Addressing the housing instability challenge Karen Leone de Nie, Federal Reserve Bank of Atlanta The information, analyses, and conclusions set forth are those of the presenters and do not necessarily indicate concurrence by the Board of Governors of the Federal Reserve System, the Federal Reserve Banks, or members of their staffs. ROADMAP: About the Federal Reserve Trends in housing Responses to issues: Affordable rental Negative equity Heirs Properties Blight reduction Small Cities Following the Money 1
About the Federal Reserve System Responsible for monetary policy, supervision and regulation of banks, and payment systems and better understanding of the processes and resources that support successful community development programs 2
Atlanta Fed s Community and Economic Development Program MISSION: To activate financial, human, and social capital to foster the conditions that support economic growth in the Southeast, especially in disinvested communities. SMALL BUSINESS AND ENTREPRENEUR- SHIP: Promote greater economic inclusion by assessing credit appetite and access for small businesses HOUSING & NEIGHBORHOOD REVITALIZATION: Foster promising approaches to neighborhood blight remediation and durably affordable housing WORKFORCE AND HUMAN CAPITAL DEVELOPMENT: Define the long and short term human capital interventions that encourage local economic growth and mobility Economic Inclusion and Mobility COMMUNITY DEVELOPMENT FINANCE: Define the scale and scope of the investment opportunity to improve economically distressed communities 3
Ann Carpenter CED Advisor, Housing & Neighborhoods Will Lambe CED Sr. Advisor, CED Finance Elora Raymond Graduate Intern, Center for Real Estate Analytics Mels de Zeeuw CED Research Analyst Atlanta Fed Community and Economic Development Housing/ Finance Team Visiting Scholars: Donna Gambrell, formerly of the CDFI Fund Renee Glover, formerly Atlanta Housing Authority Dan Immergluck, Georgia Institute of Technology 4
Affordable Rental Decreased supply of lowcost rentals, replacement with less affordable units, 2010-2014 Atlanta Birmingham Jacksonville Memphis Miami Nashville Orlando Tampa Percent Change in Low-Cost Rentals (<$750), 2010-2014 -17% -16% 56% -9% -3% -20% -4% 75% -25% -11% 68% -14% -6% 79% -12% -19% 95% -15% -5% 67% 3% -8% 93% 105% (FRBA: ACS) -40% -20% 0% 20% 40% 60% 80% 100% 120% Gross rent - < $500 Gross rent $500-749 Gross rent $1,500 or more 5
Affordable Rental Annual losses of low-cost units 2010 2014 4- Year Loss % Loss over 4 Years Annual % Loss Rate Nashville 46,626 38,848-7,778-16.7% -4.5% Atlanta 32,490 27,181-5,309-16.3% -4.4% Memphis 53,560 45,517-8,043-15.0% -4.0% Miami 33,140 29,886-3,254-9.8% -2.6% Jacksonville 36,602 33,306-3,296-9.0% -2.3% Orlando 11,642 10,693-949 -8.2% -2.1% Birmingham 24,348 23,147-1,201-4.9% -1.3% Tampa 19,319 18,523-796 -4.1% -1.0% Data source: Calculated using American Community Survey 5 year estimates 2006-2010, and 2010-2014.
Affordable Rental Positive relationship between loss of low-cost rental units and cost burden Percentage Increase in Low-Income Rent-Burdened Households, 2010 14 5% 4% 3% 2% Percent Decrease in Low-Cost Rentals and Percent Increase in Cost Burdened Households Jacksonville Memphis Atlanta Nashville Birmingham Miami Tampa Orlando 1% 2% 6% 10% 14% 18% Percent Decrease Low-Cost Rented Units 2010 14 7 (FRBA: ACS)
Affordable Rental Private-Equity Liquid Capital Available for Real Estate Investments ( Dry Powder ) in $Billions Capital Markets hungry for luxury multifamily Liquid Capital (Dry Powder) Available ($Billions) 250 200 150 100 50 $148 B $167 B $156 B $186 B $196 B $210 B $230 B 0 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Mar 2016 Data source: Q1 2016 Quarterly Update: Real Estate. Prequin https://www.preqin.com/docs/quarterly/re/preqin-quarterly-real-estate-update-q1-2016.pdf
Affordable Rental Some affordable rental housing approaches in response Property tax reductions to owners of rental properties who commit to long-term affordable rents for lower-income households State refundable income tax credits to lower-income renters State housing voucher programs to supplement the federal program State and local government working with banks to develop affordable finance programs for investors in small rental properties for purchase and repair State and localities can use real estate fees, impact fees, real estate transfer taxes, or other resources to fund housing trust funds Mandatory inclusionary zoning Source of income protections 9
Negative Equity Southeast continues to struggle with negative equity 23% of Southeast homeowners remain underwater. 10
Negative Equity Negative equity lingering challenge 11
Heirs Property What is Heirs Property? Inherited property without a recorded will Informal ownership Joint ownership among heirs with undivided interests Absence of a clear title Vulnerable to disputes and predatory land deals, partition sales (Baab, 2011)
Heirs Property Previous heirs property studies The Emergency Land Fund, 1980 1980 study employed a randomized sample survey in 10 counties to extrapolate the scope of the issue across the rural south 27% of black-owned properties in the south were found to be owned by heirs 82% of land owners surveyed stated they had no will
Heirs Property Southeast outlook on heirs property Known heirs properties is as high as 11.4% of residential land in some rural areas in the district Spatial pattern similar to 1976 map of black-owned land
Heirs Property Preventing and addressing heirs properties Estate Education and Assistance Probate Process Reform Clearing Title Other Policy Changes
Blight Reduction Neighborhood Blight Reduction Approaches Vacant, abandoned, and problem properties result from a combination of social, economic, and financial conditions, like depopulation, loss of major employers, suburbanization, foreclosures, or natural disasters Case studies: New Orleans, LA Goal of eliminating 10K blighted properties Macon, GA Estimated 4K blighted properties Additional interviews in Jacksonville, Dallas, and Birmingham 16
