A key missing item in the debate in Arlington today over the proposed Affordable Housing Master Plan is consideration of the effectiveness of Arlington housing assistance and whether today’s program is efficiency helping tenants . There is no question that Arlington needs to expand funding for its housing assistance to lower income renters, but just expanding ineffective programs is unwise.

Arlington County spends in 2015 about $36 million of its own tax revenues (as distinct from Federal HUD funds) for housing assistance. The largest program is the $12 million for the AHIF program that provides loans and grants to developers to build or renovate apartments that are then rented to lower income tenants (called committed affordable units (CAFs). Most of the households in the CAFs earn 60-percent of the area median income. The second-leading program is housing grants with $8 million that provides monthly rental subsidies to about 1,200 households (averaging about $555 a month). Most of these households are below the 30-percent AMI (about $30,000 a year or less).

The question occurs as to which of the two leading programs provide more effective assistance to low income renters? In recent years, each new CAF has required about $100,000 from the AHIF. On average the rents charged in CAFs averaged about $150-200 per month below the rents in comparable private market complexes. For every million dollars of AHIF funds, about 10 households receive a total of $24,000 in benefits as lower rents charged per year. Most CAF households are in the 60%-AMI income level.

With regard to the housing grants program, 1,200 households received in 2015 an average $555/month grant each or about $6,000 annually. Thus for every million dollars spent for housing grants, 167 households received benefits of one million dollars in lower rents charged. All of these households earned well under $30,000 a year and most under $20,000 a year, including disabled, seniors and working families with children. This is what a million dollars spent for AHIF versus housing grants yields:

Number of households helped…… 10 AHIF 167 Housing grants
Median income level of households 60-% AMI 30%-AMI
Monthly rental reduction per
Household…………………………….. $200 $555
Duration of assistance……………… 30 years 1 year
Total 2015 value of assistance over
30-years………………………………. $480,000 $1 million

If one compares the benefits of a one year housing grant of $1 million to spending that amount in AHIF, the difference is still large over 30 years: the ten CAF apartments yield $720,000 in lower rents, but this economic value in 2015 of such lower rents (considering time and interest rates), falls to $480,000. (The lump sum value in 2015 of receiving $24,000 a year in payments at a 3% interest rate over 30 years). All benefits of the housing grants are received in the first year, whereas the benefits of lower rents in the CAFs accrue over 30 years.

In summary, the housing grants program provides about twice the benefits to renters than the same amount for new construction of subsidized apartments over 30 years. In the first year with a million dollars, housing grants help 167 households, versus only 10 households in CAFs. Housing grant households are the lowest income persons in Arlington, and in addition must be a senior over 65, disabled or a working family with a child, and thus are arguably the neediest group in our community.

It stands to reason that if Arlington County wishes to help the identified 7,000 households living in Arlington earning under 60-percent AMI, the cheapest way to do so is expanding the housing grants program.

The Washington Post reported on July 13 that Arlington County gave $4.5 million (and the State of VA gave $9.5 million) to lure CEB Inc. to move from NW DC to Rosslyn into a new yet to be built high rise office building.
http://www.washingtonpost.com/news/digger/wp/2015/07/12/high-stakes-battle-ensues-over-advisory-board-co-headquarters/

This article is mainly focused on Arlington and the State of Virginia’s efforts to get the Advisory Board to rent the empty Rosslyn office building with over 500,000 square feet in a 390 foot high building. If Arlington county gave CEB (a company associated with Advisory Board) $4.5 million to go to a smaller building, then you can bet Advisory will get double or triple that to move into the white an existing massive office building that has been vacant since being built for the past two years.

Taxpayers should NOT be giving subsidies to get big businesses to move across jurisdictions in Arlington or anywhere in the U.S. (or the world for that matter). The developers who built 390-foot empty office building with no commercial tenants in mind and have left it empty for two years are to blame. That’s capitalism for you: there are winners and losers, but the government shouldn’t finance the losers. Otherwise we are into crony capitalism or lemon socialism. Risk should be borne by investors who make mistakes and not local Arlington taxpayers who urgently need to pay for more schools, parks, and safety net aid for things like homeless assistance and housing assistance.

What does Arlington County really get for its $4.5 million and Virginia’s $9.5 million? Many of CEB employees will never live here in Arlington or even Virginia; the amount of sales taxes obtained from stuff these employees might buy in Rosslyn at lunchtime is trivial. The main revenue Arlington gets is property tax, and if the county gives away $14 million of that initially, how long will it take to get it back?

County Board members apparently have accepted the idea that Arlington County has to start giving out subsidies to big business to locate here in empty space. The economic development spending is now about $12 million, up a $1 million from last year. The $4.5 million given away to CEB is about equal to the increase in county spending this past year for all programs except public schools. Our county’s legitimate needs are overwhelming our tax revenues and we cannot afford any white elephants such as tax give aways, the now cancelled Pike trolley, the now closed Artisphere, and the yet-to-be build $60 million aquatic park in Crystal City.

The best economic advice for these billion dollar developer corporations and realty trusts: lower the rent asked for your vacant office space or convert it into residential use. Government dollars should be used to fund our community needs and not go into the treasuries of major corporations.