The Rent Rub
Working Poor Getting Stiffed on Housing Costs
"I thought, `Oh, god, it's going to be one of those things where they're going to tell me I make too much money'," Holly recalls. In fact, the Skeens, who were making around $20,000 a year, just barely made enough to qualify for a $550 two-bedroom duplex. That's because Buckingham Estates is a privately owned "affordable" housing development that operates much like any other rental property: Renters have to show sufficient income and pay promptly on the first of the month, or they're out. It operates as a form of housing assistance that few people understand. Yet developments like Buckingham are primarily responsible for providing what little shelter exists for families who don't receive public housing assistance but also can't afford exorbitant Austin rents.
In short, Buckingham Estates is not "the projects," and the tenants are more likely to be cops than drug dealers.
The waning years of the 20th century have seen direct government housing subsidies to poor people, administered through the Department of Housing and Urban Development (HUD), fall out of fashion. Now, the IRS builds more affordable housing than HUD - through tax credits, tax-exempt bonds, and other incentives meted out to developers in exchange for landlords' promise to hold a portion of their rents down for low-income tenants. In July, the state Department of Housing and Community Affairs awarded federal tax credits to three developers in the Austin area to build 560 new rent-controlled units, and the city this year is considering bonds for another 551 apartments. Meanwhile, HUD, which subsidizes fewer than 4,000 publicly owned apartments and Section 8 vouchers in the Austin area, has no budget to expand its services, even though 27,000 families are technically eligible for public housing assistance.
Like the Skeens, however, the majority of these households earn full-time incomes and aren't looking for a handout from HUD - they just need a break on their rents. Housing officials recognize that as a rule of thumb a typical household should spend no more than a third of its income on housing, but figures from the Texas Low Income Housing Information Service show that fully one-third of Austin's population - 92,000 households - do not earn enough to rent an average two-bedroom apartment without exceeding that limit. And among the renting population, the figures are even worse: Less than half of all Austin renters can truly afford the fair market rate for a two-bedroom apartment. And one in five current renters - 23,000 households - spend at least half their incomes for rent.
So the Skeens' predicament in finding a home wasn't unusual - rather, it was far too typical. Their neighbors at Buckingham Estates include police officers, account managers, engineers, school teachers, even a Baptist minister. Recently, at a catered barbecue thrown by the complex for its residents, families with young children clustered around picnic tables and expressed gratitude for living in a community that offers both elbow room and security. John Martinez, a security officer, moved his family into one of the duplexes five years ago, escaping a cramped apartment that was eating more than half his income. Now he pays $75 less for a lot more - a garage and space for the children to play.
"Apartment living ain't no way to raise the kids," Martinez says, glancing over at his two children. Likewise, Dianne, an employee of Jardin Foods in Buda, was sick of high rents and lack of privacy. Now, she says, she likes the familiarity of meeting neighbors out in their yards. "I've never felt as safe in any apartment complex as I do here," she says. "This is the kind of living I want no matter what the price."
Indeed, the Skeens, whose fortunes have risen since they moved into Buckingham, are considering buying a home, but they say there's no rush. "I feel like I have a life - it's not like I'm stuck somewhere," Holly remarks. "This has helped me pursue a career that I enjoy, and without it it would have been very difficult," adds Bill. "I think a lot of people don't have a chance to go ahead and take a risk, at lower pay, to work their way up through something that they can have a career in."
The Skeens and their neighbors, however, dwell in an oasis that contrasts markedly with the harsh rental conditions that confront the 86% of Austin's low-income households who receive no rent relief. The nonprofit company that operates Buckingham, the Central Texas Mutual Housing Association (CTMHA), is one of very few Community Housing Development Organizations in the area that offers rent-controlled units on a sizable scale; they have about 560 units in Austin and more in Dallas. CTMHA claims as its mission to provide "great housing where families are proud of where they live, can improve their lives, and pursue their dreams." In that spirit, the nonprofit uses charitable grants to fund a savings program for its residents, which will match 2-1 any dollars residents set aside monthly to buy a home or start a business.
But CTMHA is a somewhat singular enterprise, and is responsible for only a sliver of the 11,000 or so privately owned rent-controlled apartments in Austin, most of which are owned by for-profit landlords. Existing rent-controlled apartments don't begin to meet the demand - especially, as will be seen later, for lower-income renters who need them the most. One of the reasons there aren't more rent-controlled apartments is that the bulk of tax incentives doled out by the state of Texas are used to aid potential homebuyers, not low-income renters. As a result, the Texas Department of Housing and Community Affairs (TDHCA) had only $24 million in developer tax credits to allocate for projects across the state this year, though they received applications for $114 million in credits. Then too, neighborhood opposition to the perceived "tenement projects" kills off some of what few rent-controlled properties do get approved, as happened last year when northeast Austin homeowners stormed Austin City Council chambers and deep-sixed the Tannehill apartment complex. It's hard to explain to people that although tax-credit and mortgage finance bond developments, which represent the leading affordable housing programs in Austin, are technically government-subsidized, they are not government-managed properties stuffed full of welfare recipients.
