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The Affordable Housing Trust Fund is about to get another $5M. But how affordable will that housing be?

Creative Commons

Five million dollars from Cincinnati’s carryover budget is destined for the Affordable Housing Trust Fund. The exact destination for that money is in dispute at City Council, and the final decision will affect just how affordable the units subsidized by this fund end up being.

The Affordable Housing Trust Fund dates back to December 2018. Then-council member David Mann authored the ordinance creating Fund 439.

It says all money from the fund must be used for housing affordable to households making 60% or less of the Area Median Income, or AMI. Currently, that would be a family of four making $57,300 or less. At least half the fund has to be used for even more affordable units for families making 30% AMI or less, or $26,200 a year.

Mann says that was intentional.

"We wanted to try to make sure that the trust fund just wasn't for housing, but it was for housing that would be affordable — or approach being affordable — for folks that are below the Area Median Income," he said.

But current requirements offer subsidies for up to 100% AMI. That means taxpayer money can subsidize housing for a family of four making about $100,000 a year.

Mann calls that very disappointing.

"The whole point of this modest commitment to affordable housing was to provide affordable housing," Mann said. "You certainly are not meeting the needs of those who have the lower income levels if you're saying, 'OK, 100% of AMI is adequate.' "

'That's where the need is'

The difference is possible because nearly all of the money city officials have committed to the Affordable Housing Trust Fund has gone to a variety of capital accounts instead of the original Fund 439. Although standard procedure is to duplicate the spending rules for any capital accounts created, that didn’t happen in this case.

Advocates like Greater Cincinnati Homeless Coalition Director Josh Spring are concerned.

"The reason that housing spending out of the trust fund is targeted at 60% AMI or lower, with at least half going to 30% AMI or lower, is because that's where the need is," Spring said.

Federal data seems to confirm this. According to the Department of Housing and Urban Development and the U.S. Census Bureau, nearly 50,000 households in Cincinnati are cost-burdened, meaning they have to pay more than a third of their income on rent or mortgage, plus utilities.

Sixty percent of those households make 30% or less AMI. Households making between 80% and 100% AMI, which would qualify for subsidized housing under the current trust fund rules, make up less than 5% of all cost-burdened households in the city.

The data

So why would a fund designed to support new affordable housing offer cash to a developer charging rents that don't seem very affordable — as in, more than $1,000 for a studio apartment?

The parameters are laid out in a contract with the Cincinnati Development Fund, a nonprofit lending organization that recently started managing the city’s trust fund.

A Housing Advisory Board appointed by the mayor and council offered input on the contract. Council Member Reggie Harris is a member.

"2018 was very different from 2022," Harris said. "And that account, and that ordinance was created — and essentially laid dormant for four years — nothing was done with those parameters."

The advisory board met for the first time in March and the contract with the development fund was finalized in August. Developers can get the most money for units priced at 60% AMI or less — between $50,000 and $60,000 per unit. Units at 100% AMI are eligible for $10,000 to $20,000 per unit.

Here are the rent limits for units affordable to households at 80% AMI:

  • Studio: $1,338
  • 1 BR: $1,432
  • 2 BR: $1,720
  • 3 BR: $1,986
  • 4 BR: $2,216
  • 5 BR: $2,445

And the rent limits for units affordable to 60% AMI households:

  • Studio: $1,003
  • 1 BR: $1,074
  • 2 BR: $1,290
  • 3 BR: $1,490
  • 4 BR: $1,662
  • 5 BR: $1,834

Harris says it's part of a much more comprehensive strategy than the original Fund 439, and the fund can and will subsidize housing below 60% AMI. Harris says adding more restrictions to the money would be an unnecessary barrier.

"I have not seen a convincing argument or engagement that has said that by restricting $5 million to these price points, we're going to actually yield more units," he said.

Harris says it all boils down to flexibility: other sources of funding for affordable housing are tightly regulated and the city's trust fund is designed to fill in whatever gaps are left over. And, Harris says the city uses other local money for housing at lower income levels, pointing to the most recent allocation of NOFA (Notice of Funding Availability), which directed$7.1 million to housing projects ranging from 30% to 80% AMI.

