In The News › Does N.O. have too much subsidized housing?

Oct 11, 2009

Source: The Times-Picayune

Filed under: Housing, Orleans Parish

Does N.O. have too much subsidized housing?

A state panel seems to think so. It has halted new bonds for affordable housing.

Sunday, October 11, 2009
By Katy Reckdahl, Staff writer
The Times-Picayune

Even before it opened in July, renters were anxious to land an apartment in Walnut Square, a new mixed-income apartment complex in eastern New Orleans.

Its 125 market-rate apartments went fast. Only 10 remained unleased this week.

But its 84 affordable units went more quickly still.

By the time the complex opened three months ago, its rental office had compiled a waiting list of 1,800 for the affordable apartments, manager Sandy Feraci said.

Such an enthusiastic response to Walnut Square would seem to indicate the city is short on affordable apartments.

But not everyone sees it that way. During a five-hour State Bond Commission hearing last month, longtime New Orleans landlord and former banker Donald Vallee called the city’s rental market “overbuilt” and successfully sought a temporary moratorium on new bonds for subsidized affordable-housing construction in New Orleans.

Already, the credit-market crash has stalled some developments, whose would-be builders can’t find investors to buy their state-allocated tax credits.

The Bond Commission hearing was prompted by a recent Bureau of Governmental Research finding that, since the storm, a larger share of New Orleans families receive federal housing subsidies. The BGR report suggested that the city may be in danger of having too much affordable housing. It projected that, if all proposed projects came to fruition by 2012, one in four households in New Orleans would be subsidized, compared with one in 10 pre-Katrina.

Larry Schedler, author of the Greater New Orleans Multi-Family report, also sees a softened rental market, but mostly for apartments targeted at higher-end and middle-class tenants. For those renters, “we probably have enough product,” he said.

Schedler, unlike Vallee, sees a definite lack of moderate- and low-income housing, for renters making up to 50 percent of the area’s median income: $20,950 for a one-person household and $26,900 for a family of four.

“That appears to be where the need is,” Schedler said. “But the issue becomes, ‘How much do you need?’ “

—- No easy answers —-

The hearing last month was an attempt to answer the questions: How much affordable housing does New Orleans have, and how much does it need?

But the answer isn’t easily gotten. Higher vacancy rates, for instance, could be the result of too much rental stock, or of landlords who sit on empty units until they can get the reliable fair-market rents paid by those with housing vouchers.

Other questions are also vexing. How best to house fixed-income and low-wage families, who have little hope of paying market-rate rents? And from a regional standpoint, how realistic is it to expect other metro-area parishes to build a substantial number of affordable rentals, so that poor and working-class tenants are not concentrated in New Orleans?

The BGR’s report cautioned of that possibility. But the idea that there is too much affordable housing in New Orleans is “totally surreal” to Laura Tuggle, who works with the city’s low-income renters at Southeast Louisiana Legal Services’ housing-law department.

For starters, Tuggle noted that HANO received 36,584 applications during last month’s Section 8 lottery, which translates roughly into one application for every four households in New Orleans. Based on HANO’s existing supply, only 3,500 of the applicants will receive a voucher.

Moreover, Tuggle noted that not all of her clients qualify for Section 8, though they are poor by most definitions. As an example, she mentioned a lower-tier grocery-store worker and mother of a young child whose income is too high to qualify for a voucher.

—- The supply side —-

Katrina is seen as the chief culprit. The post-storm floods damaged thousands of subsidized apartments and tens of thousands of unsubsidized — but still cheap — rental units. Much of that housing stock has gone unrepaired, because privately owned rentals were generally not eligible for Road Home money and because the Louisiana Recovery Authority’s Small Rental Property Program sputtered early on and has only recently begun to gather steam.

Vallee said he believes rents artificially inflated by voucher rates may be partly to blame for the difficulty in finding affordable apartments. “What we don’t need is more construction,” he said. “We need reasonable rents.”

The moratorium on new subsidized housing is necessary, he said, because no one has properly studied the big picture. The moratorium should remain until a comprehensive market study can be completed by an independent party: “someone without any skin in the game,” he said.

