Nonprofits and the City's Quest for Affordable Housing

In April, as part of its effort to combat the deepening housing shortage, the city of Austin adopted its Strategic Housing Blueprint, a 39-page plan outlining a medley of strategies to throw at the proverbial wall, hoping one (or more) will stick.

Diverse as its tactics may be, the blue­print orients its overall approach to the housing market: Should things go as planned, for-profit developers will be building the bulk of the target 135,000 housing units in the next 10 years, including the much-needed affordable units. On the periphery of that undertaking are the city's nonprofit affordable housing providers. Such organizations may not be able to compete with for-profit developers in scale, but the extra amenities they provide for low-income tenants have raised the standard of affordable housing in a way that makes the city's goals look modest by comparison.

Foundation Communities, the city's pre-eminent nonprofit housing organization, built its first project in 1989, and has since expanded to 16 family and six efficiency communities, which supply over 2,000 affordable rental units – 12% of the estimated low-income affordable housing (affordable to households with an income less than $25,000) in the entire Austin metro area. In those communities, Foundation has provided residents with support services like education programs, financial assistance, and access to health care. "The seed for the vision was that a person in a connected community can thrive in a way that a person alone cannot," wrote Frances Ferguson, the organization's founder. "The dream was that this could be done at a magnitude that influences practice across the city and beyond."

The holistic approach has had a quantifiable effect on areas where the organization has opened doors. In South Austin, where Foundation has established learning centers at the Sierra Ridge and Sierra Vista apartments, the nearby St. Elmo Elementary School has seen its state-test-passing percentage rise from 71% in 2006 to 81% in 2016, despite 85.6% of its student population being classified as economically disadvantaged. In addition, the nonprofit has helped prepare over 20,000 tax returns in the past year through its financial centers, and registered more than 5,000 people for health care plans.

Today, Foundation continues in line with Ferguson's original vision – "to work citywide, to not just focus on one neighborhood," said Walter Moreau, the organization's current executive director. This fall, the new Cardinal Point apartments near Four Points will begin leasing as the first affordable rental complex in North­west Austin. Foundation is also working on adding 20 units to one of its original projects, Garden Terrace (on William Cannon).

One future development that's not so certain is Foundation's proposal for a 200-unit affordable complex at the Austin Independent School District's Allan Center in East Austin. Staffers and tenants alike have spoken multiple times at AISD board meetings to petition for the partnership. On April 24, a resident named Patrick Martinez told trustees that, as a single father living in Austin, he had struggled to find a place he could afford. "That is, until I discovered Foundation Communities," he said. "Now [we] call Sierra Vista home … it's beautiful, affordable, and I feel a real sense of community there."

Another tenant, Marisa Fernandez, spoke of being abandoned by her ex to raise three young children on her own. She got an apartment through Foundation, and participated in the organization's matched savings program, making it possible for her to start her own business. "My children and I have found stability at Southwest Trails, and because of this, I am able to be a better mother to them and help support their goals," she said. "There are many families in Austin that are similar to mine that have faced similar struggles. I want more families to have the same opportunities as my family and I have."

No One-Stop Shop

Fernandez's hope that many more might share her experience may go unanswered by the city's current plan for affordability, because of its dependence on market-produced units. According to the 2014 Com­pre­hen­sive Housing Market Analysis, there are an estimated 48,000 households that earn less than $25,000 per year and cannot find affordable housing in Austin. The Strategic Housing Blueprint calculated that it would cost $6.48 billion to supply each of those households with a reasonably priced rental unit. Jeff Patterson, spokesperson for the city's Neighborhood Housing and Com­mun­ity Development department, said that to close such an enormous gap, the city will have to diversely invest in multiple approaches: "There's not like a one-stop shop, or one panacea to address this issue," he said.

The blueprint calls for the city to facilitate the production of 45,000 new units for households with incomes below 60% median family income (roughly $32,000 per one-person household) over the next 10 years. Nonprofits will contribute, Patterson noted, but the city will have to employ various tools of its own to accomplish the lion's share of the enormous task, such as changing the permitting process through CodeNEXT and revamping its density bonus programs. Many of the blueprint's recommendations seek to make it easier, or more desirable, for private interests to build affordable low-income units, because federal and state funding has diminished considerably over recent years and shows no signs of soon returning. The blueprint predicts that in 10 years, 272 units will be built through federal funding, and 1,384 units by the Housing Authority of the City of Austin (HACA) – perhaps less, it notes, if Trump has his way as president. (The White House's proposed budget cuts $6.8 billion in federal affordable housing money, projected as an $18 million loss for Austin.)

