Transit struggle: Holding onto affordable housing

Across America, rail and bus rapid transit (BRT) lines have proliferated during the past decade. Los Angeles will have a total of 71 light-rail and BRT stations operating by the end of this year. The Boston region is extending heavy rail for the first time in a quarter-century. Rapid transit has been growing significantly in many metropolitan areas.

One beneficial result: Cities and suburbs are getting—or anticipate getting—new concentrations of housing, offices, and retail around many of the stations.

But advocacy groups such as Reconnecting America and its Center for Transit-Oriented Development see a problem: As growing numbers of middle- and upper-income Americans choose to live within walking distance of transit, the price of housing near rail and BRT lines is rising and may well escalate.

On May 16, Reconnecting America and the City of Los Angeles Housing Department released a report warning of “unfortunate side effects if efforts aren’t made to preserve affordable housing in transit-rich neighborhoods.” The report, Preservation in Transit-Oriented Districts, was the latest in a series of studies identifying this danger either nationally or in particular locales.

• A 2009 report from Reconnecting America and the National Housing Trust—a nonprofit organization that advocates for affordable housing near transit—counted more than 100,000 federally assisted housing units in transit-rich neighborhoods in eight cities: Chicago, Cleveland, Denver, New York, St. Louis, Seattle, Boston, and Portland, Oregon.

Nearly two-thirds of those units had federal rental assistance contracts (such as Section 8 subsidies) that were due to expire before the end of 2012. When the restrictions run out, apartments owned by for-profit companies could demand much higher rents, the organizations warned.

• As many as 160,000 renters in 20 metro areas could lose their privately owned, HUD-subsidized apartments near transit by 2014, said another 2009 report, from Reconnecting America, the National Housing Trust, and AARP.

“The renewed popularity of urban living means that properties in walkable neighborhoods near transit have increased in value, and that property owners are likely to opt out of the HUD program and convert the housing from affordable to market rate,” the report noted. Nearly a quarter of the affected units are occupied by people 65 and older.

• Places that previously lacked rapid transit service are increasingly getting it. This improves access to employment and services, but puts those places’ housing in greater demand. The coming extension of the Boston area’s Green Line rail service into Somerville, Massachusetts, north of Boston, is a case in point. It’s anticipated that the route will raise housing costs for many existing residents in that historically blue-collar community of 76,000.

A  2008 study by Reconnecting America’s Center for Transit-Oriented Development (CTOD) declared that in Somerville, “steps to ensure equitable transit-oriented development must be taken quickly.”

Otherwise, residents may be “vulnerable to displacement when values rise.”
In Los Angeles County, the threat posed by greater demand is an unintended byproduct of Measure R—a 2008 ballot measure that authorized a half-cent sales tax for transportation projects.

Measure R is expected to help pay for the Expo light-rail line on the Westside, a light-rail connector in downtown LA, a Crenshaw corridor transit project, extension of the Metro Gold Line, a rail connection to Los Angeles International Airport, and a Green Line extension to the South Bay, among others.

“Today, the City’s most transit-rich neighborhoods house a high percentage of low and moderate-income residents,” says the LA report, written by Abigail Thorne-Lyman of Reconnecting America with assistance from Jeffrey Wood of Reconnecting America and Helen Campbell, Franklin Campos, Carmen Chavez, Claudia Monterrosa, and Rebecca Ronquillo of the LA Housing Department. ”There is concern,” the report observes, “that as transit catalyzes reinvestment in these core, transit-rich neighborhoods, lower income residents and workers might be displaced to areas with fewer transportation options.”

Striking the right balance

Increased demand and greater investment are good, acknowledges Michael Bodaken, president of the National Housing Trust. Development gives a community a larger tax base. Jobs and services become more plentiful as new buildings, businesses, and activities crop up along a transit network.

“We all want [increasing] property values and a certain amount of gentrification,” says Bodaken, “but we don’t want it at the expense of the communities in which it’s occurring. There has to be some way for the people who now call it home to remain in the neighborhood as it improves.”

The difficulties facing modest-income renters have been exacerbated by the global economic crisis of 2008 and the bust in American homebuilding. With fewer Americans now able to buy new houses or to keep up with their mortgage payments, people are filling the available rental units. “Vacancy rates are coming down,” Bodaken says. “All over the US, rental is becoming more expensive.”

Bodaken cites R Street Apartments—five buildings on R Street between 14th and 15th Street NW in Washington, DC—as “a model of what can be done.” The five, constructed decades ago, lie in a part of Washington that in the past several years has gone from being considered undesirable by many middle- and upper-income people to being a place where a new condominium unit is selling for a million dollars.

The Trust began working on R Street because of its superb location. The buildings are within half a mile of three Metro station and within a quarter-mile of eight frequently used bus routes; R Street has a Walk Score of 95 (“walkers’ paradise”); and the buildings contained modest-income renters who wanted to avoid being displaced.

To prevent the five apartment buildings from being converted to luxury condos, the Trust and its partner, the Hampstead Companies, arranged $24.5 million in acquisition financing via its nonprofit affiliate, National Housing Trust/Enterprise Preservation Corporation (NHT/Enterprise).

Low Income Housing Tax Credits played a key role in the R Street transaction and have been a critical element in the creation or preservation of affordable housing nationwide. Among the project’s supporters was Enterprise Community Partners, which provided a $50,000 grant for consideration of energy-efficiency measures.

Hampstead and NHT/Enterprise acquired and improved the five buildings’ 124 apartments, making them more energy-efficient. Six market-rate rental units were added. While market-rate tenants pay $2,200 a month for efficiency apartments, lower-income tenants subsidized by Section 8 pay rents guaranteed not to exceed 30 percent of their income.

The project each year generates revenue that the Five Voices of R Tenants Association can use to offer services and programs for residents. A renovated community center and a computer lab are part of the complex.  

Focus on existing buildings

In about a decade, the Trust has developed approximately 5,000 apartments on the East Coast and in Illinois—all in existing buildings. Some of the buildings are owned by sponsors the Trust assisted, but more than 2,000 units are owned and operated by NHT/Enterprise.

Nationwide, there has been a marked shift toward preservation of existing affordable housing with state and local resources. “The Trust deliberately began working with states on how they allocated their tax credits in 2001,” says Bodaken. “When we started that work, states were overwhelmingly emphasizing new construction.” The roughly $5 billion a year in tax credits is enough to support about 100,000 apartments. Tax credits account for about 90 percent of the equity involved in housing preservation near transit.

Now, with public funds less abundant, there’s a logic to focusing on existing buildings. “In a cost-constrained environment, it’s less expensive to preserve than to build new,” Bodaken points out. “It’s also faster and it’s greener”—avoiding the environmental waste and the extra time that full-scale demolition involves.

Bodaken believes that nationally there is “an increasingly nuanced view” of how to make affordable housing available. Not only has preservation become a favored strategy, he says; there’s also a growing understanding of “how and where you should preserve. Increasingly, policymakers are realizing we should preserve housing near transit, and when we preserve, we should make it green.”

Reinforcing those trends, there seems to be a growing convergence between the aims of transit agencies and the aims of affordable housing advocates. According to Bodaken, housing finance agencies are increasingly saying “we need to have housing near transit.”