Outcomes for FY2023 Budget: Affordable Housing and Homelessness

Mayor Proposed FY23: $498 million

Council FY23: $444 million

CNHED strongly supported the Mayor’s historic proposed investment of $498 million in the Housing Production Trust Fund (HPTF) in FY23.

The Housing Production Trust Fund (HPTF) continues to be the primary tool that enables affordable housing developers and renters wishing to exercise their Tenant Opportunity to Purchase Act (TOPA) rights to preserve or create affordable rental or ownership housing across all eight wards of the District.  The HPTF has produced over 6,000 affordable housing units since 2015.  The HPTF requires covenants to be placed on properties that keep them affordable for a certain period of time: typically, rental units must remain affordable for 40 years or longer and homeownership units must remain affordable for 15 years.

The Council had concerns regarding 913 families expected to be exited from FRSP in the next several months, a subset of which (approximately 273 families) had not been matched with an alternative subsidy or program (such as DC Flex, Permanent Supportive Housing (PSH), or Targeted Affordable Housing (TAH) vouchers). To ensure financial support and housing stability for families exiting FRSP, the Council reallocated approximately $54 million from the HPTF; this primarily funds 350 TAH vouchers in FY23 and the following three fiscal years, thereby creating a continuing funding commitment in future budgets, in addition to funding 175 units of the shallow senior subsidy.

DHCD FY23-25: $33.39 million

DCHA FY23: $4.85 million

Total: $38.24 million

Council FY23: $38.2 (over 4-year financial plan)

CNHED thanks the Mayor and Council for investing an additional $33.39 million in project- and sponsor-based LRSP in DHCD’s budget over FY23-FY25 and $4.85 million in DCHA’s budget in FY23, for a total of $38.24 million. Given the reduction in the allocation to the HPTF, the approved level of LRSP should still be adequate to meet the HPTF’s statutory requirements to spend 50% of its funding on producing and preserving units serving households with incomes at 0-30% of Median Family Income (MFI).

Project- and sponsor-based LRSP is used to produce new housing affordable to extremely-low-income households by providing operating subsidies as part of the development process. These homes are needed to: (1) ensure meeting statutory requirements to use 50 percent of the Trust Fund at 0-30 percent of MFI; (2) meet the goals of the Homeward DC plan by supporting the production of Permanent Supportive Housing (PSH) in new developments (including the 5% now required in all DHCD-funded rental projects); and (3) allow the production of housing for people with extremely-low-incomes beyond the scope of the Homeward DC plan to serve additional individuals and families.  Project-based LRSP covers rent, maintenance, utilities, and other ongoing expenses not covered through one-time HPTF loans.

Further, CNHED encouraged DHCD, DHS, DCHA, and OCFO to expeditiously complete their negotiations on the agreements necessary to implement the changes made to the administration of LRSP in the FY22 BSA and to then share their draft agreements with stakeholders for input before implementation.

Mayor’s proposed FY23: $0

Council FY23: $0

Mayor Bowser created the Housing Preservation Fund (HFP) as a public-private source for acquisition and critical repairs financing.  The HPF leverages public investments 3:1 with private investments, so a $1 in District investment leverages $3 in private investment for a total of $4 available for affordable housing projects.  The HPF has become a critical source of acquisition and critical repairs financing for tenant organizations exercising their Tenant Opportunity to Purchase Act (TOPA) rights.

The Mayor’s budget included no new funding for the HPF in FY23; the approximate $2 million denoted in the Department of Housing and Community Development’s (DHCD) budget chapter on the Preservation Financing line likely represents unspent carryover funds and not new funding.  The expressed rationale for no new funding is that with HPF loan repayments starting to happen the Fund will be self-sufficient in FY23.  The FY22 funding for the HPF has not yet been allocated to the organizations managing it and the rate and number of repayments over the coming few years are unpredictable; therefore, CNHED was concerned that assumptions that the HPF have reached self-sufficiency might be premature.