The federal government has also invested in rental assistance programs, like Section 8 vouchers, to address affordable housing needs – for households with less than 30% MFI, in particular. Michael Gerber, HACA's CEO, said that locally, this demographic still struggles to find apartments that will accept their vouchers. Although no new public housing has been created for decades, HACA has developed other properties through its subsidiary, the Austin Affordable Housing Corporation, as part of an effort to meet the growing need, supplying 3,500 units in the past several years. As far as connecting these tenants with services, HACA has relied on partnerships with nonprofits (like Foundation) to provide financial, education, health, and job training resources. Gerber said: "Too often we find that the population we're serving – a lot of seniors, a lot of people with disabilities, a lot of single moms – almost all our clients are coming to us in crisis or near-crisis."

In light of these losses, the city has high hopes for its CodeNEXT update of the density bonus programs. While every one of the 10 current density bonus programs is different, they each function on the premise that if a developer agrees to make a small percentage of their project's units affordable, they can gain access to extra entitlements. For six of these programs, developers can pay a fee-in-lieu, which goes into the city's Housing Trust Fund, rather than include on-site affordable units. As of last August, the density bonus programs have generated 1,653 affordable units, but the blueprint predicts they'll prove responsible for 1,450 additional units over the next decade after CodeNEXT consolidates and improves the programs. The current proposal on the table standardizes the programs into one section of the new code and doubles the area covered by these programs. But during a June presentation, council members (including Kathie Tovo, Leslie Pool, and Greg Casar) noted that the change in size did not resolve previous concerns about the programs. Consultants and staff are currently in the process of incorporating the feedback into a second draft.

Effective as these programs may be at putting a roof over one's head, they will inevitably place low-income households in complexes where most tenants don't have the same need for support services. Those amenities, and the opportunities that come with them, will likely be unavailable – as will be the feeling of "belonging" that folks like Martinez and Fernandez described in April. There are some for-profit developments that consist entirely of affordable units, some of which take advantage of the same tax credits used by nonprofits, but these have a habit of dropping into substandard conditions. While there are exceptions, like Wildflower Terrace in Mueller, for-profit affordable apartment complexes such as Cross Creek, Orchard Plaza, and Wood Ridge have made the news because they've either threatened mass evictions of their tenants or failed to keep infrastructure up to code, endangering residents. In 2013, after years of sluggishness, the city adopted a repeat offender list for substandard housing violations. Since then, 73 properties have been registered to the list, amounting to a total of over 8,100 rental units in questionable condition.

And yet there's no way around relying on the private sector to produce the majority of affordable low-income units, said David Potter, NHCD's program manager. "The smaller nonprofits that are mission-driven are the ones providing specialized housing, but the larger for-profits are able to build on a larger scale … just by way of access to money. So we need them too," he said.

Historically, however, this paradigm has not always been the case.

"Like a Moon Landing"

The affordability needs being tackled today are the same needs that inspired the Wagner-Steagle Housing Act in 1937, which established the U.S. Housing Authority during the Great Depression. Thanks to Lyndon B. Johnson's advocacy during his stint in the U.S. House of Representatives, Austin was one of the first cities to receive funding for public housing. The city used those funds to construct the 186 units at Santa Rita Courts, Rosewood Courts, and Chalmers Courts. Each continues to serve residents today. Contrary to the negative imagery sometimes associated with public housing, these projects were once quite desirable, according to local historian Dr. Fred McGhee. "Many of the people at the time lived in shacks, so when public housing showed up, it was like a moon landing," he said. "The construction of the public housing here absolutely revolutionized the real estate industry, and reports from that time [indicate] that tenants were extremely grateful and very satisfied."

Between 1940 and 1943, Housing Author­ity funds helped build nearly 10,000 affordable units across Texas. "There were many units created in a relatively short amount of time," said John Henne­ber­ger, director of the Texas Low Income Housing Information Ser­vice. "Public housing was revolutionary in terms of its scale." The speed at which the government responded to the era's housing crisis was spurred by the demands of the housing reform movement. For these advocates, public housing was a more direct solution than trying to enforce private landowners to comply with housing standards. Architect and planner Catherine Bauer, one of the movement's main organizers, summed up their position: "What housing mainly needs … is more grassroots."

