Friday, June 21, 2019

What is Affordable Housing?

A ground breaking ceremony will be held by E. J. Plesko & Associates for their coming affordable housing project called Fitchburg Senior Housing project. This development is located at the corner of Traceway Drive and Fish Hatchery Road will create 160 affordable housing units. The real question is what makes affordable housing possible? Linette Rhodes, interim community development grants supervisor, gets questions about what exactly “affordable housing” means all the time. She understands the confusion.

Rhodes said “I even hate that we say ‘affordable housing,’ because ‘affordable’ means something different to every single person that you talk to.” There are various ways by which you can gain access to affordable housing or housing at lower-than-market-rate-rents which include Section 8 vouchers, Section 43 apartment buildings and public housing. Read further to learn more about affordable housing.

What is known as affordable housing? Affordable housing of the past may conjure up images of desolate concrete buildings in Chicago, but today it “comes in all sizes and types, from scattered single family houses to high-rise apartments for elderly families,” according to U.S. Department of Housing and Urban Development.

To live in a public affordable housing building; tenants needs to apply through the Madison Community Development Authority or Dane County Housing Authority. If the tenants are accepted, they pay about 30% of their income as rent for the affordable housing. About 800 units of public affordable housing is in Madison and another 100 in the Dane County area.

To be eligible for this affordable housing, tenants cannot make more than 80 percent of the area median income. In 2018, that was $50,350 for an individual and $71,900 for a family of four. Rhodes noted that they find “most people are making far below 80 percent.”
What are Section 8 vouchers? Theoretically, what Section 8 vouchers allow in affordable housing is for people to live in any regular apartment building. Tenants of the Section 8 vouchers affordable housing pay about 30% of their income as rent and HUD picks up the rest of fair market rent.
Local housing authorities distribute the vouchers; the Madison Community Development Authority administers the program in Madison and Dane County Housing Authority is responsible for the rest of the county. There are long waiting lists to receive a voucher, and neither the CDA or DCHA has accepted new applications for vouchers in several years.

Once an individual receives a voucher, it’s up to them to find a landlord. It can be difficult to find a landlord willing to accept a voucher, even though Section 8 discrimination is against the law in Madison and Dane County.

What are Section 42 apartment buildings? Section 42 affordable housing refers to the section of IRS code detailing tax credits that make these affordable housing developments financially possible. In Wisconsin, Wisconsin Housing Economic and Development Authority (WHEDA) distributes several different types of Section 42 Low Income Housing Tax Credits.

In 2014, Madison was able to set up a concerted effort to take advantage of one type of federal Section 42 tax credits; this was when the Affordable Housing Fund was established. Thousands of millions of dollars was distributed to developers making their project more likely to be awarded good credits.
With that fund, the city has supported 18 affordable housing developments, and if all proposed projects are completed as planned, Madison will benefit from a total of 1,149 affordable units, meeting its goal to create 1,000 units of affordable housing in five years. Examples in Madison include Pinney Lane Apartments at 902-914 Royster Oaks Drive, Carbon at Union Corners at 2504 Winnebago St. and The Breese at 1003 E. Mifflin St.

Section 42 affordable housing don’t usually need credits to make them a reality and this is because the city uses federal HOME and Community Development Block Grant funds to help nonprofits rehabilitate or build affordable housing . Rhodes confirmed that it would not have been possible to meet the 1000 affordable housing project without the Section 42 tax credits.
What is the amount tenant in Section 42 affordable housing pay as rent? This affordable housing tax credit is a little different from that of public housing and section 8 where tenants pay 30% of their income generally. Rents are not charged as a certain percentage of income in the Section 42 affordable housing development. What they do is to set limits for their tenants to those who make less than a certain percentage of the area median income.

In Madison, many projects limit tenants to those making up to 30, 50 or 60 percent of the area median income. For an individual in 2018, that would be someone making between $19,250 and $38,520 a year. For a family of four, 30 to 60 percent of area median income would be between $27,500 and $55,020.

WHEDA uses a formula based on fair market rents to set the maximum rents for Section 42 units, so units with the same number of bedrooms should have relatively standard rents across the city, Rhodes said. Rents are set with the goal that tenants earning 30, 50 or 60 percent of the area median income will pay 30 percent of their income.
Rhodes noted that rent of the Section 42 affordable housing tenants does not decrease even if their income decreases or they are not earning up to the anticipated WHEDA. Rhodes said “in order to really consider something affordable, basing it off someone’s income is the best way.”

And because rents in Section 42 units are based on area median income, “rent continues to go up if those income levels in our community continue to go up,” which regularly happens in Dane County, Rhodes said.