Friday, November 8, 2024

Wilmington leaders get lesson on affordable housing bonds and how other cities are using them

The City of Wilmington leaders and affordable housing advocates learned about housing bonds and how other cities are using them at the annual legislative breakfast. (Port City Daily/Michael Praats)

WILMINGTON — Municipal bonds have been used in Wilmington to help fund an array of projects, from the North Waterfront Park to roadway improvements, but can they be used to help solve the affordable housing crisis?

In cities across the state, municipalities are doing just that.

In November, Durham voters approved a $95 million affordable housing bond. On Thursday during the annual Cape Fear Housing Coalition Legislative Breakfast, Mayor Nancy Vaughan of the City of Greensboro explained how her city was working to utilize a $25 million housing bond voters passed in 2016.

But what is an affordable housing bond and what could the money be used for?

In Durham, “The $95 million bond would be combined with $65 million from local and federal funding for a total of $160 million to fund the City’s Affordable Housing Bond Investment Plan. The plan aims to significantly increase the city’s quantity of affordable housing by working closely with Durham Housing Authority to:

  • Build 1,600 new affordable housing units and preserve 800 affordable rental units 
  • Move 1,700 homeless individuals and households into permanent housing
  • Provide 400 affordable homeownership opportunities for first-time homebuyers
  • Help 3,000 low-income renters and homeowners remain in or improve their homes”

The City of Wilmington has not proposed an affordable housing bond, but affordable, workforce housing, has been a topic of discussion amongst elected officials for several years now.

The question as to how to implement affordable housing bonds has several answers, for Durham, the city is not directly creating affordable units.

“The City of Durham does not develop affordable housing directly. Instead, the City works with for-profit and nonprofit affordable housing developers, providing the gap funding, or subsidy, that is essential to making housing affordable,” according to the city.

Developers are often labeled as greedy and unwilling to build lower-cost housing options but that is not always the case. With the price of land, construction costs, and raw materials all on the rise — coupled with the expenses of infrastructure improvements like connecting water — developers often have to build high-end housing in order to turn a profit and keep a project viable.

That is why Durham is using some of their housing money to help developers cover the costs to actually construct lower-cost rentals.

“In general, developers rely on the rental income from a property to pay the property’s operating expenses (utilities for common areas, maintenance, and repairs, etc.) and to cover the debt service for the capital that the developer borrowed to build the property. In the case of income-restricted affordable rental housing, however, the amount of rental income is lower, which reduces the amount of capital that a developer can borrow to finance construction. Since the cost of constructing an affordable unit is nearly the same as a comparable market-rate unit, the only way to plug the resulting financial gap is some form of subsidy,” according to Durham’s housing bond information.

Of course, anytime a municipality wants to raise funds through bonds voters must approve it — and in Greensboro — the proposal back in 2016 faced resistance from both elected leaders as well as voters, Vaughn said.

City of Wilmington leaders have not, at least publically, discussed the idea of housing bonds but local affordable housing advocates, like Habitat for Humanity, are proponents of the idea.


Related Articles