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Durham, NC $95 million bond for affordable housing

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Durham, NC $95 million bond for affordable housing

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Overview

In November of 2019, 79.5% of the voting residents of Durham, North Carolina voted in favor of a $95 million housing bond referendum to fund the Affordable Housing Bond Investment Plan (the “Investment Plan”).

The Investment Plan was designed to help address several goals outlined in Durham’s comprehensive housing strategy, including:

  • The creation of 1,600 new dedicated affordable housing units for families at or below 80% AMI.
  • The preservation of 800 affordable rental units, including public housing, existing income-restricted housing, and naturally-occurring affordable housing.
  • The creation of 400 affordable homeownership opportunities for first-time homebuyers through a combination of the construction of affordable homes and downpayment assistance for low-income homebuyers.
  • The transition of 1,700 homeless households living in emergency shelters into permanent housing.
  • The stabilization of 3,000 low-income renters and homeowners in their homes through eviction diversion, emergency rental assistance, property tax assistance, and repair/rehab funding

Over the next five years, the city anticipates leveraging the bond funds to bring in approximately $443 million in additional capital and $130 million in contracting opportunities prioritized for women and minority-owned enterprises. The additional housing financed by the Investment Plan is projected to increase the stock of affordable housing in Durham by at least a third, as well as create nearly 3,000 jobs in construction and operations. Although it is too early to evaluate the outcomes from the bond issuance, as of October 2020 city officials stated that larger affordable housing developers have begun to express interest in developing in Durham as a result of the new availability of financial support.

Key takeaways

  • It was helpful for the affordable housing bond to be grounded in an established housing plan. Prior to the bond’s proposal, the City Council had adopted a comprehensive set of housing goals in 2016 with clear priorities and substantial political buy-in. The plan facilitated a shared understanding of the city’s housing affordability issues, possible solutions, and the need for increased public investment to fund affordable housing.
  • The housing bond was able to gather support from key voting constituencies by addressing non-housing related goals important to these groups. During the campaign, the public was concerned about economic development related to job creation and opportunities for minority- and women-owned businesses. City officials recommend making sure policymakers address this topic from the early stages of planning, with a particular focus on sizing the presence of Women and Minority-Owned Business Enterprises in the city.
  • Communication and transparency were key to maintaining resident support. Residents wanted to remain informed on the bond’s spending and wanted the city to track progress from the first moments the policy was enacted.
  • According to Mayor Schewel the housing bond likely wouldn’t have been feasible if the housing authority hadn’t already begun redeveloping its public housing stock through a federal program that allows the agency to supplement its federal funding by borrowing money and partnering with developers. While the specific program Mayor Schewel is referencing is not identified in the article reporting his quote, it appears to be HUD’s Rental Assistance Assistance (RAD) program.

Description

To increase its supply of affordable housing units, city officials in Durham presented voters with a $95 million housing bond referendum to fund the city’s Investment Plan. The five-year plan will directly invest money toward several activities to develop and preserve affordable housing units. To repay the bond and its interest, property owners in Durham will be subject to an initial tax rate increase of 1.6 cents per $100 of assessed property value. Property owners with homes at the city’s median value ($229,266) will see an increase of approximately $37 more in taxes per year.

Additionally, the city intends to repurpose an additional $65 million of existing local and federal funds for complementary programs that address homelessness and eviction diversion. The combined $160 million in bond and complementary funds will be spent as follows:

  1. $10.5 million to strengthen the City’s homeless system, which will be used to increase shelter staff capacity, expand shelter service hours and client follow-up, as well as provide technical assistance to build the capacity of homeless service providers.
  2. $100 million toward the preservation and construction of affordable multifamily rental units in central Durham. To create more affordable rental opportunities in multifamily rental properties, the city plans to invest almost $84 million in the redevelopment of several Durham Housing Authority (DHA) properties in downtown Durham, including funds for predevelopment activities, project subsidies, and site and infrastructure costs. Additionally, the plan allocates $16 million towards new 4% Low Income Housing Tax Credit (LIHTC) construction projects.
  3. $6.5 million to create affordable homeownership opportunities with long-term income restrictions through the re-launching of the city’s Downpayment Assistance Program.
  4. $1.5 million toward the Durham Affordable Housing Loan Fund, which aims to help create more affordable housing in Durham by assisting its housing authority and nonprofit organizations in acquiring market-rate properties and securing construction/rehabilitation and permanent financing. The fund also provides financing, access to legal and real estate development expertise, and pre-underwriting assistance.
  5. $17.5 million towards neighborhood stabilization efforts, including $4.5 million to help fund minor repairs for low-income homeowners with significant code violations, and $2.3 million to support eviction diversion efforts for low-income renters. In addition, $650,000 will be used to support existing homeowners and renters by launching outreach to increase utilization of state property tax credits and address predatory lending practices.
  6. $3.5 million to develop training programs and financing tools to support an Accessory Dwelling Units pilot, development of small homes, and related programs.
Table 1: Breakdown of how the $160 million will be spent on affordable housing

Process

Until recently, Durham was a relatively stable and affordable housing market. The rapid growth of the Research Triangle Park region and revitalization of downtown Durham in the past decade, however, triggered an influx of new residents, rising rents, and the risk of displacement of long-term residents. As described below, Durham began addressing these housing challenges in earnest around 2015, a process that ultimately resulted in passage of the housing bond.

