Affordability Leads to Opportunity: Benefits of an Affordable Housing Trust Fund in Mississippi. Introduction

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1 June 2013 Affordability Leads to Opportunity: Benefits of an Affordable Housing Trust Fund in Mississippi Introduction National economic recovery is slowed by a weak and unstable housing sector. 1 As in much of the country, job growth and wages are stagnant in Mississippi. Unemployment hovered around 9% in 2012 (9.9% in February 2013), which placed it 49 th in the nation. 2 Median household income is stuck at a mere $38K (U.S. $54K) and the average hourly wage for renters is $2.00 less than what they need to afford a basic 2-bedroom unit at Fair Market Rent (FMR). 3 These are just several factors that leave hundreds of thousands of Mississippians struggling to afford housing costs. 4 A place to call home is essential to the success of everyone in Mississippi: working families, seniors, returning veterans, people living with mental and physical disabilities, and especially children. People need a place to call home to thrive. A Mississippi Affordable Housing Trust Fund will go a long way to helping all Mississippians find a place to call home. Better still, the Housing Trust Fund will generate economic activity beyond the value of housing built. A housing trust fund generates new jobs and increased local and state tax revenue. A housing trust fund is also a magnet for attracting federal and private resources that otherwise would not come to Mississippi. The estimate for the Mississippi Affordable Housing Trust Fund is that every dollar the state invests would leverage an additional $8 for Mississippi. Drivers to greater stability and increased assets take form through affordable housing options. For decades, state housing trust funds have proved successful at increasing affordability. A housing trust fund (HTF) represents a local, state or national effort to designate a revenue stream to affordable housing. Emerging in the mid-1980s, the number of housing trust funds has grown immensely over 3 decades, owing to their programmatic flexibility in addressing housing needs for both renters and homeowners. 5 Operating in 47 states and more than 600 cities and counties, trust funds stabilize, restore or build hundreds of thousands of affordable housing units while creating jobs, personal income and tax revenue. With a small set-aside (2.5%) of tax revenue from the sale of lumber and building material, Mississippi can repair its distressed housing sector while creating thousands of badly needed jobs and generating tens of millions in economic activity each year. Affordability Mississippi s Housing Problems Housing affordability equates to a monthly cost that does not exceed 30% of a household s income. In real terms, it means having enough for rent and all of life s other basic expenses: food, clothing, medicine, childcare and transportation. Applying this standard, 331,939 Mississippi

2 households are cost-burdened, spending 30% or more of their income on housing costs. 6 This includes occupied rental units, homes with a mortgage and homes without a mortgage at all income levels. A total of 134,155 households currently paying rent or mortgage are severely cost-burdened, spending more than 50% of their earnings on housing. Mississippi experiences a high rate of both cost- burdened and severely cost-burdened renters and homeowners currently paying rent or mortgage (See Figure 1). 7 On average, 1 out of 3 owner-occupied units struggle to afford housing costs (32.9%), while 3 out of every 7 renteroccupied units pay a monthly cost that exceeds 30% of household income (44.4%). 8 A high concentration of renters (22.3%) pays 50% or more of income on monthly costs. Among mortgaged homeowners, nearly 14% are severely cost-burdened Fig. 1. Percent of Income Spent on Housing by % of Tenure Group Out of all cost-burdened households, 1 in 5 owner-occupied units and 1 in 3 renter-occupied units spend at least $40 out of every $100 earned on monthly housing costs. 10 Unaffordable housing is widespread throughout the state, but some counties display markedly higher concentrations of financially distressed owners and renters. Percent of Cost-Burdened Homeowners and Renters by County 22.3% 13.7% % % % 50% or More Renter Homeowner Map 1. Homeowners Map 2. Renters Source: U.S. Census Bureau, American Community Survey. Data classes reflect % of households. 11 2