There are many factors that will impact the timing of when the HPF reaches self-sufficiency.  The historic investment of $500 million in the HPTF over FY21 and FY22 and the investment of $444 million in HPTF in FY23 will provide takeout funding for many projects to repay existing HPF loans, but the timing for when those projects will go to closing over the next one to three or more years add uncertainty to the repayment schedule.  TOPA tolling during the public health emergency provided tenant organizations with the ability to protect their health and additional time to exercise their TOPA rights; however, tolling created a backlog in the sales pipeline and as these preservation projects move forward there is and will be increased demand for HPF acquisition and critical repairs loans.  CNHED believed that the HPF should receive additional funds in FY23 to assure that it can continue its important role of providing acquisition and critical repairs funding to keep the affordable housing pipeline active through FY23 and FY24, until self-sufficiency is assured.

In FY22, $5 million of the $17.1 million appropriated for the DC Housing Preservation Fund was devoted to Limited Equity Cooperatives, enabling it to leverage a total of $20 million for this purpose.  When the contract agreements are finalized for this portion of HPF funds, we recommend adapting the terms and conditions of the HPF to facilitate a better fit with their unique set up and development needs.

Mayor’s Proposed FY23: $10 million

Council FY23: $10 million

CNHED recommended appropriating $30 million for the First Right Purchase Program (FRPP).  The FRPP is a rolling acquisition loan fund and historically has been the primary facilitator for utilizing TOPA to preserve affordable rental housing in the District and to create Limited Equity Cooperatives.  The FRPP currently has no formal application process and has for several years been a soft segregation of $10 million within the HPTF that has been used discretionarily.  We believe that an updated version of the FRPP would fit the recommendation of the Mayor’s Saving DC’s Rental Housing Market Strike Force to develop “a new program or increase the capacity within an existing program to support the acquisition of small multi-family buildings (under 50 units) by tenant organizations and developers exercising TOPA or DOPA rights to create or preserve affordable rental or ownership housing protected by long-term covenants.”^[1]  CNHED has presented several iterations of a proposal to revise the FRPP to DHCD over the past several years and hopes that the most recent version focusing on 5-49 unit properties will be the basis for the FRPP to once again become an active part of the District’s affordable housing strategy.  CNHED’s recommended changes to the FRPP are below.

Neither the Mayor nor the Council increased the FY23 allocation for the First Right Purchase Program, leaving the allocation at $10 million.

First Right Purchase Program (FRPP) for small multifamily properties:  CNHED proposes to reconfigure the FRPP to enable tenant organizations to use their TOPA rights to preserve or create affordable housing at small rental properties for which the terms of the DC Housing Preservation Fund are not viable because of variables such as a combination of high acquisition cost, low rents, and high deferred maintenance needs.  The FRPP should be limited to multifamily properties with 5-49 units for rental or for the creation of homeownership opportunities through limited or shared equity cooperatives.  Aside from incorporation into a Low Income Housing Tax Credit (LIHTC) pool, multifamily rental properties with 5-49 units that have the above characteristics have relatively few affordable housing development financing options, representing a gap in the District’s affordable housing strategy for a significant portion of its existing naturally occurring affordable housing (NOAH) stock.

Why is FRPP Necessary?

Due to the unpredictability of when residential rental properties come up for sale, having an available, affordable funding source is critical.  FRPP loans provide an essential, permanent acquisition source and a path forward for challenging projects that would not score well under current Consolidated RFP criteria (e.g., small scale, high percentage of subsidy needed due to very-low incomes, very affordable rents, deferred maintenance costs, and high acquisition costs). TOPA projects often have significant numbers of low-income tenants, many with household incomes below 50 percent of Median Family Income (MFI), with significant numbers below 30-40 percent of MFI. These projects often require 75 percent or more public financing due to rent limitations in serving this demographic.  The FRPP is necessary to support projects for these and the following specific reasons:

