What is Arizona going to do about its affordable housing crisis?

For sale house.jpg
Posted at 5:57 PM, Mar 08, 2021
and last updated 2021-03-08 23:00:34-05

PHOENIX — The burden of figuring out Arizona’s affordable housing crisis has largely fallen on cities, non-profits, and charitable organizations.

But the current system can’t create enough affordable and subsidized housing for a growing number of people who need it.

The Arizona Housing Coalition, a non-profit that advocates for affordable housing policies, is looking for the state legislature to help.

“It needs a deliberate policy intervention to create more affordable housing,” said Executive Director Joan Serviss.

She believes one of the policies needs to be a state low-income housing tax credit that mimics the federal tax credit, “which has been responsible for a lot of the affordable housing multifamily housing that you see across the nation, and in Arizona,” Serviss said.

With the Federal Low Income Housing Tax Credit (LIHTC) program the Internal Revenue Service allocates $20 million in credits to Arizona each year. The Arizona Department of Housing awards them to affordable housing developers. Those developers sell the credits to investors then use the cash to help pay the startup cost for affordable projects.

That is how the Coalition envisions Senate Bill 1327 and its mirror House Bill 2562 would function except instead of the IRS issuing the credits the state would.

“Anybody that has state tax liability, you can invest in affordable housing development and receive a state tax credit. And this would basically work hand in hand with the federal income housing tax credit and produce more units,” Serviss said.

If passed the state would set aside $8 million in tax credits for a 6 year period. Investors would be able to claim the credits for 10 years. Serviss estimates the program would cost the state $480 million over 15 years but said, “both construction and operations would create over $6.2 billion in economic activity over the course of the program. So it's a state investment, but a huge economic state return on investment.”

The state already has a tool to create more affordable units through the State Housing Trust Funds.

According to the state housing website, it was established to provide a “flexible funding source to assist in meeting the housing needs of low-income families in Arizona.”

Before the great recession in 2008, it was funded with fees collected from the state department of housing and half the proceeds of sale of the state’s Unclaimed Property Fund.

“It (the trust fund) had reached a balance of approximately $40 million dollars. And during the last economic downturn, lawmakers saw that high balance and they were in an economic crisis. So they swept it,” Serviss said.

The trust money moved to the general fund and later capped at $2.5 million dollars. With the exception of a one-time infusion of $15 million in 2020, Serviss said the fund is not being used to its full potential to create more affordable housing.

“At the state level, we need a significant increase or significant investment,” she said.

But some housing advocates are taking matters into their own hands.

“A lot of people look to the government to solve all these problems. And that's just not going to happen,” said Howard Epstein, founder of the Arizona Housing Fund.

Epstein, a long-time Valley banking executive, has spent several years on boards of charities that serve populations that are housing insecure or are experiencing homelessness.

“Because the shelters are always full, that leaves people living unsheltered meaning in their cars or in the streets,” Epstein told ABC15. “So I kind of saw first-hand--I've been board chairman of this one agency for about 15 years--that we just need money. We need money to build more units because it's expensive to build, bring new units to our communities.”

Originally Epstein said he pitched legislation that would have added a $25 affordable housing fee to homes sale in Arizona, but it was not received well.

“I kind of, you know, get punched in the face and say don't even try it. It's just not gonna work,” he said.

Instead, the idea turned into the Arizona Housing Fund, a non-profit that asks for a $25 donation at the close of real estate transactions.

“We're asking buyer's or seller's agents, etc, to donate $25 to the Arizona Housing Fund. So it's like checking out at a grocery store, but it's when you buy or sell a house,” Epstein said. Individual donors in the public can donate as well.

Since 2019 Epstein said the fundraised more than $500,000 and has a goal of $100 million. He said 100% of the money goes to non-profit projects that build permanent housing for people with low incomes or who are experiencing homelessness.

“It's $25, right? It's such a non-offensive amount. Maybe someday it'll be a law. But until then we're going to do it privately,” Epstein said.

Another fund, Home Matter to Arizona is affiliated with the state Medicaid system, AHCCS, and the insurance companies that it contracts with. It has a stated goal of reaching $100 million for affordable housing grants and low-cost loans through “leveraging government, philanthropy, and national private investment,” according to its website.