Lack of funding contributing to Arizona's affordable housing shortage

Housing Metro Phoenix
Posted at 5:54 PM, Mar 04, 2021
and last updated 2021-03-04 20:56:55-05

Valley non-profit UMOM is known for shelter, supportive and rehousing services for families experiencing homelessness, but for the past several years it has also branched off into real estate development of affordable housing.

One of its latest builds, Bethany Crossing, is located at Bethany Home Road and 69th Avenue in Glendale. When complete it will provide subsidized two and three-bedroom apartments for 72 families.

“Families who will move into Bethany Crossing, they are not homeless, but they are struggling to make ends meet,” said Jackson Fonder CEO of UMOM.

The National Low Income Housing Coalition estimates that Arizona has a shortage of 134,000 units for extremely-low income families who make between $0 and $19,000 per year.

But Arizona is producing an average of 1500 affordable units per year, according to Joan Serviss, Executive Director of the Arizona Housing Coalition which advocates for housing throughout Arizona.

Building subsidized housing is complicated and expensive. Market rate and luxury real estate developers get a return on their investments by setting rental rates above their costs for land, materials, labor, and permits. But affordable housing developers keep their rental rate low by not passing those costs to renters, they have found less expensive ways to finance the projects.

“It's a choice you make it is and it's not an easy choice because the skill sets to pull this off are fairly complex,” Fonder said.

One of the main ways affordable housing projects receive initial funding is through the federal Low Income Housing Tax Credit program (LIHTC).

“It's a public-private partnership that allows these housing developments to be developed. And if not for that, I don't know if it would be created,” Serviss told ABC15.

The LIHTC funding process begins with an allotment of tax credits from the Internal Revenue Service to the Arizona Department of Housing. Affordable housing developers submit applications and receive points according to the type of housing.

“Developers will receive additional competitive points for creating housing in the rural areas for seniors, for veterans, for hardworking families,” Serviss said.

Once developers are chosen they can sell the tax credits to investors and use the money raised to help finance their affordable housing project.

But there are a limited number of credits. In 2020 Arizona received $20,593,205 million which was divided amongst 15 projects.

LIHTC only pays for a small part of affordable housing developments.

UMOM received $1.4 million in LIHTC funding during the 2019 round of awards to help finance Bethany Crossing. But to cover the $18.3 million price tag the organization, like all affordable developers, had to find additional funding sources. These often include donations, public grants, private grants, and low-cost loans.

It’s a process Fonder said takes a lot of effort and desire to get done.

“You've got to have the right people in the right place at the right time to design and build this. More patience, more paperwork. You've got to work through the city, you've got a lot of permitting, a lot of zoning,” he said.

UMOM has about 500 affordable units in the Valley. Bethany Crossing will start moving in families in May. But it’s the families that will not be able to move in that stay on Fonder’s mind.

“Thinking about the fact that we can't build units fast enough to help our most vulnerable citizens is a travesty,” he said.