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The Growing Movement For Socialized Housing Could Win A Big Victory In D.C.

As the affordable housing crisis in the United States stretches even the most forward-thinking local governments to their limits, the nation’s capital appears poised to embark on the biggest test of publicly developed housing in decades.

In Washington, D.C., a proposed “Green New Deal for Housing” would create an Office of Socialized Housing Development, a new District agency charged with developing mixed-income housing developments where market-rate renters subsidize extremely low-income renters.

The bill, which got its first hearing in November, will be reintroduced in the new legislative session of 2023, a spokesperson for the bill’s lead sponsor, Council Member Janeese Lewis George, told Bisnow. The proposal already has the backing of a majority of the council, and proponents are hopeful it could be passed in time to receive funds in next year’s budget cycle.

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Courtesy of the Office of Council Member Janeese Lewis George

D.C. Council Member Janeese Lewis George speaks at a press conference announcing the Green New Deal for Housing on April 26, 2022.

The desire to build locally financed and owned public housing is borne out of the difficult economic headwinds facing renters today — median rents rose 7.45% nationally and nearly 3% in D.C. over the past year after double-digit rent growth the previous year, according to Rent.com data. With new construction down considerably due to a tough interest rate environment, even private market proponents believe supply will remain constrained.

Affordable housing advocates, fed up with public solutions that they say don’t provide housing for the most vulnerable residents fast enough, are betting that the Green New Deal for Housing is the closest they’ve come yet to shifting good housing from a commodity to a public good enjoyed by all.

“We’ve seen social housing succeed in other places … when we talk to folks about it, they say if it’s succeeding there, why not here?” said Kush Kharod, an organizer for the bill. “We’re asking too much for the private market to create these affordable housing units, because at the end of the day the private market’s goal isn’t to create affordable housing, it’s to make a profit.”

The bill, which has earned the support of an array of progressive organizations in D.C., follows in the footsteps of Rhode Island, which included a $10M pilot program to build mixed-income public housing as part of the budget it passed this summer, and Colorado’s recently created Middle Income Housing Authority, which is poised to create 3,500 units of workforce housing

In the District’s own backyard, Montgomery County, Maryland, has quietly developed its Housing Opportunities Commission into an innovative affordable housing partner of its own. But the D.C. proposal is the biggest municipal social housing bill so far.

“We’re all dealing with the same systems: people not having enough housing, people not being able to afford housing, people not getting paid as much. And I think that those similar issues connect us all over the world,” Kharod said. “We are leading this conversation in D.C. with this bill, and we are reshifting the idea that only people who are rich deserve these things.”

Drew Hubbard, the interim director of the District’s Department of Housing and Community Development, testified at a council hearing that the idea of social housing had merit, but the proposal to shift funds away from his department to a new one was misguided.

“Clearly, the idea of social housing, as a new way to meet old challenges, is a powerful motivator across the country, but we have work to do to understand what it means as practical policy in the District of Columbia,” Hubbard testified. 

Despite a demonstrated need for affordable housing in D.C. — there were just 50 affordable housing units available in the District for every 100 extremely low-income households, the National Low Income Housing Coalition found in 2019 — developers are wary of the proposed income mix’s ability to pencil out.

What’s more, District agencies have a poor track record of caring for those vulnerable renters. The D.C. Housing Authority received a scathing report from the Department of Housing and Urban Development in November alleging bad conditions and inadequate oversight of the rents it charged. Meanwhile, Mayor Muriel Bowser’s preferred tool for affordable housing, the Housing Production Trust Fund, was far behind its ambitions in serving the most vulnerable renters as recently as last year.

“It’s a lot harder than it sounds,” said Susan Popkin, a public housing expert with the Urban Institute and resident of Fairfax County. “I would love to say this is a great idea because we need the housing so badly and ‘go, go, go,’ but I’d like to see them fix what we have first.”

 

‘A Financially Impossible Proposition’?

Kharod said some of the architects of D.C.’s Green New Deal for Housing have already received some skepticism from developers who are looking to understand their role in the new proposal, but that hasn’t caused proponents to scale back their ambition.