3 As Maps 1 and 2 illustrate, some counties experience a rate of 6 in 10 households spending 30% or more of income on housing costs. Approximately 55.5% of renters and 42% of owners in the state s 14-county Delta region are cost-burdened. Even in counties with the lowest rates, at least 1 in 5 households struggle to afford housing costs. 12 Table 1. Number of Occupied Units By Percentage of Income Spent on Housing and Tenure Percent of Income Spent on Rent, Mortgage and Selected Costs Renter Occupied Owner Occupied (with Mortgage) N N 30% to 34.9% 24,327 33,808 35% to 39.9% 19,211 22,538 40% to 49.9% 26,407 27,576 50% or More 73,610 60,545 Total 143, ,467 Source: U.S. Census Bureau, American Community Survey, 5-year Estimates Taken together, a total of 288,022 renter-occupied units and mortgaged owner-occupied units are housing cost-burdened (See Table 1). The remaining cost-burdened households are those without a mortgage, meaning the mortgage is free and clear. Still, more than 40,000 housing units with a free and clear mortgage are burdened by selected monthly housing costs ,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Fig. 2. Median Income by Tenure $47,881 Median Income for Homeowners $22,648 Median Income for Renters Cost-Burdened Households by Income Group The need for affordable housing is great in Mississippi. Median income across all households is currently $38, Thousands of Mississippi households earn less than $20,000 per year, which is about 50% of state median household income ($19,359). 15 Median income for an owner-occupied housing unit is more than double the average for renter-occupied units (See Figure 2). 16 A significant portion of households has either zero or negative income. Approximately 16,632 ownerand renter-occupied households fall into this category. More than 4 in 10 renter-occupied units (42.3%) earn less than $20,000 per year, while 1 in 10 mortgaged units (11.3%) fall into this earning bracket (See Table 2). 17 Table 2. Number of Total Occupied and Cost-Burdened Units by Income and Tenure Income Range Renter Occupied N (N Cost Burdened) $20,000 or Less 112,638 (97,942) $20,000 to $34,999 60,857 (34,584) Owner Occupied (w/mortgage) N (N Cost Burdened) 48,149 (47,063) 60,014 (43,831) 3

4 $35,000 to $49,999 38,856 (7,727) $50,000 to $74,999 30,650 (1,146) $75,000 or More 20,917 (178) 62,837 (24,310) 94,652 (16,894) 158,599 (8,347) Total 263, ,251 Source: U.S. Census Bureau, 2011 American Community Survey 5-year Estimates Cost Burden for Households Earning 50% or Less of Median Income Mississippi s very low-income population is in dire need of affordable housing options. Together, 160,787 renter- and mortgaged owner-occupied housing units earn less than $20,000 a year. Nearly every owner-occupied unit in this earning category is housing cost-burdened. Approximately 97% (47,063) of owner-occupied units and 87% (97,942) of renter-occupied units earning less than $20,000 are housing cost-burdened. Beyond the lowest earning range, 57% of renter-occupied units making between $20,000 and $34,999 are cost-burdened, while 73% of owneroccupied units in this income range spend beyond 30% of income. Moving past these bottom two earning categories, almost 4 in 10 (38.7%) mortgaged owner-occupied units earning between $35,000 and $49,999 are paying 30% or more of their income on monthly costs. 18 These data strongly suggest that both low- and moderate-income owners and renters are unable to reasonably afford the cost of housing. Gap in Wage Median monthly housing costs for Mississippi households are currently $ The average hourly wage for renters is approximately $1.94 less than the hourly wage needed to afford a basic 2- bedroom unit at what the Department of Housing and Urban Development (HUD) sets as FMR. 20 Mississippi experiences the largest regional gap between the average renter s hourly wage and what they need to afford a two-bedroom at FMR. This gap in wages means choosing between paying rent and buying basics like milk, diapers and medication. Table 3. Gap in Average Renter s Actual Wage and Wage Needed to Afford Rent Alabama Arkansas Georgia Louisiana Mississippi $1.62 $0.58 $1.22 $1.61 $1.94 Source: See, State Data, in Out of Reach 2012, National Low Income Housing Coalition, The average HUD FMR rate for 2012 was $622. On average, more than 36,000 2-bedroom units are priced above $750. Based on Census data, an estimated 29% of 2-bedroom rental units in Mississippi are priced higher than HUD FMR. 21 Gap in Value and Foreclosure Though owner-occupied units experience a higher median income than renter-occupied units, home values in Mississippi are drastically lower than regional and national averages. In fact, Mississippi s average home value is 50% lower than the national rate, making it the 2 nd lowest among states. 22 Stark imbalances within Mississippi contribute to a weak overall housing sector (See Figure 3). Relying on wealth accrued from the value of one s home is a decreasing option for Mississippi 4

