National Housing Conference's Robert Reid

There’s a crisis in the land. It’s not terrorism and it’s not subleases and it’s not the economic slump. It’s a shortage in affordable housing that, according to Robert Reid, executive director of the National Housing Conference (nhc.org), will only get worse next year. The head of the Washington, DC-based lobbying group says that a new but inadequate HUD budget, coupled with a growing number of investors itchy to take their affordable housing to market rates and a presidential administration that is at best lukewarm to the concept are all contributing to a crisis that is the worst since the 1930s. This has been a battle that the NHC has been fighting since its inception in 1931, says Reid. The 800-member group is comprised of state and local officials, community-development specialists, builders, bankers, investors, syndicators, insurers, owners, residents, labor leaders, lawyers, accountants, architects and planners and religious leaders. And yet, the problems continue. Here is Reid’s take on the current crisis.

GlobeSt.com: On many levels–economic, political, social–these are not fast times in the affordable housing sector. What is the tone in Washington, DC, particularly with a new administration in place?

Reid: It’s not very good right now, but that’s largely because of the continued squeeze on the domestic budget. In terms of the Bush administration, there seems to be no change from the Clinton years, although the White House now is less warm and fuzzy to affordable housing. This could be simply that their commitment has not been made evident yet. The new $30-billion HUD budget is really a standstill budget, which means that while they advertise that they’ve increased the budget by a billion or a billion and half dollars, it’s really a little less because of prior years’ obligations. If we adjusted the HUD budget for inflation since 1980, it should be in excess of $80 billion now.Also, while there was an increase in low-income-housing tax credits, it is still inadequate; it comes down to $3 billion per year, which sounds like a lot of money, but not when it’s compared to need.

GlobeSt.com: So the crisis is worsening not only from a Fed standpoint but from the business and social standpoints as well.

Reid: A lot of these subsidized units with old contracts are in hot markets, and owners have opted to buy out and go for market rates. But there are actually two trends that are impacting the market. In subsidized housing, we are losing anywhere from 3,000 to 4,000 units per month. Keep in mind that 20 years ago, there were 1.5 million built.The other factor is that there is more market-rate housing for lower-income people than there is affordable. This nation has roughly 13 million families with critical housing needs, meaning people spending more than 50% of their income on housing or living in substandard facilities. This segment of the population isn’t eligible for subsidized housing. So while government-assisted housing equals about four million units, there are 13 million families in critical need.

One of the biggest problems is that there is something called an exit tax. A lot of the units built 20 years ago, under the old tax code, were built by syndicators with deep pockets. They were able to take big tax breaks on early losses. In 1986, the tax law changed and eliminated that source of funding. But it has created a Catch-22 because investors can’t get out of these units without facing the exit tax and they won’t invest any more money to repair these 20-year-old properties. The whole idea was to turn these assets over–find another buyer and go on.

GlobeSt.com: So there is a market if you could get the old owners out?

Reid: Given the right systems, there is no shortage of capital.

GlobeSt.com: We’ve covered the federal and national scenario. What does it look like on a local level?

Reid: There are a lot of local barriers to building affordable housing: NIMBY, outmoded zoning codes, outmoded building codes that don’t account for newer, less expensive building materials. And taxing too comes into the picture again because the construction industry is hit hard with impact fees.

GlobeSt.com: So what is NHC’s response to these various barriers?

Reid: On the Federal level, we’ve been up to Congress, but the treasury department is opposed to anything that says reduced taxes. Our position is that you’ll never collect that tax money because people won’t sell. So we try to do it on a housing-policy basis and give exit-tax relief to get old owners out. There are people who are still willing to buy and put more into it.

The individual states can also do more to relieve this problem, such as enforcing regional planning to avoid five-acre lots.

GlobeSt.com: I don’t see the connection.

Reid: Because of urban sprawl, more municipalities are dictating minimum lot sizes of five acres and owners of these properties don’t want affordable housing adjacent to them. On the local level more can also be done to create a little more density in the inner areas, and more can be done to foster inclusionary zoning whereby a developer builds 50 houses or more and he can set aside 15% for affordable.

GlobeSt.com: What is NHC doing on a local level to relieve the situation?

Reid: It’s very easy to sit around and talk to ourselves or simply preach to the choir. But we’ve launched a series of roundtables in various metro areas in an effort to reach out to non-housing group. We’re reaching out instead to major local employers–that’s where the primary leverage resides. One group that’s starting to get involved on a local basis–although not yet on a national level–are the chambers or commerce, which are starting to support housing initiatives.

GlobeSt.com: Is this enough to turn the crisis around in 2002?

Reid: In 2002 it will be worse. It’s hard to put numbers on it, but this is the worst housing crisis that we’ve had since the ’30s, and it’s not going to get better because we’re not building units. And all the while the cost of housing continues to rise.

The essential problem is this, and neither political party has dared to tackle it: There is no national will on housing. On a list of 10 priorities, it’s number 20. We have no problems increasing the defense budget–and certainly in times like this, we should. But don’t then pass a $1.3-trillion tax cut when there is a major infrastructure need that we’ve been putting off for 20 years.