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Testimony Regarding Proposed Annual Action Plan (City Fiscal Year 2021/HUD Program Year 2020)

Andrew Frishkoff-LISC Philadelphia Executive Director

Philadelphia Local Initiatives Support Corporation (LISC)

 – Andrew Frishkoff, Executive Director

To The Committee on Finance of the Council of the City of Philadelphia

Regarding Bills 200299 & 200300

Proposed Annual Action Plan (City Fiscal Year 2021/HUD Program Year 2020)

June 5th, 2020

Dear Chairman Green, members of the Committee and other members of City Council,

Thank you for the opportunity to provide written testimony regarding the Proposed Annual Action Plan. On behalf of Philadelphia Local Initiatives Support Corporation (LISC), I would like to testify on the needs of our residents and communities and the moral and policy imperatives for increasing resources for equitable development, preservation and production of affordable housing, and neighborhood businesses and commercial corridors in the City of Philadelphia.

LISC would like to thank the Division of Housing and Community Development, the Commerce Department and other City agencies for continuing to support Philadelphia’s lower and modest-income residents and neighborhoods under difficult conditions.  As the nation’s largest non-profit intermediary supporting neighborhoods, LISC recognizes the challenges confronting our communities. 

To begin, LISC would first like to acknowledge the pain and suffering that Philadelphia’s residents have endured under COVID-19.

In order to address inequity, the City’s Action Plan must affirmatively advance racial equity and must promote comprehensive community response. That starts with fully funding its obligations to its poorest citizens and residents, who are predominantly African-American and other people of color, not relying only on federal CARES Act funding to fulfill the City’s own responsibilities for affordable rental housing. It includes fully supporting community development corporations and other community-based organizations who were already on the front lines in alleviating the effects of institutionalized poverty, and who have been struggling valiantly to serve residents during the pandemic. It includes public investments in MBEs and in corridors serving predominantly non-white residents and neighborhoods.

The following are specific and urgent recommendations.

First and foremost, LISC urges City Council and the Administration to restore $20 million from the General Fund to the Philadelphia Housing Trust Fund for FY21. The proposed FY21 budget that eliminates that General Fund commitment is in conflict with previous commitments and would decimate necessary funding for affordable housing, including a cut of more than $9.8 million for rental housing production and preservation.  This will negatively affect our lowest income tenants who desperately need safe, affordable homes. Furthermore, our affordable housing organizations have been struggling to maintain safe and clean housing with reduced rental payments and increased COVID-related costs. They need these Housing Trust Funds to continue providing tenants with safe living conditions.

Additional recommendations include:

The following are broader and longer-term housing policy statements and recommendations.

Production and Preservation of Affordable Rental Housing

Philadelphia has grown into dual-market city and we must develop policies and programs that support and promote equity. Between 2008 and 2013, more than 6,000 new housing units renting for $2,000+ were developed. Yet, during the same time period, the City lost more than 13,000 units renting for $800 or less. The loss of these lower-cost units demonstrates an urgent need for the City to continue to encourage the development of new affordable rental housing, while preserving the existing stock of affordable rental units. 

In 2019, LISC administered planning and recoverable grants that will lead to the preservation of 156 affordable rental properties. In addition, our equity partner, National Equity Fund, invested $27.4 million in three LIHTC projects that will result in 122 units of new affordable rental units, that will complete construction in 2020.

While these are important steps forward, the Assessment of Fair Housing (2016) indicates Philadelphia has approximately 14,500 publicly assisted affordable rental housing units that may be at risk. These are properties that may be lost due to age and deteriorating physical condition, the end of the LIHTC 15-year compliance period, or expiration of rental subsidies. Properties located in stronger markets or owned privately, may be particularly susceptible to losing affordability.

In addition to LIHTC and HUD-Assisted commitments, the City has invested tens of millions of HOME and CDBG funds to build these affordable housing projects. Without an infusion of new financial, regulatory, and technical support, the impact of the City’s investment may be diminished because the building owners may not be able to recapitalize them and maintain them as long-term affordable housing. 