5 homeowners. With chronic unemployment and poverty, the foreclosure crisis left Mississippi 1 of 18 states participating in the Hardest Hit Fund a federal foreclosure prevention program, 23 with a statewide rate of 3.44%, while Gulfport (5.8%) and Jackson (5.7%) rank 93 rd and 98 th, respectively, of 362 Fig. 3. Median Value of Owner-Occupied Units metro areas across the nation. 24 Conditions Households are burdened by more than the cost of mortgage or rent. Inefficient, deteriorated and inadequate living conditions mean higher utility costs for occupants. For instance, homes with outdated insulation see heating and cooling expenses skyrocket. Arkansas Mississippi Biloxi, MS 130, ,300 $96, ,300 Lacks Complete Plumbing Households lacking Indianola, MS 67,800 complete plumbing and kitchen facilities Jackson, MS 89,100 are forced to make adjustments in 60, , , ,000 spending to either constantly fix or work around deficient housing. Substandard housing conditions lead to negative health outcomes for all people. Studies acknowledge substantial costs associated with a lack of affordable housing. For instance, a study in Lee County, Florida analyzed a range of additional costs that can be attributed to housing affordability and calculated the net county impact at $250 million a year. 25 In North Carolina, a study of children living in substandard housing conservatively estimated that $95 million in health costs are attributable to poor housing conditions. 26 Poorly fortified and aging construction leaves way for rodent infestation and mold, both triggers of Asthma, 27 and lead-based building material is found to stifle cognitive development among young children, leading to higher rates of hospitalization. These common problems in distressed households can be costly, which displace critical funds necessary for life s everyday expenses. Thousands of Mississippi households currently experience basic housing problems. Recent data show that 7,293 households lack complete plumbing facilities (See map on left) and 9,601 lack complete kitchen facilities (See map on right). 28 These housing units include homes with a mortgage, homes with a free and clear mortgage and rental units at all income levels. Families with children do better with a safe, healthy place to call home. That is also true for seniors, people with disabilities and all Mississippians. Individuals living in decent, stable and affordable housing experience better life outcomes across the 5 United States Alabama Louisiana 117, ,400 Lacks Kitchen Facilities

6 board than those living in unstable housing. Spin-off costs resulting from an unstable and inadequate housing sector are reflected on every taxpayer s bottom line, which makes affordability everyone s issue. Limited Spending Flexibility Households forced to spend $30 or more dollars out of every $100 on housing costs desperately need to use these resources for other common expenses, like medical bills, monthly fees for child care, healthier dinners or fuel costs. Right now, the average rental household watches $8,124 (36%) of their yearly earnings go to housing costs. 29 This is $3.58 out of every $10 dollars they earn. If these households were able spend 20% less on housing, they would have an additional $ per month. For low- and moderate-income households, resources are severely limited. The smallest shifts in spending make dramatic differences in a family s quality of life for a given month. If the average renter could save $1 out of every $5 dollars they currently spend on housing costs, by year s end they could have $1,624 in savings. Just this small shift would bring the average renter s housing expense as a percentage of income to 28.7%, just under the affordability threshold. Federal Rental Assistance in Mississippi Total Low-Income Homes Assisted 62,000 Extremely Low-Income 59% Headed by Elderly 20% Headed by Individual w/disability 23% Family w/children 48% 6 in 10 HUD- and USDA-assisted homes are outside Mississippi s metro areas Source: Center on Budget and Policy Priorities, Mississippi Federal Rental Assistance Facts, If freed up, an additional $ per month means that families do not have to choose between basic expenses, like food, childcare and fuel. For instance, average weekly costs of food for a family of four ranges from $128 to $192. This is the thrifty and low-cost plan. 30 The average monthly cost of childcare in Mississippi for a 4 year old is $325 and for a school age child is $ When fuel prices fall between $3.30 and $3.60 per gallon, the average Mississippi household spends $100 to $110 on gas per week (over $400 a month). 32 Money that could otherwise pay for these necessary expenses has to be stowed away until the end of the month to prevent eviction, foreclosure, or utility cut-offs. Families are forced to make tough decisions about what they are going to eat, how they are going to get childcare so they can make it to work, and even the maximum distance they can travel in their own vehicle. Individuals and families in these circumstances need targeted support. Inadequate resources stretched to the absolute limit increase the risk of becoming homeless. Currently, an estimated 2,300 people are homeless in Mississippi. 33 A dedicated revenue stream investing in affordable housing can lead to better outcomes for all Mississippians. An affordable housing trust fund will free up struggling families resources, ease day-to-day struggles and reduce the risk of slipping further into distressed circumstances. 6

