Lawrence voters to decide whether city should triple spending on affordable housing

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

What’s clear about the city’s affordable housing issue is that it is large.

The latest Census numbers estimate about 13,000 of the city’s homes and apartments don’t fit the definition of affordable. That’s a little more than three out of every 10 homes in the city.

What’s less clear is how the city will tackle the problem. Voters in November will be asked to approve a special sales tax to help fund affordable housing projects, but city officials are acknowledging they don’t have a specific plan in place for how the money will be spent.

A study that should help create a more targeted approach is in the works, but won’t be done before voters go to the polls. City officials acknowledged that may be a concern for voters.

“That’s certainly a valid point,” Vice Mayor Stuart Boley said. “I guess, on my part, there’s reluctance to say this is what we would do in advance of receiving the information that we’ll get from the housing study. I think that’s a very important piece, and unfortunately the timing doesn’t work for this.”

The tax

In November, voters will decide whether to repurpose a 0.05 percent special sales tax that will provide about $1 million annually to the city’s housing trust fund.

Though the trust fund has helped fund a handful of affordable housing projects over the past several years, the extra sales tax would more than triple the amount of money allocated annually.

If voters approve the tax, Boley said it would add to other efforts by the city to address the issue, such as the policy that requires developers seeking city tax breaks for housing developments to designate some units in their buildings as affordable housing.

“This is a broad problem and it will require a lot of work in a lot of ways,” said Boley, who is also a member of the city’s Affordable Housing Advisory Board. “What the voters have a chance to decide in November is whether this would be one of the tools that would be in our toolbox.”

The 0.05 percent tax is one of three sales taxes, totaling 0.55 percent, that will expire in 2019 unless voters choose to renew them. The 0.05 percent is being repurposed from transit expansion to affordable housing, and it is projected to generate about $10.5 million between 2019 and 2029.

In addition to more than tripling the money for affordable housing efforts, the new sales tax dollars could be spent on purposes other than construction. The vote raises the question of what the city would do with the money to create a meaningful difference for the thousands of Lawrence residents financially burdened by their housing costs.

What’s the plan?

Like the other components of the sales tax, which will go toward transit and infrastructure, the ballot language dictates how the city can spend the affordable housing money. The language, though binding, is also broad, and the city does not have a specific spending plan with examples of potential projects.

The ballot question states, in part, that the sales tax proceeds will be used “for the purposes of providing and improving the quality, availability, and affordability of housing in Lawrence.” That includes acquiring land, investing in private/public partnerships and “such other related affordable housing purposes as may be in the best interest of the city.”

When asked why there is not a spending plan, AHAB chair Matt Sturtevant said there are many variables because projects involve nonprofits and developers, who also rely on outside grants or tax credits.

“So all of those things together make it a little more complicated to say, ‘It’s going to look exactly like this,'” Sturtevant said, noting a developer may be excited about a project but fail to get the needed tax credits. “That’s kind of the balance between being as clear as we can be and we want to be, but also for these other reasons having to be realistic and responsible about how we use that language.”

But Sturtevant said AHAB’s recommendations would follow the same pattern as recent projects and voters could look to those as examples of how money could be spent.

This year, the city received applications for two projects totaling $105,000. Lawrence Habitat for Humanity was awarded $75,000 toward construction of three homes that will be sold to families with incomes below 60 percent of the area’s median income. Tenants to Homeowners was awarded $30,000 toward construction of six one- and two-bedroom “cottages” for households earning less than 40 percent of median incomes.

Those projects amounted to about one-third of the dollars available, and the plan is to open the application process earlier next year in hopes of receiving more funding requests.

AHAB is also in the process of contracting a study that will provide more detailed data about the city’s affordable housing problem, and Boley said having new data will provide the board more direction about the best way to address the problem.

Assistant City Manager Casey Toomay, AHAB liaison, said the housing study will be complete in early 2018. She said although the board can make effective recommendations without the study, it will help the board develop a more narrow framework to prioritize specific problems.

“All these agencies in the community that provide housing assistance report that they have long waiting lists for people that need help with housing affordability,” Toomay said. “So we know there is a need out there; what the housing study does is narrow it down.”