CTMHA, for example, held a series of meetings with neighborhoods adjoining the site for its new four-plex complex, across Slaughter Lane from Buckingham Estates. At one of those, one outspoken critic waved a sheet of paper listing qualifying incomes for the new homes, noted that they were similar to what area residents earned, and accused CTMHA of insulting the locals by calling them low-income. The irony hung heavily overhead like a giant water balloon, which CTMHA executive director Walter Moreau delicately avoided pricking by replying that the term "low-income" housing was merely unfortunate official nomenclature. But if the realization did set in among many of the protesters that the people who would be moving into Trails at the Park were essentially the same as themselves, it certainly didn't happen until later.
"Usually, these developments help an area rather than hurt it," remarks Gary Adrian of the city's office of Neighborhood Housing and Community Development. "Some of the people it's for have higher incomes than people already living in the neighborhood."
But that point highlights both the strength and weakness of leveraging the private market to obtain affordable housing. The tax credits and mortgage finance bonds are a carrot for developers, but they are not a committed social service net. Developers who take advantage of the financing often create a desirable mixture of tenants and maintain properties that don't exude blight and transiency, but they also don't tend to reach the people who are enduring the greatest housing stress.
Remember that the Skeens barely qualified to get their duplex? That's the uncharitable side of privately run affordable housing.
As local affordable housing advocates can tell you, there is not only a paucity of reasonably-priced rental property in Austin, but much of what is sold as "affordable" housing isn't all that affordable for much of the city's rental population. Even the bulk of CTMHA properties are out of reach for most of the city's neediest residents. That's because a significant gap exists between the income levels of renters who get direct subsidies through federal Housing and Urban Development (HUD) programs - such as public housing recipients - and the income level needed to step into even rent-controlled private rental properties.
Developers are rarely obligated to set aside units for tenants making less than 50% of Austin's median income, or about $25,000 for a family of four, but $25,000 is also the average renter household income, meaning that half of the city's rental population falls below the 50% level. The cheapest two-bedroom apartment one can expect to find is about $500, and the cheapest three-bedroom $600, meaning that a family of three will have to earn $18,000 annually to meet income guidelines, and a family of four needs about $21,600. Yet nearly 50,000 households - 17% of those in Austin - earn less than $15,000, and another 43,000 earn somewhere between $15,000 and $25,000. Secretaries, receptionists, food service workers, and account clerks typically earn around $19,000, meaning that while a single parent with one child could technically find an affordable two-bedroom, another parent with children of different sexes would run up against a barrier trying to afford an additional bedroom.
That's the reality that single mom Tanyika Johnson and her four children have encountered. They've been bunking with friends for nearly a year, ever since Johnson's previous complex was sold to a new owner, remodeled, and her rent was bumped from $525 to $715. Johnson only earns $1,200 monthly as a telephone customer service representative, which qualifies her to stand in line for public housing, but won't begin to reach minimum levels for a three-bedroom apartment. Johnson holds little hope for getting into public housing. "That list is so long - I don't know when I'll ever get one of those [apartments]," she says. Market-rate apartments are out of the question for Johnson - the lowest priced three-bedroom she could find was $680, and she's inquired at many rent-controlled properties, only to be told that she is too poor, or to keep checking back for vacancies.
Bruce Rodenborn, of the Austin Tenants' Council, says that most applicants like Johnson can usually find a place within a year, "but part of the problem is following up. These people get lost in the shuffle." From Rodenborn's perspective (and no doubt Johnson's), "affordable housing in Austin is somewhat of a misnomer."
John Henneberger, of the nonprofit Texas Low Income Housing Information Service, agrees. Even though his office doesn't make housing referrals, his staff receives calls daily from people searching for housing, and Henennberger says that on any given day he talks to someone with a full-time job who can't break into the housing market. The day before he was interviewed for this story, it had been a mother of two living homeless while working a shift at a Wal-Mart. And CTMHA receives a whopping number of phone calls at the one property it operates exclusively for very-low income families - about 800 inquiries for 148 units in the last six-month period. Maintaining waiting lists isn't even feasible considering the high volume of applications.