7 The Economy of State Housing Trust Funds Critical Flexibility Affordable housing trust funds are investments, not expenses. Because of this, critical leeway is granted in enabling legislation to ensure that benefits of spending are maximized. Program flexibility allows the housing trust fund to link resources directly to the most pervasive need and to adapt as needs shift. This means that a fund could simultaneously rehabilitate vacant or inadequate housing, and provide rental assistance or initiate new construction. Mississippi s proposed affordable housing trust fund would provide rental assistance, rehabilitation of units, revitalization of neighborhoods, incentives for homeownership and prevention of homelessness. Forty-seven states have embraced the utility of housing trust funds. Eight states have more than one housing trust fund, 9 have passed laws that incentivize local jurisdictions to dedicate public revenue to housing affordability and 6 have passed enabling legislation, but are waiting for the commitment of a public revenue source. 34 Policymakers and housing advocates in Mississippi have proposed a state-based housing trust fund designed to reach a wide range of households. The structure of the proposed housing trust fund allows crucial flexibility in its scope of assistance, but also in the households it targets. Policymakers in Mississippi shaped language to include extremely low-, very low-, low- and moderate-income households 35 and as previously discussed data show, the state experiences a high incidence of cost-burdened homes across all of these income categories. Construction Trends Show Need Annual building trends over the last decade indicate that private market activity is not enough to repair Mississippi s housing sector. The number of cost-burdened homes is growing and building activity is in a lull. Development of single-family homes and multi-family units started to dramatically decline after According to HUD, the construction of single-family homes declined from 14,150 in 2006 to 10,800 in While construction of single-family homes decreased, the number of multi-family units increased from 2,400 in 2006 to 5,900 in In the last decade, 2006 and 2007 were the most active years of single- and multi-family housing construction. Annual building activity of both single- and multi-family units began a sharp decline in The distressed post-recession housing market was among many economic factors leading to a 50% to 75% reduction in the construction of single- and multi-family units from 2008 to For example, the number of multi-family units constructed fell from 3,900 in 2008 to 1,160 in A small redirect of public revenue gives struggling Mississippians a critical source of assistance and gives the state a much-needed boost in revenue and industry activity. Investments made by the Mississippi affordable housing trust fund that increase development of units could fill gaps in single- and multi-family development, while creating jobs. This kind of economic activity ushers in private and federal investment, ultimately resulting in increased state collections of sales, income, property, mortgage and deed taxes. 7

8 Mississippi s Revenue Source The primary determining factor for size and reach of state housing trust funds is the revenue source. According to the Housing Trust Fund Project at the Center for Community Change, the most common source of revenue is a real estate transfer tax and a documentary stamp tax. These sources are put to use by 10 states. 37 Mississippi s proposed affordable housing trust fund seeks a unique and low-risk funding source. It proposes to be funded with no less than 2.5% of sales taxes collected on lumber and building materials. According to recent sales tax data from the Mississippi Department of Revenue, this would equate to an investment over the first two years totaling $10 million. 38 This proposed revenue source for a Mississippi affordable housing trust fund is unique because a portion of activity supported by the trust fund is designed to self-perpetuate. As trust fund dollars are distributed, construction jobs are created and projects require the purchase of lumber and other building material. Chart 1. Mississippi Affordable Housing Trust Fund Revenue Cycle 2.5% of tax revenue from the sale of lumber and building materials returns to the trust fund INVESTMENT: Tax revenue from sale of lumber and building material starts the fund $ Funds to Stabilize, Restore or Rebuild Administered Hundreds of jobs, millions in personal income and tax revenue generated Households and projects are selected Construction projects spend trust fund dollars on lumber and building materials Construction jobs are created Rehabilitation, Restoration, New Construction Begins 8

