How does Affordable Housing Happen?
Affordable housing is either bought from the existing housing stock or newly built. Long term or dedicated affordable housing is the result of someone paying to mitigate the difference between market prices and what is affordable to a low, moderate or middle income household. Usually, several different sources of equity and debt funds are necessary to successfully acquire and rehabilitate existing housing or construct new housing to be affordable. There are a variety of competitive federal programs that make available both equity and debt sources and some local communities also choose to make funding available to support affordable housing.
Affordable housing in a high cost market, such as Golden’s, means that there are rent or resale limits that keep the home affordable to a specific household income. Rent and resale restrictions are the tradeoff or result of the various equity and debt sources used to make the housing affordable to low, moderate or middle income households. Here are some examples of what this means for different types of programs:
· A qualified household can buy a home with a grant or loan that reduces the price to an affordable one and in return, must sell the home to another income qualified household for an affordable price.
· An agency can buy an existing apartment building with grants and loans and in return, rent the apartments to income qualified households for an affordable rent.
· A qualified low income household may receive a Housing Choice Voucher that helps them to rent certain market rate apartments by paying a portion of their monthly rent.
· An agency that constructs multifamily rental housing may receive Low Income Housing Tax Credits and loans to build new apartment buildings and in return, rent the apartments to income qualified households for an affordable rent.
· An agency that constructs for-sale housing may receive grants or loans to produce housing that sells for affordable prices to income qualified households. In return, those homes continue to be re-sold to qualified household for an affordable price.
· Some communities require that a portion of certain new residential developments be dedicated affordable units. There may be grants available to help with this or the developer alone is required to subsidize these units with the profits from the market rate units.
Who pays? Subsidies for affordable housing ultimately come from community members in the form of taxes, fees or prices. The largest source of subsidy for newly constructed rental units is the Low Income Housing Tax Credit program. The Department of Housing and Urban Development (HUD) has a variety of grant programs to help subsidize the cost of acquiring or building affordable housing and state housing finance agencies can help with below market financing. Most affordable housing projects, whether it involves buying existing housing or building it new, requires multiple equity and below market debt sources to make it financially viable.
It is important to note that in addition to federal tax credits, the other significant source of housing grant funds come from the HOME Investment Partnership and some Community Development Block Grant (CCBG) funds. The amounts available under these and other federal block grant programs have been declining significantly over time.
Golden’s greatest opportunity to maintain and create affordable housing in the community is in helping low, moderate and middle income households to purchase or rent its existing housing.
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