With enough local subsidies, 4% LIHTC and tax-exempt financing, responsible owners could recapitalize and maintain affordability for many of these expiring tax credit buildings at a lower cost than developing new units. LISC, again congratulates the City in its efforts to implement recommendations from the Housing Action Plan and its work to identify new sources, like the Housing Accelerator Fund, that will leverage local and federal resources to support preservation through acquisition and rehabilitation of affordable housing.

Doing so will help alleviate some competition for 9% LIHTC, which can be used to support the development of new affordable rental units. We are very supportive of Administration’s passage of the Preservation of Affordable Housing legislation. The Right of Notice will require owners of publicly assisted affordable properties to notify the City, or its designee, prior the expiration, opt-out, or sale of an affordable rental property. We urge the City to continue to strengthen the bill by supporting Right of Offer and Matched Offer provisions that will allow qualified developers to purchase properties and maintain them as affordable rental housing. We strongly support the City in its innovative $2 million Shallow Rent Subsidy Pilot that could support up to 550 vouchers per year for the next five years.

Preservation of Non-Subsidized Affordable Rental Housing

The loss of low-cost rental units is of growing concern to the city. This is especially true for non-subsidized affordable rental units (also known as naturally occurring affordable housing, or NOAH). Research has shown that households displaced from low-cost non-subsidized housing in stable communities are often forced to move to neighborhoods with access to fewer opportunities such as education, jobs, healthcare, and transportation. We recommend the City use the tools and data at its disposal to examine the rate at which rents are increasing in order to better understand this issue and develop policies and programs that will support landlords and tenants.

To this end, we support the city’s efforts to develop a Small Landlord Repair Program, which aims to provide low-cost capital small landlords in order to make necessary improvements to properties. However, this should be done in conjunction with other programs and policies:

We support: 1) Developing a shallow rent subsidy where landlords would agree to maintain rents that are affordable to extremely low-income households in exchange for the rent subsidy;  2) Exploring taxing properties at an affordable rate if the landlord accesses rental subsidies or agrees to maintain the property at an affordable rate; and 3) We recommend the City explore using Neighborhood Action Centers and/or Housing Counseling Agencies as models for supporting small landlords and tenants. In the same way that these agencies provide information and services to existing and prospective homeowners, we would urge the city expand rental programs and services to landlords and tenants.

Finally, we also urge the city to increase support to tenant and legal aid organizations that provide vital tenant rights services and protect against wrongful eviction. 

Improving Housing Condition to Improve the Health of Homeowners and Tenants

Although the City is acutely aware of Philadelphia’s affordable housing needs, it bears repeating that the city’s aging and blighted housing stock are one of the key factors impacting quality, safe, affordable housing. It also bears repeating that housing condition has a direct impact on a persons’ health, well-being and ability to thrive.

To this end, we congratulate the City for continuing to fund the Basic Systems Repair Program (BSRP), and we applaud the City and Children’s Hospital of Philadelphia’s (CHOP) recent partnership to reduce and eradicate childhood asthma through its CAPP+ program. Still, 1,907 homes annually are insufficient to address the need for home repairs across the city. Even with the addition of the Home Preservation Initiative and other privately funded home repair programs, we are not doing enough. LISC recommends funding for BSRP, recoverable grants, or deferred loans in cases where there is sufficient equity in homes. We are also encouraged by the Restore, Repair, Renew loan program that provides low-interest loans to modest income owners that can afford monthly loan payments. We are further encouraged by the Philly First Homebuyer Assistance Program, and its goal to support approximately 1,000 modest income homebuyers reach their dream of owning a new home.

Finally, we recommend the city, local hospitals, and public health institutions leverage data and new resources to better understand and improve the connection between housing condition and the social determinants of health. This work must also include the broad spectrum of housing practitioners in Philadelphia, and should include supportive service housing providers, small and mid-size landlords, and homeowners.