The New Orleans City Council on Thursday approved $32 million for a new affordable housing fund, nearly doubling the financing assistance available to developers planning large multifamily projects across the city.
City officials say the additional subsidies are needed because developers face soaring insurance premiums, mortgage rates, construction costs and other increases. The money, in addition to $42 million the city has already committed, should ensure completion of as many as 1,000 affordable units over the next year, according to Tyra Johnson Brown, the city’s housing director.
There are about 1,500 units in various stages of development across the city, according to Mayor LaToya Cantrell’s administration. The new city funding will go to projects that are furthest along and most in need of “gap” financing to cover increasing costs, Brown said. She said she hopes to make the awards early next year.
A dent in a big housing problem
Even if all 1,500 units are built, no one believes it will come close to addressing the need for affordable housing in New Orleans, with rents and homelessness rising in tandem.
New Orleans is among three dozen metro areas with fewer affordable housing units per capita than what exists across the country, according to a March report by the National Low Income Housing Coalition.
New Orleans would need to build more than 40,000 units to meet the national rate.
“This is a start, a down payment. We know it's not going to solve our problem, we need more, but it's a good first step,” said Maxwell Ciardullo, policy director for Louisiana Fair Housing Action Center.
Terri North, of Providence Community Housing
The fund includes $8 million American Rescue Plan Act grants, part of more than $120 million the council appropriated on Thursday to a range of priorities, including mental health care for public school students, homeless services, vehicles and other equipment.
Advocates had hoped for far greater allocations toward housing programs — beyond development financing — in addition to violence intervention, youth services and other priorities. Some of their priorities overlapped with those of City Hall, but they said the administration had been opaque in its decision making.
"Our opposition isn't necessarily on substance," Ciardullo said. "We need and deserve a transparent and orderly process for making decisions."
Ciardullo's criticisms aligned with similar arguments from the nonpartisan Bureau of Governmental Research, which said in a letter to the administration and council members this week that appropriations "are continuing without adequate public information, planning and accountability."
Cobbled together
Still, affordable-housing developers said the funding for their projects would make a difference.
Terri North, chief executive of Providence Community Housing, is one of the developers who said public funding was needed to make sure projects are financially feasible. She said the nonprofit developer’s insurance costs rose 30% last year and another 40% this year. Federal loans come with strict insurance requirements, so there’s little wiggle room, North said.
“We're very concerned that we won't be able to close on deals if we can't meet the insurance requirements, and finding money for that is going to just add to our list of woes when trying to fill gaps in projects,” North said.
The new fund is cobbled together from a variety of sources, including the pandemic relief grants, bond issues and a separate fund, the Neighborhood Housing Improvement Fund, that receives a portion of short-term rental proceeds.
That fund was also fed by property taxes for affordable housing, but voters declined to renew the tax in 2021.
New Orleans City Council member Joe Giarrusso speaks during a Budget Committee meeting on Thursday, March 17, 2022.
BGR and others have criticized the neighborhood housing fund for its muddled purpose and opaque accounting. Councilmember Joe Giarrusso, who spearheaded the new fund — called the Affordable and Workforce Housing Financing Fund — said he wanted to create a single fund with a clear purpose.
“There's all this uncertainty about where money lives in government,” Giarrusso said. “Having a singular fund provides more predictability.
The new fund is sourced entirely with one-time funds, which will likely be committed within a year. Giarrusso said he hopes to replenish with future bond proceeds and, at some point, regular allocations from the general fund.
Giarrusso said he thinks completed projects could generate political will to tap the general fund.
“People get more interested in using general fund dollars for different measures if there's return on investment,” he said.