Advocates want to see city-owned land be considered for social housing before other uses. Such housing would reserve a third of its units for those making below 30% area median income, a third for those making 30%-50% AMI and a third for market-rate renters. 

The housing would be designed for net-zero emissions, include solar energy and be built without natural gas components. Tenant leadership boards would run individual properties, and tenants would join representatives from affordable housing developers and financiers, nonprofit housing providers and representatives from D.C. housing agencies on a social housing coordinating council overseeing the entire portfolio.

Yesim Sayin, executive director of the D.C. Policy Center and one of the only witnesses to speak against the Green New Deal For Housing during its 11-hour public hearing on Nov. 22, said she doesn’t believe there are enough market-rate renters willing to pay the rent needed to cross-subsidize the social housing developments’ cheapest units.

“Romanticism is not dead,” Sayin said. “This is largely driven by ideology.”

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Bisnow/Jon Banister

D.C. Council Chairman Phil Mendelson and D.C. Policy Center Executive Director Yesim Sayin at a 2018 Bisnow event.

In her testimony, Sayin said that households that could afford the market-rate rent needed for cross-subsidization in the proposed social housing developments would be earning 137% of median family income. Such renters make up 6% of the overall tenant pool, and Sayin worries those earners may be more interested in luxury buildings or homeownership instead.

That makes cross-subsidization unlikely, Sayin said. What’s more, provisions that require net-zero emissions in newly constructed social housing, solar energy, all-electric appliances and more run up the tab for such developments, potentially putting positive cashf low out of reach for the proposed agency.

“They take a difficult problem and make it even more difficult,” Sayin said. “This bill … starts with a financially impossible proposition and then it makes it even costlier.”

Local developers agree the financing hurdle could be too high to climb. Evens Charles, founder and managing principal of Frontier Development, is developing mixed-income housing on publicly owned land in D.C.’s Hill East neighborhood after receiving final approval from the D.C. Council Tuesday.

He said developing mixed-income housing is “challenging” and needs more than just the subsidy that comes with free public land to pencil out. Of the roughly 1,000 units in his own project, a third would be deeply affordable —184 held affordable for those making 30% AMI and 150 at 50% AMI. Another third would be workforce housing for those making up to 80% AMI and the final third would be market-rate.

“In today’s economic environment, with construction costs compared to where they were a year or two ago and interest rates, it’s extremely tough,” Charles said. “You’re working with your partners, with the public agencies or the public entity, as well as us in the private sector trying to figure out how do we solve for gaps.”

But removing the need to produce revenue as a for-profit business may shrink that gap, proponents say. Sam Myszkowski, a volunteer political organizer with Sunrise Movement DC, noted that Sayin’s median rent assumes the need to pay for “operating expenses, debt service and the required return on investments” for a private development, but a District agency wouldn’t have the same obligations.

“That’s something that I think is cowardice on the part of housing developers really. It’s not something that I think is founded in reality,” Myszkowski said. “Developers would rather put in two 50%-80% [AMI] units than one 0%-30%.”

Other options to subsidize socialized housing developments are also on the table, said Will Merrifield, founder of the nascent Center for Social Housing & Public Investment and an architect of D.C.’s bill. Housing Choice Voucher holders could occupy lower-income units since they have a designated need, but the resident’s voucher would subsidize their affordable unit.

“This is a more efficient way to get more low-income people housed and use that financing to create more middle-income housing,” Merrifield said.

The biggest cash cow that advocates are after is the Housing Production Trust Fund. Since 2019, the fund has spent more than $1B to finance and preserve housing across the District. But in 2020, a report found that officials used $82M that should have gone toward extremely low-income renters for higher-income bands instead.

Between September 2015 and June 2022, the fund financed the creation of 9,000 affordable housing units, and it has financed 921 net new housing units that serve residents making up to 30% AMI since 2019, a spokesperson for the Department of Housing and Community Development told Bisnow.

Merrifield said that total was “spitting in the ocean” compared to the demand for housing in D.C.

“We’ve created this idea that the most effective way to create affordable housing in D.C. is to subsidize the private market with public resources, and I would argue that that hasn’t worked very well,” Merrifield said.

