Meeting the Moment for the Housing Affordability Crisis

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August 29, 2022
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The Fahe Network Talks ‘Concrete Solutions’ for Today’s Housing Affordability Crisis

With the Fahe Annual Meeting fast approaching, reflecting on some of the important conversations regarding the unprecedented challenges our Members and community practitioners have encountered in the housing market this year has never been more timely.  Rising to “Meet the Moment,” as the theme of the 2022 Annual Meeting suggests, requires an understanding of the unique forces that are shaping the affordability barriers for American families and how those forces are spawning new and unpredictable complexities into local workforces, economies, and markets.  It also invites an opportunity to engage with policymakers and thought leaders to envision innovative approaches to overcome these new obstacles, finding concrete solutions to both emerging and inherited affordability issues.

As our country copes with economic realignments, workforce displacement, and a number of other public policy challenges in the wake of the pandemic, widening affordability gaps in the housing market may pose one of the most significant obstacles to families striving to reach their American Dream. While both homeownership and rental markets have seen unpredictable fluctuations in recent months, it appears clear that rising cost trends are slowly edging more families into uncertain housing situations. As demand for housing far outweighs supply, according to the Pew Research Center, active listings on the market have dropped 60% since 2020. Moreover, the price for a single-family home rose by roughly 25% during this same time period. 

Complicating the conditions of today’s housing market, many communities throughout Appalachia have long struggled with histories of generational poverty and chronic underinvestment in local infrastructure, particularly residential infrastructure and durable housing.  When dwindling stocks of financially-accessible housing converge with national pandemic-related relocation trends and rising prices for construction supplies and skilled labor, the result manifests in soaring costs both for rent and homeownership—often beyond the financial means of working families.  Ultimately, these price spikes often lead to housing instability for some of our most vulnerable neighbors, including veterans, the elderly, disabled residents, and cash-strapped workers.

For many rural communities facing high concentrations of poverty in their geographic footprint, these growing affordability barriers can be made even more difficult to overcome under existing federal calculations for determining eligibility for income-based housing assistance. In fact, economically disadvantaged rural counties in poor states, like those in Appalachia, suffer from statutory inequities compared to similarly-disadvantaged rural counties in wealthy states in the allocation of federal aid dollars.  

In order to examine this issue and the larger landscape of challenges facing homeowners, renters, home-seekers, and the housing industry as a whole, Fahe convened a panel of expert housing practitioners and senior federal policymakers in the economic and community development arena. Entitled “Concrete Solutions: Addressing the Housing Affordability Crisis,” panelists included policy leaders like USDA Undersecretary for Rural Development Xochitl Torres-Small, HUD Deputy Assistant Secretary Robin Keegan, and Treasury Deputy Assistant Secretary Noel Andrés Poyo.  Together, they joined leading Fahe Members Duane Yoder (Garett County Community Action), Scott McReynolds (Housing Development Alliance), Lindy Turner (Clinch-Powell RC&D), and Karen Jacobson (Randolph County Housing Authority) to explore the drivers behind the affordability crisis and brainstorm solutions. 

The webinar can be viewed in its entirety here.

The Discussion

The panelists’ conversation began with a thorough discussion of the availability of federal resources to fund housing and community projects, particularly for those that serve persistent poverty localities.  In order for non-profit community developers to access federal resources under some of the most widely-used mechanisms like the Low-Income Housing Tax Credit (LIHTC) program, they must compete on a state-by-state basis, sometimes against larger for-profit developers or better-resourced states. Fahe Member Duane Yoder, representing the West Virginia and Maryland state caucus, explained how difficult this dynamic can be for smaller non-profits serving disadvantaged communities in rural or isolated areas, which can be overlooked in federal grant or assistance applications.  Specifically for LIHTC projects in these communities, average household incomes are frequently lower than those in the rest of the state.  However, despite these depressed income levels, development and building costs remain the same. Yoder explained that his organization, Garrett County Community Action, meets about one-third of its total development costs from various grants, contributions or loans in order to help defray these cost disparities. However, due to the gaps between fixed construction costs, insufficient LIHTC or HOME program assistance, and the need to aggregate diverse sources of funding from private, philanthropic, and government grantors, keeping pace with his community’s growing demand for housing can seem impossible.

