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September 29, 2015

County Board Affordable Housing Master Plan—Likely Annual Cost of $17 Million to $51 million, depending greatly on type of program

County Board Affordable Housing Master Plan—Initial Annual Cost of $17 Million to $51 million, depending on type of program

The Arlington County Board adopted on September 19, 2015 the Affordable Housing Master Plan (AHMP) that has useful data and some broad goals. Unfortunately, there was no cost or budget information on how these optimistic goals can be achieved in Arlington over the next 25 years, and nothing on how these funds can be raised or considering alternative ways to achieve the same goal. http://newsroom.arlingtonva.us/release/county-board-adopts-first-affordable-housing-master-plan/
Below is an effort to provide costs and compare two ways of providing these benefits.

The plan’s primary goal is to have a supply in Arlington of 22,800 affordable units by 2040, a rise of about 16,000 units from the current supply of 7,000 committed subsidized units (CAFS). This is an annual goal of adding 640 CAFs over 25 years. Today, an average CAF rents for about $200 per month below comparable private market rents. Another way to effectively add 16,000 affordable units in Arlington would be to provide 16,000 housing vouchers on existing private rental units.

Cost of building or adding 16,000 CAFs
Based on cost data over the past two years, the county affordable housing investment fund (AHIF) has supplied $80,000 per new CAF; thus $51 million of AHIF funding is needed annually to add 640 CAFs. Over the past 14 years, the county added 250 CAFs annually. Since the county now contributes about $12 million for AHIF, another roughly $40 million is needed annually for AHIF. However as housing construction costs rise as they have over the past five years, the required AHIF contribution will have to increase as well.

Most of this additional funding will have to come from local tax sources or developer contributions (that only amounted to $3 million annually over the past decade). Some funds will come from re-payment of prior AHIF loans, but in most cases AHIF loans are for 30 years, and repayments are likely to fund only a small portion of the annual $51 million required. Over the 25 years, the budget cost will be $1.3 billion (current dollars). AHIF funds must continue indefinitely or the CAFs will cease to exist.
Cost of providing housing vouchers for 16,000 households within 25 years

An alternative way to obtain the same effect would be to provide 16,000 housing vouchers. A housing voucher for $200 per month would cost $2,400 per year per household, and the one year cost of 675 new vouchers is $1.6 million. In 2040, 16,000 vouchers would cost thus $38 million. This is still $13 million less per a one year cost of building new 640 CAFs. Vouchers are provided during the entire 25 years, unlike building new CAFs which will only fully appear 25 years from now and provide little housing relief in the next ten years.

Over the full 25 years voucher costs are half those building 16,000 new CAFs. The number of vouchers to meet the full needs of all households earning less than 60-percent AMI is 7,000 in 2016, and then rises by 640 annually reaching 16,000 by 2040. The cost to provide $200 per month vouchers during 2016-40 is $687 million, only half of the cost of providing the $1.3 billion to build 16,000 CAFs.

Vouchers provide about 43 percent more benefits to renters during the 25 years than slowly building new CAF units.
Measured in benefits over the 25 years, vouchers provide 287,000 household-years versus only 200,000 household-years for the CAFs. Vouchers also go to much lower income renters than those in a CAF who are predominantly at the 60-percent AMI.

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