Housing & Homelessness Myths Busted: Deeply Affordable Housing

Last month, the Building Bridges blog launched a new series devoted to unpacking some of the most misunderstood housing and homelessness terms and concepts. Earlier posts in the series covered the topics of “Housing First;” Naturally Occurring Affordable Housing (or NOAH); the role of supportive services in the work to end and prevent homelessness; and most recently, common myths and misperceptions about affordable housing.

These posts are inspired by the 2025 Charlotte-Mecklenburg Housing & Homelessness Strategy (CMHHS), which was launched in April 2021.  The 2025 CMHHS represents the first time that the public and private sectors have come together to comprehensively address the entire housing continuum, from housing instability to homelessness, in Charlotte-Mecklenburg.

Advancing widescale solutions – even the ones backed by research and data – also means overcoming obstacles that have historically gotten in the way. Some obstacles take the shape of myths or misconceptions.

This week’s post focuses on both the need for and lack of deeply affordable housing for extremely low-income households and ultimately, its role in ending and preventing homelessness in Charlotte-Mecklenburg.

WHAT IS DEEPLY AFFORDABLE HOUSING?

Housing is generally considered “affordable” if a household does not have to spend more than 30% of their pre-tax, gross annual income on all their housing-related expenses. Although people across all demographics want (and deserve) housing that they can afford, the term “affordable housing” is generally applied to households with incomes ranging from 0% to 120% of a given area’s median income (AMI).

These areas are geographically defined; in relation to large cities, the area for which an AMI is derived is referred to as a Metropolitan Statistical Area (MSA). In addition to an area median income for an MSA, a Fair Market Rent (FMR) is also determined. These figures are provided by the U.S. Department of Housing and Urban Development (HUD) and are updated annually.

“Deeply affordable housing” is housing specifically for those households with extremely low annual incomes, which is defined as at or below 30% of AMI. Using FY2021 data from Charlotte’s MSA, the upper limit for a one-person household in this income bracket is $17,700 annually ($341 per week; or $8.51 per hour for a full-time job). The upper limit for a four-person household in this income bracket is $26,500 annually ($510 per week; or $12.74 per hour).

The latest Fair Market Rent for a 1-bedroom unit in our community’s MSA is $1,014. This number does not include utilities and other housing-related expenses. However, a 1-person household at 30% of AMI can afford (at most) $443 per month in rent and utilities without being cost-burdened. This leaves a monthly gap of at least $517. Similarly, the Fair Market Rent for a 2-bedroom apartment in Mecklenburg County is $1,155, while a four-person household at 30% of AMI can afford (at most) $662 per month in rent and utilities without being cost-burdened. This leaves a monthly gap of at least $493.

According to the National Low Income Housing Coalition’s (NLIHC) Out of Reach Report the “housing wage” (or hourly rate required to afford a one-bedroom unit in Charlotte-Mecklenburg while working a full-time job) is $21.04; the wage to afford a two-bedroom unit is $23.98. The difference between the hourly wage for an extremely low-income household and the actual housing wage for one- and two-bedroom units is vast.

“Permanent, affordable housing” is more typically used to refer to the physical units, themselves. However, it can also encompass the financial assistance provided to gap the difference between what housing costs and what a given household can afford. Examples of financial assistance include short-term rental subsidies, such as rapid re-housing; and long-term subsidies and/or vouchers, like permanent supportive housing or Housing Choice Vouchers. Financial assistance is provided by both public and private entities at the local, state, and federal levels.

Therefore, there are three primary considerations related to all aspects of permanent, affordable housing: preserving existing units and resources; adding new units and resources; and removing barriers to all available units and resources. Preserving existing housing inventory means not only the retention of Naturally Occurring Affordable Housing (NOAH) and other lower-cost rental units, but also the maintenance of the existing rental subsidies needed to gap the difference between cost and affordability.

WHY DO WE NEED DEEPLY AFFORDABLE HOUSING?

There is not enough housing stock to support the demand at all income levels. However, the largest gap (and therefore, greatest need) in affordable housing is for deeply affordable housing, serving households with income at or below 30% of AMI. Using data from the NLIHC, the chart below depicts this gap for deeply affordable housing to serve extremely low-income households in comparison with other higher income brackets for the Charlotte Metropolitan MSA.

When narrowing the focus to Mecklenburg County, there is a current gap of 23,060 deeply affordable housing units. Put another way, only 23% of our extremely low-income households are able to rent a unit that is “deeply affordable” and, therefore, affordable to them. The other 77% are cost-burdened, or worse.

Extremely low-income households are more likely to be severely cost-burdened, which means that they are spending more than 50% of their income to housing-related expenses. According to data from the NLIHC, 67% of extremely low-income households in the Charlotte MSA are severely cost-burdened, compared with 25% of households with income between 31% and 50% AMI; 4% of households with income between 51% and 80% AMI; and 1% of households with income between 81% and 100% AMI.

Data from the NLIHC also show that extremely low-income households are disproportionately people of color; and include seniors or individuals with a disability, many of whom are living on fixed income. However, thirty-six percent of extremely low-income households are employed either part- or full-time but earn wages that fall far short of a housing wage.

While many essential workers, including firefighters, bus drivers, janitors and cleaners, and retail workers in Charlotte-Mecklenburg receive wages that are higher than the upper limit of extremely-low income households, their paychecks still fall well below the housing wage for a one-bedroom unit at Fair Market Rent.

WHAT KEEPS COMMUNITIES FROM CREATING ENOUGH DEEPLY AFFORDABLE HOUSING?