Still, some council members are skeptical. Two filed a motion asking that the $5 million from the carryover budget be set aside to follow the original income limits: Victoria Parks and Jan-Michele Lemon Kearney.

"The biggest need in affordable housing is 60% AMI and lower," Kearney said. "And $5 million is not a lot, considering we're talking about a much larger fund."

Assistant City Manager Billy Webber is scheduled to give council a "deep dive" on the history of the Affordable Housing Trust Fund next week. He'll present to the Equitable Growth and Housing Committee, of which Harris is chair. The meeting is Tuesday, Oct. 25 at 1 p.m. in council chambers.

After that, council could move the $5 million to Fund 439, or to a new capital account with the same income restriction rules. Or, they could ask that the contract with the Cincinnati Development Fund be revised to offer more subsidy for units below 60% AMI.

Why was money diverted from Fund 439?

At least part of the disagreement about which account should house money for the Affordable Housing Trust Fund may stem from confusion about the fund’s history.

When WVXU asked the City Manager’s Office about Fund 439 several weeks ago, the initial response was that Fund 439 was always intended as a way to accept donations from outside sources, not a place for city funds; a thorough review of past council meetings proved that inaccurate. When presented with that evidence, the office then corrected itself to say that Fund 439 could in fact accept other revenue sources beyond donations.

Council established Fund 439, called the Affordable Housing Trust Fund, on Dec. 12, 2018. Although the ordinance outlined the specific uses for the money, it didn’t include a revenue source. Instead, council pledged to follow up with additional legislation with a revenue stream and establishing “eligibility requirements for the receipt of funds … and an oversight board that will notify the public of existing funds available … enforce funding priorities and eligibility requirements, and recommending funding recipients to City Council.”

The revenue source was addressed first. In February 2019, then-mayor John Cranleyannounced a one-time source of $700,000 for the fund. Council voted to appropriate those funds in March, creating a new capital account that did not have the income limits laid out in the original trust fund ordinance.

It’s common for money to move from the General Fund budget to the Capital Fund budget and vice versa. Simply put, the General Fund can pay for operating expenses while the Capital Fund can only pay for construction or maintenance of physical infrastructure like buildings, roads and bridges. As noted earlier, standard procedure is to duplicate any spending restrictions when a “twin” capital account is created. That did not happen in this case and it’s not clear why.

In April, then-council member David Mann introduced an ongoing revenue source by establishing a new excise tax on short-term rentals like Airbnb and VRBO. The ordinance passed April 24, 2019, and specifically directed that tax revenue “shall be deposited into special revenue Fund 439.”

Very soon after, during the budget process for fiscal year 2020 (from July 2019 to June 2020), Council amended the excise tax to direct revenue into the General Fund instead of Fund 439. It clarified that an equal amount of money “shall establish the minimum amount appropriated in the annual budget for the following fiscal year to capital improvement projects for the preservation and development of affordable housing in the city.”

“That was a specific proposal that Mayor Cranley made, I think first to me personally," Mann said. “And I said, 'Look, all I want to do is get some money into affordable housing and if you're saying it would be easier to make capital money available, I'm all for it as long as it's we don't lose any dollars in the process.' "

The amendment was part of the overall budget ordinance and did not get a separate roll-call vote of council. There was some discussion of the change in committee, however; then-budget director Chris Bigham confirmed the idea was part of Cranley’s effort to fill a sizeable deficit in the General Fund budget.

“[Cranley] then reduced the General Capital budget by $611,000 and created a new affordable housing capital project for the $611,000,” Bigham said.

Then-council member Chris Seelbach questioned the move.

“I just want to make sure we're clear,” Seelbach said at the time. “We would be using the short-term rental revenue to close the operating deficit that [Cranley is] restoring. We would still be spending $611,000 on affordable housing, but we would be cutting capital expenses we would otherwise expend.”

