Should D.C.'s Poor Get to Keep Their Housing Windfall?

Who should benefit from affordable housing programs in Washington, D.C.?

Washington, D.C., like many cities, has affordable housing programs aimed at promoting home-ownership among its lower-income citizens. And like many cities, Washington is experiencing rising home prices. This has left it with a bit of a conundrum, writes Aaron Wiener at Washington CityPaper: Should participants in the affordable housing programs be allowed to reap a windfall from their city-funded adventure in home-ownership?

Of all the city's affordable housing programs, this has to be among the worst returns on investment: The city, through its Housing Production Trust Fund, subsidizes the construction or renovation of an affordable home. A low-income resident buys it at a steep discount. After 15 years, the resident can sell the property and pocket not only the initial purchase price and any appreciation, but also the value of the city's subsidy. The seller walks away with a windfall profit, the home is no longer affordable, and the Trust Fund investment is gone.

The affordable housing nonprofit Manna finds this problematic. So over the past three years, the organization, together with several partners, has worked on a solution that culminated in a proposal Manna shopped to several members of the D.C. Council: first Ward 4 Councilmember Muriel Bowser, then Ward 5 Councilmember Kenyan McDuffie, who expressed interested in introducing the legislation, and finally At-Large Councilmember Anita Bonds, who jumped on the proposal with the most gusto and quickly introduced it as a bill earlier this week.

The bill under proposal is modest: It claws back the initial subsidy out of the sale proceeds. But others say that this doesn't go far enough, and that the program should restrict resale at market rate for much longer -- perhaps for good. The debate exposes a tension at the heart of these programs: Are they for the citizens of Washington, or are they for the city?

If the purpose of the program is to help individual citizens, then you should be pleased that they are reaping the benefits of appreciating equity prices. You've taken a struggling family and helped them get their hands on a financial asset that can help fund college educations, retirements, small business investments.

But if the purpose of the program is to keep the city a place where lower-income families still live, then it's a problem when one of those families sells their subsidized home to a gentrifier. We may be glad that the net result is one less poor family in the world, but it's also one less low-income household in D.C. The character of the city changes.

This is obviously bad for the politicians who fund the affordable housing program (politicians rarely like to see the demographics of their districts change). But it's not unreasonable to worry about the other citizens of D.C.; there's a lot of social capital in a neighborhood, and disrupting that destroys valuable human networks on which many people depend. I don't think it's practicalto try to stop neighborhoods from changing, but I can certainly see why people want to.

But if that's how you see your affordable housing program, then you should probably just focus on rentals. An affordable housing program where you can't sell for market rate gives people all the downsides of homeownership -- the lack of mobility, the possibility that your home will lose value and the need to make your own repairs -- while sharply limiting the upside. Why not just use the program for long-term rentals and help low-income folks establish 401(k)s instead?

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