The Urban Institute released a report this week on the Washington Housing Initiative (WHI), comparing it to other housing preservation and production tools.
We’re used to hearing that everything’s changed because of COVID-19. When it comes to the WHI, the pandemic has given more urgency to the model’s success. Essential workers need to be able to live close to their jobs. And private capital needs to step up since tight budgets are forcing governments to take a step back.
Below is an interview from the Urban Institute blog about the WHI in this new era with Kimberly Driggins, who heads the WHI’s nonprofit-arm called the Washington Housing Conservancy, and A.J. Jackson, who runs the WHI’s social impact investing pool.
Kimberly, given everything happening with COVID-19 and the emphasis on addressing rising unemployment, on housing the homeless to prevent the spread of disease, and on preventing people from becoming homeless, is there still a place right now for models like the WHI?
The economic recovery from COVID-19 will demand an increased need for innovative solutions to address housing affordability, particularly for middle-income residents who can’t qualify for public subsidies and are increasingly priced out of market-rate housing. We have already seen that local governments have been forced to scale back their affordable housing investments due to COVID-19, so solutions that don’t rely on large government subsidies are needed now more than ever. The crisis elevates the need for models like ours that focus on preserving workforce housing—and use private capital to do it.
AJ, do you think recent COVID-19 related financial liquidity issues will impact the ability of models like the WHI to obtain additional private sector capital investment?
If anything, we expect the health crisis will highlight the benefit of ensuring that critical workers, especially in health care and other essential industries, can live close to their jobs and in communities where they have support services such as affordable child care.
At the same time, the housing shortage was caused by years of underproduction, and we don’t expect a result of the current situation to be that the housing market is brought into balance. We expect private capital will continue to invest in vehicles that deliver both social impact and competitive risk-adjusted returns, especially when the model is not dependent on large amounts of public subsidy at a time when government budgets are strained.
Kimberly, why is a preservation mechanism aimed at addressing moderate incomes still relevant in a post-COVID-19 housing market? And does the targeting of neighborhoods with rising property values and rents still make sense?
In a post-COVID-19 environment, there will be a strong need to preserve housing affordability for people with low to moderate incomes. Hard-hit industries like hospitality, tourism, and the restaurant industry, have laid off massive numbers of people—many of whom are those the WHI was developed specifically to serve.
We must also continue to focus on neighborhoods with rising property values and rents, where the risk of displacement for the nurses, teachers, and caregivers who live there now is greatest. Preventing displacement by preserving affordability in neighborhoods that are under increasing development pressure is one of our central goals.
AJ, what do you hope state and local governments and their partners in the private and nonprofit sectors, who want to address the increasing affordable housing crisis now further exacerbated by COVID-19, can learn from the WHI?
The WHI model shows the power of private capital to preserve naturally occurring affordable housing in a financially sustainable way with limited public support. As local governments face new demands and diminished revenues, leveraging private sector solutions will be essential to providing more committed affordable housing with fewer public resources. For nonprofit affordable housing developers, investing in mixed-income affordable workforce housing communities can provide much-needed cash flow and an opportunity to diversify revenue streams.
As state and local governments and their partners in the private and nonprofit sectors consider models for addressing the shortage of well-located and reasonably priced housing for essential workers, they could consider how models like WHI and others can fill the gaps left by the limits of federal, state, and local resources and help them build more stable and inclusive communities.