• Projects may not qualify for the DC Housing Preservation Fund (HPF) or other bridge loans because they may be seen as too risky due to their limited ability to leverage private funding (high level of subsidy needed limits their take-out options and they do not compete well in the Consolidated RFP).
• Low average incomes and very affordable rent levels do not support much debt, even at the below market interest rates offered by the HPF, and interest reserves must be relied upon to make interest payments during the bridge loan period, which adds significant additional cost to the project after two to three or more years.  (The amount of subsidy required to make these types of projects viable is higher than what HPF lenders are permitted to do under their current agreements with DHCD, and the smaller unit numbers make it more challenging for HPF lenders to meet the performance targets set with DHCD in terms of number of total number of units preserved.)
• Many NOAH multifamily properties with 5-49 units have significant deferred maintenance, which makes them unsustainable during a bridge loan period without funding that far exceeds the typical lender loan to value restrictions, even beyond the 125 percent loan-to-value permitted by the HPF.
• Many quality-of-life and healthy-housing deferred-maintenance issues may not meet critical repairs criteria to be covered by the HPF or DHCD’s Small Building Program.  This gap in repairs funding makes these 5-49 unit properties less competitive in the Consolidated RFP based on per unit rehabilitation costs and more difficult to carry while applying through one or more RFP cycles.
• TOPA projects tend to not score well in the Consolidated RFP, even those that qualify for an acquisition loan through the HPF; without the FRPP they are at much higher risk of not securing takeout financing, limiting the ability of tenant organizations to choose a development option that would preserve or create affordable housing.
• The nature of TOPA development teams, involving a tenant organization and small consultant entity, and group decision-making processes, makes it difficult to manage a five-or-more-year development process—and much more expensive—if multiple Consolidated RFP applications are required (added costs for bridge loan interest, multiple updates to due diligence requirements for the application).  FRPP can offer a streamlined and lower cost alternative when Consolidated RFP funds are not needed.

The District should make a policy decision to invest in the following kinds of projects that would not move forward without assistance from the FRPP.

Proposed Criteria for FRPP-Funded Projects

The following can apply where FRPP (or DHCD) is the sole lender, as well as to cases where FRPP leverages private financing as a subordinate lender or takes out some or all of a DHCD Preservation Fund loan.

• High level of public benefit: preventing displacement of low-income people, especially communities of color; preserving affordability in expensive neighborhoods; direct tenant ownership.
• Long-term affordability covenants: perpetual covenant and average rents affordable for households at/below 50-60 percent of MFI or a significant percentage at/below 30 percent of MFI.
• Limited Equity Cooperatives (LECs) or direct tenant purchase and buildings with community based organization (CBO) participation and strong agreement with tenants (100 percent of TOPA projects that preserve affordability have CBO assistance).
• Prioritize LECs and small rental properties of 5-49 units.
• Buildings with a high level of public subsidy needed to complete the project—on average DHCD financing providing 75 percent plus of total development costs, especially where Low Income Housing Tax Credits (LIHTC) is not applicable or feasible: self-ownership/LECs, very small projects, special interest, etc.
• Projects that would not score well in the Consolidated RFP because they do not qualify for Prioritization Scoring or need a high level of subsidy.
• Projects funded under the HPF that still may not score well in the Consolidated RFP, where FRPP could leverage private financing in a take-out package.

FRPP Application Review and Underwriting

Consider outsourcing all or in part: HPF lenders could take a “first cut” review and determine whether projects are a good fit for HPF loans or a better fit for the FRPP, or DHCD could outsource underwriting of the FRPP.

If DHCD retains underwriting in-house, the following are recommendations:

• DHCD can provide Development Finance Division (DFD) loan approval letters as a basis for private bridge loans with FRPP take out within 24 months.
• Certain priority projects might close the DHCD loan within the TOPA timeline—e.g., those that cannot support bridge loan interest, or
• DHCD could provide a soft interest reserve (recoverable grant or grant to reduce total development costs) to cover bridge loan interest.

