KGW-TV Portland
Story by Pat Dooris, Jamie Parfitt • February 27, 2023
Excerpts:
Three decades ago, the federal government launched a program that incentivized property owners to provide affordable housing for people with lower incomes. Now, all these years later, some owners have an opportunity to bow out of the program, and many are taking advantage of it.n Watch
For low-income renters in the Portland metro area, it’s a terrifying prospect — one that carries the very real risk of leaving them homeless when housing prices and homelessness are already an intractable problem.
The Low-Income Housing Tax Credit is supported by the federal government and operated by the state. It first launched in 1986, becoming permanent in 1993.
With the credit, property owners get a tax break that lasts between 10 and 60 years, depending on the project. In exchange, they reserve some of their units for low-income renters.
The deal has always included a built-in countdown. Once the time is up, owners are allowed to raise the rates for those low-income units up to market rate.
Federal regulations require owners to let low-income residents stay in their homes for three years after the deal expires — a grace period, more or less. Past that point, the owners will be hiking the prices up to market rate.
Oregon Housing and Community Services estimates that the low-income requirements for about 4,400 units will expire within the next 8 years.
The Oregon legislature set aside $500,000 last year to help in situations like this. The state housing authority is taking about half of that money for administration and staff time. The remaining money goes toward one-time payments of $3,000 to low-income renters in danger of being priced out, either helping them to move out or pay the increased rent.
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Comment:
The LIHTC program was set up as a tax benefit to investors. But the actual program recipients are little more than puppets in this two act play. The low income tenants are dispensable, left in an insecure situation by no shortcoming of their own. What happens when 4,400 affordable units are converted to market rate by their owners? In this scenario, Oregon state taxpayers will pick up the tab if voters agree to paying for perpetual public subsidies. If all these contingencies don’t materialize, low income tenants are left out in the cold.
There is really only one way to defuse this delayed action time bomb, that is to remove a substantial share of the existing housing stock from the private speculative market. Community land trusts are a prime example of social housing. Perpetual ownership of land titles by a non-profit corporation offer a more sustainable form of tenancy.
The way to accomplish this evolution is through the transfer of existing or expiring affordable multifamily properties to public or quasi-public owners. A local ordinance is needed, requiring owners selling their residential properties to extend the first opportunity to purchase to qualified non-profit housing organizations. The right of first refusal (ROFR) is a preemptive right, an option given to its holder the power to compel the sale or transfer of a property interest. Its holder has the exclusive right to acquire a property before the owner conveys it to a third party.
RFR guarantees local nonprofits, especially community land trusts, a window of time to make an offer on any property before the owner can sell. Taking the purchase option, the non-profit corporation retains ownership of the land and sells the housing units to qualified low income buyers. The occupants can later sell the unit (at a controlled price) and the lot remains with the corporation.
Then, rather than spending $500,000 for one-time payments of $3,000 to low-income renters for payments to private landlords for increased rents, instead create a fund for use by non-profits like Proud Ground community land trust to purchase and renovate residential buildings whose tax credits are expiring.
If an Oregon State Bank including a Housing Opportunity Fund becomes a reality, a city could establish funding for qualified non-profits to assist purchasing and management of permanently affordable units. HB 2763, currently moving through the state legislature, establishes a State Public Bank Task Force to study and make recommendations.
Affordability over the long run can only be sustained by intentionally holding down land prices which are the biggest driver of escalating housing costs. If Oregon would change its broken property tax system to a land value tax, the incentive effects could both dampen land price inflation and encourage the redevelopment of vacant and underutilized sites.
Here are a couple of instances citing the right of first refusal:
The Community Opportunity to Purchase Act (COPA), administered by the San Francisco Office of Housing and Community Development, gives qualified non-profit organizations the right of first refusal to purchase certain properties offered for sale in the City. COPA was created to prevent tenant displacement and promote the creation and preservation of affordable rental housing.
In Victoria, B.C., buildings that are 30 to 40 years old are being purchased by real estate investment trusts, according to a new report (Ben Nelms/CBC). Advocates of affordable housing in Greater Victoria say they are worried that the increase in the sales of older buildings in the area is contributing to the housing crisis, and are calling on the provincial and federal governments to step in.
“The issue is we are losing affordability faster than we can gain it. We need to preserve the existing affordability if we’re going to have a chance at turning this housing crisis around.”
Jill Atkey, CEO of the B.C. Non-Profit Housing Association (BCNPHA), says there are building owners who want to sell to non-profits specifically, to ensure housing units are affordable to tenants. She says a right of refusal would help housing non-profits make more purchases.
Tom Gihring, Research Director
Common Ground – OR-WA