9 METHODOLOGY Applying HTF Data to Estimate the Mississippi Affordable Housing Trust Fund s Economic Impact Who s Data and Why? Economic outcomes reported by two state HTFs with comparable revenue levels are applied for purposes of forecasting the economic impact of the Mississippi (MS) fund. State HTFs used for comparative estimate purposes include Arizona (AZ) and Connecticut (CT) due to similarity in funding level and available programmatic data on job creation, personal income and net economic output. Filling in Holes. For a consistent variable range to derive MS averages, the following metrics were employed: Derivation of Tax Revenue for All Leverages Tax revenue = 19% - 20% of Wages and 6.6 % - 8% of Total Economic Activity (Based on AZ and CT HTF Data) Wages and Employment Derivation by Leverage (L) L 1. $5 to $1: AZ HTF data L 2. $12 to $1: CT HTF data L 3. $8.50 to $1: Avg. of AZ and CT HTF data L 4. $7 to $1: Avg. Wage outcome in Leverages L1-L3 (rounded down) = wages; Wages/Avg. Wage per job in L1-L3 = employment MS Estimate = $8 to $1: Avg. of L1-L4 4 Data points Used to Determine MS Estimate -AZ and CT program data = low and high baseline leverage for $10M investment (2 data points; $5 to $1 and $12 to $1 leverages) - AM* of AZ-CT baseline data = middle baseline leverage for $10M investment (1 data point; $8.50 to $1 leverage) - Average Total state HTF leverage (Brooks 2010, w/yield estimates based on $10M baseline average of L1-L3) = Total state-based HTF average outcomes based on $10M investment (1 data point; $7 to $1 leverage) Estimate of MS Leverage Ratio, Employment, Wages, Tax Revenue and Economic Activity = AM= L1 + L2 + L3 + L4 N (4) Wages per job range from $25k to $32K among L1 L3; L4 employment based on AM wages per job= L1 + L2 + L3 N (3) *AM Arithmetic Mean 9 Mississippi s Potential Leverage The economic impact of housing trust funds varies based on the fund s size and structure. Among trust fund experts, state-based trusts are found to be the most effective at keeping people stably housed, while spurring broad economic growth. State housing trust funds most often measure economic impact through a leverage ratio, or how much private and federal investment is generated for a given amount of state housing trust fund investment. According to the Housing Trust Fund Project at the Center for Community Change, on average, for every $1.00 invested by state trust funds, public and private investment yields $ This amount, however, varies from state to state from a low of $2 to $1 to a high of $22 to $1. Multiple examples of state housing trust funds provide clear evidence that benefits of trust funds far outweigh the costs. Based on a 2010 survey of state housing trust funds by the Center for Community Change, Arizona, Connecticut, Hawaii, North Carolina, Minnesota and Texas have state housing trust funds that are sourced with a comparable level of revenue as that proposed for a Mississippi housing trust fund. 40 Leverage amount is linked to the program parameters and scope. Among similarly sourced housing trust funds, leverage ranges from a low of $5 to $1 to a high of $12 to $1. The mean average of these two ratios is $8.50 to $1, while the average across all state housing trust funds at all funding levels is $7 to $1. 41 If Mississippi s housing trust fund is able to accomplish the average leverage and associated outcomes experienced by state housing trust funds with a ten million dollar investment, the affordable housing trust fund can expect a yield of $8 to $1, hundreds of jobs and millions in economic activity on an annual basis. Outcomes associated with this leverage are derived from sums of programmatic data representative of different leverages from comparably funded housing trust funds and the average of these sums. These data capture the lower, middle and high yield ranges of state housing trust funds with an

10 investment of $10 million, as well as the average yield. Table 4 displays the average economic impacts by various leverage ratios among housing trust funds with ten million dollar investments. This estimates what is to be expected from low, middle and high leverage ratios ($5 to $1, $8.50 to $1 & $12 to $1), the ratio that most state housing trust funds experience ($7 to $1) and the average outcomes from these groups to derive the leverage and associated outcomes that Mississippi can expect. The Bottom Line If accomplishing a leverage of $8 to $1, with a $10 million investment, Mississippi can expect just over $80 million in total economic activity. Direct and indirect economic impacts would result in the creation of an estimated 972 jobs spinning off into $28.9 million in wages during the first two years of the trust fund. A potential total of $5.77 million in state and local tax revenue would result from the Mississippi housing trust fund s first two years of activity. In total, $80 million in net economic output over this period and repeating thereafter would stabilize households, economic conditions and lives. Based on proportional estimates, the Mississippi trust fund would result in impacts totaling $25.3 million in private investment, $12 million in federal investment and $42.6 million in construction loans and mortgages in the first two years alone. 42 Table 4. Direct/Indirect Economic Outcomes for HTF Investment of $10 million by Leverage Ratio Leverage Ratio Employment Impact (Number of Jobs) Wages (Millions) Tax Revenue (Millions) $5 to $1 660 $16.5 $3.3 $50 (AZ) $12 to $1 1,290 $42 $8.4 $120 (CT) $8.50 to $1 (Avg. AZ/CT) 975 $29.2 $5.8 $85 $7 to $1 (Avg. Among State HTFs) $8 to $1 Mississippi HTF Potential Economic Impact (Avg. of 4 Possible Leverage Outcomes) 962 $28 $5.6 $ Jobs $28.9 Million Wages $5.77 Million Tax Revenue Total Economic Activity (Millions) $80 Million Economic Impact Note: Total wages, tax and economic output generated is susceptible to higher or lower rates than what is reflected in Table 4 depending on differences in state and local tax rates, average wages earned and average levels of federal and private investment per dollar spent by the state on other programs. These differences will factor into the final real output. The above estimates are based on a combination of mean averages and the likely associated yields. 10

