Committee on Housing & Community Development Agency Performance Oversight Hearing
Thursday, February 26, 2015
My name is Eugene Puryear and I am testifying on behalf of the organization Justice First that, among other things, is working in conjunction with the Alabama Ave./13th St. Tenants Coalition in their effort to prevent their displacement as a result of a planned development at the Congress Heights Metro Station. I open by highlighting this case because it is highly indicative of the problems surrounding the entirely inadequate creation of housing that is affordable to District residents regardless of income.
Some of these issues are “macro” and extend far beyond this hearing.
The tide of gentrification across the District now means that the median rent is more than $1,400. A family needs to earn $27 per hour to afford a two-bedroom market-rate apartment. The current minimum wage ($8.25) is only 30 percent of the needed wage, and even the minimum wage increase coming in 2016 ($11.50) is only 42 percent of the housing wage. Currently, rent control is limited to buildings built before 1976 – a rapidly shrinking set of units. This lack of real rent control has had serious consequences. Between 2000 and 2010, median rents increased by 50 percent. In the same period, half of all low-cost rental units were lost, while the number of high-cost units tripled. To put this even further in context, the lowest-income 40 percent of D.C. households have seen essentially no change in income. Specifically for renters, the average income has also remained virtually unchanged.
The true meaning of “affordable” housing is very muddled. Affordable housing is determined via relationship to area median income (AMI), which measures not just the District, but many of the wealthy surrounding counties, distorting measures of affordability. The current AMI in the District is $107,500. Practically, this means even a lot of “affordable” units remain out of reach for those with the greatest need and the most significant burden in housing costs.
In short, we have too few well-paying jobs combined with a market that creates primarily only units aimed towards high-income earners and ultimately the long-terms needs of their capital investors, which needless to say are based on their own rate of return and not the housing needs of District residents.
Further, the funds provided for affordable housing are abysmally low. The District has a Housing Production Trust Fund, which has received roughly $100 million per year (the baseline for appropriate funding according to many housing activists) over the last three years. But historically, this Trust has produced fewer than 1,000 units for families earning under $32,250 per year, meeting less than 2 percent of the need. That’s fewer than 1,000 units for 60,000 families!
There are currently 71,000 people on the public housing waiting list. To house them would cost an estimated $2.3 billion. $1.3 billion of that would upgrade our existing public housing stock and ensure our residents in public housing have safe, livable and comfortable accommodations. Currently, however, no substantial sum is being appropriated to upgrade or build public housing units. Instead, the District is continuing efforts to reduce the number of public housing units, and in fact allows hundreds to sit vacant.
With challenges like these DHCD has to husband its money somewhat carefully to get maximum impact. This is why I highlighted the Congress Heights tenants because the situation there absolutely deserves answers from DHCD as to their behavior.
The project includes one building currently not owned by those proposing the current development. Currently, this building has a 40-year covenant requiring all units to be affordable for extremely low-income tenants. And while the current owner of that building received almost $1 million in a loan from the District government, the building still remains vacant. No money has been repaid on that loan, nor has the owner paid any taxes. Despite the dire need for affordable housing, and the outstanding loan, it is our understanding that the District is preparing to sell the building very cheaply and wave the affordability covenant – essentially allowing anything to be built in its stead, namely the smaller, market-rate units that Sanford Capital is proposing. These units would be unaffordable to the vast majority of Congress Heights residents.
Not only are these facts alone quite distressing, but the parties involved have long-checkered histories with the District and its agencies. One partner in this deal is Sanford Capital. Sanford is known very well to DHCD. In another Southeast apartment complex, Terrace Manor, Sanford signed an agreement with a tenants association in exchange for the association’s right to purchase the building, then promptly reneged. It has not implemented any of the repairs or improvements promised, has maintained poor conditions, and has evicted half of the building’s residents. Sanford has failed to repay a District loan, pleading poverty, while simultaneously trying to sell the building. Sanford has a reputation for this – buying low-income buildings under false pretenses, refusing to maintain them in livable condition, and then trying to sell in order to dodge their obligations and line their pockets. This is classic slumlord behavior. DHCD is trying to force Sanford to sell because of its actions.
So one must ask why on earth would DHCD would even consider facilitating a deal with Sanford Capital, whose recent track record shows their willingness to game District agencies and low-income residents for their own profits? Further, CityPartners, headed by Geoffrey Griffis, is also a party to this deal. Mr. Griffis has his own history of corruption while he was a member of the Board of Zoning Adjustment, enough of a history that this body, the D.C. Council, rejected him when he was proposed as a member of the Zoning Commission. Further, as is outlined in the WAMU series “deals for developers,” Mr. Griffis was a part of a very unsavory deal that transferred millions of dollars’ worth of District-owned land for $1 dollar.
On top of all of this, in documents procured through a Freedom of Information Act (FOIA) request, one DHCD employee stated to another: “I looked through the coupon book and now I see what this deal is all about.” The implication there is clear: that cases like these with sweetheart deals for slumlords may not be that rare.
We need serious answers on these questions:
- Does DHCD consider past history of ethical and legal malfeasance in considering who they work with? If not, why would they knowingly facilitate developments that could harm current and future tenants?
- What is the current status of 3200 13th St. SE (the building at issue)? Do they plan to waive the previous affordability covenant? Do they plan to forgive all or part of the outstanding loan? What steps are being taken to recoup the District’s investment and sanction the current owner for wasting taxpayer money?
