Income Averaging to Pave the Way for More Affordable Housing

Laura Bailey

A majority of affordable housing leaders and lenders surveyed recently by Capital One on deals and challenges heading into 2019 expect mixed-income averaging passed by Congress in March as part of a bipartisan omnibus bill to spur increased affordable housing development.

“This is the kind of innovation and creative thinking that is going to be necessary if we are going to continue making progress addressing the demand for affordable housing,” Laura Bailey, head of community finance and community affairs at Capital One, said in a prepared statement. “As obstacles are ironed out, I think we will be seeing more of it.”

Of 101 attendees surveyed by Capital One at the recent National Council of State Housing Agencies 2018 Conference & Showplace in Austin, 68 percent said the income-averaging set-aside for low-income housing tax credit (LIHTC) properties will lead to more affordable housing, with 61 percent expecting it to have the most impact in urban markets. The provision, originally introduced as part of the Affordable Housing Credit Improvement Act in 2017 by Sen. Maria Cantwell (D-Wash.) and Senate Finance Committee Chairman Orrin Hatch (R-Utah), was included in the March omnibus spending bill. It replaces the 60 percent AMI maximum eligible income for LIHTC properties with 80 percent for apartments where the propertywide average does not exceed 60 percent. Affordable housing advocates hailed it as a way to serve a wider range of households and encourage development in more markets, particularly low poverty, racially diverse neighborhoods. Fifty-three percent of those surveyed by Capital One cited the social impact of income diversity as the primary attraction of income-average.

While supporting the concept, the respondents did raise some questions about the rollout of the new rules with 33 percent identifying “lack of clarity about state and local implementation” and 32 percent citing “gray areas in the legislation” as the greatest impediments to its adoption.

Despite some concerns cited by the survey respondents, Bailey told Multi-Housing News she was confident developers and lenders would work through them.

“We believe that developers are feeling like they have the information they need to put mixed-income averaging to work and increase their development of affordable housing,” she said. “When asked what the challenges were facing mixed-income development, widespread awareness barely registered a blip—coming in at only 2 percent of respondents. We also see that developers are interested because only 13 percent listed developer interest as a challenge. This is all very promising.”

Special Needs Housing

The survey also asked respondents about creating affordable housing for the special needs segment and found 41 percent expect development activity next year will be highest in disability communities, followed by 32 percent who predicted it would be higher in senior communities.

“The emphasis on housing for people with disabilities reflects the growing trend among qualified allocation plans (QAPs) to award points for special needs on 9 percent LIHTC,” Bailey said. “Now it will be up to developers to follow through with the services this population requires.”

She added development organizations “are very interested in scoring points with state housing programs by building housing that is targeted for special needs segments. If they can do that while satisfying a compelling need, then it works for everyone.”

The survey pointed to NIMBYism (46 percent) and low local awareness (34 percent) as potential obstacles to developing more special needs housing. Bailey noted Capital One has seen affordable housing developers and specialized organizations use technology platforms to increase community engagement and defuse fears.

“One great example that we’ve seen of a technology platform developers have access to today to increase engagement around their affordable housing plans within a community is coUrbanize, which we like for just this reason. What coUrbanize and other platforms like it are doing so well is to make sure that community members are part of the process,” Bailey told MHN. “By soliciting their opinions and concerns, developers are able to dispel incorrect rumors early on and incorporate suggestions into their plans that make the development more successful for all involved.”

Image courtesy of Capital One