The BGR study, which started the whole discussion, was not a comprehensive analysis of the market, President Janet Howard said. “It was just about one element: supply,” she said. “It was not addressing demand.”

Although BGR’s report merely recommended that policymakers “strive for a housing market that accommodates different income levels without placing a disproportionate burden on the city,” some concluded that the city had taken on too much subsidized housing.

Not Howard. “If someone is calling for curtailed affordable housing, it’s not us,” she said. She added that her agency “didn’t have a position or a purpose” beyond its long-held position that housing should be approached on a regional basis, to avoid job-housing mismatches and over-concentration of poverty in one area. It’s an approach successfully used by other metropolitan areas and mandated by some states.

After hearing testimony last month, House Speaker Jim Tucker, R-Algiers, also pushed for the moratorium. Policymakers had been “flying by the seat of our pants” when originally determining what housing subsidies were necessary in New Orleans, he said.

The result: “excess supply,” Tucker said.

—- Assessing needs —-

But the Louisiana Housing Finance Agency, which awards tax credits to developers, commissioned a review of the BGR report and came to a different conclusion. Its report, presented at the hearing by agency head Milton Bailey, differed with BGR’s supply data in a few key areas and also projected a continuing, unmet demand for subsidized units through 2012.

“Without demographic data or reconciliation between supply and demand, it is our opinion that the BGR report should not be a basis for decisions regarding the need for affordable housing,” the LHFA analysts wrote.

Howard and Bailey both say the next step should be a comprehensive needs assessment of Orleans Parish’s housing market in the face of dwindling recovery funds. “We feel it is imperative that policymakers have a complete understanding of the current and future housing situation,” Bailey said, “so that the real needs of Louisianans can be addressed.”

Within a week or so, the Louisiana Recovery Authority will seek a firm to provide an independent market study, said state Treasurer John Kennedy, the Bond Commission chairman.

The LRA, which is charged with planning the overall recovery and rebuilding of Louisiana, is a natural mediator, LRA spokeswoman Christina Stephens said.

“It is our responsibility to listen to the concerns of those on both sides of this discussion and strike a balance between over- and under-development,” she said.

For his part, Kennedy is looking forward to seeing the data consolidated in one place. He found it difficult to process what he heard at last month’s meeting.

“At the end of it, the only thing I was certain of is that I was uncertain,” he said.

—- Skyrocketing rents —-

Before the post-Katrina levee breaks that flooded most of the city’s rental stock, there was not much difference between market-rate rents and those for apartments designated as affordable, Schedler said. That’s no longer the case.

In large part, that’s because only 38 percent of the 50,000-plus Katrina-damaged apartments in New Orleans have been repaired or are being rebuilt, according to housing analysts at PolicyLink. The group says more than half of the lost units were affordable to low-income households.

After the storm, rents rose by 44 percent, fueled by demand for a drastically reduced number of apartments and skyrocketing insurance and operating costs, according to a recent Greater New Orleans Data Center study, which compared rents between 2004 and 2007.

But Vallee, the landlord, predicts rents will continue to decrease because of the vacancies he sees across town and that, gradually, some units that are not currently considered affordable might fall into that category.

Vallee also doesn’t support building more subsidized housing for low-income residents who either stayed out of town after the storm or moved to outlying areas of the metropolitan area — and may never return. “I don’t think anyone has good numbers of who’s out there and who’s not,” he said.

Vallee sees the large number of applications for Section 8 only as an indicator that the applicants “want cheap rent and they want someone else to pay it,” calling it more of a “social economic problem more than a housing problem.”

But Schedler sees a deeper need. While every metro area lacks enough affordable housing, he said, New Orleans’ shortage is amplified by the city’s “service-driven, tourism-industry economy” and its largely low-wage work force.

As a result, developers can’t depend solely on rental income to cover construction costs for affordable housing, he said.

“You cannot justify building affordable units without a subsidy,” Schedler said.

Oct 11, 2009

Source: The Times-Picayune

Filed under: Housing, Orleans Parish

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