Consolidated RFP scoring criteria for projects awarded FRPP funding should be adjusted in the following ways:

• Higher priority scoring (or fast-track) in the Consolidated RFP;
• Exclude the FRPP loan in calculating the total percentage of HPTF allowed, in effect allowing a higher percentage of HPTF for TOPA projects that use or meet the criteria for FRPP; and
• Make LRSP available outside of the Consolidated RFP.

Lastly, the DHCD Preservation Unit and DFD could convene semi-regular meetings with nonprofit technical assistance providers and bridge lenders to track potential TOPA purchases and strategize on funding such projects.

[1] “Saving DC’s Rental Housing Market: A report of recommendations from Mayor Bowser’s Strike Force to Save DC’s Rental Housing Market,” p. 17.

Mayor’s Proposed FY23: $13.3 million

Council FY23: $13.3 million

CNHED was pleased to see the Mayor’s proposed increase of funding for the Neighborhood Based Activities Program (NBAP) to $13.3 million in FY23, and Council’s agreement with that funding level.

The NBAP provides Community Based Organizations (CBOs) to supply an array of essential services for District residents, including TOPA technical assistance, tenant housing conditions technical assistance, eviction and foreclosure prevention counseling, limited equity cooperative technical assistance, homebuyer counseling for HPAP and EAHP, Inclusionary Zoning (IZ) certification, and Schedule H application assistance.  During the COVID-19 public health emergency and the following recovery, tenants and homeowners will have even greater need for the essential services provided by CBOs with this funding.

CNHED strongly supports the recommendation of the Mayor’s Saving DC’s Rental Housing Market Strike Force to “increase funding to Community Based Organizations that provide TOPA technical assistance.”[1]  DHCD increased funding to CBOs for TOPA and housing conditions technical assistance provision in FY22, and we recommended further increases in FY23.  TOPA is well positioned to help with the District’s recovery after the public health emergency by enabling tenants to assist in achieving Mayor Bowser’s goal of creating 12,000 new units of affordable housing by 2025.   Further, the Attorney General’s laudatory campaign against slumlords has highlighted the valuable work that CBOs have long performed in educating tenants about their rights and organizing them to seek redress of housing code and other violations of District law: work that is desperately needed and worthy of funding, given the importance of safe, stable, and affordable housing as a social determinant of health.

Legacy Initiative

CNHED strongly supports all aspects of Mayor Bowser’s Legacy initiative.  Below, we consider the six housing-related programs of the eight included in the Legacy Initiative.  All were approved by the Council in the FY23 budget.

Black Homeownership Fund and Strike Force:  CNHED strongly supports the formation of the Black Homeownership Strike Force and appropriating $150,000 for its operation, as well as and $10 million for the Black Homeownership Fund that will be allocated based on the Strike Force’s recommendations to support black homeownership and asset building through homeownership.  The Strike Force will convene in June 2022 and be charged with developing recommendations to address (1) increasing access to homeownership for longtime Black residents of the District of Columbia and (2) supporting asset-building through homeownership. American Rescue Plan Act (ARPA) funds will be used for the Black Homeownership Fund.

Heirs Property Legal Assistance Act of 2022: CNHED strongly supports the passage of the Heirs Property Legal Assistance Act of 2022 to assist multigenerational families in maintaining their family property after their original homeowner passes on and funding it with $1 million in recurring funding beginning in FY23. This Act would empower the Mayor to issue grants to assist low-income individuals to pay for legal services necessary to obtain clear legal title to property the individual inherited either testate or intestate from a family member.  American Rescue Plan Act (ARPA) funds will be used for heirs property legal assistance.

