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LISC DC Budget Testimony - Committee on Housing and Neighborhood Revitalization

By Adam Kent, Deputy Director

Dear Chairperson Bonds and Members of the Committee:

My name is Adam Kent and I am the Deputy Director of the DC office of the Local Initiatives Support Corporation (LISC). LISC is a national community development organization, with a flagship office in DC. Established in 1982, LISC DC has invested in 13,000 affordable homes, in health clinics, theaters, community centers, and retail all across the District of Columbia. We work every day to help create healthy and resilient DC neighborhoods that are good places for low-and moderate-income families to live, work, raise children, and conduct business.

COVID-19 continues to lay bare the dramatic racial and economic inequities in our city and now is the time to double-down on programs that foster the creation and preservation of affordable housing across the District. As a multitude of research has shown, few factors affect health and prosperity more than where you live. To promote equity and inclusion now, we must invest heavily in affordable housing – rental, as well as cooperative and single family home ownership – that is accessible to residents at the lower end of the income spectrum in every ward of the District.

In our testimony today, we highlight four critical programs in DC’s affordable housing ecosystem that deserve attention and increased funding: (1) Neighborhood-Based Activities; (2) Affordable Housing Preservation Fund (AHPF); (3) First Right to Purchase Program (FRPP); and (4) Housing Production Trust Fund (HPTF). We have chosen to highlight these four programs due to their unique contribution to DC’s affordable housing landscape. Each program plays a distinctive and important role in the complex process of creating more affordable housing opportunities for DC residents. As members of CNHED and supporters of The Way Home Campaign, we also sign-on to their budget recommendations regarding other crucial housing and economic development programs, and defer to their testimony on those programs.

Neighborhood-Based Activities
LISC DC recommends that the Council fund Neighborhood-Based Activities at $10M in FY21 so that Community Based Organizations (CBOs) can meet the increased need for tenant- and homebuyer-based services.

Neighborhood-Based Activities fund agencies who counsel renters, owners, tenant associations.  . Community Based Organizations (CBOs) use this funding to provide homebuyer counseling for HPAP and EAHP, Inclusionary Zoning (IZ) certification, Tenant Opportunity to Purchase Act (TOPA) technical assistance, eviction and foreclosure prevention counseling, limited equity cooperative technical assistance, Schedule H application assistance, and tenant housing conditions technical assistance.

The Mayor has proposed a 10% cut in the FY21 budget. However, demand is high and growing. Fully-funding Neighborhood-Based Activities, particularly in the support of tenants exercising their TOPA rights, is key to preserving affordable housing and preventing displacement. To meet this growing need, LISC DC recommends at least $10 million in the FY21 budget for Neighborhood-Based Services.

Affordable Housing Preservation Fund (AHPF)
LISC DC recommends that the Council fund the AHPF at $10M in FY21 so that community-based lenders can deploy $40 million to continue to preserve affordable housing throughout the District.

As one of the Fund Managers of the AHPF, LISC DC has used AHPF funds to preserve 530 affordable homes across DC since receiving our first AHPF award in October 2018. The AHPF has allowed us to support 10 different tenant associations as they worked to purchase their buildings and keep rents affordable in Wards 1, 3, 4, 7, and 8. (It is important to note, that without the tenant organizing from CBOs funded through Neighborhood-Based Activities, these projects would likely have never come to fruition.)

Three key components about the AHPF: (1) it leverages public dollars 3:1; (2) it is a revolving fund and is re-deployed; and (3) it acts as a quick-strike acquisition fund to provide necessary capital to tenants exercising their TOPA rights. To date, LISC DC has deployed nearly $40 million in acquisition loans to preserve affordable housing, of which only $9 million are public dollars. AHPF’s ability to leverage private dollars with public sources expands that the District’s ability to preserve affordable housing, and that LISC DC can provide more flexible loans that we otherwise would not be able to make. Additionally, the revolving nature of the AHPF means that as projects move forward in redevelopment, AHPF funds get repaid and redeployed for new affordable housing preservation projects throughout the District. Finally, LISC DC and other AHPF Managers can quickly close on acquisition loans, meaning that tenants’ TOPA rights are more likely to be exercised and that more buildings that would previously have been lost to the market can now be preserved as affordable.

We need to be ready now for a flood of buildings to be placed on the market due to COVID-19 economic impacts. Itis imperative that the Council fund this source of acquisition financing so that long-term residents are not displaced from the neighborhoods in which they’ve lived for decades.

First Right to Purchase Program (FRPP):

LISC DC supports the Mayor’s recommendation that $10 million be devoted to the FRPP for both FY20 and FY21 so that tenants can quickly move through the TOPA process, secure permanent financing, and maintain their building as affordable for years to come.

Historically, the FRPP has been the primary conduit to secure local financing for TOPA projects. FRPP funding has made the difference in whether tenant associations can preserve their buildings as affordable, whether through the formation of a Limited Equity Cooperative or an agreement with a developer to maintain affordable rental housing. The FRPP has served as a permanent financing take-out for bridge acquisition loans (like those made with the AHPF), helping to recycle dollars for future preservation projects.

Importantly, the FRPP benefits tenants living in smaller buildings that do not compete well in the HPTF Consolidated RFP scoring rubric. Smaller buildings make up so much of the fabric of DC neighborhoods and keeping the FRPP alive and usable would make tenant purchase a reality for thousands more people while significantly adding to the long-term affordable housing stock.

Housing Production Trust Fund (HPTF):

LISC DC asks the Council to make clear its continued commitment to the preservation and creation of affordable by appropriating at least $116M in the FY20 supplemental and $120M in FY21 for the HPTF, and by exploring additional means to raise significant funds to augment these appropriations. Certainty in funding at this level can sustain pending proposals and facilitate ongoing production of new affordable homes.

The FY19 and FY20 appropriations for the HPTF have already been spent or committed, and there is insufficient funding available for existing awardees of previous Consolidated RFP rounds to close this year or for awards to be made to projects that applied to the fall 2019 Consolidated RFP. DHCD has told approximately 11 projects (totaling 700 units) that received awards in prior RFP rounds that they must delay their closings beyond this fiscal year. At an average investment of $110,000 per unit, more than $80M would be needed for these projects to close. Approximately 32 projects that applied to the fall 2019 Consolidated RFP passed threshold scoring, indicating eligibility for HPTF investment. DHCD indicated in January 2020 that the projects that made threshold had requested more than $350 million in total funding.

The lack of clarity concerning when Fall 2019 Consolidated RFP awards will be made and with what funding, in addition to the unknown timing of the next Consolidated RFP round, put existing affordable housing developments in jeopardy as their bridge financing nears expiration.  This uncertainty also significantly reduces the ability of tenant associations exercising their TOPA rights and affordable housing developers working with them to take the risks and make the plans necessary to acquire properties to preserve or create affordable housing.

If significant investments are not made to support the affordable housing pipeline and a clear plan not published quickly for the timing and process for making these investments, affordable housing developments already in the pipeline may be forced to forgo affordable housing covenants to continue operations, or maybe resold to developers interested in maximizing rent revenue. Either outcome will have profoundly negative impacts for DC residents living in these buildings.

Below, is a graphic that illustrates how these four critical programs interact to preserve and create affordable housing in the District. Without the proper funding for each of these programs, DC will continue to lose the housing affordability battle and further exacerbate extreme racial and economic inequities that exist in our city. Thank you for the opportunity to testify, and please do not hesitate to contact me with any questions or clarifications.