If the sales tax is approved, Toomay said the funds generated will go toward the existing housing trust fund, which AHAB helps oversee by ordinance. Toomay said the board will continue to provide recommendations for how money in the trust should be spent, which will go to the City Commission for consideration. As far as how the funds will be distributed, Toomay said options include the board’s existing annual grant application and soliciting requests for proposals for specific projects related to affordable housing.

The numbers

As is, the numbers don’t look good for Lawrence.

About 40 percent of Lawrence renters and homeowners — or more than 13,000 households — spend more than 30 percent of their income on housing costs, qualifying them as “cost-burdened,” according to census numbers. Half of those cost-burdened households spend more than 50 percent of their income on housing, making them severely cost-burdened.

More specifically, 51 percent of renters in Lawrence are cost-burdened, meaning more than 30 percent of their monthly incomes are spent on rent and utilities. Twenty-one percent of homeowners are cost-burdened, meaning more than 30 percent of their incomes are spent on mortgage payments, utilities and property taxes.

Over the past couple years, the housing trust fund has helped fund the construction of a couple dozen affordable housing units, and more than tripling the trust’s funding would certainly increase that number. But with thousands of unaffordable homes and apartments, Sturtevant said there is no quick fix for making a meaningful difference on a communitywide scale.

“It’s a big problem, that’s one of the things we’ve tried to make clear from the beginning,” Sturtevant said. “It’s a problem that we’ve worked ourselves into for several years if not decades, and it will take some time to get out of it too.”

Considering the magnitude of the problem, Mayor Leslie Soden also noted that the dollars the city provides don’t stand alone and have allowed nonprofits such as Habitat for Humanity and Tenants to Homeowners to leverage additional grants.

“It’s important for the city to show buy-in,” Soden said.

A regressive tax

By nature, sales taxes are regressive, meaning that unlike property taxes, they disproportionately affect those with lower incomes. For those already struggling to make ends meet, some say that paying more in sales tax isn’t the right approach. One advocacy group, the Lawrence Sunset Alliance, thinks the city should let the sales taxes sunset and find other sources of funding.

With state, city and county sales taxes, Lawrence residents pay 9.05 percent on their purchases, which in Kansas includes groceries. The sales taxes up for renewal are in addition to the 1 percent general city sales tax and the 1 percent county tax, of which the city gets a share.

While acknowledging that sales taxes are regressive, Sturtevant said the practical effects need to be considered. He said the 0.05 percent sales tax would cost someone a matter of cents on $100 of groceries, but if that same person has to live outside of Lawrence to find affordable housing and commute in for work, that impact is substantial.

“We don’t want to rob Peter to pay Paul, and tax people in order to help them on the other end, but it’s really a matter of scale,” Sturtevant said.

Regarding the regressive nature of sales tax, Boley and Soden both said the idea is to provide information to voters about the tax and let them make the decision on whether they want to pay to support affordable housing.

“We need the voters to show up and say this is how we feel about this proposal,” Boley said. “And that will be useful information for the Affordable Housing Advisory Board and for the City Commission as we go forward.”

More options

When asked if using a tax that is tough on low-income residents is the best way to fund affordable housing, Soden said she thinks it’s an appropriate use of public dollars and the best tool the city has now. But she said that may change in the future.

“If there’s an overwhelming support at the ballot box to use public dollars for this kind of issue, then it’s something that we could look at dedicating future property tax revenues to,” Soden said. “As for now, I think it’s good for us to start to test the water as to what people want us to do.”

Using sales tax dollars will also give the city more leeway for how the money is spent.

Currently, the trust fund is funded with general obligation debt, which restricts the projects to construction projects. The sales tax dollars, though, will provide the city more spending options, allowing funds to go toward housing vouchers or other support programs in addition to subsidizing affordable housing construction, according to Toomay.

Another factor to keep in mind is the lack of affordable housing affects people with both low and moderate incomes in Lawrence, and Toomay said the goal is to address all affected populations.

“The sales tax ballot language, the way it’s written, allows for programs and spending that are aimed at addressing affordability of housing across that spectrum,” Toomay said.

Considering the variety of people affected, Soden said she thinks there should be performance measurements put in place to see how the housing trust dollars are addressing the full scope of the problem.

“Looking at our current gaps in coverage and making sure that we’re narrowing those gaps, and maybe even eliminating them, would be important to see as progress,” Soden said.