Seniors and Individuals with Disabilities Real Property Tax Increase Limit Amendment Act of 2022: CNHED strongly supports the passage of the Seniors and Individuals with Disabilities Real Property Tax Increase Limit Amendment Act of 2022 to lower the cap on annual increases in property taxes for seniors from 5% to 2% for seniors and individuals with disabilities.  The fiscal impact in reduced revenue would be $9.276 million over the four years of the financial plan: FY23 ($879k), FY24 ($1.803M), FY25 ($2.779M), and FY26 ($3.814M).

Single Family Residential Rehabilitation Program: CNHED strongly supports significantly increasing funding to help low-income homeowners fix and maintain their homes.  While we appreciate the Mayor’s proposed increase and Council’s approval of $3 million for the Single Family Residential Rehabilitation Program (SFRRP), we believe that the need among low-income District homeowners warrants significantly more funding.  While the SFRRP administers grants for roof repairs and/or modification to eliminate barriers to accessibility for persons with mobility or other physical impairments, its administration has been problematic for many years.[2] We propose that DHCD create a stakeholder working group of SFRRP applicants, healthy housing advocates, and organizations that provide single-family rehabilitation programs to develop recommendations for improving the administration of the SFRRP.

FloodSmart Homes: CNHED supports the District’s participation in the federal FloodSmart Homes program to assist residents in flood prone areas to retrofit their homes to reduce the risk of damage.  The Mayor’s budget included $2.6 million in federal funding for this program in the budget of the Department of Energy and Environment (DOEE). 

Home Weatherization and Lead and Mold Remediation: CNHED strongly supports the District significantly increasing spending to make energy-efficiency improvements and remediate lead and mold hazards to improve both the health and comfort of residents.  While the Mayor budgeted an additional $10 million for these purposes in DOEE’s budget, the need for remediation funds, as well as additional housing code building inspectors in the Department of Buildings (DOB), warrant significantly higher funding levels in the budgets of DOEE and the DOB.

[1] “Saving DC’s Rental Housing Market: A report of recommendations from Mayor Bowser’s Strike Force to Save DC’s Rental Housing Market,” p. 17.

[2] https://dcist.com/story/22/03/01/dc-house-fix-accessibility-dhcd/

Mayor Proposed FY23: $20.9 million (HPAP) and $6 million (EAHP)

Council FY23: $20.9 million (HPAP) and $6 million (EAHP)

CNHED supported the Mayor’s recommendation of $6 million for EAHP in FY23 but recommended an increase to $24 million for HPAP.  CBOs confirmed throughout the public health emergency that demand for HPAP increased and will likely continue to do so given the District’s very hot housing market during recovery.  The FY23 BSA increased the amount of the HPAP down payment assistance maximum to $202,000, the additional funding recommended by CNHED could have helped to maintain or increase the number of HPAP recipients in FY23.[1]

HPAP provides interest-free loans and closing cost assistance for residents purchasing single-family houses, condominiums, or cooperative units.  EAHP offers District government employees a deferred, 0% interest loan and a matching funds grant for down payment and closing costs to purchase their first single family home, condominium, or cooperative unit in the District. Down payment assistance is a critical tool to help first-time buyers purchase homes during a time when wealth-building is essential for long-term financial stability.

While the approved allocation for EAHP did not increase, the Council did vote to include teachers as “participants” eligible to receive First-Responder grants for the purchase of a home. This change will increase the number of potential applicants for funding; Council indicated on June 7, 2022, that it wanted to ensure a five-year service commitment for teachers, like the service expectation for other first responders under the program.

Home Purchase Program Amendment Act of 2022

The BSA included the Home Purchase Program Amendment Act of 2022, which made the following changes to the HPAP program and its administration.

First, the Act increases the maximum down payment assistance provided by the HPAP program to very-low-income applicants from $80,000 to $202,000 and increase the minimum amount of assistance to $70,000.  There would be no fiscal impact because HPAP funds are only available until they are exhausted for the year.

