Mass Alliance of HUD Tenants

42 Seaverns Avenue/Jamaica Plain/MA/02130
617-522-5133/617-233-1885 [email protected]

To: Mayor Michelle Wu
Arthur Jamison, Director, BPDA
Sheila Dillon, Chief, Mayor’s Office of Housing

From: Michael Kane, Director, Mass Alliance of HUD Tenants                  March 8, 2023
Staff, City Rent Subsidy Coalition

Re: Proposed changes to Boston’s Inclusionary Development Policy

This letter is submitted on behalf of the Mass Alliance of HUD Tenants (MAHT) and the City Rent Subsidy Coalition (CRSC). 

MAHT and CRSC support the goals of the Coalition for a Truly Affordable Boston (CTAB), to more closely align Boston’s IDP program with the urgent need for rental housing affordable to the majority of Boston’s residents. Our focus is on how City Rent Subsidies and Section 8 Tenant Protection Vouchers can be utilized to achieve CTAB goals of a deeper average income for the rental units set aside for IDP, and 33% affordability for new IDP rental housing overall.
  
1) To achieve the goal of 40% AMI average for tenants in IDP set-aside units, require developers to utilize City Rent Subsidies for a portion of IDP units

The Mayor’s proposal calls for 17% IDP set-aside units (17 out of each 100 new units), aiding renters with an average of 60% AMI. If 10 of these 17 units were assisted with City Rent Subsidies, the average AMI would drop to 40% of AMI, achieving a key CTAB goal. This would also ensure developers receive the full IDP rent for these units, with no further commitment (i.e., rent reductions) from their own resources. Some IDP renters would also remain in the 60- 70% of AMI range, further diversifying incomes in IDP buildings.

Note that a 10% set-aside for City Rent subsidies (i.e., 10 out of 17 required IDP units) is comparable to the 10% homeless set-aside which the City now requires from recipients of City grant/loan programs, such as the Neighborhood Housing Trust Fund. Utilizing City subsidies for these units will promote the Affirmatively Furthering Fair Housing mandate for BPDA approved housing, by increasing the mix of ELI households of color in new IDP buildings, thus promoting racial equity and class diversity.

If IDP units are increased beyond 17%, we recommend increasing the City subsidy units proportionately to maintain a 40% average AMI in IDP units.

Boston’s City Rent Subsidy program. MAHT spearheaded the CRSC in 2015 to advocate for a City-funded subsidy for low-income renters, funded from the regular City budget, similar to the Local Rent Subsidy Program (LRSP) in Washington, D.C., to address Boston’s severe shortage of housing affordable to Extremely Low-Income renters and homeless people.

In January 2020, Mayor Walsh announced a pilot Boston Rent Subsidy Program, funded at $5 million/year, to be administered by the Boston Housing Authority (BHA). The CRSC was invited to participate on an Advisory Committee to help the BHA design and implement the new program. Quarterly meetings have been held since fall 2020. 

Initially, the BHA resolved to target City funds as Project-Based subsidies in new developments in Boston, capped at the IDP rent level of 70% of AMI, or the Low-Income Housing Tax Credit (LIHTC) rent at 60% of AMI. Subsidy commitments were to be long-term to provide permanent housing for Extremely Low Income (ELI) and/or homeless Boston residents. The BHA agreed to prioritize currently unhoused working families with children in the Boston Public Schools. Because these are City, not federal, funds, the BHA is able to assist undocumented residents and unhoused families not otherwise eligible for federal funds.

In July 2022, Mayor Wu and the City Council approved $9.75 million/year for City Rent Subsidies in the FY 2023 budget, enough to permanently house up to 900 ELI or currently unhoused families, at IDP or LIHTC rent levels.

Project-based City Rent Subsidies are underutilized. In November 2022, the BHA provided an analysis of the allocation of funds to date. Only 175 units had been allocated or committed as project-based assistance, in five developments, in the first 16 months of the program. The BHA has had difficulty “marketing” project-based subsidies in new LIHTC or IDP developments; very few developers have applied. The BHA is “land-banking” the remaining funds by issuing temporary city-funded mobile Vouchers, until such time as project-based developers can be found. That leaves up to 725 additional Project Based City Subsidies that can be allocated now for IDP or LIHTC units in new, mixed- income developments.

“Marketing” by BHA, BPDA and the City is the key. Although promises have been made, the BHA’s marketing of the Rent Subsidy program has fallen short. BPDA officials until recently seemed to be unaware of the new program. CRSC members have found that most nonprofit and for-profit developers of LIHTC or IDP housing are unaware that the program exists.

We strongly urge the BPDA, BHA and MOH to proactively meet with prospective IDP (and LIHTC) developers, and to require utilization of City Rent Subsidies to provide homes for ELI/homeless families to improve the income and diversity mix of new developments.

2) Achieve the CTAB goal of up to 33% of housing affordable to Boston residents in new IDP buildings, by utilizing additional Section 8 Housing Choice Vouchers paying the Small Area Fair Market Rent (SAFMR)

The Mayor’s proposal commendably includes a 3% set-aside (3 out of 100 units) for regular BHA Section 8 Housing Choice Vouchers which pay the Small Area Fair Market Rent (SAFMR) to landlords. Requiring IDP developers to accept additional Section 8 Vouchers, could approach the 33% goal. There are 14,000 or so Vouchers issued by the BHA each year. Many Voucher holders have difficulty finding an apartment, even with the SAFMR due to widespread discrimination against Section 8 voucher holders, so IDP buildings could help these Voucher holders find a home.

The SAFMR is substantially higher than IDP rents, up to a $1,200 to $1,500/month more in 1 BR apartments, and $1,500 to $2,300/month more in 2 BR apartments, in the higher income neighborhoods where IDP buildings are typically located. At the same time, IDP developers are able to obtain anywhere from $664 to $2,699/month for new luxury market rents above what SAFMR Vouchers can pay, depending on neighborhood/zip code. (See attached chart). So accepting up to 13% additional Vouchers at SAFMR (beyond the Mayor’s proposed 3%) would likely mean developers absorbing a reduction below potential market income, in these units.

However, this amount would be at least partially offset by the “savings” from what developers are otherwise being asked to absorb in the Mayor’s proposed IDP plan. If 10 IDP units are subsidized with City Rent subsidies at the IDP rent, we believe that another 5 to 10 units could accept SAFMR Vouchers, at little or no additional marginal cost to the developer. The Section 8 set aside, could be achieved either by accepting mobile Vouchers or a Project Based Voucher contract from the BHA.

In sum, we recommend that the BPDA (1) utilize City Rent Subsidies in the IDP set aside units to lower average AMI to 40%, and (2) require acceptance of Section 8 subsidies paying SAFMRs in the remaining non-IDP, “market” units, to achieve the overall goal of 33% affordability urged by CTAB. This arrangement would enable creative developers to offer a more truly diverse, equitable and socially healthy income mix in future IDP buildings, at little or no additional “cost” beyond that required by the Mayor’s current proposal.