HOUSING NEEDS

The City's housing stock is one of its greatest assets and one of its biggest challenges. The subject must be examined from the perspective of the city as a whole, and that of individual residents.

The availability, quality, character, and cost of housing defines a community. From a Citywide perspective, these factors will determine who wants to live in the community, and the resulting demand for City services and contribution to the tax base. Finding ways to encourage investment in the variety and quality of the housing stock is of central importance. Individual neighborhoods and the overall community will flourish or decline in light of how much housing investment occurs.

From an individual's perspective the challenge is one of finding adequate, affordable housing in a secure, convenient, and attractive neighborhood. For many, satisfying this basic need is extremely difficult, and a much more basic concern than the overall levels of residential investment.

Specific housing needs are examined in this section in terms of six categories: rental housing, homeownership, public housing, housing for the disabled, the homeless and housing for persons with HIV/AIDS.

RENTAL HOUSING

Chapter III has reviewed the overall rental market in St. Louis, noting its size and character which varies widely by neighborhood. Overall, there is a large inventory of units in comparison with the demand. Unfortunately, many of those units are in poor condition or beyond the affordable range of less affluent households.

The City is involved in many aspects of the rental market as described in the sections on Code Enforcement, Lead Based Paint, Asbestos Removal, and Historic Preservation. This section focuses on the traditional support role of the Community Development Agency and other development entities. Services include:

• Developer Assistance. CDBG and HOME funds are made available to individuals and businesses in response to proposals to build or renovate affordable rental housing. As illustrated on the Residential Development Strategy map, current efforts are being coordinated through a 15 million dollar housing plan that focuses on many parts of the City, with emphasis on 11 target areas.
• Tax Relief. New construction and substantial renovation is encouraged through the provision of property tax abatement plans that allow new investment to occur without a subsequent increase in assessed valuation, typically for a ten year period.
• Housing Initiative Program. Through the non-profit Operation Impact organization, the City helps neighborhood housing corporations address problem properties. Often these properties are purchased and sold to a private redeveloper with the expectation that they will be renovated and managed in a professionally responsible manner.
• Financial Support. The St. Louis Equity Fund coordinates corporate investments that are pooled to provide the equity necessary to enable affordable housing projects that qualify for low-income housing tax credits. In the last several years, a concerted effort has been made with help from the national Enterprise Foundation to expand and streamline this process.
• Landlord Support. A limited number of programs are available on a pilot basis to assist existing landlords. The primary focus is on incentives that will encourage landlords to maintain property, screen tenants, promote leases, and otherwise initiate professional rental property management operations.
• Direct Rental Assistance. A large number of households receive federal Section 8 rental support that covers the difference between the fair market rent and thirty percent of their income. This assistance is administered by four different organizations in St. Louis - HUD which provides support to selected tenants within assisted housing projects for which they are responsible; the St. Louis and St. Louis County Public Housing Authorities which provide tenant based vouchers and certificates; and the Missouri Housing Development Commission which provides support, especially to families that are in shelters.

As explained in Chapter III, the rental housing market is weak in much of the City. The result is that many apartment complexes do not generate the rents that landlords would like, especially if they are to honor their responsibilities to maintain and improve their properties. As a result too many rental buildings have not received ongoing reinvestment. At the same time, large numbers of people are too poor to comfortably afford the existing rents of apartments that are in satisfactory condition.

In the face of this weak housing market, there are many specific challenges. With a few exceptions, private housing developers are not interested in rental rehabilitation or new construction, especially in the absence of the tax incentives that were removed in 1986. In their place non-profit housing development organizations have been encouraged to fill the void. Many of these groups lack the experience or financial stability to undertake complex projects of any scale. The proliferation of groups within the same neighborhoods, some supported with public monies and others completely voluntary, also contributes to inefficiencies.

A related problem has to do with the availability of both construction and long term financing. In general, banks and other financial institutions want to accept a smaller share of the risk. The low income tax incentives that remain are difficult to administer. Finding a workable approach to significantly expand contributions to groups like the St. Louis Equity Fund, and to streamline the underwriting process, has proven difficult. When combined with the requirement to appropriate CDBG and other public housing monies on an annual, rather than multi-year basis, it is understandable that both private and non-profit developers work in an environment of great uncertainty. Large scale, phased, multi-year developments are extremely difficult in this setting.