Second, the Act allows HPAP funds to be used to buy down mortgage rates, and in the event there are no closing costs, the applicant would still be entitled to the full funding available, inclusive of any funding initially set aside for closing costs, and which may be used for a down payment or mortgage rate buydown.

Third, the Act also establishes a grant program that provides qualifying applicants up to $25,000 for repairs identified in writing by a certified home inspector in writing on a home purchased with HPAP assistance.  These grant funds are in addition to HPAP funds provided to applicants for down payment or mortgage rate buydown.

Fourth, the Act directs DHCD to disburse the funds necessary to administer the HPAP program and provide financial assistance to applicants to its administrators at the beginning of each quarter.  This change is intended to make sure that HPAP loans are not delayed as program administrators wait for disbursements from DHCD.

Fifth, the Act specifies that “No later than 120 days after October 1, 2022, the Mayor shall issue updated rules that will allow organizations that meet the following criteria to provide homebuyer education and counseling, and to underwrite eligibility for the Home Purchase Assistance Program: (A) The organization is approved by the United States Department of Housing and Urban Development to provide housing counseling services, including homebuyer education workshops, pre-purchase counseling, and financial management; and (B) The organization provides access to below-market, fixed-rate mortgages with no down payment or closing costs. The rules shall require any such organizations to provide closing disclosure verifying the mortgage and use of any Home Purchase Assistance Program funds.”

[1] CNHED does appreciate that the new Black Homeownership Fund may augment the role of HPAP in facilitating homeownership for low-income District residents, but it is unclear at this time whether that new fund will be ready to provide assistance to homebuyers during FY23.

CNHED recommended the passage of the Limited Equity Cooperative Advisory Council Act of 2021 (B24-0430), the Housing Production Trust Fund Transparency Amendment Act of 2021 (B24-0459), and the Housing Production Trust Fund Income Targeting Accountability Amendment Act of 2021 (B24-0458) either as part of the FY23 BSA or before Council’s second vote on the FY23 budget so that any fiscal impact can be included in the budget.

The Limited Equity Cooperative Advisory Council Act of 2021 (B24-0430) would establish an Advisory Council for the purposes of helping to implement the recommendations of the Limited Equity Cooperative Task Force and providing continuing comprehensive policy recommendations to DHCD and the Council for creating and maintaining Limited Equity Cooperatives. A hearing is scheduled for this legislation along with the Limited Equity Cooperative Property Tax Assistance Amendment Act of 2021 (B24-0430) on June 24, 2022.

The Housing Production Trust Fund Transparency Amendment Act of 2021 (B24-0459) would require: (1) the existing publicly available affordable housing pipeline database to contain additional information regarding all multifamily HPTF loans, (2) the Mayor to release the number of applicants that met the threshold criteria after Consolidated RFP funding decisions are made, and (3) DHCD’s Director to issue and release a written report listing any additional criteria applied in evaluating applications and comparing the housing contributions that would have been made with the recommended applications based on the published criteria and the selected applications after any additional criteria is applied.

The Housing Production Trust Fund Income Targeting Accountability Amendment Act of 2021 (B24-0458) would clarify that the metric for meeting HPTF spending requirements should not be funding “disbursed” in a particular year but, instead, the funding “obligated to new projects for an award” in a fiscal year.  This Act also would clarify the process and requirements for the Mayor to submit a written request for a waiver to the Council if the HPTF income bracket spending requirements will not be met in a fiscal year.