"The state agency [Texas Dept. of Housing and Community Affairs] has not focused on where we believe the data shows the need is the greatest," says Henneberger. "In fact, they've done very, very little for really poor people ... It's a big problem, because basically nobody does anything for the people at the bottom rung of the ladder." Henneberger refers to rent-controlled housing built through current government incentives for private developers as "narrowly banded housing," targeted almost exclusively at households making between 50% of the median family income ($25,000), and 80% MFI ($40,000) as defined for a family of four by HUD. No regulations prevent landlords from discriminating against poor renters, Henneberger points out - they can choose who occupies their units just like at any other complex, and can require minimum incomes - just so they meet the obligation to set aside a (typically small) percentage for renters who don't exceed certain incomes.
Statistical analysis of the rent-controlled properties available in Austin, as listed in the Austin Tenants' Council's "Guide to Affordable Housing," bears out what Henneberger is saying. Of all the rental units currently operating under some form of rent-control arrangement in Austin, only about a third are truly targeted to low-income earners. In southwest Austin, about 75% of the apartments in these complexes are available to renters with higher incomes; in East Austin, just under half of them are. On average, only about one-third to one-half of all "affordable" units are set aside for households earning $30,000 or less yearly, and probably no more than two-thirds of that subset are for folks making $25,000 or less. Taking these distinctions into account, the supply of roughly 11,000 units suddenly pares down to around 4,000 actually intended for truly low incomes.
It's Never Enough
Distribution of Income in Austin by Household, 1997One-third of Austin households, more than 90,000 families, earn less than $25,000, yet little rental housing is available to families in that income range.
Similar breakdowns occur in individual projects due to arrive in the near future. For example, the city recently issued $20 million in tax-exempt revenue bonds through the Austin Housing Finance Corporation to finance construction of the 256-unit, "reasonably priced" Scarbrough Apartments. But less than one-third of the units will be filled with households below 60% MFI, and only 10% will be for folks at 50% MFI. The balance of the apartments will be leased to renters earning between 60-75% of the median family income, or for families of three, incomes of $27,000 to $34,000. This is fairly typical of bond-financed development, which stipulates that landlords have to set aside only about 40% of their units for incomes at 60% MFI and below. Undoubtedly, plenty of stable but rent-stressed families will be glad to fill the $560-670 units, but the new complex won't do Tanyika Johnson or other single working parents in low-wage jobs [see sidebar] any good at all. And even CTMHA's new complex, Trails at the Park, while having a far larger percentage of low-income units (about 75%), will nonetheless be out of reach for anyone earning below $19,000.
A current lawsuit taken up by Legal Aid of Central Texas against the landlord of Windcrest Apartments highlights another problem with tax credit properties: Two women on Section 8 vouchers - rental payments provided by HUD that can be redeemed in private properties - were refused an apartment by the landlord because, technically speaking, they couldn't show sufficient income, even though their rent payments were guaranteed by HUD. Legal Aid lawyers claim that Windcrest had "absolutely no business justification" for denying the women a home - the owners simply didn't want public housing recipients in their complex. Windcrest management declined to comment on the lawsuit.
"You can't have it both ways," Henneberger says, commenting on the case. "You can't take the federal subsidy and then say you don't want poor people living there."
The owners of private rent-controlled properties are operating with an inherent conflict - a requirement to accept poorer renters but a need to attract market-rate renters to enhance the property's profit margin. CTMHA executive director Walter Moreau says that this conflict prevents private affordable housing from being as charitable as it might be.
"We philosophically want to serve families as much as possible below 50% of median income, but we need to create good communities and mixed-income levels as well," Moreau says. "The assumed philosophy is, where public funds are involved they should be targeted to the very lowest income, and in general I agree, but in practice a lot of the federal programs and funding for affordable housing are not set up that way." Loans received in exchange for tax credits or from bond sales have to be repaid, Moreau points out, making those financing tools impractical for serving families much lower than 50% MFI.
The bias toward serving higher income levels rather than lower can be traced back to the policies of the state Department of Housing and Community Affairs, which has never been secretive about its preference for extending incentives to developers who can make the housing pay. The agency has been criticized for channeling its federal tax allotments and bond financing not where the need is greatest, but where developers can attract a higher-income clientele. Brian Montgomery, a spokesperson for TDHCA, does not deny that is true. "You've hit the nail on the head," he responds when asked if subsidized development tends to cater to more prosperous renters. "As long as we have to rely on bonds to raise the dollars, we have to pay those back. Unfortunately, we have to help people on the higher end of the income scale."
For the most part, the state legislature has focused mortgage bond incentives away from low-income rental housing development. Of the $972 million in bonds the TDHCA is permitted to issue annually, one-third are used to finance low-interest mortgages for home buyers, who can qualify earning up to 115% MFI, and another third is funneled off into pollution control subsidies for industry. Only $75 million, less than 10% of bond funds, are used to build multi-family housing, even though the demand from applicants this year totaled $400 million. But in this, the state is only mimicking federal housing policies, which direct an overwhelming majority - 80% - of housing assistance into mortgage tax credits for homeowners rather than low-income assistance for renters.