Table 13 summarizes the rental housing burdens experienced by St. Louis citizens. The cost burden and overcrowding figures were recorded by the U.S. Census in 1990. The calculation of families living in housing with serious physical defects is a rough estimate that assumes that 30 percent of housing stock has serious physical deficiencies, that two-thirds of the units are rental, and that they are distributed proportionately among small families, large families, the elderly and other households. There is a further assumption that 50 percent of the substandard units are occupied by those making 30 percent or less of the median income; that 30 percent are occupied by those in the 31 to 50 percent income category; that 15 percent are occupied by those in the 51 to 80 percent category, and that 5 percent is occupied by those making more than 80 percent of the median income.

The reality is that there are no easily available measures of housing with physical defects. The Census Bureau only records units that do not have plumbing or kitchen facilities; there is no attempt to judge the overall condition of the unit. The St. Louis Building Division collects information on the number of violations encountered in dwellings, but only those that they inspect (see the Section on Code Enforcement).

Overall the table suggests about 56,000 rental households with boarders; however, this could lead to a misinterpretation of the housing problem, because there is, no doubt, some double counting of households. Thus, in many cases, a new, standard, affordable unit would satisfy the multiple needs experienced by families that today live in an overcrowded, substandard, expensive (relative to income) apartment.

But even if the total rental units necessary to meet the need were only 25,000, the aggregate cost necessary to renovate or construct these units would be immense. Costs of $75,000 to $100,000 per unit are typical of substantial rehabilitation or new construction projects. Thus, the total "estimated dollars to address" figure could be in the billions. The reality of today's inner City market is that about 33 percent of this amount would have to come from public or voluntary contributions, as opposed to the conventional financial market.

The Priority Needs Table presents a reasonable number of units to be assisted over the next five years, and an estimate of the dollars required. It is evident that this relatively optimistic level of activity will not begin to solve the total problem. Units recorded in the cost burden rows are assumed to be provided via rental assistance, primarily Section 8 certificates and vouchers. The assumption is that an average annual Section 8 subsidy is $6000 or $30,000 over five years (in the absence of inflation).

Units that are recorded in the physical defect or overcrowded rows are assumed for the most part to require subsidy from CDBG, HOME or related programs at an average cost of $30,000. Minor assistance programs to landlords are not recorded.

Improving the quality and affordability of rental housing in St. Louis will require a number of programs over the next five years, most of which are in place:

a) Implement the Mayor's Residential Development Strategy.

The new policy is to promote renovation and new construction in a series of defined target areas. These have been identified working in consultation with City aldermen. The concept is to build from strength within neighborhoods, using a comprehensive approach of new construction, renovation and homeowner assistance.

b)Give priority to the renovation of rental property where problem buildings threaten to upset otherwise stable blocks

Not all the rental property can be rehabilitated in St. Louis. In a City with around 30,000 vacant units and a population that is approaching half its 1960 level, that doesn't make sense. Working with neighborhood housing corporations to target buildings that can be converted from a problem to an asset is a difficult, but important, element of the Mayor's strategy.

c) Consider special priority for the proposed renovation of two - six family complexes where the owner commits to fix up the property and to live in one of the units for a set period of time.

The maintenance record of absentee owners is a disgrace in many neighborhoods. To the contrary, in most cases where the owner of the property is, in effect, one of the tenants, prospects for a successful building are much improved. Many neighborhoods are characterized by two, four and six family buildings that need repair. Where the owner is present, repairs are more likely to receive proper attention.

d) Provide public assistance for the construction of new rental units only in certain cases - those projects that will meet the requirements of citizens with special needs, such as the disabled, or in conjunction with major renovation projects such as the Vaughn or Darst-Webbe public housing transformations.

There are too many existing rental projects that are in trouble, unable to maintain the occupancy rates that are necessary to cover their expenses and debt. Newly constructed rental units aimed at the conventional market simply compound the problem. On the other hand there are special cases where new rental units will meet the special needs of certain population segments. Similarly, when the new construction can be demonstrated to be an important component of an overall neighborhood renewal project, an exception may be warranted.

e) Encourage responsible use of Section 8 vouchers and certificates in all neighborhoods.