Hubbard, interim director of the agency overseeing the fund, testified that his agency has made progress to improve the quality of affordable housing financed by the HPTF, including new sustainability commitments, making some of the aspirations of the bill moot.

“This bill may be a good starting point for this discussion, but it can only be a starting point,” Hubbard testified. “It raises important questions but lacks the necessary detail and insight to answer them.”

‘A very, very, very different history’

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The Kabelwerk social housing development in Vienna, Austria

The history of socialized housing stretches back to Red Vienna, the interwar nickname for the capital of Austria. From 1919 to 1934, left-leaning leaders of the city went on an aggressive development campaign to build tens of thousands of units of publicly owned housing in response to a severe shortage, financing their efforts in part through luxury taxes, land taxes and taxes on commercial property units.

Today, a majority of Vienna’s residents live in social housing, and the relatively affordable cost of living there has become a North Star for advocates frustrated by the spiraling cost of housing in major cities across the U.S.

Like D.C.’s Green New Deal for Housing, social housing in Vienna is mixed-income, and it is often designed to high standards with interior courtyards and other amenities. But Andrew Trueblood, the former director of the Office of Planning in Washington, D.C., said activists have to be careful not to import Vienna’s model wholesale without considering the particularities of the local market. 

“Vienna is a very, very, very different market with a very, very, very different history than the United States,” Trueblood said. “How directly translatable it is to the U.S. is a very different thing.”

Besides financing, social housing proponents face an uphill battle in overcoming how the history of public housing in the United States has shaped popular opinion. Two million people lived in public housing across the country as of 2019, according to the Urban Institute, but many housing authorities have been plagued with maintenance backlog, mismanagement and declining living conditions for residents.

Popkin, who has studied the changing demographics of public housing residents for the institute, said she’s skeptical that there’s enough popular support for a nationwide movement for social housing given how contentious such entitlements can be.

“We’ve got people pushing back on our major entitlement programs in this country like Social Security and Medicare. I don’t see us creating a new one,” Popkin said.

That means if D.C. wants to give social housing a try, it will have to forge its own path. But it will do so while facing a great deal of scrutiny over the past and present of its own public housing track record. 

The D.C. Housing Authority, which is responsible for managing more than 8,000 public housing units in the District, has an “extraordinarily low” public housing occupancy rate that’s beneath any of the other large authorities in the country, owing in part to poor oversight and management, HUD found in its September report.

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The Potomac Gardens housing complex, where the Department of Housing and Urban Development discovered health and safety hazards in a report released in September 2022.

The report found that DCHA’s board provided little direction in how to improve conditions for public housing, and it found multiple buildings with one or more moldy or otherwise uninhabitable units.

The D.C. Council moved to make changes to the quasi-independent DCHA on Tuesday, voting to alter its board and give the mayor more control over its appointees, but questions remain about whether that will be enough to turn the agency around.

“I feel like I’m reading the reports from 1995 all over again,” Popkin said, referencing the last time the authority was put into receivership.

But that stain is precisely why advocates say it’s time to try something new. Kharod said conversations with public housing residents helped shape the solutions proposed by the Green New Deal for Housing, inserting provisions about tenant oversight and day-to-day management of social housing at their request.

“Sometimes private and public management companies are so mismanaged that they don’t have the skills to stay on top of things,” Kharod said. “What we’re trying to bring with this bill is just some order and some stability [so] you can trust your management company and they’re going to be on top of it.”

He said residents in particular told him they were ready for a new approach that could tackle the challenge of displacement better than other efforts by the District government, which informed the bill’s move to set up an independent agency. 

Kharod pointed to the number of witnesses, 154, who spoke at the hearing two days before Thanksgiving as a sign of popular support for the Green New Deal for Housing. He said it was the most witnesses he’d seen at a hearing since the days of the 2020 protests.

Merrifield, who hopes to one day bring the concept of social housing to other markets around the United States, believes the frustration in D.C. and desire for new solutions make the market an ideal place to test-drive the European model.

“Our current process, you’d have to be nuts to say it was working. We’re throwing a lot of money at this affordability crisis and housing costs keep going up,” Merrifield said. “To continue to do things the way we’ve been doing them … is not an appropriate way to move forward.”

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