- What is the “coupon book”?
- Given the facts regarding the history of the proposed developers and their current abysmal treatment of current tenants, will they reconsider any involvement with the current Planned Unit Development?
I want to end by restating the point made at the beginning of this testimony: There is not even close to enough money appropriated to house all those who need housing. In Justice First, we believe housing is a human right, not a privilege. This committee needs to use its oversight powers to suss out the key obstacles to an aggressive plan — in the billions of dollars — to put a roof over everyone’s head. Literally billions are given out each year in tax breaks as advocacy group ONE DC points out; however, in the past 10 years, the District gave $1.7 billion to developers, and this amount could have housed every family making less than $32,250 (30 percent of area median income) — 60,000 families — for more than two years. This quite frankly is just the tip of the iceberg for misused public funds, like $100 million for a soccer stadium.
While developers get free money from the District, tenants — like those at Congress Heights — get abused, neglected and displaced. This is a sign that the entire system we have created to allegedly provide affordable housing is entirely broken.
Demand that the D.C. Council commit $50 million of affordable housing funds to Limited Equity Housing Cooperatives
There is an affordable housing crisis in D.C. The District continuously chooses corporate development over the needs of its residents. The effects of this gentrification are astounding.
Between 2000 and 2010, our median rent increased by 50 percent. We lost half of all low-cost rental units, while the number of high-cost units tripled.
Rent control policy does little to quell this surge. It only applies to buildings built before 1976 – a rapidly shrinking set of units – and pretty much ensures a return of 10 percent to landlords. It isn’t tied to actual cost-of-living increases, or to actual wages.
We need real affordable housing. A family needs to earn $27 per hour to afford a two-bedroom apartment at market rate. Our minimum wage currently is $8.25 per hour. We must preserve and create true affordable housing.
Affordable housing is tied to area median income (AMI). But our AMI is distorted since it measures not just the District, but many of the wealthy surrounding counties. In D.C., as long as housing is accessible to families making $65,000 per year, it is “affordable.”
This means as long as rent is $19,500 per year – $1,625 per month – a unit is “affordable.”
The general rule is that you shouldn’t spend more than 30 percent of your income on rent, but the median rent in D.C. is now $1,400 per month.
We currently have 71,000 people on the public housing waiting list.
District policies must change. Too often, the District government uses housing funds to pay developers, rather than to preserve, upgrade or build new units for residents.
We have tens of thousands on waiting lists for affordable housing, but hundreds of units sit vacant. Housing everyone would cost an estimated $2.3 billion. Simply upgrading our current stock would cost $1.3 billion.
The District claims there is no budgetary solution, but over the last 10 years it gave $1.7 billion to developers. That would have housed 60,000 families for more than two years.
We can make a real difference – now. Currently, housing policy in the District is developed ad hoc, without a consistent and focused plan. We need not only significant investment, but also investment that is targeted for those most in need.
Instead of using funds to pay developers, the District needs to earmark portions of those funds to affordable housing for projects and programs that will make a big impact.
Limited Equity Housing Cooperatives (LEHCs) present one of the most powerful tools we have. They are cost-effective ways to preserve affordable housing (an average development cost of under $165,000 per unit). Yet, funding for LEHCs has fallen sharply.
LEHCs provide long-term affordable housing stock, and turn tenants into owners of their units, improving their economic position over time.
Join us to demand the Council commit $50 million of affordable housing funds to LEHCs. The money is there, it’s even already committed to housing. We just want it to go to residents.
There are many actions the District can take to support affordable housing. I call on the D.C. government to take some very specific steps:
- Increase funding for Limited Equity Housing Cooperatives
- At least double funding for the Housing Production Trust Fund
- Strengthen rent control laws
- Build more public housing
- Finalize the rules for the District Opportunity to Purchase Act, a law the District has on the books that can protect and expand affordable housing
The District's current housing policies are not working for the poor and working people in D.C. We need a grassroots movement to fight back. Justice First believes housing is a right; no one should be denied access to shelter, certainly not in one of the richest cities in the richest country on earth.
So where does Justice First fit?
Justice First recognizes that this is a fight that will take a lot to win. The statistics show that District policies are totally backward. We believe housing is a right; no one should be denied access to shelter, certainly not in one of the richest cities in the richest country on earth.
We can have a big impact:
Tenants facing displacement can lean on Justice First as a resource in the fight to protect their rights. Whether it is preparation to deal with District boards and agencies, building support amongst neighbors and D.C. residents, or holding rallies and press conferences, we are here to help. Our organizers work directly with tenants to empower and support the struggle.
Fighting for Rent Control
Rent control is critical and more advocacy is needed to change decades-old policies. Justice First is engaged in a district-wide campaign to demand that rent control be determined not by a set multi-year formula but instead be based on real annual increases in the cost-of-living and wage realities.
As we fight gentrification and displacement, we also promote and produce materials on alternatives, like Limited Equity Housing Cooperatives to create affordability and ownership, a D.C. Public Bank to leverage District dollars, and District investment in priorities for residents – like housing – as opposed to contributing to the dividend payments of Wall Street banks.
Building long-term empowerment
We recognize that the issues are not only broad but ongoing and ever-changing. As such we are a membership organization that brings together people who believe that housing is one of the basic rights people should have. We are building an infrastructure, and a culture of organizing to confront a myriad of challenges in housing and other areas of the lives of working-class and low-income District residents.