Unfortunately, this boom in construction came at the expense of reinforcing racial and economic segregation. In fact, the reason Austin's first public housing project wasn't just one single development was to accommodate the racist views of the city's white elite, forcing LBJ and his allies to compromise by splitting the project into three: one for whites (Chalmers), one for African-Americans (Rosewood), and one for Hispanics (Santa Rita). Housing reformists, as they were called at the time, also faced resistance nationwide from private developers. In 1939, the National Association of Real Estate Boards referred to the Housing Authority's "undiluted socialism." In order to pass the 1937 Housing Act, legislators had to reassure developers that public housing would remain in the poor areas of towns and cities. "The most important consideration is that public housing projects should not be brought into competition with private industry," one of the bill's co-sponsors, Sen. Robert Wagner, said during a 1936 legislative hearing. "To reach those who are really entitled to public assistance, and to get into the field where private enterprise cannot operate, is the objective of this bill."

By the Eighties, very few new public housing projects were being built in the U.S. The housing movement that had prevailed in the Thirties had dissipated, and negative stories coming from cities like Chicago about poor management and appalling conditions sounded the death knell for public housing as a national strategy. Housing authorities were "already struggling, because much of the housing stock that they operated was old, and many of them had been underfunded in terms of providing maintenance," said Henneberger. "Then Congress comes along and says that public housing now has to be the housing of last resort. The Housing Authority collapsed" under that weight.

During the Reagan administration, Con­gress passed the Tax Reform Act of 1986, signaling a transition in government policy away from public housing toward low-income housing tax credits. Today, the Austin metropolitan area gains access to about $45 million in tax credits annually, which specifically goes to for- and nonprofit affordable housing developers. But UT professor Jake Wegmann says there remains only enough funding for a few hundred affordable units. "Hopefully, someday, maybe, the federal government will see fit to increase the amount of those tax credits," he said. "But if [Austin] wants to see more nonprofit affordable housing, it's going to have to put in a lot more dollars. The city is used to the nonprofits getting these tax credits and the city tops it off with some city dollars. But if we want to increase the total [unit] production, the city will have to get comfortable with paying the lion's share for some projects."

The Texas Hammer

The tax credit system has ultimately fallen short of matching the expediency and quantity of public housing in its heyday, and it also failed to solve the problem of segregation. In 2008, nonprofit Inclusive Communities Project in Dallas sued the Texas Department of Housing and Com­mun­ity Affairs for disproportionately awarding tax credits to applicants in historically low-income segregated areas of Dallas. The organization offers a mobility assistance program wherein counselors help households with a Section 8 voucher to find and move to new living spaces. It eventually became clear to ICP's counselors and clients that "the credit properties were all in highly segregated areas," said ICP president Demetria McCain, "not where our clients wanted to move." In 2015, the Supreme Court ruled 5-4 that disparate impact claims were pertinent under the Fair Housing Act, although the ICP case itself was later dismissed by a Dallas federal judge.

Moreau says that discriminatory pattern is not unique to Dallas. A study out of the Furman Center for Real Estate and Urban Policy found in 2011 that this correlation was a national trend, concluding that 60.3% of the tax credit developments built in U.S. cities were in census tracts with high minority populations. "If you were to make a map of all the tax credit developments in Austin up until the last five years or so, most of them were east of I-35. There's a handful between MoPac and I-35, and I think [Foun­dation Communities] has the only project west of MoPac, Southwest Trails," he said. "Our philosophy has always been that we want to build affordable housing in all parts of town, so in a way [this lawsuit] gave us the opportunity to push further west."

McCain presented a blunt assessment: "People shouldn't have to live in segregated neighborhoods." There are some areas of cities, she said, that remain "totally off-limits to [low-income families of color] because there's no affordable housing. The only way you're going to get a mixture racially and ethnically is if you have various types of rent and housing in a given area."

In line with the federal government's shortcomings, the state of Texas has doubled down against local integration and affordable housing efforts. Last month, Gov. Greg Abbott signed into law House Bill 1449, which prohibits municipalities from instituting linkage fees (payments into an affordable housing fund which are required by the square foot for all new development) on new construction that could lower rent prices. As with inclusionary zoning (which is also prohibited in Texas), other parts of the country have implemented linkage fees, often with positive results. In Washington, D.C., inclusionary zoning (which requires any new housing development to include a mix of income levels) has produced more than 15,000 affordable units since 2003. The city of Boston has collected over $45 million in linkage fees since it started collecting in 1984. With the documented success of these programs, the state's ban comes off as cruel.

"This Texas Legislature is segregationist, reactionary, and punitive toward working families in a way that is just incredible," said Henneberger. "These people just don't care. Not only do they not care, they want to hurt people."

