Report: $5 million public investment needed annually for affordable housing in Athens

With rent and home prices skyrocketing, Athens is rapidly becoming unaffordable for many. The rising cost of housing might seem like an intractable problem, but a report released this month provides some hope that the situation could be turned around at a reasonable cost to taxpayers. 

The core recommendation of the report, emphasized repeatedly, is for the mayor and commission to invest $5 million a year into a local housing fund, up from the current housing investment of $1.7 million a year. This could help triple the creation of affordable homes and apartments countywide as the funds are leveraged many times over for the benefit of Athens residents.

The growing need for intervention

Athens has been a haven for affordable living up until quite recently. 

After the Great Recession of 2008, that started to change. Big-picture factors, most notably the historically-low interest rates set by the Federal Reserve, encouraged wealthy investors to buy real estate at the same time Athens was underinvesting in housing locally. Developers paused most construction for years after 2008, and the units that were built in the 2010s were often marketed towards wealthier students and not made affordable for the general population.

Only 56 subsidized homes have been built in Athens since 2019
Only 56 subsidized homes have been built in Athens since 2019. (Source: HR&A report)

Athens’ growth as a city complicates this situation even further. Housing in Athens has grown by 5% over the past decade, as HR&A’s report describes, and that might be enough for some towns. However, Athens’ population has grown even faster – there was a 20% growth in households over that same time period.

That’s caused the cost of housing to explode. 

Rents have increased 54% over the past decade while household income has only gone up by 29%, according to the report. Buying a home could be an option for some, but home prices have almost doubled since 2015. You’d have to earn $84,000 a year to afford the average home in Athens, which unfortunately puts homeownership out of reach for most people here.

For Athens’ Black residents, things are even tougher. Not only do Black people face higher rates of poverty and unemployment, but banks are also less likely to loan them money even when they have a good-paying job. According to the report, Black families who earn $100,000 a year have a mortgage denial rate equivalent to a white family making only $35,000 a year. That can keep Black families paying sky-high rents for longer and hinders them from building wealth through homeownership.

Mortgage denial rates in Athens by race and income from 2018 to 2021
Mortgage denial rates in Athens by race and income from 2018 to 2021 (Source: HR&A report)

Thankfully, the big-picture issues are easing up a bit. For example, the Federal Reserve has raised interest rates and inflation has been cooling across the country in recent months. That should help keep home prices and rents down over the long-term, or so one might think. But at least for now, home values are continuing their rapid climb even in the face of higher interest rates and as the prices of other goods have leveled off. So the good news on inflation isn’t actually very helpful on the housing front.

The bottom-line is that if you’re waiting for the free market to take action to lower rents and provide affordable starter homes for Athenians, you might be waiting a while. The trend is in the opposite direction. 

The report states that Athens is actually losing affordable homes over time due to price increases, with 1,400 fewer homes renting for less than $875 in 2020 compared to 2015. Only about 300 subsidized units were built in Athens during that time. 

A nearly empty toolbox

Aware of Athens’ large and growing problem with affordable housing, the ACC Mayor and Commission directed some American Rescue Plan funding towards the HR&A study, which they began last year and have now finally completed. While their report does have ideas for how to invest affordable housing funds to achieve the greatest impact, it doesn’t describe any secret tips or magical tricks to achieve affordability.

Instead, it urges the commission to put down some actual tax money to help tackle the issue. According to the report, $5 million a year placed into a local housing fund could triple the creation of subsidized housing in this town, from about 50 units a year to around 150 units annually.

But the hard truth that we need to increase public investment is not what some commissioners wanted to hear.

Mike Hamby
Commissioner Mike Hamby

“I’m a little bit disappointed,” Commissioner Dexter Fisher said after hearing a presentation on the affordable housing report.

“I was hoping to see something new,” said Commissioner Mike Hamby. “We have put a substantial amount of dollars into affordable housing and I do think we need to continue finding ways to do it, but we need to find creative ways to do it.”

Unfortunately, the HR&A report describes a lack of tools on the local level for dealing with this problem, creative or otherwise. Georgia law prohibits many local tenants’ rights measures that might help, not to mention rent control, which is explicitly illegal in this state. 

One factor that is under the local government’s control is zoning and other land use regulations. Planning and zoning rules can have a big impact on the type, amount and location of housing that’s built, but the report states bluntly that “land use tools cannot meet the needs of the lowest-income households.” So these tools are important in a limited sense only and can’t be the only thing we rely on.

