Drafting New Plans for Housing

Numerous programs seek to preserve low-cost homes

With the help of federal programs and foundation grants, homeownership rates have risen to their highest level

in the nation’s history. In 2001, 67 percent of American families owned homes or paid a mortgage. Put another way, 11 million more Americans owned homes than in 1990.

But that gain may have come at a price. While grant makers and government agencies were busy helping those of moderate means find mortgage money, many of the country’s poorest residents were caught in a squeeze.

Because of spikes in home prices and rents during a decade-long housing boom, many apartments built for the poor with federal-government help began to command market-rate rents that drove the tenants out. Meanwhile, federal public-housing construction programs were virtually halted. Federal spending on housing programs has decreased by more than half in inflation-adjusted dollars since 1980.

The upshot: As the number of public-housing units for poor people has declined, and subsidized, privately owned units have dwindled, more people need homes, but can’t find them. Last year, homelessness in major American cities grew by 19 percent, and studies by a federal housing agency estimated that two million families need homes they can afford, while another 1.7 million live in substandard homes.

Foundations Step Up Support

Confronted with the growing needs of poor and homeless people, advocacy groups and nonprofit housing developers are increasingly finding comfort in the renewed involvement of foundations, trusts, and individual donors. After stepping away from efforts to help poor people find homes during the 1990s, foundations have begun to offer support to groups that have come up with new ways of housing those in need. Those efforts include:

• Preserving inexpensive apartments, many of which are being converted to market-rate housing. Grants and loans from foundations, such as the John D. and Catherine T. MacArthur Foundation, in Chicago, and the McKnight Foundation, in Minneapolis, have been made to nonprofit groups that buy and manage low-cost housing. MacArthur, with a three-year, $45-million commitment started two years ago, hopes to preserve 100,000 low-cost units nationwide in the next 10 years. McKnight grants, totaling $28-million in recent years, have helped save 30,000 units of housing.
• Pooling the resources of grant makers. Faced with a shortage of 5,000 low-cost rental homes in Massachusetts, the Hyams Foundation, in Boston, the Paul and Phyllis Fireman Charitable Foundation, in West Palm Beach, Fla., and others are in the midst of creating a $25-million loan fund for developers of low-cost housing.
• Loans for the working poor. A $20-million gift from Jerry Bisgrove, founder of the Stardust Foundation, in Scottsdale, Ariz., is helping to start the Arizona Family Housing Fund. Mr. Bisgrove hopes the fund will provide loan help and other services to many of the 400,000 low-income workers in the Phoenix area, as well as make grants to the nonprofit groups that serve them.
• A drive to increase available housing for those with physical or mental problems, including people who repeatedly find themselves homeless. The Corporation for Supportive Housing, in New York, has helped create 10,000 apartments for needy people in recent years, thanks to grants from McKnight, the Robert Wood Johnson Foundation, in Princeton, N.J., the Melville Charitable Trust, in Providence, R.I., and others.
• Loan help for those who live in factory-built homes — more commonly known as “mobile” homes. The New Hampshire Community Loan Fund, supported by more than $2-million in grants and loans from the Ford Foundation, in New York, and others, is helping owners of such homes acquire the land their dwellings sit on and obtain lower-rate mortgages to protect their investments.
• Services for public-housing residents who face changes as their old homes are torn down and new ones, many designed for people with higher incomes, are built. A MacArthur Foundation commitment of $25-million is designed to ensure that people who live in public housing have options for relocation and access to services, such as job placement.

Grant makers have also stepped up efforts to finance ideas and programs that were created in the 1980s, when federal spending on housing began taking its hardest hits. Some foundations are supporting the formation of housing trust funds, which use government money in conjunction with private dollars to build low-cost homes. The majority of the 280 state and local trust funds have sprung up in the past decade.

Help for Poor Renters

Homeownership rates have increased at all income levels, but extremely poor people are still more likely to rent than own. While government aid to low-income renters and homeless people amounts to around $30-billion annually, homeowners take nearly $300-billion in mortgage-interest tax deductions each year — a boon to those with sufficient means to buy homes, but no help to those who rent.

Grant makers who once ignored the plight of low-income renters have begun to recognize their needs.

“The thing that is driving philanthropy is that the affordable-housing situation has gotten much worse,” says Jerry Jones, a lobbyist at the Center for Community Change, an advocacy group in Washington. “Foundations simply couldn’t ignore it any longer.”

Foundations and trusts that typically have backed programs for homeless people have begun to look at expanding their grant making, beyond providing shelter beds and services, to include housing.

“You can’t solve homelessness without providing housing — they’re twinned issues,” says Bob Hohler, executive officer of the Melville Charitable Trust, which has donated $2.4-million over the past three years to groups that provide homeless people with housing and other services.

Alarmed by the growing numbers of homeless people in Boston, where shelters have multiplied from 2 to 80 in the past 20 years, the Paul and Phyllis Fireman Charitable Foundation began to meet with other Boston-area grant makers two years ago to discuss new ways to attack the problem. Since its formation in 1989, the foundation has focused its grants on helping homeless families.

“We realized we had to educate ourselves about housing,” says Melinda Marble, the foundation’s executive director. “What we found was that one-quarter of those in shelters are working people. These aren’t street drunks. These are people who could live in traditional housing.”

The foundation, along with Hyams, the Boston Foundation, and the Highland Street Connection, a small grant maker in Boston, decided last year to form a corporation and make $25-million available in low-cost loans for new housing. The money would be used by developers in conjunction with state and federal funds, and rents would be subsidized by federal assistance. “The goal is to reach down to those who make less than $40,000,” says Ms. Marble. The overwhelming majority of subsidized homes built in Boston in recent years were rented to people who earned at least that much per year, she notes. “The average wage for people leaving welfare is about $17,000 per year. We have to go that deep to be effective.”

Federal Efforts

While efforts to increase the numbers of low-cost homes have begun to grow, so have programs aimed at preserving apartment complexes for the poor and keeping them affordable. With federal help, hundreds of thousands of low-income-housing units were built by private developers during the 1970s and 1980s. In exchange for offering and maintaining apartments at below-market rates, developers received tax breaks and low-cost federally backed loans. But after many federal programs encouraging low-cost developments were eliminated in the 1980s and 1990s, fewer additional complexes were built.

What’s more, many multiyear deals made between private landlords and the federal government to maintain a ready supply of low-cost apartments have expired, freeing owners of those buildings to convert them to market-rate apartments. All told, more than one million units of privately owned, low-cost housing were lost, either to market conversion or demolition, during the 1990s.

To stanch the flow of apartments to people with higher incomes, the MacArthur and McKnight Foundations have supported programs run by nonprofit housing developers and lenders that aim to preserve low-cost apartments.

But even if the foundations’ goals of helping preserve more than 100,000 low-cost units is successful, more will need to be done to find homes for all who need them.

“More than 80 percent of households will live in rental properties at some point, yet affordable rental housing is a scarce asset,” says Debra D. Schwartz, who oversees MacArthur’s grants to preserve housing. “If we lose these buildings, we’re not going to replace them. Even if we could preserve them all, we still don’t have enough low-income rental properties.”