The Section 8 program has a mixed record. It provides important benefits to poor households who would otherwise not be able to afford decent housing. It also bolsters the rental market by providing tenants who are able to pay the "fair market" rent. Yet to the extent that the program has enabled large numbers of poor families to cluster in certain neighborhoods, especially where the program has not been properly managed, there has been disruption. Improved oversight of landlords participating in this program will be increasingly necessary for this important, but controversial program.

f) Experiment with landlord rehabilitation assistance when certain conditions are met - modest per unit costs, commitment to professional management, and affordable rents.

The federal rental rehab program that was oriented to moderate, as opposed to "gut" rehabilitation, of rental property has been terminated. The intent is that this kind of assistance will be done with HOME and CDBG funds when there is a local priority. The challenge is to design a program that does not simply reward landlords for deferred maintenance that should have been routinely provided. Equally important is to define a level of aesthetic and safety improvements that are sufficient to make an important difference to the building, but not so stringent as to prohibit affordable rents.

g) Implement the City-County strategic plan developed with help from the Enterprise Foundation.

The Regional Housing Alliance has been created to provide technical assistance to non-profit organizations committed to the production of affordable housing. Working with the public and private sector, it is also committed to dramatically expanding the amount of equity and debt that can be made available to support rental housing projects. Implementation of the plan will result in a production process that translates into larger numbers of affordable housing with less overall complexity.

h) Explore special housing assistance programs that can serve the needs of the mentally and physically disabled community.

The demand for units that meet the needs of those with mental or physical disabilities is high, especially as the process of "state de-institutionalization" has continued. At a time when traditional rooming houses and other forms of congruent housing are less popular, and "not in my backyard" attitudes prevail, this is a challenge. The City needs to work with representatives of these constituencies to find satisfactory rental solutions that work. This topic is examined in greater detail later in the chapter.

The problems cannot be solved with public funds alone. CDBG, HOME, Public Housing and various special grants must be used where possible to leverage additional funds from private and volunteer sources. At the same time financial institutions need to recognize both their responsibilities in terms of the Community Reinvestment Act and in making sound loans to properties located in City neighborhoods.

HOMEOWNERSHIP

Many of the programs described above with regard to rental housing apply to ownership housing as well. In addition, there are a number of programs specifically oriented to the existing and potential owners.

• Developer Assistance. The City's residential development strategy emphasizes support for developers with cost effective new construction and renovation proposals for owner occupied housing. Depending upon the proposal the assistance takes different forms - site improvement assistance; low interest, subordinated loans; and/or display homes.
• Buyers Assistance. For many years the City has also provided help to encourage first time homebuyers. Assistance has been provided in order to cover points and closing costs; write down initial interest payments; and contribute to the down payment. Education and counseling for potential homeowners has also proved important.
• Homeowners Assistance. Loans and forgivable loans are offered through a variety of mechanisms. The Urban League, Neighborhood Housing Service, and Northside Preservation are among the groups that have administered such programs, often on a ward by ward basis. Priority goes to elderly and low-income owners with code enforcement problems, and/or location in a stabilization target area.
• HOPE. The HOPE program is offered to non-profit organizations on a competitive basis in order to renovate and sell homes that, through foreclosure or tax delinquency, are currently in public ownership. The City cooperates with Operation Impact, the Catholic Commission on Housing, Northside Preservation and the Public Housing Authority to execute this program.
• New Initiatives. Finding new ways to expand homeownership opportunities for low and moderate income families is a continual concern. Recent initiatives include a lease-purchase program coordinated by the Regional Housing Alliance, support for Habitat for Humanity programs, expanding the use of the 203K program which allows acquisition and renovation of property with one loan, and more.
• Neighborhood Opportunities. In concert with many neighborhood groups, efforts are made to insure that realtors, appraisers, corporate relocation offices, and citizens throughout the metropolitan area know about the residential opportunities that are made possible with state and federal support.

The City suffers to the extent that those with choices are not convinced that property values will hold. If the prospect of property stabilization, if not appreciation, is not present, many who can will leave. Others looking to relocate within the metropolitan area will not consider the City as a serious option.

The reality is that many City neighborhoods are great places to live with reasonably strong homeownership markets. An on-going challenge is to convey that message though out the metropolitan area, and to offset the negative stereotypes that are promoted by the media and other institutions. It is especially important that banks, insurance companies, realtors and others involved in the real estate market gain a clear understanding of the promising opportunities within the City.

At the same time, it is important that a wider array of homeownership options be provided. Given site preparation, utility relocation and other factors, new construction costs can be more in the City than some suburban or exurban locations. Substantial renovation typically costs as much or more per unit because of the unique aspects of each project, and the difficulties of achieving economies of scale. There is a strong need to help developers lower their costs and their risk, if the number of homeownership choices in the City is to increase.

