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I recently wrote about the housing affordability crisis in our region (although we’re hardly unique) that can be summarized in just two numbers: a median home sales price in February of $330,000 (jumping to $347,250 in March) vs. a median Staunton wage income of $55,023. That puts the average home out of affordable reach of most two-earner households, never mind single-parent households, who then have no recourse but to lease a home—where, no surprise, they put greater upward pressure on that market, pushing local rents above $1,300 a month.
If wage incomes and housing costs were in balance, the market would respond by building more housing until equilibrium was restored. But while a lot of housing is in fact being built, it won’t do anything to relieve the affordability shortage because it costs too much. That’s not because developers are greedy, but because local incomes haven’t increased as much as have labor, materials and the other costs of building new homes. Those new homes will be sold to people moving in from elsewhere—and working elsewhere, where they’ll get paid more. In other words, what we have here is a broken economy.
When other aspects of a local economy are broken, we don’t expect it to miraculously heal itself. We turn to government, with its size and scale, rule-setting powers and taxing authority. If roads must be built or repaired to facilitate commerce, government does that. When economic inducements are needed to lure industry, government provides those. But when it comes to helping people get into affordable housing, well, that’s historically been a different story. People were expected to pull themselves up by their bootstraps, even when they didn’t have boots, and while that attitude is changing, it’s a long, slow process.
To be sure, there are government programs to help with housing—it’s just that they’re relatively few in number and rarely up to the task. Community Development Block Grants, for example, often are touted as one such source of help. But while Staunton has received such grants for several years, you’ll be hard-pressed to point to even one affordable housing unit that exists because of CDBG funding, with most of the money going instead to projects such as fixing sidewalks or getting a new kitchen for the Salvation Army. With the Trump administration now seeking to defund the CDBG program altogether, even those limited expenditures may soon seem fanciful.
Indeed, Trump’s budget proposals are consistent with a stubborn insistence on the extreme right that we’ll never have sufficient affordable housing until government gets out of the way. “The states should reduce barriers to multifamily housing investment by cutting property taxes and liberalizing zoning and building regulations,” urged a Cato Institute spokesman in Congressional testimony last May, apparently oblivious to the fact that property taxes are set at the local level. Or, for that matter, oblivious to the necessity for raising property taxes in many localities.
Unfortunately, many of the Cato Institute’s simplistic remedies, and those of its philosophical soulmates, are given legs by their more telling critique of today’s status quo. Take just one example, made topical by a recent legal threat to derail an affordable housing project in Waynesboro, the first in our region since 2020 to benefit from the federal low-income housing tax credit (LIHTC). LIHTC apartments rent at below-market rates to families with incomes below the median income, which in our area are legion. They’re also nothing new to the area, in which developers used LIHTC funds for the first time in 2001 to renovate Fairfax Hall in Waynesboro, and subsequently added 968 rent-subsidized apartments and town homes at 11 separate locations in Waynesboro, Staunton and Augusta County. But getting to that point wasn’t easy, and now is becoming less so.
The way LIHTC works is thus: each year, the Internal Revenue Service distributes credits to the states, which in turn award them to developers to cover part of their costs of constructing or rehabbing apartment buildings. In exchange, the developers agree to cap rents for low-income tenants. The developers then sell the credits to investors to raise cash with which to start construction, giving investors equity in the projects and credits to apply against their tax returns over a 10-year period. That sounds like a win-win for most everyone—except that this process has grown into such a bureaucratic nightmare over the years that most builders won’t even pursue LIHTC projects.
It also provides Cato and other critics with its most powerful ammunition against “the growth of the welfare state.” For example, the LIHTC statute and related IRS regulations are 442 pages in length, the IRS auditing guide for the LIHTC is 344 pages, an IRS guide for LIHTC building compliance is 214 pages. An industry guidebook to the program runs to 1,942 pages. That’s a whole lot of deterrence against even applying for LIHTC certification, and it doesn’t end there: once such a project is completed, building owners must adhere to rent caps and tenant income limits for 30 years and keep records of each residents’ income, assets, and family composition.
Because of these and other LIHTC requirements, the cost of such units is significantly above those of non-subsidized housing, and also result—thanks to the increased cost of all housing development—in increasingly complicated financing packages, referred to as “capital stacks.” Such stacks consist of an array of government and other subsidies, each of which comes with its own rules and fees, and each of which takes time to cobble together, thus adding to the bottom line. The LIHTC cost disadvantage, according to various estimates, is around 20%, although it can be twice as high in more rural areas. That’s just so much raw meat for the free-market crowd.
No wonder, then, that the LIHTC train ground to a halt locally over the past six years, despite a dozen successful projects completed in the previous decade. Who can handle that kind of aggravation when there’s plenty of demand for new housing at more profitable market rates?
Last year, however, a non-profit developer of affordable homes, Enterprise Community Development, stepped forward to announce it would build Alston Court, a $35 million 96-unit apartment complex near the Texas Roadhouse in Waynesboro. All 96 units would be rented at affordable rates, according to Enterprise, meaning tenants would not pay more than 30% of their income for housing. Eight units would be reserved for households making less than $18,000 a year, which is just 30% of the local median income. An additional 75 units would be set aside for those making less than 60% of local median income, and 13 units would go to households making between 60% and 80% of the median. All that works out to monthly rent topping out at $1,200 a month—and dropping to less than $450 at the low-income end.
But having secured its LIHTC package, Enterprise Community Development had to put together the capital stack needed to make it all work. It acquired $4.4 million from the state’s Affordable and Special Needs Housing program, a $560,000 grant from the Central Shenandoah Planning District Commission, a commitment of $125,000 from the Community Foundation and another $125,000 in smaller, three-year loans of $10,000 to $25,000 each from a variety of local organizations. It got a commitment from Valley Community Services Board to support 12 to 14 units through its permanent supportive housing program, and a promise from the Waynesboro Redevelopment and Housing Authority to likewise provide housing vouchers for the project. But that still left it $500,000 short of what was needed . . .
. . . and that’s when the City of Waynesboro agreed to pitch in with a grant to meet the shortfall. That’s also when city resident Mary McDermott, a retired telecommunications attorney, decided to get her dander up. As chronicled by the Augusta Free Press, McDermott fired off a letter April 15 protesting a city council vote to “donate” taxpayer dollars and threatening to sue the city in Circuit Court. No grounds for such a suit were outlined in McDermott’s letter, which lacked the rigor one would expect from someone educated at Harvard Law School and which seemed to consist primarily of McDermott’s belief that the grant should have been a loan. Moreover, the whole kerfuffle quickly blew over when McDermott decided just days later—also without much of an explanation—that she wouldn’t sue, after all. If nothing else, however, McDermott succeeded in demonstrating how precarious such initiatives can be, even as the need for subsidized housing keeps mounting.
Meanwhile, as these numbers illustrate, even an experienced subsidized housing developer like Enterprise Community Development, which already has built more than 19,000 homes across Maryland, Pennsylvania, Washington, D.C., and Virginia, can be hard-pressed to keep its costs down because of the additional costs associated with LIHTC. Alston Court, it should be noted, will pencil out to nearly $365,000 a unit—more than the median sales price of new homes locally, and therefore just the kind of bloated initiative that gets the Cato Institute and its ilk all revved up. Forgoing subsidized housing, on the other hand, only means more people forced to live beyond their means, many of whom invariably will end up on the street.
Rather than tossing the baby out with the bath water, isn’t it better to repair and streamline the rickety bureaucratic structure that makes affordable housing possible? Because, really, what else is there?
Looking askance 