Here’s what got cut from the capital budget:

  • $325,000 from the traffic signal infrastructure project (removing about 29% of that project’s overall funding). Used to “repair, replace and construct” traffic signal infrastructure. Reduction means five fewer traffic signal reconstructions during the fiscal year.
  • $250,000 from retail/commercial opportunities. This is used for projects and staff reimbursement for manufacturing development sites, small business financing assistance, neighborhood public parking and other related projects.
  • $186,000 from neighborhood transportation strategies. Used to support private developments and neighborhood initiatives. These resources “implement solutions for all transportation modes, but typically smaller physical improvements.”

Federal stimulus funding during the pandemic eliminated the budget deficits the city would have had otherwise, but the short-term rental excise tax was never directed back to Fund 439. And as before, the “twin” capital accounts that housed the money instead did not duplicate the spending restrictions of the original Affordable Housing Trust Fund.

The oversight board referenced in the original ordinance wasn’t created until early 2021. Then-city manager Paula Boggs Muething announced a series of recommendations to improve the city’s response to the affordable housing crisis.

That resulted in an ordinance passed in April 2021 that:

  • established the Housing Advisory Board;
  • authorized the city manager to execute an agreement with the Cincinnati Development Fund to manage the city’s Affordable Housing Trust Fund, as well as a newly announced loan pool funded by HUD’s Section 108 program.

Cranley appointed several members to the board and Council approved those appointments later that year.

When Mayor Aftab Pureval took office in 2022, he appointed a few more members and pushed for the board to finally start meeting. The first meeting was in late March; the contract with the Cincinnati Development Fund was finalized in late August.

The Housing Advisory Board will continue meeting and issuing recommendations to the city on various housing policy matters. For example, they are now considering a report that recommends significant changes to the city’s residential tax abatement program.

How much is in the total Affordable Housing Trust Fund?

The first agreement with the Cincinnati Development Fund covers only funding that comes directly from the city budget, not money from federal sources like HUD or the American Rescue Plan, or from private donations.

That total amount is $2,728,300; of that, $1,300 is in Fund 439 and subject to the income restrictions described above. The rest is in a few capital accounts.

Soon the total will be $7,728,300, once the $5 million in carryover is added to either Fund 439 or a capital account associated with the CDF contract.

(Note: the carryover budget is now an annual revenue stream for the trust fund; it can deposit up to $5 million a year, but after this year is expected to deposit closer to $1 million or $2 million a year.)

Separate from the city’s trust fund is the HUD Section 108 loan pool of $34 million. It will be distributed as low-interest loans to developers. As the loans are paid back, the money can be loaned out again for new projects.

Section 108 regulations require at least 51% of the "beneficiaries" of the funding be low- or moderate-income persons; in other words, residents making between 50% and 80% of AMI or less.

On two occasions, Cincinnati Council voted to allocate money from the American Rescue Plan Act (ARPA) to the Affordable Housing Trust Fund:

Neither amount is in the fund that CDF is now working to disburse.
The $6.4 million from 2021 came from a subset of ARPA (HOME-ARP) that is ineligible for the CDF-managed trust. It was later combined with a few other sources into a fund worth $9.9 million that will be allocated to developers through a request for proposals process run by the city's Department of Community and Economic Development (DCED). That's contingent on HUD approval.

The $5 million from 2022 will be managed by CDF through a separate agreement with the city, because it requires different contract language. Otherwise, the funds will follow the same basic framework as the existing agreement.

Another $12 million in private donations will be distributed by CDF, each source with its own requirements for eligibility and spending:

  • $5 million from the Greater Cincinnati Foundation
  • $5 million from Western & Southern
  • $500k from Health Path
  • $1.5 million from the Haile Foundation
Updated: October 20, 2022 at 1:23 PM EDT
Local Government Reporter with a particular focus on Cincinnati; experienced journalist in public radio and television throughout the Midwest. Enthusiastic about: civic engagement, public libraries, and urban planning.