Innovative Models to Preserve Affordable Housing Are Even More Important in the Aftermath of COVID-19
The Washington Housing Initiative (WHI), launched by Federal City Council in partnership with local real estate firm JBG Smith, acquires rental buildings in neighborhoods facing rising property values and keeps a majority of the apartments affordable for households with moderate incomes. It is one of a handful of innovative models designed to address worsening housing affordability and neighborhood displacement in rapidly growing urban regions across the US.
Even though the WHI and innovative models like it were created before the COVID-19 crisis, the crisis has highlighted their critical importance. The number of jobless people climbed above 25 million in April. Many more have seen their hours or wages drop.
In high-cost markets like DC, a growing share of working families were already struggling to pay their monthly rent. Many more now face the prospect of housing instability, making models aimed at preserving the supply of affordable housing for all income levels even more important today.
This week, the Urban Institute released a brief situating the WHI in the context of other available housing preservation and production tools, describing its potential contributions to our region’s long-term housing challenges.
Given how much has transpired in the affordable housing market because of COVID-19, I wanted to talk to the architects behind the WHI about its relevance in a post-COVID-19 world: Kimberly Driggins, executive director of the Washington Housing Conservancy (WHC), the entity that will ultimately own and operate the properties acquired by the WHI, and AJ Jackson, executive vice president of social impact investing with JBG Smith.
Kimberly, can you tell me a bit about the Washington Housing Conservancy and the evolution of the WHI?
The Washington Housing Conservancy is an independent nonprofit organization dedicated to preserving affordable and workforce housing across the DC metro area. WHC’s goal is to preserve or create 3,000 units of affordable workforce housing over the next several years and engage with residents to develop services and programs that let people thrive in place. WHC will purchase, manage, and foster community in rental properties in neighborhoods that are ripe for development.
The WHI was established in 2018 to preserve workforce housing with affordable rental rates and neighborhood amenities in Washington, DC. The WHI was envisioned as a scalable, market-driven model that engages three partners: the impact pool, the stakeholder council, and the Washington Housing Conservancy. These partners bring together key elements—capital and development expertise, community engagement, and housing preservation—to increase housing that is affordable.
Kimberly, given everything happening with COVID-19 and the emphasis on addressing rising unemployment, on housing the homeless to prevent the spread of disease, and on preventing people from becoming homeless, is there still a place right now for models like the WHI?
The economic recovery from COVID-19 will demand an increased need for innovative solutions to address housing affordability, particularly for middle-income residents who can’t qualify for public subsidies and are increasingly priced out of market-rate housing. We have already seen that local governments have been forced to scale back their affordable housing investments due to COVID-19, so solutions that don’t rely on large government subsidies are needed now more than ever. The crisis elevates the need for models like ours that focus on preserving workforce housing—and use private capital to do it.
AJ, do you think recent COVID-19 related financial liquidity issues will impact the ability of models like the WHI to obtain additional private sector capital investment?
If anything, we expect the health crisis will highlight the benefit of ensuring that critical workers, especially in health care and other essential industries, can live close to their jobs and in communities where they have support services such as affordable child care.
At the same time, the housing shortage was caused by years of underproduction, and we don’t expect a result of the current situation to be that the housing market is brought into balance. We expect private capital will continue to invest in vehicles that deliver both social impact and competitive risk-adjusted returns, especially when the model is not dependent on large amounts of public subsidy at a time when government budgets are strained.
Kimberly, why is a preservation mechanism aimed at addressing moderate incomes still relevant in a post-COVID-19 housing market? And does the targeting of neighborhoods with rising property values and rents still make sense?
In a post-COVID-19 environment, there will be a strong need to preserve housing affordability for people with low to moderate incomes. Hard-hit industries like hospitality, tourism, and the restaurant industry, have laid off massive numbers of people—many of whom are those the WHI was developed specifically to serve.
We must also continue to focus on neighborhoods with rising property values and rents, where the risk of displacement for the nurses, teachers, and caregivers who live there now is greatest. Preventing displacement by preserving affordability in neighborhoods that are under increasing development pressure is one of our central goals.
AJ, what do you hope state and local governments and their partners in the private and nonprofit sectors, who want to address the increasing affordable housing crisis now further exacerbated by COVID-19, can learn from the WHI?
The WHI model shows the power of private capital to preserve naturally occurring affordable housing in a financially sustainable way with limited public support. As local governments face new demands and diminished revenues, leveraging private sector solutions will be essential to providing more committed affordable housing with fewer public resources. For nonprofit affordable housing developers, investing in mixed-income affordable workforce housing communities can provide much-needed cash flow and an opportunity to diversify revenue streams.
As state and local governments and their partners in the private and nonprofit sectors consider models for addressing the shortage of well-located and reasonably priced housing for essential workers, they could consider how models like WHI and others can fill the gaps left by the limits of federal, state, and local resources and help them build more stable and inclusive communities.
The CEO of JBG Smith, W. Matthew Kelly, is a member of Urban Institute’s board of trustees. Trustees do not influence research findings or the insights and recommendations of Urban experts.