As we climb out of the recession, Illinois' governor will nee to find alternative funding sources to sustain and improve the stock of affordable housing.
By Geoff Smith, executive director, Institute for Housing Studies at DePaul University - August 15, 2014
As Illinois continues its slow and uneven recovery from the depths of the housing and economic crisis, the state’s next governor faces a number of challenges to ensure all Illinois residents have access to decent and affordable homes and thriving neighborhoods. Front-runner candidates Gov. Pat Quinn (D) and businessman Bruce Rauner (R) will address some of these challenges at the Metropolitan Planning Council’s Annual Luncheon on Aug. 28 in Chicago.
While the recent, modest recovery in house prices and the economy have led to reduced levels of foreclosure activity and improving conditions in many communities, many others continue to struggle. Across the region, the need for affordable rental housing remains a key challenge. Between 2007 and 2012, the numbers of cost-burdened renter households in Illinois increased by nearly 85,000, meaning that today almost half of all renter households in the state spend more than 30 percent of their income on housing costs.
Behind this growth in cost-burdened renters is a mismatch between the amount of rent these households can afford and the cost of housing available to them. During the housing and economic crisis, the number of lower-income renter households increased dramatically, yet the number of units affordable to those renters didn’t keep pace. For example, in Cook County between 2007 and 2012, the number of lower-income renters needing affordable housing increased by more than 68,000 households while the number of units affordable to those households increased by less than 50,000. This lack of affordable rental housing meant that 80 percent of low-income renter households in Cook County were cost burdened in 2012.
Developing policies that address the urgent need for affordable rental housing and ensure that Illinois households from all income groups have the opportunity to live in healthy neighborhoods is a complex challenge. It is made even more complex when one considers how widely varied housing market recovery has been neighborhood to neighborhood, ZIP code to ZIP code.
For example, Illinois’ stronger housing markets are well on their way to recovery. Growing demand in these areas has led to rising rents and reduced the supply of affordable rental housing. The limited supply of housing affordable to lower-income households in these markets is likely to be government-subsidized and, given reduced spending on housing programs, preservation of existing units is essential.
Assuming continued austere state budgets, the next governor will have to look to alternate sources of funding to prevent further loss to the affordable housing stock in stronger markets. One example of a policy tool potentially suited for markets with high levels of new development is using Tax Increment Financing (TIF) to generate targeted funding streams. TIF-based funding has the potential to take advantage of a market’s burgeoning strength in order to generate funding that can be used toward the preservation of affordable housing units within that market.
On the other end of the spectrum, some of the state’s hardest hit housing markets already may have a large supply of low-cost market-rate rental housing, but this is often found in aging properties that need investment to avoid deterioration. To preserve these units and keep rents affordable, financing for rehab and maintenance of these often “mom and pop” managed buildings needs to be more accessible. Specialized mortgage products and assistance in paying for money-saving energy retrofits are examples of policy interventions that can assist in the preservation of these units. These and other policies can address the often unpredictable costs of owning and managing rental housing and help keep rents affordable.
In the most distressed markets where foreclosure, declining demand and vacancy-related blight has taken hold, policies should focus on mitigating the impact of vacant properties using tools, such as land banking. In these areas, strategies must also go beyond housing interventions and focus on broader community redevelopment investments, such as schools and other local infrastructure that can help stabilize and rebuild market demand.
Targeting strategies based on the market conditions underlying the mismatch between the supply of affordable rental housing and the households that need it is critical to ensuring low-income families across Illinois can live in adequate and affordable homes. The next governor will need to employ multiple policy tools in order to reduce the number of rent-burdened households in Illinois, not just for these families but for healthier communities across the state.
Geoff Smith is the Executive Director of the Institute for Housing Studies (IHS) at DePaul University. IHS provides data and analysis to inform housing policy and practice in the Chicago region. Mr. Smith has more than a dozen years of experience producing research on the dynamics of neighborhood housing markets.