All of which has contributed to Austin's enormous pool of low-income working families, who have in turn created a demand for housing assistance that far outstrips what can be created even through the private market. "If the funding were available to really meet the need, which is huge, then [affordable housing] would be a huge growth industry," says the CTMHA's Moreau. "But neither at the local, state, or federal level is there the public commitment of dollars to begin to address the need - so at best it's a slow-growth industry."
When confronted with questions about the affordable housing void that exists between public housing and the private market, Austin housing officials in the office of Neighborhood Housing and Community Development (NHCD) quickly produced a spreadsheet showing that the city directs 75% of its federal housing resources to the people earning the lowest incomes. But that pot totals less than $4 million, and the city has to spend a large portion of it to prevent existing single-family homes from crumbling down on top of poor homeowners. NHCD officials acknowledge that there's a bottleneck in the housing supply for poorer people trying to move up the ladder.
"The need far exceeds what anybody here realizes," says NHCD director Paul Hilgers. "This community does not realize how much investment it needs to make, whether from the federal, city, state, or private sector, into providing good, safe, decent housing in this community. So are the resources there to meet the need? No, they're not. We just have to find a better way to coordinate and leverage the resources that we have."
The city believes it can leverage those resources further through better coordination between entities involved in various housing programs - the Austin Housing Authority, Community Housing Development Organizations, and the NHCD office - to focus funding on individuals rather than programs, through better sharing of information.
Mayor Kirk Watson, who has coined the term "stairway to self-sufficiency" to illustrate the housing system he envisions, says that greater emphasis needs to be placed on tracking individuals' progress. "Instead of just judging success by whether we've got you into a system, we're going to judge success by helping you move to the next step, from Austin Housing Authority, to rental, to first-time home buyer. We've got to go to the stairstep and judge success by that as opposed to just how many people we have in our units," Watson says.
But large numbers of people will never be able to get the first leg up on that stairway, out of public housing dependence and rent-stressed existence, until the affordable housing stock in the city multiplies considerably. Perhaps it's a little early to stop judging the success of affordable housing by how many needy residents can squeeze into it, considering how many are currently without any assistance at all.
To that end, Hilgers says the private sector is an obvious and unavoidable solution. Because of the Community Reinvestment Act, Hilgers points out, banks and other financial institutions are under pressure to invest in publicly beneficial projects, and housing programs are an obvious outlet. "We have two real customers - the people who are looking for safe, decent affordable housing, and our second customer, whom we've never tried to work with in a proactive way - the financial institutions, who are looking for reasons to say yes to people," Hilgers says. Primarily, however, the city will still be emphasizing down-payment assistance and other aids for first-time home buyers.
That's what Henneberger says is wrong with the city's priorities - putting emphasis on single-family homebuying when so many people aren't stabilized to the point where home ownership is a viable objective. But people at the lower-income levels, says Henneberger, "aren't on the politicians' radar screens, who would rather do ribbon-cuttings on suburban homes." Henneberger is less confident than Hilgers that private investments in housing will move assistance where it is needed, and he says it gives government officials false notions that they are providing for low-income families.
"There is no magic deal here. It's not like you can say, `Well, if we just get the private sector involved we can solve this problem.' Yeah, sure, get everything you can out of the private sector, but don't change the priorities in order to get the private sector involved," Henneberger says. City housing officials counter that mortgage payments through home-ownership programs are often cheaper than renting, and that single-family homes are more acceptable to neighborhoods than rental properties. But both Henneberger and housing officials are optimistic that city government will respond constructively to affordable housing needs in the near future. There's talk of a city trust fund to give low-income housing a funding source besides federal block grants, as well as a housing impact fee levied on new businesses that locate in Austin, in order to compensate for the housing demand they create. That plan, adds Hilgers, could dovetail nicely with Smart Growth, because employers could be given incentives to build housing near their offices and plants.
That's encouraging to Henneberger. "There's too many people hollerin' - the Chamber of Commerce, industry, social service agencies - the segment of people getting squeezed by rents is growing rapidly," he says. "They're becoming a more potent political entity."
Bill and Holly Skeen, for one, became part of that entity by agreeing to be interviewed for this story. While at first nervous about allowing a reporter into his home when contacted by telephone, Bill reflected on the difficulty he and his wife, friends, and family had known dealing with Austin's housing market. "Maybe this will do some good," he concluded. "It'd sure help if this could do some good."