However, the pleas from community developers and housing practitioners like Fahe have not gone entirely unnoticed by federal policymakers.  Since the recent enactment of the American Rescue Plan Act and the Infrastructure Investment and Jobs Act, billions of dollars are primed to flow into distressed rural communities with the promise of funding long-overdue imperatives like rural broadband, transportation, and even some housing.  Deputy Assistant Secretaries Keegan and Poyo, representing the Departments of Housing and Urban Development and the Treasury, respectively, both highlighted the priority placed on coordination among various governmental agencies, including the creation of a housing supply task force.  Fahe Members and government representatives on the panel discussed how this new priority on interagency coordination can help better assemble the resources needed across a diversity of state and federal stakeholders in order to bring community projects to fruition. 

Perhaps most engaging, though, was panelists’ discussion around the need for other on-and-off-ramps for families and beneficiaries to access assistance while still slowing phasing out of federal support programs successfully. Clinch-Powell’s Turner explained the phenomenon known as the “benefits cliff,” whereby families receiving income-based housing assistance may find themselves having to choose between accepting better job or income opportunities and losing access to aid dollars and support programs. For instance, as Turner explained, if someone who is benefitting from a federally-supported rental unit is offered a more lucrative job at work, he or she often might take the job, but also risk losing that rental unit and income-based eligibility for the assistance programs on which his or her family may depend.  This benefits cliff phenomenon can create negative incentives and perpetuate cycles of housing instability and economic displacement, having ripple effects across entire communities and their workforces. Striking the right balance to ensure that public investments would eventually reap productive and self-perpetuating returns for communities and families building a pathway to long-term prosperity should be another priority, Keegan and Poyo noted. 

Solutions

Examining funding disparities for unserved rural communities in poorer states versus their better-resourced urban counterparts in wealthier states, Undersecretary Torres-Small mentioned Area Median Income (AMI) calculations don’t always capture the full picture of a family or community’s economic need. She discussed USDA’s income banding approach, which attempts to more accurately capture assistance eligibility through household size determinations, and how a similar concept might also be applied towards HUD’s HOME program.  Approaches like these, and ones like Fahe’s Rural Income Limits Fairness and Income Eligibility policy proposals, can help reform AMI calculations to more justly distribute federal investments and correct for statutory imbalances in existing program design.

Real World Applications

Since the panel discussion, recent events have even further underscored the need for more comprehensive and equitable eligibility calculations for federal housing and community development investments for rural communities.  The devastation recently visited on eastern Kentucky following weeks of unrelenting rainfall and flooding in late July and early August have only multiplied the crucial lack of safe, financially-accessible housing.  Many of the flood-impacted communities already suffered from fragile housing ecosystems and chronically underfunded residential infrastructure.  Now, after floodwaters washed away thousands of homes and tragically claimed the lives of nearly 40 residents, survivors face even more dire conditions as they try to repair their livelihoods or find new housing altogether.  If these communities must rely on the existing AMI calculations and federal aid requirements in order to adequately fund large-scare recovery efforts, the harm caused to local economies and families’ quality of life will likely linger for decades.  For these communities at the heart of Fahe’s geographic footprint, the urgency of their situation calls for swift public policy responses at both state and federal levels.

What’s Next?

Both policymakers and Fahe Members alike recognize the need for innovation and collaboration in order to close the affordability gaps that threaten to price many families out of their American Dream.  As the Fahe Network continues to leverage our Strength in Numbers and collaborate in order to overcome rising home, labor, and construction costs, we intend to carry on the conversation that “Concrete Solutions” started at Fahe’s upcoming 2022 Annual Meeting.  Rising to meet the challenges of this moment requires each of us to demonstrate our will to choose action and embrace the responsibility for modeling the change we seek to see in Appalachia.  Such a charge will oblige Fahe’s practitioners to engage with policymakers and reimagine outdated program designs, reinvigorate public investment mechanisms, and rebuild prosperity for every community.  Accordingly, Fahe intends to craft an actionable blueprint from our upcoming Annual Meeting conversations on these same topics—one that will offer ideas for substantive programmatic and public policy reforms that can scale-up economic revitalization strategies across the region.    

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Emma Eichenbaum
Emma Eichenbaum
Emma Eichenbaum serves as the Fahe Communication Team's AmeriCorps VISTA. She is a rising junior at McCallister College studying sociology and economics.

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