That leaves public investment as the primary strategy recommended in the report. 

“To address the housing needs in Athens-Clarke County, ACCGov must make an ongoing financial commitment to a local housing fund,” the report states. “There are no other housing tools available to ACCGov to reach the level of impact a local housing fund can achieve.”

A local housing fund could make a real difference

As described in the report, a local housing fund is a pot of money the government could set aside for investment in housing if it wanted to. But unlike in other states, we can’t dedicate local taxes to housing in Georgia. Money for the fund would have to be decided every year during the normal budget negotiation process.  

That means affordable housing will have to compete with every other priority of the local government during every budget cycle from now on. Even so, there’s nothing stopping this commission or future commissions from deciding to make housing a priority.

The Athens Housing Authority currently provides $165,000 a year for affordable housing in Athens, and that’s the only source of local funding right now beyond SPLOST. Historically, the federal government has provided most of Athens’ affordable housing funds, and they currently provide $1.7 million a year. That means the commission would need to allocate a bit over $3 million a year of local tax money into the housing fund to meet the recommendations of the report.

At that point, the commission would be able to use the money to fill in financing gaps for private housing developments that are making use of the federal low-income housing tax credit. That’s the primary means for which the housing fund would be used, but they could also solicit donations from philanthropists and unlock additional federal funds with it. The report states that a leverage ratio of eight to one is common in these sorts of funds, meaning that for every tax dollar invested, we might reasonably expect to receive eight dollars of affordable housing in return.

As stated above, this fund would allow the local government to triple the creation of subsidized housing in Athens.

Yet, the commission will need to commit for the long-haul in order to receive these benefits. A stable yearly investment will give developers something they can rely on and allow them to plan for the future, which is a necessary aspect of big housing projects that can take years to complete.

That means if it decides to establish the fund, the commission should resist the temptation to cut its yearly investment at any point unless it decides to abandon the idea entirely. The report even states that “it is expected that funding will increase over time.”

The report also describes how some of the funding should be targeted to those making very low incomes, giving an example number of 30% of the area median income. That’s a much lower income than the commission’s affordable housing efforts in recent years have targeted. For example, the commission’s inclusionary zoning policy focused on those making 60-80% of the area median income.

Other recommendations

The report details two other major recommendations that should follow once the local housing fund is established. The first of these is an “acquisition strike fund” and the second is assistance to encourage homeownership and allow people to remain in their homes.

Buy up affordable homes, repair them, keep the rent low

Most of Athens’ affordable housing stock historically has been “naturally-occuring,” meaning that it exists without government intervention. 78% of our affordable housing today is of this variety, not public or section 8 housing. But it might not stay that way for long.

That’s because these are generally older units that might not be in the best shape. Preserving these affordable units is key, and that’s why the report recommends a revolving loan fund to help nonprofits buy up these properties, repair them and ensure their long-term affordability. The report calls this an “acquisition strike fund.”

The report recommends capitalization of the fund with a one-time expense of $5 million, in addition to the money for the local housing fund discussed above. This money wouldn’t ever be spent – it would be loaned out to various nonprofits so they can purchase older homes for renovation. When the nonprofits pay back the loan, the money could be loaned out again to continue the cycle. 

Help people become (or stay) homeowners

Lastly, the report recommends developing methods to help more people become homeowners and to help them stay homeowners for the long-term. The ACC government could consider a downpayment assistance program in addition to helping low-income homeowners repair their homes so they can stay habitable.

Homeownership counseling could be a part of this program as could low or no-interest loans to prospective low-income home buyers.

Is the commission actually going to do any of this?

That remains to be seen. Hamby drafted the commission’s budget this year, and he is arguably the most powerful member of the body at the moment. Based on his comments at the August 10 work session, the acquisition strike fund is something he would consider but the local housing fund – the report’s main recommendation – is not something he’s in favor of.

That means the report is likely to be shelved and mostly ignored. But the rubber meets the road next spring during budget negotiations – if the commission decides to capitalize the acquisition strike fund or the local housing fund, that’s when they would do it.

The local government is currently seeking public feedback on the affordable housing investment strategy outlined in the report. You can comment online here through August 30.

Before you comment, you might want to read the report yourself here.

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