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Affordable Housing Struggles to Keep Pace with Building Costs

July 22, 2008 — As construction costs continue to rise along with the price of fuel, additional money from the government — about $4.5 million a year — is needed in order for the V.I. Housing Finance Authority (VIHFA) to keep up with affordable housing, agency representatives said Monday.
The agency's budget — about $2.5 million from the General Fund for fiscal year 2009 — is meant to subsidize the territory's affordable housing program and cover costs to help VIHFA manage Homestead, Home Loan, Veteran Land and Loan, Community Development Block Grant and Emergency Shelter programs recently transferred to the agency from Housing, Parks and Recreation. However, a large chunk of the money is going to cover payroll expenses and "large" utility bills from the emergency rental units, according to VIHFA Director Clifford Graham.
Meanwhile, VIHFA has to work on collecting about $3.8 million in outstanding receivables that were transferred to the agency along with the programs from Housing, Parks and Recreation. Not collecting on the debts would have a negative impact on VIHFA's audited financials, and could work against the agency if it goes to the bond market, Graham said.
Though federal funds and tax credits make up more than 50 percent of the agency's budget, most of the money goes toward providing affordable housing subsidies for residents, Graham said during Monday's meeting of the Senate's Finance Committee. The agency has not yet received its FY 2007 appropriation from the Land Bank Fund — a pool of money earmarked for emergency housing initiatives — and has nothing in the Housing Trust Fund, a government account set up to fund affordable housing and facilities for the territory's homeless population.
Subsidies from the Land Bank Fund currently assist about 37 residents a year, but that number will continue to decrease as construction costs increase, Graham explained. Last year, the average home in the St. Thomas-St. John district sold for about $782,938, and $364,266 on St. Croix — an increase of 200-to-300 percent over the past 10 years that has not continued to keep pace with increases in residents' salaries, he added.
"If it costs about $300 per square foot, then a 1,300-square-foot house on St. John would cost the authority about $400,000 to build," Graham said. "We can't sell that under the affordable housing program, so we have to price downward so that the sale price may be somewhere around $280,000.
"Given the fact that the average median income is about $38,700, most residents require a subsidy to help them buy the house. Some can buy on their own, but most are stuck in the middle where they need some assistance in the form of local or federal funding."
If construction costs continue to climb, and larger subsidies are required to help residents buy their homes, then money in the Land Bank Fund will continue to diminish until little is left, Graham said.
Meanwhile, it has been recommended that the government appropriate about $4.5 million from payments in lieu of taxes from Hovensa to replenish the Housing Trust Fund and help the agency develop a "true" emergency housing program, he added.
Emergency housing units — once meant for families who, for circumstances beyond their control, were forced to vacate their homes — became permanent rental units for individuals and families unable to find affordable housing. VIHFA plans on rehabilitating about 285 housing units transferred from Housing, Parks and Recreation and turning them into affordable rentals, and using the remaining stock — about 30 units in each district — for the emergency housing program, Graham said.
"These units will be assigned to a not-for-profit entity, through a bidding process, for the operation of the territory's emergency housing program," he added. A request for qualifications will soon be going out for developers interested in rehabbing the other rental units, Graham said.
A "true" emergency housing program should be up and running in about three years, he added.
Present during Monday's hearing were Sens. Liston Davis, Juan Figueroa-Serville, Louis P. Hill, Terrence "Positive" Nelson, Basil Ottley Jr., Ronald E. Russell and James Weber III.
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