On June 7, 2022, Council held its second vote on the FY23 Budget Support Act, which included Title II, Subtitle K: Housing Production Trust Fund Accountability and Transparency Amendment Act of 2022. This subtitle includes aspects of both B24-458 and B24-459, though revisions were made to the introduced bills. The subtitle requires that:

• Metric for meeting HPTF spending requirements for the 0-30%, 31-50%, and 51-80% of MFI shall be changed from “disbursed” and “expended” in a given year to “obligated to new projects for a future expenditure” and “legally obligated to.”
• Mayor must submit requests to waive fund disbursement requirements (under DC Code § 42-2802(b-1) to Council for approval/disapproval and changed the timing for such requests from the “4^th quarter” to the “last day of the 3^rd”
• Within 10 business days of written notification to the selected applicants, DHCD to submit to Council a report with specific information about projects selected by DHCD for underwriting
  • Aggregated information on:
    • Number of affordable housing units that would be produced or preserved from all proposals that met DHCD’s minimum requirements, to include the number of housing units proposed in the following categories:
      • Breakdown by affordability level of expected units to be for: extremely low-income (ELI), very low-income (VLI), low-income (LI), and total affordable units
      • Total number of proposed units broken down by “Selected Project Proposals” and “All Project Proposals that Met Minimum Requirements”
    • Total number of project proposals received
    • Total number of projects that met DCHD’s minimum requirements (previously referred to as meeting “all threshold eligibility requirements”)
    • For project selected for further underwriting:
      • Names of all corporate entities and related principals with a proposed ownership interest known at the time of application
      • Funding amount requested for each project
      • Percentage contribution of HPTF funding amount as compared to project’s total funding sources
      • Total number of affordable housing units per project proposal
      • Number of ELI housing units/project proposal; VLI housing units/project proposal; number of LI housing units/project proposal; and amount of LRSP proposed for project
    • The median score based on RFP ranking criteria, and
    • Written rationale for the selection of each project, including its RFP score and any deviations from scores in final selection; provide distribution of housing units in planning areas with unmet affordability needs and the efficient utilization of available housing sources

Mayor’s Proposed FY23: $13.6 million for the creation of 500 units for individuals and $7.5 million for the creation of 260 units for families

Council FY23: $13.6 million for 500 units for individuals and $8.3M for 260 units for families

In solidarity with our partner The Way Home Campaign, CNHED supported the Mayor’s recommendation to fund PSH with $13.6 million for the creation of 500 units for individuals and $7.5 million for the creation of 260 units for families in FY23. Based on data from the DC Council’s Budget office, annual PSH-F voucher costs are $31,813; The slight increase over the Mayor’s proposed funding reflects the proper cost for the desired number of units.

PSH is a best-practice model of matching housing subsidy with wrap-around case management to ensure a long-term stock of housing that meet the needs of the District’s homeless population.  PSH has a proven record of ending chronic homelessness by helping residents maintain housing stability while improving their health.

Mayor’s Proposed FY23:  $42.7 million

Council FY23: $43 million

The Mayor’s budget included $131.6 million in rental assistance for the prevention of homelessness for FY22 and FY23.  FY22 includes FY21 carryover funds from DHS and DMPED ($9.7 million and $12 million, respectively), $8.5 million in ongoing funding, $6.5 million in one-time funding, $22.5 million in contingency cash, and federal Emergency Rental Assistance funding ($17.7 million + $12 million), for a total of $89.9 million.  FY23 proposed budget included $8.5 million in ongoing funding and $34.2 million in one-time funding, for a total of $42.7 million for ERAP.  CNHED did not have a specific ERAP FY23 budget recommendation; however, recognizing the current trends in need for emergency rental assistance, we believed that ERAP appropriations for FY23 should be at least $42.7 million.

During the Committee process, the Committee on Facilities and Procurement sent $300,000 to the Committee on Human Services to support its ERAP funding ask, increasing the overall FY23 allocation to $43 million.

ERAP helps income-eligible District residents facing housing emergencies remain stably housed and avoid homelessness. The program provides funding for overdue rent if a qualified household is facing eviction (including late costs and court fees), as well as security deposit assistance.  ERAP is effective at keeping tenants in their homes and is far less expensive than the costs per household for the District’s shelter system and the increased healthcare costs for individuals and families who become homeless.  ERAP also is far less expensive than the housing subsidies and services required for the Rapid Rehousing, Family Rehousing and Stabilization, and PSH programs to move people out of the shelter system.

