Cincinnati voters may raise taxes to help poor people
This story has been updated to show a full breakdown of how the money raised in Issue 24 was spent.
The poorest renters face a housing shortage in every state and major metropolitan area, with the National Low Income Housing Coalition estimating a shortage of 7.3 million units nationwide.
In Cincinnati, a group of affordable housing advocates thinks they have an answer: asking voters to raise taxes on themselves to pay for affordable housing.
Issue 24, which was added to Tuesday’s ballot through a signature-gathering campaign led by Cincinnati Action for Housing Now, would raise the city’s earned income tax from 1.8% to 2.1%, generating up to $50 million annually to build and maintain affordable housing. . Specifically for low-income residents of the area.
It’s a new approach to a complex issue, but it will require approval from voters who already bear higher costs of living, including higher gas prices, higher food costs and higher 20-year mortgage rates.
However, it is not surprising that voters would raise taxes on themselves to fund affordable housing.
‘Something needs to be done’
Voters in San Jose, California, approved a property transfer tax increase for affordable housing and more homeless shelters in March 2020 before the pandemic was declared. The property tax transfer measure, known as Measure E, passed with more than 53% of the vote.
Since its passage, Measure E has led the San Jose City Council to pledge money to create more than 300 “ultra affordable apartments,” help 80 unhoused students, and keep more than 1,000 families in their homes, according to a report released early this year in San Jose. Jose Spotlight.
“In recent years, many communities have seen an increase in homelessness due to a lack of affordable housing. This has increased public awareness of the housing challenges we all face. Communities have seen this and said, ‘Something has to be done.’” Andrew Aurand, Senior Vice President For research at the National Low Income Housing Alliance.
The Housing Coalition’s annual “Gap” report found that no state has an adequate supply of housing for very low-income households, and there are only 33 affordable units available for every 100 very low-income renter households nationwide.
The Housing Coalition defines very low-income families as those with incomes at or below the federal poverty line, or 30% of their area median income, whichever is greater.
How would Cincinnati’s plan work?
Issue 24 will serve essentially the same group, raising money almost exclusively for households whose annual income is at or below 30% of the area median income for a family of four in the Cincinnati metro area, or about $30,000 a year, according to U.S. . Department of Housing and Urban Development.
- At least 65% of the funds raised in Issue 24 will go toward housing development and maintenance for families earning 30% or less of the Cincinnati metro area’s median income.
- Up to 30% of the funds can be used to develop and maintain housing for people earning up to 50% of the area median income, or $50,550 for a family of four, according to HUD.
- Up to 5% of the funds will be allocated to cover administrative costs and supervision of affordable housing projects.
Issue 24 would expand Cincinnati’s already existing Affordable Housing Support Fund, which had raised about $112 million in public and private money as of October and is managed by the Cincinnati Development Fund, a nonprofit lender created by Cincinnati-area financial institutions in 1988.
In the 12 months that ended in August, the Affordable Housing Fund allocated $31 million to build or preserve 857 low-income units in developments in Cincinnati.
Projects that received funding included Slater Hall in Cincinnati’s West End neighborhood, and the Paramount Lunch and Pebbles Apartments in the city’s Walnut Hills neighborhood.
However, the vast majority (84%) of affordable housing units built or under construction are for families with incomes between 31% and 80% of the area median income.
It was rented before the sign appeared
Issue 24 would raise more money for households below those thresholds.
The gap between supply and demand for affordable rental housing for very low-income families in Cincinnati is about 28,000 units, according to a 2017 report from the Community Building Institute at Xavier University.
said Chinedum Ndukwe, whose construction company Kingsley + Co completed the project. “I’m very aware of the need,” he said, most recently the first phase of Blair Lofts Apartments in Avondale. “We didn’t even put a ‘for rent’ sign on the building, and it was 100 percent leased before our grand opening. We have a waiting list for phase two.”
The first phase of the project at the corner of Reading Road and Blair Street is a 60-unit apartment building containing one-, two- and three-bedroom apartments affordable to families with incomes between 30% and 60% of the area median income in cincinnati.
Ndukwe said other developers would likely build more affordable housing if there were more funds available to help reduce the amount they need to borrow to build and reduce operating costs.
This is because affordable projects that receive government subsidies cannot simply pass their costs on to tenants whose captive rents are too low to cover the full costs of owning and managing a rental property.
Ndukwe said Issue 24 could help bridge the funding gap.
“Tons of money” is not used.
Ultimately, it will be up to developers and builders to take the lead and leverage the funds to build and maintain affordable housing for very low-income residents.
David Stroup, chairman of the Home Builders Association of Greater Cincinnati, which opposes Issue 24, doubts there will be a significant increase in affordable housing construction if the ballot measure passes.
“There’s a lot of money that’s already out there that’s not being used,” Stroup said, referring to millions of dollars in unallocated money in the Affordable Housing Leverage Fund that has not been applied for.
The biggest impact of increasing taxes to pay for affordable housing will be the financial burden on homebuyers in the form of a new tax on their income, Straub said. This could weaken demand for market-rate housing, which most builders and developers depend on for the lion’s share of their profits.
In addition, he said, high labor and materials costs, restrictive zoning laws for high-density affordable housing and the costs of navigating “red tape” all combine to make the cost of building affordable housing prohibitive, especially at the lower end of the spectrum.
“No one builds for free,” Stroup said.