The Creation of a Federal Partnership The Role of the States in Affordable Housing Margaret M. Brassil THE CREATION OF A FEDERAL PARTNERSHIP SUNY series in Urban Public Policy C. Theodore Koebel, editor THE CREATION OF A FEDERAL PARTNERSHIP The Role of the States in Affordable Housing MARGARET M. BRASSIL Coverart:©Vatikaki/Dreamstime.com PublishedbyStateUniversityofNewYorkPress,Albany ©2010StateUniversityofNewYork Allrightsreserved PrintedintheUnitedStatesofAmerica Nopartofthisbookmaybeusedorreproducedinanymanner whatsoeverwithoutwrittenpermission.Nopartofthisbookmaybe storedinaretrievalsystemortransmittedinanyformorbyanymeans includingelectronic,electrostatic,magnetictape,mechanical,photocopying, recording,orotherwisewithoutthepriorpermissioninwritingofthe publisher. Forinformation,contactStateUniversityofNewYorkPress,Albany,NY www.sunypress.edu ProductionbyDianeGaneles MarketingbyAnneM.Valentine LibraryofCongressCataloging-in-PublicationData Brassil,MargaretM.,1959- Thecreationofafederalpartnership:theroleofthestatesin affordablehousing/MargaretM.Brassil. p.cm.—(SUNYseriesinurbanpublicpolicy) Includesbibliographicalreferencesandindex. ISBN978-1-4384-3333-2(hbk.:alk.paper) 1.Housingpolicy—UnitedStates. 2.Low-incomehousing—United States. 3.Housingauthorities—UnitedStates. 4.Federalaidto housing—UnitedStates. I.Title. HD7293.B6752010 363.5'83—dc22 2010008211 10987654321 C ONTENTS LIST OF TABLES vii ACKNOWLEDGMENTS ix Chapter 1 INTRODUCTION 1 Chapter 2 THE DEVOLUTION OF AFFORDABLE HOUSING POLICY AND THE EVOLUTION OF A FEDERAL-STATE HOUSING PARTNERSHIP 11 Chapter 3 STATE HOUSING AGENCIES: THE LINK BETWEEN STATE AND NATION 49 Chapter 4 STATE HOUSING AGENCIES IN MARYLAND, MINNESOTA, AND TEXAS 75 Chapter 5 STATE HOUSING AGENCIES’ POLICIES AND PROGRAMS 101 Chapter 6 COMPARISONS 133 Chapter 7 CONCLUSIONS 165 NOTES 183 BIBLIOGRAPHY 211 INDEX 233 v T ABLES Table 2.1 HUD AMFI Table for Somerset County and Prince George’s County, Maryland 14 Table 2.2 Income Eligibility Limits for HUD Programs 15 Table 2.3 Net Budget Authority for Selected HUD Programs, 1977–2000 27 Table 2.4 Outlays for Housing Assistance, Selected Programs and Total, 1977–2000 28 Table 2.5 Net New Commitments for Renters and Home Buyers Receiving Direct Housing Assistance Administered by HUD, by Type of Subsidy, 1977–2000 30 Table 2.6 State Housing Appropriations and Trust Funds, 2000 38 Table 2.7 States with Trust Funds, but No Other Direct Appropriation 41 Table 2.8 States without Housing Appropriations or Trust Funds 42 Table 2.9 Sources of Housing Agencies’ Operating Funds 43 Table 2.10 State-Sponsored Housing Programs 45 Table 2.11 Agency Sources for Funding State Housing Programs 45 Table 2.12 Sampling of State Housing Agency Programs Supported by State Funding Sources 46 Table 3.1 The First Wave: State Housing Finance Agencies Created 1960–1972 52 Table 3.2 The Second Wave: State Housing Finance Agencies Created 1973–1980 53 Table 3.3 The Third Wave: Housing Finance Agencies Created 1981–1992 54 Table 3.4 Private Activity Bond Use, Comparison of the Case Study States 59 vii viii TABLES Table 3.5 LIHTC: State Authority, Requests, and Allocations, 1998 64 Table 3.6 Policy Initiation in the States as Viewed by Housing Agency Officials 73 Table 3.7 Responsibility for Decision Making in the States 74 Table 4.1 Maryland, Minnesota, and Texas in Comparison, 2006 76 Table 4.2 Summary of MHFA Bonds and Appropriations, 1971–1988 79 Table 4.3 Texas Households with Housing Need by Income Group 91 Table 4.4 Texas Households by Income Group 92 Table 5.1 Minnesota Housing Finance Agency Housing Programs, FY 2003 114 Table 5.2 State-Funded Programs in Maryland, 2000–2002 118 Table 5.3 Business Types and Employment Assisted through DHCD’s Neighborhood Business Development Program, 1998 123 Table 5.4 Texas Department of Housing and Community Affairs Programs, 2003 125 Table 6.1 State Comparisons: Maryland, Texas, and Minnesota, 2006 135 Table 6.2 Summary of State Housing Problems 139 Table 6.3 Comparison of Funding: Maryland, Texas, and Minnesota Housing Agencies 142 Table 6.4 State Appropriations per Person Below Poverty Level 144 Table 6.5 Project Evaluation Criteria for Allocating LIHTC in Maryland, Texas, and Minnesota 147 Table 6.6 Common Strategies Used by State Housing Agencies 153 Table 6.7 Is Housing an Economic Development or a Poverty Issue? 160 Table 7.1 ADDI Accomplishment Report—Maryland, Minnesota, and Texas 169 Table 7.2 Housing-Related Tax Expenditures, 2002 181 Table 7.3 Estimated Distribution of Housing Subsidies by Income Quintile, 2002 181 A CKNOWLEDGMENTS Ilived in New York City during the 1980s and—along with most New Yorkers—was daily aware of the extent of the homeless crisis. While working in the publishing industry, I volunteered at Covenant House, a shelter for homeless children. My first debt of gratitude, therefore, is to my fellow volunteers and the staff and the youth who sought shelter and safety; and particularly to two special people whom I got to know—April and Phyllis. Both were residents of Grand Central Station and both died homeless. They made me aware of the human suffering that can be caused when public policymakers forget that their decisions affect real people. Those experiences led me to my initial research question when beginningmydissertation,whichwas,verysimply:Whathadhappened tohousingpolicyduringthe1980s?Whenmyresearchbeganinthelate 1990s,everyonewastalkingabout“devolution”andarguingwhetherit was good or bad for social policy in the United States. I set out to find out whether the policies of the 1980s had resulted in the devolution of affordable housing policy to the states. As almost nothing had been written at the time on the states’ role in affordable housing policy, I am truly grateful to all the people I interviewed in Maryland, Minnesota, and Texas who generously gave their time and shared their knowledge of affordable housing with me. This book grew out of my dissertation, which I wrote for the Political Science Department at Johns Hopkins University. I am partic- ularly grateful to my primary dissertation advisor, Matthew Crenson, whose critical reading and detailed comments through many drafts not only helped shape my thinking but also greatly improved my writing. I also thank Benjamin Ginsberg who provided advice and encourage- ment as well as a travel grant that allowed me to conduct my initial research in Texas and Minnesota. I greatly appreciated the advice and ix