CNHED supports the use of District incentives to help with the recovery and resiliency of the Downtown area and to facilitate the conversion of commercial properties for residential use in this area, especially to produce units that would be covenanted for households with incomes of less than 60% of MFI.

The Tax Abatements for Housing in Downtown Act of 2022 would provide tax abatements of up to $70M to real property owners in the Downtown area of the District who change the use of their property resulting in the development of at least 10 housing units of which at least 8% of the housing units must be affordable to households earning 60% or less of the MFI for a period of at least 20 years.  The duration of the tax abatement would be 20 years.  For each property approved by the Mayor as meeting the requirements, the real property tax would be abated in an annual amount of $2.50 per residential square foot of real property and for a maximum of 20 years. The total value of abatements the Mayor may approve across all projects would be limited to a maximum of $2.5 million in fiscal year 2024. The cap is escalated by 3 percent annually thereafter and authorized abatements are subject to an overall limit of $70 million in the aggregate.  The Deputy Mayor for Planning and Economic Development (DMPED) would hire one employee to review tax abatement applications, at a cost of $180,000 (including fringe). The Act would reduce real property tax revenue by a total of $7.727 million over the financial plan FY23-26.  We are continuing to evaluate if the terms proposed in the BSA strike the right balance between recovery and resilience funding to repurpose commercial properties for residential use and requirements for the provision of the community benefit for additional affordable housing for 60% of MFI households.  We do not have a recommendation at this time regarding whether the terms of the Act as written strike the right balance.

On June 7, 2022, Council held its second vote on the FY23 Budget Support Act, which included Title VII, Subtitle I: Tax Abatement for Housing in Downtown Act of 2022. The subtitle required the:

• Geographic area for the abatement to expand
• Real property may be eligible for a tax abatement if:
• There is a change in the use of the real property resulting in the development of at least 10 housing units
• Increased the percentage of affordable housing units from 8% to 15% for households earning 60% or less of MFI, for at least a period of 20 years
• Housing units to be designed and administered in accordance with the requirements of the Inclusionary Zoning (IZ) program
• Property owner must file a covenant in DC’s land records binding the owner and all successors to comply with the requirements of this Act (particularly development of at least 10 housing units and maintaining 15% for 20 years)
• Property owner/designee or assignee must:
  • Enter into CBE agreements for 35% of contract dollar volume regarding construction and operation of the project
  • Execute a First Source agreement on construction and operation of the project
  • Request a letter from the Mayor stating the proposed project is eligible for the tax abatement and setting forth the expected amount of abatement
• Requires Mayor to set the annual amount for the abatement; transmit to the Office of Tax and Revenue (OTR) a copy of each eligibility and reservation letter
  • No tax abatement shall be provided if the project has not received its Certificate of Occupancy within 18 months of the date the eligibility and reservation letter was transmitted
    • Mayor may extend by 6 months if project has reached grade within 18 months
  • Restores minimum abatement amount and timing as approved by Committee on Business and Economic Development
    • Abatement in an annual amount to be set by the Mayor per residential FAR square foot of real property multiplied by the building’s total residential FAR square footage (as certified by the architect); provided:
      • Abatements to begin in the tax year in which the Certificate of Occupancy (COO) is issued, and will expire in the 20^th tax year after the tax year in which the COO was issued
      • A property will cease receiving the abatement during the period of tax abatement if the Mayor determines the property is no longer eligible; Mayor required to send a notice to OTR and the property owner regarding the reason for the termination. Termination is appropriate when a building no longer has at least 10 housing units or is otherwise in noncompliance
      • Mayor may provide property owner the ability to cure if the property is determined to no longer be eligible for the abatement
    • Amounts of abatements to be capped at:
      • FY24, 25, and 26 at up to $2.5M
      • FY27, up to $6.8M
      • After FY27, an amount equal to 104% of the prior year’s cap