  1. Identifying Housing Needs. Like many American cities, Durham has become increasingly unaffordable to its lowest-income residents. Median home sales price increased by almost $100,000 since 2014, and the city reports that approximately 30,000 renters are cost-burdened. In 2015, with the assistance of Enterprise Community Partners, the City of Durham prepared a Housing Profile and identified many of the city’s critical housing needs. Most notably, the city suffered from a shortage of units affordable to extremely low- and very low-income households.
  2. Goal Setting. To address these challenges, Enterprise and Durham’s Community Development Department (CDD) developed several strategies to encourage housing production and preservation and neighborhood revitalization. In June 2016, the CDD presented the city with the final set of five-year goals, marking the city’s first step towards achieving a shared understanding of the city’s housing affordability issues, possible solutions, and the need for increased public investment. To achieve these goals, which were formally adopted by the City Council in 2016, city officials explored additional funding options to support the activities envisioned under this plan.
  3. Announcement. In February of 2019, during his second state of the city address, Mayor Steve Schewel highlighted the need for more housing for Durham’s low-to-moderate income residents. Schewel proposed that his colleagues on the council place a $95 million bond issue “to fund affordable housing” on the November ballot. City Council voted to move ahead with a $95 million housing bond referendum on the November 5, 2019 ballot.
  4. Campaign. In preparation for the vote, the Mayor’s Office, in coordination with the Community Development Department, the Housing Authority, and the Finance Department, developed a communications and outreach campaign to further educate the public about the needs for additional affordable housing, the city’s planned investments, and the financial impact the bond would have on citizens’ future tax bills. The administration hosted presentations, conversation, and public debates with residents, business leaders, developers, residents, and other important stakeholders. During the campaign, key voting consistencies raised concerns over the Bond Plan. For example, several groups raised the concern whether the bond would facilitate any job creation and economic development opportunities for minority- and women-owned businesses. City officials addressed these concerns by ensuring that all contracting opportunities created through the bond activities would be prioritized for women and minority-owned enterprises. The housing bond was able to gather support from key voting constituencies by addressing these important, non-housing related goals
  5. Vote. On November 5, 2019, voters approved the affordable housing bond by a 76 to 24 percent margin.

Current outcomes and continuing concerns

The bond’s first funding commitments were made in September 2020. Although it is too early to evaluate the outcomes from the bond issuance, the current administration expects the Affordable Housing Bond Investment Plan to help to accomplish many, though not all, of the strategies proposed in the city’s 2016 housing goals. Karen Lado, Assistant Director of the CDD, said in October 2020 that larger housing developers have raised their interest in Durham as a result of the new availability of financial support.

Furthermore, the city government believes that the new funding would have a “multiplier effect,” as they have estimated that the bond investment will leverage approximately $443 million in capital for the projects and $130 million in contracting opportunities prioritized for women and minority-owned enterprises. In addition, the city expects to support nearly 3,000 jobs through construction, operations, and resident spending over the life of the housing created.

Despite its popularity and anticipated impact, some activists raise concerns that the increase in property taxes will only further increase housing cost-burdens for low-income property owners without adequately addressing Durham’s housing challenges. The city is currently developing a communications plan to keep residents informed of the Affordable Housing Plan and bond progress, as well as the development of methodologies to track the spending that results from the passage of the affordable housing bond referendum.

Policy significance

Durham’s housing bond is the largest housing bond in North Carolina’s history. Additionally, passing the housing bond referendum was an important step in providing the city with the funding necessary to offset its affordable housing shortage. Like many cities throughout the United States, Durham does not directly develop affordable housing. Rather, it provides gap funding to for-profit and nonprofit affordable housing developers. The new funding available through the Affordable Housing Bond Investment Plan is expected to support many of the programs and strategies necessary to achieve the city’s housing goals (see “Goal Setting” under PROCESS below for more information).

Related resources

  1. Proposed Affordable Housing Investment FY20-FY24
  2. $95 Million Affordable Housing Bond Referendum FAQ’s
  3. $95 Million Affordable Housing Bond on November Ballot | Durham, NC
  4. What You Need to Know About the Largest Proposed Housing Bond Referendum in North Carolina History
  5. Your guide to the $95 million Durham housing bond on Tuesday’s ballot
  6. What you need to know about the Durham affordable housing bond
  7. Durham, North Carolina, Housing Bonds (November 2019)
  8. Big Housing Bonds Pass in San Francisco and Durham, N.C.
  9. Durham City Council Votes to Add Density in Single-Family Neighborhoods Near Downtown
  10. Durham Final Budget FY21
  11. City of Durham Affordable Housing Goals 2016-2021

Image Source: Planning NEXT

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