A stronger demand, and increasing housing prices are generally good for the City. Unfortunately, that will run counter to the desires of many renters who would like to own their own home. Homeownership does not make sense for everyone. Yet there are a large number of households who have the ability to pay off a mortgage as easily as the monthly rent, but for whom it is difficult to obtain a loan. The challenge is to identify those individuals and then help them to obtain the down payment, repair their credit rating or overcome other impediments that may stand in the way.

Still another serious challenge relates to those who own homes, but do not have the income or inclination to keep them in repair. In most of these difficult situations the problem is essentially one of insufficient income. It is the City policy to provide assistance in special cases. The size of the problem, however, is such that not everyone can be helped.

Table 14 notes that there are about 27,000 small, large and elderly households for whom homeownership is a major or severe financial burden. An estimated 2500 households live in overcrowded conditions, and, while it not possible to calculate with any accuracy, an estimated 16,000 households live in houses that have physical defects. If we reduce this total number of problem homeowners to 15,000,in order to account for double counting, and, assume that all problems could be resolved with a home improvement loan of $10,000, then the gross estimated cost to address these problems is $150 million. In reality, to the extent that most of these problems are reflections of poverty, the estimate must be considered conservative.

Creating a larger and stronger homeownership market in St. Louis will require the continuation and expansion of a various initiatives. The Mayor's Residential Development Strategy has already been discussed. Other initiatives should include:

a) Continue to attract private redevelopers through the provision of technical assistance and appropriate financial subsidy.

Private developers can be attracted in cases where the City demonstrates a willingness to share the risk, and where the redevelopment process can be simplified. Assembling selected properties through Neighborhood Housing Corporations, and making them available at a written down cost will continue to be one aspect of assistance.

b) Explore ways to integrate the delivery of services provided by Neighborhood Development Incentive organizations and Neighborhood Housing Corporations.

The City supports a large number of neighborhood organizations through direct CDBG support and/or technical assistance provided by CDA/SLDC, the Neighborhood Stabilization Task Force (formerly Conserve and NLO staff) and Operation Impact. In some neighborhoods this help goes directly to deal with housing production. In other neighborhoods there is substantial room for productivity improvements. New ways need to be found to expedite the housing development process that is appropriate in each neighborhood.

c) Explore the feasibility of manufactured housing in St. Louis.

New production techniques for manufacturing housing in a central location, rather than completely on site, hold the promise of an improved product at a cheaper price. Traditional concerns have revolved around the aesthetics of such housing, and worries on the part of organized labor. With more than 10,000 vacant lots in the City, and observed demand for new, contemporary housing, the time has come to find solutions to the concerns. Manufactured housing holds a special appeal, if volume could be generated sufficient to warrant construction of a factory in St. Louis.

d) Support the Youthbuild initiative.

Youthbuild is a program that combines two important goals - renovating housing while at the same time training young men and women in construction skills. There are many challenges associated with this kind of program, as attested by similar efforts that have failed in the past. However, the current program has received the confidence of the national Youthbuild program, as demonstrated by a large grant. Given the importance of the overall purpose, efforts should continue to make the program succeed.

e) Provide sites and public infrastructure in support of volunteer efforts such as Habitat for Humanity.

To the extent a relatively small amount of public investment can leverage new affordable units produced by volunteer help coordinated through a non-profit organization everyone benefits. Care needs to be taken to insure that the non-profit organization knows what it is doing, that public involvement is kept at a modest level, and that an acceptable unit is produced. When this happens, these kinds of public-private partnerships are of great benefit.

f) Serve as a developer of last resort in special situations.

Wherever possible, the City should assist private developers in renovating City housing. In certain cases, however, the project may have such importance to the neighborhood, and have such little appeal to the private sector, that direct involvement by CDA or Operation Impact is warranted. Serving as developer/general contractor is extremely demanding; it should be done only as a last resort.

The same resources that go to rental housing are applicable in helping current and potential homeowners. Direct public support (CDBG, State Treasury Funds, MHDC, etc.); private support (financial institutions, foundations, etc.); and indirect support in the form of tax abatement or land donations are all important. Especially important are the voluntary contributions of time and money made through private and non-profit organizations to enable homeownership by those in need.