Financing Affordable Housing: A Primer
By Rick Liu
Creating affordable housing for people of all incomes is
a challenging undertaking in almost any urban center these days, but the task
is especially daunting in Boston's Chinatown. The high density, high poverty
rate, lower median income, and increasingly high market value of the real
estate, make innovative strategies and strong community support essential to
producing effective results.
One of the densest residential neighborhoods in the city,
42-acre Chinatown is home to more than 5,100 residents. The area median
income of Chinatown households is lower than in most Boston households, and
the poverty rate is 10% higher than for the general population in Boston. To
make matters worse, because of Chinatown's location near high-end
neighborhoods such as the South End and Bay Village, the price of housing has
shot up tremendously in recent years, and is increasingly pricing residents
out.
While for-profit developers see Chinatown's potential for
luxury residential buildings, non-profit organizations and
government-sponsored affordable housing finance agencies make it their goal to
preserve and create affordable housing in the existing neighborhood. Right
now, Boston requires developers to set aside at least 13% of their housing
units to be affordable. However, if only 13% of the housing in Chinatown were
affordable, virtually none of the residents would be able to live in their
community. The situation has required the involvement of non-profits in the
community -- sometimes partnering with experienced for-profit developers -- to
take advantage of the subsidies and loans offered by affordable housing
agencies, and create housing developments with affordability levels
significantly higher than 13%. Notable Chinatown housing developments with
deep affordability include Oak Terrace and the Metropolitan, developed by the
Asian Community Development Corporation, and Tai Tung Village, developed by
the Chinese Consolidated Benevolent Association.
It is the subsidies and loans offered by
government-sponsored agencies, however, that truly makes affordable housing
possible. Subsidies reduce the cost to developers -- and increase their
willingness -- to participate in such projects. In return for the subsidies,
monitoring agencies generally want to see deeper and longer-lasting
affordability in their projects. Subsidies in the City of Boston include
"linkage" money -- distributed by the Neighborhood Housing Trust -- in which
developers of large-scale commercial downtown projects pay money to develop
affordable housing elsewhere.
Additionally, money from the national level is passed
down to the state and Boston for use in a program called Home Investment
Partnerships Program (HOME), which focuses on building affordable housing.
Loans can also be integral to the development process.
Because creating affordable housing is riskier than creating market-rate
housing, both for-profit and non-profit developers may have trouble paying off
the high interest rates from loans that they take out to pay for building a
project. Therefore, loans from agencies such as the Massachusetts Housing
Investment Corporation offer lower interest rates, and have more generous loan
standards, but in return ask for certain affordability restrictions on the
development.
The creation of affordable housing under circumstances
such as those in Chinatown requires the goodwill and partnership of a wide
range of stakeholders -- from government agencies and community organizations
to for-profit partners and neighborhood residents. It is important to always
be mindful of the complexity of the process and to continually advocate for
more resources to make deeper affordability a feasible option.
Rick Liu is a staff member of the Asian Community
Development Corporation.