11 The National Association of Homebuilders (NAHB) estimates that for each newlyconstructed single-family home, 3 jobs are created, while $67,000 in federal taxes and $23,000 in state and local taxes is generated. 43 Though these and other multipliers are rigorously derived and based on observed baseline outcomes that are employable in this context, this analysis is limited to estimates with no baseline data specific to a Mississippi trust fund. To account for this data limitation, outcomes cited in Table 4 are based on purposeful sampling, a widely used qualitative methodology, of observed economic outcomes from existing state-based trust funds with revenue totaling $10 million. 44 Selecting rich case studies (existing state-based housing trust funds with uniquely different housing problems and needs) that were representative in the level of funding, various housing trust fund outcomes were placed on a continuum representing the lowest to highest leverage ratios. The lowest, median and highest points in the continuum representing the sample group, in addition to the average yield across all trust funds at all funding levels (Derived by Brooks, 2010), were selected as data points to inform estimates of average direct and indirect economic impacts that Mississippi can expect, dependent on where the fund concentrates its resources. Differences in outcomes are also displayed to show the range of scenarios Mississippi can expect, whether achieving below or above the average outcome. As Table 5 indicates, the higher sourced a state trust fund is, the more units assisted, restored or rebuilt, which leverages a higher return in jobs, personal income and tax revenue. However, the yield is largely dependent on where the trust fund focuses its assistance (restoration, rehabilitation, financial assistance). Depending on this factor, similar investments can equate to dissimilar outcomes. For instance, North Carolina s housing trust fund has leveraged much more in tax revenue and job creation than Florida s fund, though it has invested slightly less. 45 Table 5. State Housing Trust Funds with Varying Outcomes 46 State Dollars Invested (Cumulative) Jobs Created (Cumulative) Tax Revenue Generated (Cumulative) Florida $194.6 Million 14,984 $72.3 Million Tennessee $23 Million 821 $3.6 Million North Carolina $167 Million 17,521 $122 Million Induced Economic Activity No matter the trust fund s focus, whether financial assistance, rehabilitation or a mix, Mississippi can expect substantial induced economic activity. Sizable gaps in federal subsidized assistance indicate a ripe opportunity for targeted support and the positive economic returns that follow. For instance, federal rental assistance reaches only 62,000 low-income rental homes in Mississippi, while at least 98,000 very low-income rental homes remain cost-burdened. In addition to direct and indirect economic benefits generated by the trust fund, induced impacts include savings achieved with more access to affordable housing that ripple into other sectors of Mississippi s economy. For instance, if one-quarter of low- and moderate-income cost-burdened rental households (33,131) can save $1 out of every $5 dollars currently spent on housing, lowering the monthly expense as a percentage of income to 28%, the average household in this group will save $1,624 per year. Even slightly decreasing costs for just these 1 in 4 burdened rental homes would result in personal savings totaling $53.8 million per year. 11

12 Investing in a state housing trust fund could serve critical pockets of Mississippi s housing problems, but conditions reveal a need for affordable and decent housing that would require a much higher level of funding. For instance, an even distribution of $10 million to Mississippi households identified as having substandard conditions (7,000 to 9,000) would bring just over $1,000 in assistance to each home. Conclusion State-based affordable housing trust funds have a track record of success. A 2.5% re-direct of sales taxes collected on lumber and building material to an affordable housing trust fund is a lowrisk, high-return investment that will result in a high level of direct, indirect and induced economic output. As the national economy continues to heal from Recession, the weakest state economies are in dire need of these positive economic impacts. High proportions of distressed housing in Mississippi call particularly for investments that work to repair and revitalize homes and communities. With a small percentage of tax revenue generated in part by its activity, a Mississippi affordable housing trust fund can serve as both a vital tool and a strategy to get Mississippians more benefit for their tax dollars. If protecting economic interests through surrendering or expending public funds is a commonly expressed priority for the state legislature, then housing stability and affordability should coincide with current interests. The Mississippi legislature currently pushes for corporate tax cuts, which may or may not secure future revenue. Two bills proposed in 2013 would implement corporate tax cuts totaling $18.5 million in 2014 alone and over $50 million by In addition to actively securing the interests of businesses, designating public funds for affordable housing is an investment to secure the interests of households across the state. If implemented from , the proposed Mississippi housing trust fund could invest $20 million and generate $160 million in economic activity. Investment in a state housing trust fund is complementary to corporate development incentives, given that stably housed populations and adequate affordable housing stock are deciding factors for corporate location. Having enough safe, affordable housing is the cornerstone of a healthy neighborhood. Unfortunately, a place to call home is financially out of reach for too many Mississippi families. The shortage of housing impacts the economic well-being of the entire community. If established, the Mississippi Affordable Housing Trust Fund will give working families, seniors, returning veterans and people living with disabilities a place to call home, while opening the door for much-needed economic activity. As recovery in the nation s housing sector unfolds slowly, but surely, it is time for Mississippi policymakers to invest in strategies that both increase housing stability and lead to economic opportunity. To Contact the Author of this Report: Matt Williams, mwilliams@mscenterforjustice.org 12

