Detroit is creating a $250 million affordable housing fund that would preserve 10,000 affordable housing units with expiring low-income housing tax credits and create 2,000 new ones on vacant land or in existing vacant buildings by 2023, the city announced Monday.
In a news release, the city said the fund would be made up of $50 million in grant funding; $150 million in low-interest borrowing; and another $50 million in city and federal funds over the next five years. Some of the funding is expected to come from CDFIs, shorthand for community development finance institutions, traditional financial institutions and philanthropic groups. A fund manager is expected to be chosen this year.
As apartment rents have risen in Detroit the last several years, maintaining and creating affordable housing in a city in which the median household income is just more than $28,000has become a key goal for Detroit officials.
Mayor Mike Duggan first referenced the fund — which will leverage bank financing, low-income housing tax credits, tax-exempt bonds, brownfield financing and historic tax credits — in his State of the City address last week.
The city says an estimated $800 million — with $550 million through LIHTC, debt and equity — is needed to support its affordable housing goals, including $300 million for preservation and $500 million for new development. There are approximately 22,000 affordable housing units in the city, and the federal requirements for them to remain affordable are expected to expire for about 10,000 of them by 2023, according to the city.
An affordable housing unit is one that is affordable to those making 80 percent of less of the area median income for the entire metro Detroit area, which last year was about $54,900 for a family of four and $43,950 for a two-person household.
“We have had a chance to observe and speak with leaders from Washington, D.C., Chicago and San Francisco and learned how they have had to make major investments in affordable housing after the real estate market grew and missed some opportunities to include affordable housing in their revitalization,” Arthur Jemison, the city’s director of housing and revitalization, said in the release. “With a strategy and fund of this kind, we hope to learn from their efforts and invest in affordable housing now.”
Nearly 1,800 affordable housing units have been preserved and about 850 created since 2015, according to the release. The first project funding commitments are expected early next year.
The city says average rents in greater downtown have increased from $746 per month to $1,020 per month from 2005 to 2016, a more than 37 percent increase; and in the city as a whole from $650 to $820 per month, a rise of 26 percent. As rents rise, developers often look to convert low-income housing to market-rate.
However, federal funding for affordable housing programs in Detroit such as Community Development Block Grants and HOME Investment funds from the U.S. Department of Housing and Urban Development have fallen 45 percent from $75 million in 2002 to $41 million in 2016.