Strategy type Real property data information system Vacant property condition survey Vacant property registration ordinance Cleaning, beautification, or safety improvements Code enforcement Administrative remedies Civil injunction Criminal prosecution Nuisance abatement strategy Demolition Blight Reduction Land banks and land banking Defining characteristics Gather, consolidate and synthesize real property data over time or in geographic areas. Policy Tools Implement and collect information for a real property data information system. Require owners to register vacancy properties with the municipal government after a period of vacancy. Programs offered in exchange for discounted purchase price for property acquisition. Compliance with all applicable building, housing, health, and zoning laws that apply to properties and structures. Local government issues property maintenance tickets for noncompliance, impose small civil penalties and often are heard by property maintenance review boards. Civil lawsuit seeking injunctive relief (of the behaviors or state of the property constituting the nuisance), penalties and costs and administrative hearings. Code enforcement in many jurisdictions currently involves criminal prosecution of the property owner for unremediated code violations. Process by which local governments are authorized by state law to abate the nuisance and then assess the costs against the property, which then becomes a special assessment on property taxes. Deconstruction and removal of all or part of a parcel, often happens during the nuisance abatement process if deemed necessary to maintain health and safety or with transfer of ownership. Government entities created to efficiently acquire title to hold, manage, and develop tax-foreclosed Summary table from paper
Blight Reduction Lessons learned CODE ENFORCEMENT Successful code enforcement should focus on compliance Abatement processes should be streamlined Some administrative restructuring and statutory change may be necessary DATA COLLECTION Data should be public and accessible; data can be used to set goals and track inspections, hearings, abatements, and reinvestments monthly PARTNERSHIPS An overarching, multiagency strategy is needed 54 different organizations mentioned in New Orleans; Macon engaged the Land Bank, Historic Macon Foundation, and the Macon Arts Alliance OTHER LESSONS Multiple sources of funding can be leveraged Land banking can be used to strategically acquire and reuse land
Small City Economic Dynamism Index Interactive data tool comparing 245 small cities (metro areas <500,000 people) across multiple dimensions Tools, contact info and accompanying materials available at: www.frbatlanta.org/smallcities
20 Small City Economic Dynamism Index 4 categories: Demographics, Economics, Human Capital, and Infrastructure Data from wide array of sources, including: Bureau of Labor Statistics; U.S. Census Bureau s: American Community Survey, Business Dynamics Statistics, County Business Patterns; IRS Statistics of Income 14 indicators, including: in- and out-migration, per capita GDP, educational attainment, business startups, and building permits Index is weighted measure of long- and short-term change in these indicators. Updated annually.
21 Small City Economic Dynamism Index Small-cities are nerve centers connecting their regional and local economy, particularly in more rural regions. Understudied, but crucial to local economic growth. Previous work has been mostly qualitative and case studies. The index and tool allow scholars, policymakers, funders, and nonprofits to easier identify dynamic small cities, and compare communities. The Index has informed the Small City Study Tour hosted by Federal Reserve Banks of Atlanta, Chicago, Boston, NY and funders in: Chattanooga, TN Cedar Rapids, IA Rochester, NY Grand Rapids, MI The story emerging from that tour some cities are embracing the Arcs of Opportunity and Growth. Report due in spring
22 Following the Money Are small or distressed communities at a disadvantage for receiving grant dollars from large foundations? Publication in The Foundation Review Journal in September Data: 1,000 largest foundations in US; 169,000 grants; for a total of $15 billion, between 2008 and 2013 Key Findings: Significant regional variation: in SE largest recipient is New Orleans MSA: $145 per capita; smallest receipt in Hattiesburg, MS: $0.17 per capita Small-metros are at a disadvantage: larger population size means more per capita grant dollars Higher poverty rate more grant dollars per capita More nonprofits per 10,000 residents more grant dollars per capita
Following the Money Interactive Tableau tool allows users to compare up to 5 metro areas to each other and US Median Compare grant dollars per capita, grants, distribution of grants, CED nonprofits per 10,000 people, and large foundation assets per capita Data is presented for 2008 through 2013 for 366 metro areas Visit the tool at: frbatlanta.org/followingthemoney
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26 Following the Money Foundation grant dollars are patient, often first-in, flexible capital that can combine with public dollars, or make up for gaps in public funding. The Small City Study Tour work shows these investments are important for economic development. Boosting the capacity and density of the local nonprofit sector provides communities a lever to boost grant receipt from large foundations. Aim: start conversation between/among funders, nonprofits, and local governments Next steps: in depth conversation with funders; examine philanthropic education funding, and workforce training funding; explore role of local leadership and capacity
Learn more Subscribe to Atlanta Fed resources Partners Update Digest (everything that s in Partners Update, plus more) CED Discussion Papers On the website at https://frbatlanta.org/commdev/. Contact me at karen.leonedenie@atl.frb.org 27