13 Endnotes 1 Brian Tracey, Growing the Economy by Using Community Development Programs Differently, Journal of Housing and Community Development (July/August 2012), pg Local Area Unemployment Statistics, Bureau of Labor Statistics (BLS) and Mississippi Department of Employment Security (MDES), Unemployment Rates, 3 See, State Data/Mississippi, in Out of Reach 2012, National Low Income Housing Coalition (NLIHC), 4 U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Percent Spending 30 Percent or More of Income on Selected Housing Costs, Extracted via American Fact Finder 2, Tables GCT2515 and GCT See, Mary E. Brooks, Housing Trust Funds: Seeking Security in Housing Finance, Affordable Housing and Community Development, 55 ( ), pg U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Tenure by Housing Costs as a Percentage of Income in the Past 12 Months, Extracted via American Fact Finder 2, Table B U.S. Census Bureau, 2010, American Community Survey (ACS), 5-year estimates ( ), Table B Cost burdened equates to a household spending > 30% of income on monthly housing costs and severely cost burdened equates to a household spending > 50% of income on monthly housing costs. Figure 1 illustrates the rate of cost burdened households by tenure and excludes owner-occupied units with a free and clear mortgage. 8 Ibid, U.S. Census Bureau, Tables GCT2515 and GCT 2513, Ibid, U.S. Census Bureau, Table B25070, Ibid. 11 U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Extracted via American Fact Finder 2, Tables GCT2515 and GCT2513. Map 1, Map 2, Lacking Kitchen Facilities, and Lacking Plumbing Facilities extracted via U.S. Census Bureau, American Fact Finder mapping tool. The graphical representation of the map, including data ranges and design, is by the author. 12 Ibid. 13 Ibid. 14 This median income amount reflects ethnic/racial group totals. Disaggregated, white households experience a much higher level of median income, at $48,227, versus African American households, which experience a median income of $25,455. U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Extracted via American Fact Finder 2, Tables B25119 and S U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Extracted via American Fact Finder 2, Table B Ibid, U.S. Census Bureau, Table B25119, Ibid, U.S. Census Bureau, table B25106, Ibid. 19 U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Extracted via American Fact Finder 2, Table B FY 2013 Final Fair Market Rents for Existing Housing, Department of Housing and Urban Development, 21 Based on analysis of unit data from 2010 U.S. Census Bureau American Community Survey 5-year estimates ( ), Table B Based on analysis and ranking of median home values for all owner-occupied units using original data from 2010 U.S. Census Bureau American Community Survey 5-year estimates ( ), Table GCT2510. According to 2011 American Community Survey data, approximately 42.4% of homes with a mortgage are valued at less than $99,999. Additionally, approximately 12% of this group has either a 2 nd mortgage or a home equity loan (not both). Finally, approximately 19.5% of mortgaged homeowners spend $1,500 or more in real estate tax, 2011 American Community Survey (ACS), 5- year averages ( ), Extracted via American Fact Finder 2, Table S Hardest Hit Fund, U.S. Department of Treasury, Programs/housing/hhf/Pages/default.aspx. 24 Foreclosure Rate, Corporation for Enterprise Development (CFED), CFED s calculations are based on analysis of, National Delinquency Survey: Second Quarter Washington, DC: Mortgage Bankers Association, For ranking data, see Diversity Data, Harvard School of Public Health (2010), 13

