Facebook wants to invest $20 million in San Francisco to help with the city’s severe affordable housing shortage. Other private-sector firms are stepping up to similar contributions in other cities. What’s happening? Perhaps it is the realization of how important it is to have affordable living options in the country’s major cities.
Municipal leaders grapple with many critical issues that have no easy fix – affordable housing is a good example of that type of problem. It’s critically important to have affordable housing available in downtown areas of a city so that firefighters, police, teachers, hospital workers and others are able to live near their jobs. Not only is it important for them to be available quickly when needed, but there is also a huge disincentive to hiring good employees if they are forced to travel great distances just to arrive at work each day. Not all private-sector executives, however, feel compelled to try to rectify that situation.
Developers have been aggressively constructing beautiful high-rise buildings that offer expensive condominiums in urban areas. Retail establishments fight for prime locations to provide products and services. Hospitals, community colleges and private clubs also want to locate downtown. Urban living is popular and downtown areas are vibrant and thriving. There is, however, a dearth of property available for affordable housing.
Some city leaders, vowing to make it possible for citizens from different tax brackets to reside downtown, have found support and funding from sources they would never have approached in the past.
Public-private partnerships are becoming the norm. In many situations, municipal governments have taken non-revenue-producing properties, offered low-interest loans as well as Federal Low Income Housing Tax Credits (LIHTC) to private-sector partners to create all kinds of socially desirable outcomes. The Aspen City Council has been successful in the past in working with private-sector developers, so it is again announcing the upcoming launch of another affordable housing initiative. The city is currently negotiating to finalize a public-private partnership contract with two national real estate companies to lease, develop and manage three city-owned properties as affordable rental units.
Similarly structured projects are underway in New York City, albeit on a much larger scale. In newly rezoned areas, developers are eligible to receive city financing and tax credits to renovate existing affordable housing units. The goal is to create new affordable housing units in East New York, and with 15 planned rezoning areas, the project is just the beginning. In another innovative move, the New York City Housing Development Corporation (HDC) has introduced Sustainable Neighborhood Bonds. These bonds are a new category of social investment bonds and similar to Green Bonds, which have been used to redevelop brownfield sites. The bonds are specifically for the development of new construction and preservation of affordable housing projects.
Nonprofit Google donated more than $6 million to anti-homelessness causes, one of which was Destination Home, a public-private partnership in Santa Clara County where the median cost of a home jumped to almost $1 million last year. Numerous nonprofit organizations are joining partnerships as well.
In the Austin, Texas, metro area, home prices have escalated by more than $100,000 over the past five years. The result has been a shortage of affordable housing for sale or rent. Local public entities are collaborating with the private sector to tackle the issue. Last year, a private real estate investment trust partnered with Austin Affordable Housing Corporation to acquire two properties and convert half of the units to affordable housing. Meanwhile, the Austin Independent School District (AISD) has placed 10 of its properties on the market for sale or lease. Some of the properties are expected to be developed as affordable housing units. The city, AISD and Travis County have also started a collaboration to identify public land for affordable housing. That is a very good place to start.
Taxpayers and citizens have recognized the benefits of public-private partnerships and are wondering who will be the next large benefactor after Facebook!!
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