Where Is Mixed-Income Housing Development Headed? Proposed Choice Neighborhoods Program Points the Way

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Tax Credit Advisor, December 2009: In many ways, an affordable housing developer is a surgeon. In poor urban neighborhoods, making use of partnerships and government resources, the developer removes part of a neighborhood’s ills and inserts a healthy new organism – mixed-income housing development paired with resident services.

The Obama Administration, with scalpel in hand, is seeking to expand both the scope and impact of these kinds of operations to reshape America’s disadvantaged neighborhoods, through its proposed new Choice Neighborhoods Initiative (CNI) program. Administered by the U.S. Department of Housing and Urban Development (HUD), it represents the next likely direction in mixed-income housing development.

On November 3, Dominique Blom, HUD Deputy Assistant Secretary for the Office of Public Housing Investments, described the Administration’s vision for CNI in a keynote address at the National Housing & Rehabilitation’s 2009 Fall Developer’s Forum conference in Boston. She also highlighted the accomplishments and lessons learned from HUD’s 15-year-old HOPE VI program, which Choice Neighborhoods would build upon.

Proposed in the FY 2010 HUD budget request with first-year funding of $250 million, Choice Neighborhoods needs congressional approval of authorizing legislation and an appropriation to become a reality. HUD officials are hopeful for both in the near future.

HOPE VI provides competitive federal grants to public housing authorities (PHAs) to help finance the revitalization of severely distressed public housing projects into mixed-income housing communities with services. These communities usually contain a mix of public housing, low-income housing tax credit, and often also market-rate rental and affordable and market-rate for-sale homes.

“We need to build upon the successes of HOPE VI,” Blom told the audience.

To date, HOPE VI has provided $6 billion in grants to PHAs of which $5.4 billion has been expended, creating 80,000 new affordable housing units with another 32,000 to be developed. The program also pioneered the use of mixed-finance housing development.

Blom said there’s enormous remaining need, with nearly eight million Americans living in poor neighborhoods, more than 240,000 distressed existing public housing units, and 83,000 distressed HUD-assisted rental units.

Competitive Grant Program

Choice Neighborhoods would provide competitive grants to help finance projects located in neighborhoods with a concentration of poverty and substantial presence of existing public and assisted housing units. Projects would start with the development, renovation, or preservation of public and assisted housing, but go beyond housing to incorporate other elements to create a healthy mixed-income community and expanded opportunities for residents of both the project and the surrounding neighborhood. Blom described Choice Neighborhoods as “the next generation of placed-based community development.”

Some of the likely parameters of the program as HUD envisions it include:

  • A mix of grants. Of available annual funds, roughly 10% would be for planning grants and 90% for implementation grants.
  • Eligible applicants. Broader than HOPE VI, these would include not only PHAs but also local governments, nonprofit and for-profit developers, community development corporations, and owners of assisted housing. Each grant recipient would likely be part of a larger team of partners.
  • Eligible activities. Again broader than HOPE VI, these would include: transformation of housing through rehab, preservation, and/or demolition and replacement of severely distressed housing projects; on-site and off-site infrastructure and site improvements; construction of public services, facilities, and retail; and supportive services. Funds would also support self-sufficiency activities and relocation assistance.
  • Emphasis on education. In neighborhoods with under-performing schools, there would need to be a local strategy to address this. A continuum of educational opportunities, from early childhood through adulthood, would be encouraged. One model for early childhood education programs is the Harlem’s Children Zone (see Tax Credit Advisor, September 2009, p. 14)
  • Unit replacement. Each unit lost would have to be replaced, with a public housing, assisted housing, or project-based voucher Section 8 unit. In soft markets with a high voucher utilization rate, vouchers might count toward this requirement.
  • Right to return. Displaced public housing or assisted residents would have the right to return to the redeveloped housing if they haven’t had previous lease violations.
  • Leveraging of other funds and resources.
  • Emphasis on energy efficiency and green.

Blom said funded projects would be “more than just housing.” Grants would also help generate other opportunities for residents, including education, transportation, and access to jobs and economic activities. Along this line, Choice Neighborhoods grants would be used in conjunction with other government funding sources and programs (federal, state, local), for multi-part projects with multiple partners. Blom, for example, cited the U.S. Department of Education’s proposed new Promise Neighborhoods program.