HOUSING POLICY

GUEST COMMENTARY

Reauthorize HOPE VI, But Make a Few Changes First

BY ORLANDO CABRERA

AFFORDABLE HOUSING FINANCE • April 2008

While I would like to see HOPE VI reauthorized, I believe that the focus of reauthorization should be on three fundamental issues: creating the legislative pathway to build the maximum number of viable affordable units, keeping development moving quickly, and introducing measures to make HOPE VI work better with the tax credit and private-activity bond world (and, importantly, any state-funded subsidy).

I would also like to see legislation that continues to keep Department of Housing and Urban Development (HUD) involvement to a minimum but allows recapture and regranting of long-unused HOPE VI money, and provides public housing authorities (PHAs) and their development partners with maximum flexibility to develop in accord with the economics of their communities, as opposed to using a one-size-fits-all economic model that would likely not fit many communities.

Regrettably, both the Senate and House versions of the HOPE VI reauthorization bills are too prescriptive and focus on broader political concerns instead of creating a platform that gives PHAs the ability to use the legislation and maximize the economics of their discrete deals.

Moreover, both reauthorization bills fail to recognize that every community and the economics of every community are different.

For example, I do not see it as an improvement in the program to now require one-for-one replacement of public housing units or even comparably affordable units on the previous footprint of the property to be redeveloped, even if the PHA is permitted to undertake development off site.

Nor do I see how prohibiting demolitiononly grants under HOPE VI will help communities to rid themselves of obsolete and often blighted developments so that newer and better affordable units might be built. Affordable units almost always replaced those public housing facilities that were demolished using demolition-only grants.

If PHAs cannot look to HOPE VI for demolition of public housing units, those units in many cases will provide inadequate housing to the PHAs' tenants, or-worse yet-may be left standing and uninhabited, adding to the exact blight that HOPE VI was designed to address.

Both of those provisions in the reauthorizing bills will do more to impede the redevelopment of aging public housing properties than promote the effective use of HOPE VI grants.

Congress might help HOPE VI work better if lawmakers remembered that HOPE VI does not, in and of itself, build HOPE VI developments. In order to improve HOPE VI, Congress would do well to better dovetail legislation with the Internal Revenue Code.

Congress would achieve more and better housing results if it were to focus on creating better and clearer interrelationships between the low-income housing tax credit and private activity bond programs, on the one hand, andthe HOPE VI program on the other.

Some ideas that Congress may want to consider are all rooted in keeping a deal as financially viable for the public housing authority as possible.

For example, why not allow a floating credit for HOPE VI deals so that the tax credit allocated by the housing finance agency (HFA) is not limited to the 70 percent limit and can take full advantage of equity even beyond the 30 percent difficult- to-develop area/qualified census tract (QCT) bump, yet structure this in such a way that it will not impact a state's overall annual allocation? Or, if the HOPE VI project borders a non-QCT area, why not let the HOPE VI transaction impute the QCT status if it is adjacent to or rationally linked with the development?

Why not create an incentive for HFAs to accommodate HOPE VI transactions in their qualified allocation plans by perhaps making clear that any amount of tax credits allocated to a development that has received a HOPE VI grant will have extended placed-in-service dates- or, better yet, that such tax credits will be allocated over and above a state's annual allocation and the state will never be at risk of losing those credits to the national pool?

Finally, why not encourage readiness to proceed by giving the HUD secretary the ability to recapture and recycle unused HOPE VI monies after a period of time?

The debate over HOPE VI should be driven by the pragmatic goal of producing more affordable and other units at the lowest impact to the federal budget, encouraging the grants to be spent, leveraging all of the legislative tools needed to produce affordable housing, and very little else.

The rest of the issues that become attached to reauthorizing language add to the risk that an otherwise viable deal will never be built. What will truly help the affordable housing conversation is to improve the business end of HOPE VI- the part of HOPE VI that allows the development of units-as opposed to anything else.

Orlando Cabrera recently resigned as assistant secretary for Public and Indian Housing at HUD. He is also the former executive director of the Florida Housing Finance Corp. He is currently on a long-planned sabbatical.