In that context, Greg Anderson, director of Habitat for Humanity's Austin chapter, believes it's up to the local community to do everything they can to foster affordability. "That's going to come in two main forms," he said: "the continued funding of the Affordable Housing Trust Fund and the relaxation of land use regulations in exchange for on-site affordability." The blueprint predicts the Trust Fund will produce 1,795 affordable units in the next 10 years, but the fact remains that most of the affordable housing responsibility will lie with nongovernmental entities.

As part of the Preserve Rosewood organization, McGhee has advocated for a completely different direction: a reinvestment in public housing. He points to how other developed countries have robust subsidized housing programs, similar to the argument Bernie Sanders made about universal health care during the 2016 Democratic primary race. "It's a situation where politically, we have to organize to turn things around," McGhee urged. "We have to stop this worship of the market and return to more New Deal-oriented policies where there is direct provision of basic services for the citizenry, and then the private industry can be allowed to do what it does."

A Sense of Community

Nonprofits in Austin, with Foundation Communities as the prime example, have transformed the way city officials, housing advocates, and tenants think about affordable housing. The term now embodies more than shelter at a reasonable cost, but also a way out of poverty. Potter says nonprofits "provide a sense of community, a landlord that really cares about how you're doing, whether you're getting the things you need, and if your family is able to succeed."

Strong support exists to take these nonprofits as far as they will go, but even if they continue to grow, there will still be renters they can't serve. For most of its clients, Foundation must make sure that its tenants follow their leases in order to secure long-term financial sustainability. "The biggest challenge we have right now is a waiting list almost everywhere," said Moreau. "When someone does move up the waiting list and fills out an application, we do a rental, credit, and criminal history check. Criteria varies somewhat by property, although the criteria for our supportive housing for folks who are homeless is much more open."

The low-income housing tax credit is intended for households making 60% of the median family income, but there are many households below that cutoff, with an estimated 30,000 making $15,000 or below annually. The lack of housing for this income level forces people into desperate living situations where they must take extraordinary risks to survive. It only takes so many chances for someone in this position to find themselves in a vicious circle of misery. "Many in our community are homeless, temporarily or chronically, because current financial issues are woven together with a troubled debt history, unemployment or underemployment, substance use, and/or a criminal record," said Juliana Gonzales of the Austin Tenants Council. "The most complete solution will include affordable housing providers that can assist individuals in that cycle despite diverse conditions or backgrounds, and will not rely on one organization or public funding source to meet all of our community's affordable housing needs."

Without a complete solution, the city is destined to institute a new type of segregation, one where only the most fortunate of the working class can prosper within a rental community that invests in the future of its members. The rest will be scattered across the city, some winding up as the few poor people in a luxury apartment complex, and others becoming outcasts in dilapidated for-profit complexes.

The consensus in local housing advocacy circles is that the nonprofit housing model is special and not possible for everyone. It can't be scaled to meet the demand, and operationally cannot serve as a housing of last resort. The only group of people bold enough to say that everyone does deserve an empowering and affordable community are the low-income tenants themselves – like Marisa Fernandez, who can see the necessity more clearly through the lens of her past struggles. For her and those in her situation, resolving affordability does not mean making it possible for low-income residents to live within the city; it means claiming a foundation to rise up, and by doing so, helping usher Austin out of a quagmire of inequality.

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What's in the Strategic Housing Blueprint?

On April 14, City Council adopted a Strategic Housing Blueprint, a road map for the development of 135,000 new housing units in the next 10 years. If targets are met, 60,000 of those units will be labeled "affordable" (at or below 80% median family income). The involved strategies are categorized in five value groups, listed below with a few proposal highlights for each set.

Prevent households from being priced out of Austin
• Allow homeowners to rent portion of houses
• Expand the use of community land trusts
• Develop programs to mitigate gentrification

Foster equitable, integrated, and diverse communities
• Create a strike fund that can buy property for future affordable housing
• Undertake strategic land banking
• Implement tenant relocation assistance program

Invest in housing for those most in need
• Pursue bond election for affordable housing
• Utilize tax increment financing for affordable housing
• Incentive programs

Create new and affordable housing choices for all Austinites in all parts of town
• Revise S.M.A.R.T. Housing program
• Allow development of smaller houses on smaller lots
• Relax regulations on accessory dwelling units

Help Austinites reduce some of their housing costs
• Link housing choices with transportation choices
• Comprehensive parking reform
• Increase bikeability and walkability