14 otes=true&rt=metroarea&rgn=showcustom&usecustomlocs=true. 25 Center for Community Change, Housing Trust Fund Project, 26 David Chenoweth and Chris Estes, The Economic Costs of Substandard Living Conditions Among North Carolina Children, North Carolina Housing Coalition. Formal analysis conducted by Chenoweth & Associates. Available at, 27 Valerie Salle, Out of Breath: Childhood Asthma, Poverty and Housing, Metropolitian Housing Coalition, Available at, 28 U.S. Census Bureau, 2011 American Community Survey (ACS), 5-year estimates ( ), Extracted via American Fact Finder 2, Tables B25016 and B This calculation assumes the median income for rental households is $22,648 and median monthly housing costs for all occupied units is $677. Median monthly costs multiplied by 12 results in a yearly expense of $8,124, which is approximately 36% of the average renter s median household income. 30 Center for Nutrition Policy and Promotion, Official USDA Food Plans: Cost of Food at Home at Four Levels, U.S. Average, January 2013, United States Department of Agriculture (USDA), 31 Parents and the High Cost of Child Care, Child Aware America (2012), Available at, 32 This calculation is based on data analysis by Oil Price Information Service for CNNMoney in See, 33 The State of Homelessness in America 2012: A Research Report on Homelessness, National Alliance to End Homelessness and Homelessness Research Institute, 34 Center for Community Change, Housing Trust Fund Project, 35 In Mississippi s 2013 Regular Session, the affordable housing trust fund was proposed through Senate Bill The legislation ultimately died in committee by a narrow margin. As drafted in 2013, the HTF would designate 60% of benefits to low-income households, 15% to extremely low-income households and 55% to the state s rural areas (Lines ). The affordability period is a minimum of 5 years for units receiving less than $15,000, 10 years for those receiving $15,000 to $40,000, and 15 years for those receiving more than $40,000. See, 36 Department of Housing and Urban Development (HUD), 2013 Annual Building Activity Center for Community Change, Housing Trust Fund Project, 38 Mississippi Department of Revenue, Gross Monthly Tax Collections, 39 See, Center for Community Change, Housing Trust Fund Project, 40 See Mary Brooks, Center for Community Change, Housing Trust Fund Project, At, Funds.pdf. Also see, Housing Trust Fund Project, Economic Impact and Job Creation, 41 As indicated in Methodology, the following HTF data are used to inform baseline assumptions in an estimate for the Mississippi HTF. Arizona Department of Housing, Housing Trust Fund, Also, State of Connecticut Housing Trust Fund for Growth and Economic Opportunity, EconomicImpact2.pdf. Another study conducted, but not explicitly employed here, worth noting is an economic forecast of Colorado s HTF, This study used IMPLAN, a sophisticated statistical modeling program that projects direct, indirect and induced economic outcomes. This study assumes $10 to $1 leverage for an annual investment of just over $15 million. This analysis projected 3,200 new jobs per year, $334 million in total economic output and $26 million in tax revenue. Projections were similar to that seen in AZ and CT, however, were more nuanced and resulted in higher yields. For instance, the Colorado study included new spending patterns in stable 14

15 homes as well as multi-variate job creation forecasts. Though similar, this study does not lend itself as directly to the calculations herein as does either AZ or CT. 42 Investment Percentages of private, federal and construction activity are derived from CT HTF data and applied to MS estimate. 43 National Association of Homebuilders (NAHB), Economic Benefits of New Home Construction, 44 M. Patton, Purposeful Sampling, Qualitative Evaluation and Research Methods: Designing Qualitative Studies, pgs , Beverly Hills, CA: Sage (1990). Using baseline data from selected samples, this analysis derives calculations set forth in Methodology on page 9 to estimate economic outcomes. In order to select samples strongly representative of the inquiry, and also with available programmatic data, the qualitative sampling methodology purposeful sampling is employed. Of the variations set forth in Patton (1990), this analysis specifically employs mixed purposeful sampling to meet specific needs of the research inquiry. In this case, the stratified approach seeks cases that are above average, average and below average in terms of leverage per dollar invested and employs criterion sampling to ensure cases from which baseline data are derived meet certain criteria, in this case a state-based housing trust fund sourced at $10 million. This sampling also includes maximum variation, but only within the criterion sample group, given that baseline data used represents each leverage scenario s extreme low and extreme high potential in addition to leverage outcomes for the median point, thus structurally representative of a stratified sample group s high, median and low outcomes. 45 Data is from HTF reports from the Sadowski Housing Coalition (Florida), The Tennessee Housing Trust Fund, and the North Carolina Housing Finance Agency. 46 Ibid. 47 Ed Sivak, Mississippi Economic Policy Center (MEPC), Policy Matters (blog) (February 2013), 15