Affordable housing takes many forms in South Pittsburgh
June 22, 2021
"Long-term affordable housing is the concept of having housing that is affordable for low and moderate income people on an ongoing basis," began Gordon Davidson, executive director of the Mount Washington Community Development Corporation to open the June community forum on Zoom. "It's a project that MWCDC has been working on in our neighborhoods.
Among the speakers at the forum were: Robert Damewood, an attorney at Regional Housing Legal Services (RHLS); David Howe, development coordinator at Pittsburgh Housing Development Corporation (PHDC); and, Aaron Sukenik, executive director of the Hilltop Alliance.
Mr. Damewood opened the presentations explaining the RHLS is a state-wide legal aid program providing free legal representation to community-based non-profits that are developing affordable housing or are engaging in other community development activities that benefit low-income people.
Affordable housing is when rent or a mortgage and utility costs don't exceed 30 percent of income and are usually figured using the Area Median Income (AMI) published by every year by HUD (the United States Department of Housing and Urban Development). Pittsburgh's affordable housing gap, according to a housing needs assessment performed five years ago, was determined to be almost 20,000 units.
"For the lowest wage earners in Pittsburgh, households at or below 30 percent Area Median Income, there's a gap. There's 20,000 too few homes available that are affordable and available to households in that income level," Mr. Damewood said.
In the Pittsburgh area, the 30 percent AMI for one person is $17,850, two people is $20,400 and a family of four, $26,500.
When there are too few affordable homes available to low-income people, they rent unaffordable housing, taking away housing from people in the next tier up. In Pittsburgh, housing reaches equilibrium at about 80 percent AMI.
"It creates a ripple effect that causes a lot of Pittsburghers to pay more than half of their income on rent and utilities," he added.
Mr. Damewood said the wage Pennsylvania's need to afford an even modest home is more than $19 per hour. There are more than 19 classifications of works not making $19 an hour, including fast food workers, labors, cashiers, home health aides, janitors, secretaries and also seniors and people with disabilities.
He said there are two ways to define affordable rents: Deep subsidy programs and shallow subsidy programs. A lot of the HUD programs are deep subsidy programs where the rent is set at a percentage of income where if the income goes up, the rent goes up. Many of the affordable housing programs, like the Low-Income Tax Credit Program, are shallow subsidy programs where the rents are set at an affordable rate for a "hypothetical family" making a certain income.
As an example of shallow subsidy, he said the rent for a one-bedroom apartment for those in the 30 percent AMI would have to be under $500.
Mr. Damewood said few years ago, a developer was touting a project with affordable housing, but the affordable housing was at 80 percent AMI where a one-bedroom apartment would rent for almost $1,300 per month.
"Affordability gets thrown around pretty loosely and you always need to ask, 'What do you mean by affordability,'" he said.
The major source for affordable housing is the Federal Low Income Housing Tax Credit Program (LIHTC). He said generally, those rents are set at 50-60 percent AMI with a few units that are sometimes set at lower rates.
The length of time those units have to be affordable is usually set at 40 years, but there are times when it can be as short as 15 years.
He explained community development organizations can get involved in affordable housing in a variety of ways:
• As a developer to arrange the financing, acquiring and holding property, or contract with contractors. Their responsibilities include see the project gets built on time and on budget.
• As a co-developer, helping the developer with certain tasks.
• As the owner or a general partner responsible for the day-to-day operations.
• As a co-owner with some input or control over decisions being made on the project.
• As a land owner, allowing the CDC to have some control over how the property is used.
• Through a community benefits agreement where a contract between the builder and the CDC spells out what benefits will be provided to the community.
Mr. Howe began his presentation says PHDC was established in 1994 an affiliate program of the Urban Redevelopment Authority of Pittsburgh. Over the last 27 years, they have completed almost 300 units of affordable for-sale housing including some condo units totaling about $68 million.
PHDC has worked in about a third of the city, generally with the consent or support of the local community group. Currently, they have seven units under construction and 24 units in a predevelopment period and zero units on the market.
He said home ownership and the ability to pass down generational wealth is important.
In the affordable home sales program, construction costs have risen over the last year with the price of lumber.
"It puts a pretty deep crimp in a construction budget. That's bad enough for a market rate housing but for affordable housing it's a real deal killer," Mr. Howe said. Adding that when a potential homeowner can only afford to pay $100,000 for a home and then to have this unprecedented spike in cost making it more difficult.
PHDC can generally spend $200,000 on a renovating a home, of which $150,000 can be attributable to construction. Other costs can include mandatory sewer and water taps or having to deal with buried old foundations or crushed sewer lines or other legacy problems.
Another problem is that although a home may be considered affordable, it may need thousands of dollars to make it livable. A home buyer looking to purchase a home may find the renovation costs exceed the price of the mortgage.
The hot housing market in Pittsburgh has caused a deficit in the number of affordable homes available for easy and inexpensive renovation. Taken into consideration that the majority of houses in the city were built prior to the 1960s using construction practices not currently used (lead paint and asbestos as examples) has driven up costs for affordable housing.
"The remaining options involve more time and more capital investments to complete," Mr. Howe said.
To help lower costs, PHDC has established relationships with Home Depot and Lowes, enabling them to purchase materials more inexpensively. They have also entered into a cross promotion partnership with Ikea to design and donate furniture for PHDC homes.
They have also assembled teams of smaller local contractors that are able to complete jobs quickly, efficiently and at a lower cost.
As an organization, they have been able to work with financial and funding organizations to direct funding to projects that need low interest financing. PHDC has been able to explore creative ways to acquire rehabilitative housing rather than just through the URA or the city's land reserve system.
They also work through a variety of programs to assist low-income homebuyers with down payment assistance and financial literacy.
In 2013, the Alliance undertook a Hilltop Housing Strategy focusing on Beltzhoover and Allentown. From the strategy they focused their efforts in Allentown, dividing the neighborhood into three parts: South of Warrington Avenue between Warrington and Cedarhurst Street: East of Arlington Avenue, bordering the South Side Slopes; and, North of Warrington, between Warrington and Grandview Park from Arlington Avenue to Beltzhoover Avenue.
The Alliance initially is focusing on the area north of Warrington which they call Grandview South. They looked at it through two lenses: property stabilization (cleaning up dump sites and overgrown weeds, boarding up and securing properties and offering resources for low-income property owners) and adding properties to the city's property reserve process. A property is eligible for the property reserve process if it is two or more years tax delinquent and vacant, he said.
Working with the MWCDC, URA and through their own efforts, the Alliance put a number of properties in the property reserve.
The intention was to put the properties through a process to see if there was interest in them from a private developer. Although the first property was successfully renovated and sold through a private developer without subsidy subsequent properties proved to be more challenging.
Mr. Sukenik said this led them to explore a relationship with PHDC. PHDC currently has three of the properties in predevelopment awaiting funding and could do as many as six or even 11 in the neighborhood.
Working with the community, they decided to pursue scattered site single-family homes through the LIHTC program on the vacant properties they acquired through the property reserve by MWCDC or the Alliance or held by the city. The proposal is for 31 single-family new homes scattered throughout the Grandview South portion of Allentown. They will be homes for people in the 20 percent up to 60 percent AMI including four ADA homes.
The total development cost of the project is $12.6, with a lot of subsidized money needed to make it happen, he said.
"The goal is, in the next three years, is to have nothing else to do in this Grandview South part of the neighborhood," Mr. Sukenik said. "So we can cross the other side of Warrington Avenue and start to run the same playbook over there."