $3 million annually over seven years, for a total of $21 million.

“We’ve become adept at cobbling together all kinds of disparate resources to create housing opportunities,” said Greg Winter, who chairs the local coalition to end homelessness. “This would create a dedicated fund to really meet those goals.”

Lack of safe affordable housing creates an enormous impact on American families and our communities, Winter notes. Families with high housing costs are often forced to choose between paying rent and putting food on the table. Those hard choices often result in external costs a community must bear.

“I believe we are a caring city, and that we should want to create homes so that every child can succeed in life, so to help our veterans who are returning,” Winter said. “But when we think about the costs of homelessness, which is really the ultimate end when you do not have enough housing that is affordable to those on the lower end of the income spectrum, our community ends up paying those costs.”

The program is modeled after Seattle housing levy, approved by voters there in 1981. Over three decades, the Seattle levy has created more than 10,000 affordable apartments for seniors, low- and moderate-wage workers, and formerly homeless individuals and families. The fund has also provided down-payment loans to more than 600 first-time homebuyers and rental assistance to more than 4,000 households. When the renewed 2002 housing levy was wrapped up at the end of 2009, the Seattle program had met or exceeded all of its goals.

The Bellingham Home Fund would collect about 36 cents per $1,000 of assessed property value each year for similar purpose. A home with an assessed value of $250,000 would pay about $7.50 per month in additional property tax. Bellingham City Council anticipates exemptions and relief programs for qualifying homeowners who are senior citizens or disabled. The levy would sunset in 2019, unless extended by voters.

The Home Fund would create a pool to match available state and local housing funds, among other uses. Programs would be administered by city Planning and Community Development in coordination with mandates from the U.S. Department of Housing and Urban Development (HUD).

“These local sources can then be leveraged 5-to-1, even to 10-to-1 or more, against federal and state sources,” a task force on affordable housing noted.

In 2007, Bellingham and Whatcom County governments launched a Countywide Housing Affordability Taskforce (CHAT) to develop strategies and programs to address the need for an anticipated 11,000 additional housing units by the year 2022 that are affordable to households earning less than the county’s median income. Among their six primary recommendations, the task force identified the need for an affordable housing investment fund.

“One of CHAT’s six primary recommendations recognized that, for the lower end of the income spectrum, there’s a lack of a local revenue source to use as a match so that our community can secure more tax credit financing and federal and state funding for affordable housing needs,” Winter explained. Winter directs the Whatcom Homeless Service Center, a program supported by the nonprofit Opportunity Council that provides support services to reduce homelessness. He is an organizer for Bellingham’s Proposition 1.

“The CHAT report came out in 2008 and essentially sat on a shelf” as the local housing market imploded in economic downturn, Winter explained. “With all that’s happened, the downturn, we’re seeing some of those effects on the rental market. We’ve seen lower vacancy rates and higher rents—lots of people who are doubling up, many who have left home ownership and are now renters have tightened up the market.

“Problems in the rental market that were observed in the CHAT report have only been exacerbated. So it seemed time to dust off the report and implement,” Winter said.

A small town with a big college, Bellingham’s supply of affordable rental housing is particularly crimped. Since 2004, rental vacancies are halved, from 4.3 percent to 2.2 percent, according to data from the Washington Center for Real Estate Research. A lack of supply creates an inelastic market, and a sharpening increase in rental costs. City data indicates monthly apartment rents have increased from an average of $660 to more than $780 in the same period.

“As home prices escalated in 2004, the number of homes on the private market in Bellingham that were affordable to a low-income family plummeted,” David Stalheim explained to Bellingham City Council in June. Stalheim manages the City of Bellingham’s block grant program, which helps secure and allocate federal and state housing funds.

Trends were similar in single-family homes, Stalheim reported. In 2003, 598 two-bedroom homes were sold at prices within reach of a low-income family. By 2007, the number of sales that were affordable dropped to just 40.

In the past decade, while the median value of housing increased 96 percent, median family income increased just 23 percent. One person in five in Bellingham lives below the poverty threshold, with nearly a third of single mothers living in that diminished capacity.

City staff catalogued their findings in a housing market needs analysis as part of the city’s consolidated plan for growth. A draft of their report was presented to City Council in June.

Low-income households face a severe housing cost burden, staff found.

Forty-six percent of all renters, and 31 percent of all owners, spend more than half their income on housing costs. That threshold is a key indicator of a household’s discretionary income, according to the Runstad Center for Real Estate Studies at the University of Washington. The Center monitors this indicator as part of its affordability index. Whatcom County ranks among the worst in the state on the Center’s index for first-time homebuyers. In Bellingham, the situation is particularly egregious, with most new home construction targeting upper incomes.

For many private developers, building affordable units without some type of low-interest loan or grant isn’t financially feasible. The collapse of the housing market created financing constrictions that have made this worse, Winter noted. An investment fund that provides a revenue source could rekindle this industry.

“Local communities around the country have begun to address their affordable housing needs by creating housing trust funds,” notes Laura Barrett, a press contact for the National Housing Trust Fund, a national advocacy campaign to develop these programs in communities across the United States.

“These housing trust funds—which exist in more than 170 states, counties, cities and towns—provide low-interest loans and grants to affordable housing developers. The developers leverage housing trust fund loans to attract additional private and public money until they can afford to build an affordable home for low and moderate-income families,” she explained.

Bellingham’s version of this national initiative is not without critics.

“This tax increase request appears on the ballot before the study documenting the need for the increase has been completed,” Jack Petree complained. A consultant to the local building industry, Petree was enlisted to help draft the statement opposing Prop. 1.

“The draft study of need indicates that 64 out of every 100 households in Bellingham make less than the median income in Bellingham. This mathematical impossibility illustrates why we should not vote for this measure until the ‘bugs’ have been worked out of the city’s research,” he said.

Petree points out that increases in property tax often get shifted as pass-through costs on to renters, increasing their rents and worsening the problem.

“You don’t make housing more affordable by making it more expensive,” Petree noted. “$21 million in new taxes will raise rents on low-income wage earners and stifle jobs growth.”

Many local builders support the proposition, believing it could rekindle new construction, creating higher wage local jobs. A 2010 U.S. Department of Commerce model estimated that investing $5 billion directly into housing construction could result in 184,300 new jobs nationally. Local housing trust funds leverage an average of $9 from private, non-profit, and other governmental sources for every $1 spent by the fund, Barnett reported.

The Building Industry Association of Whatcom County (BIAWC) tenatively supports the measure, encouraging city policy to strengthen program goals with appropriate standards and performance metrics. All of the CHAT recommendations regarding affordable housing should be considered, BIAWC Government Affairs Director Linda Twitchell wrote in June.

“CHAT recognized that subsidized housing and affordable housing—housing units that local residents can afford—are two very different things,” Twitchell noted. “To some extent we feel the proponents are using the good intentions of CHAT to promote an initiative that is not representative of CHAT’s conclusions.

“The BIAWC supports efforts to provide shelter and homes for all members of our community,” Twitchell noted. “Voters need to know precisely what they’re voting on and how the program will work to determine whether this would be an advisable use of their monies. The devil is in the details.”

Bellingham must do what it can, when it can, supporters of the initiative counter. The perfect final program often comes in pieces, unassembled.

“Communities of people will always include some who can use a hand, often through no fault of their own,” Bellingham City Council member Seth Fleetwood observed. Fleetwood sponsored Prop. 1 and voted, along with other council members, to place it on the November ballot. “For those of us blessed by relative comfort it is usually, to some important respect, life circumstance and good fortune that accounts for it. To help a little bit is to acknowledge this reality.”

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