Communities across the United States are failing to produce enough deeply affordable housing for extremely low-income households. So, who should ultimately be responsible for delivering these units? Is it the public sector? A public housing authority? Private sector? Both?

There are multiple barriers to producing deeply affordable housing units: first, construction is costly. The rent necessary for an extremely low-income household may not easily support the cost to develop, operate, and maintain the unit over time. Deeply affordable housing units are also stigmatized, often falling victim to “Not In My Back Yard” (NIMBY) neighborhood opposition.

Dedicated public funding is not enough. The National Housing Trust Fund was created in 2008, becoming the most recent federal effort to target extremely low-income households since the Section 8 (now Housing Choice Voucher) program began in the 1970s. By law, at least 75% of this funding must be used to support rental housing for extremely low-income households and the balance for households with incomes at or below 50% of AMI. However, it it was not until 2016 that the first $174 million was allocated by block grant to states.

The 2021 formula allocation for North Carolina is $17.4 million (out of $689.7 million total) and is administered by the North Carolina Housing Finance Agency (NCHFA). According to the 2020 Annual Action Plan report, only 788 units were created across the state between 2016 and 2020, using $6.5 million from the National Housing Trust Fund allocation combined with $4.1 million from other federal housing dollars to support households with income ranging from 0% to 60% of AMI.

In addition to the national Housing Trust Fund, the North Carolina General Assembly established the North Carolina Housing Trust Fund in 1987. State funding has decreased significantly from the $20 million it was launched with, to only $7.7 million in FY2017. Funding in 2020 was leveraged with other federal dollars, as well as funding from the private sector, to support the financing of 1,070 affordable units across the state. Half of these units were for households with incomes at or below 30% of Area Median Income.

At the local level, the city of Charlotte established its Housing Trust Fund in 2001. The local housing trust fund, which has been funded by a $50 million voter-approved general obligation bond every other year, is used to support the development, preservation, and rehabilitation of multi-family housing units. Funding has also been used to support homeownership and shelter beds.

The local Housing Trust Fund has supported the development, preservation, or rehabilitation of 10,369 total units between FY2002 and FY2020. After deducting the total number of units that were emergency shelter beds for people experiencing homelessness (694); and the total number of units that are pending and/or under construction (3,599); this equates to a total of 6,076 total new units over eighteen years, or only 338 new units on average each year. Of that total, 38% (or 3,986) were committed to extremely low-income households.

Beyond housing trust funds, there are other federal, state, and local public resources for permanent, affordable housing (including the development, preservation, and rehabilitation of units; as well as subsidies and vouchers). The problem is that the funding levels for all these programs and funding sources cannot meet the affordable housing demand for all income levels; many of them only commit a portion of their allocations for extremely low-income households.

What about the private sector? Consider the example of Destination: Home, a “public-private partnership ending homelessness in Silicon Valley.” The organization recently announced the commitment to produce four new “deeply affordable” housing developments in Santa Clara County. Of the 500 new units to be produced, more than half will be reserved for households with income at or below 30% of AMI. To make these units possible, the private sector stepped up, closing the gap.

Private sector funding included the launch of the Supportive Housing & Innovation Fund and the Community Housing Fund, which have, together, raised $250 million for deeply affordable housing in Santa Clara County and the Bay Area. To date, the Supportive Housing & Innovation Fund has financed 20 new housing development (which created 1,964 deeply affordable housing units) as well as funding to support a dedicated city planner to reduce the approval time for deeply affordable housing projects by 2 months.

SO, WHAT

Essentially, there are three levers that can be used to close the gap for deeply affordable housing: 1) Increase wages; 2) increase the number of units of deeply affordable housing (and/or subsidies to make units “deeply affordable); and 3) a combination of the two whereby there is both an incremental increase in both factors that helps close the gap.

Looking at the first lever, the local level seems to have the best shot. The federal minimum wage has remained stagnant at $7.25 per hour since 2009. North Carolina’s minimum wage is aligned with the federal wage. But at the local level, some organizations and employers in communities across North Carolina (and including Mecklenburg County), have provided a higher wage for their employees.

When considering the second lever, there’s also hope; especially at the local level. At bottom, increasing the number of deeply affordable housing unit is a funding issue. An issue of dedicated funding. Communities need dedicated funding for deeply affordable housing units from both the public and private sector.

In addition to the new dedicated private funding streams in Santa Clara County, local voters approved Measure A in 2016. Measure A is a $950 million affordable housing bond, of which $700 million is dedicated to multi-family rental units for extremely low-income households.

In addition, communities can dedicate portions of existing affordable housing funding, such as local housing trust funds, for deeply affordable housing units. Local jurisdictions can also adopt policies and processes prioritizing developments that include extremely low-income housing units when developing on publicly owned land. Many of these strategies are being evaluated by the Charlotte-Mecklenburg Housing & Homelessness Strategy.

Developing deeply affordable housing is possible. But it isn’t easy. Furnishing a unit that costs the same to deliver as a “non-affordable” unit, while only recouping a fraction of the rent, is not something that most developers and landlords are willing or able to do. In a world of inequality, affordable housing is simply not “created equal.” Therefore, at minimum, whenever new “affordable housing” is developed (or existing “affordable housing” is preserved), it is important to understand all the details, including how many units will be made available, and at what AMI levels. And then, as a community, we must ask for more. In the asking, we must also have the resources and the commitment from all sectors to ensure the outcomes we seek.

Stay tuned for future posts covering common housing and homelessness-related misconceptions and myths. To learn more about the Charlotte-Mecklenburg Housing & Homelessness Strategy, please visit: www.charmeckhousingstrategy.com