Testimony of the Housing Alliance of Pennsylvania
Democratic Policy Committee Public Hearing on State Budget Cuts
Harrisburg, PA – August 16, 2011 – (RealEstateRama) — The Housing Alliance of Pennsylvania is a statewide membership organization working to increase the availability of homes within reach of all Pennsylvanians, especially those with low incomes. Our members include nonprofit and for profit developers, social service and homeless providers, housing counselors, local government officials, lawyers, bankers, real estate professionals, and people in need of affordable homes. We are all working to balance the housing market so that supply more closely matches the demand for affordable homes.
Today’s hearing is about the impact of state budget cuts. But before discussing the effects of the cuts, I would like to talk about the impact of state programs, a very positive impact for our neighbors and our neighborhoods.
When we talk about balancing the housing market, we are referring to the over supply of higher end homes and the deficit of homes affordable to lower wage workers. There is no lack of desire among developers to build workforce housing; the deficit is the result of simple economics. It simply costs more to build or rehabilitate a home than a low wage worker can pay. In many parts of the state the same is true of rental homes. The cost to purchase and maintain a home means that landlords must charge a certain rent in order to break even or, hopefully, make a profit. Too often that bottom line is more than someone with limited resources can pay in rent.
So how do we balance the housing market? For many years, the state and federal government, along with philanthropic organizations, have stepped in to close the gap between what people can afford and what homes cost. On the federal side, programs such as Community Development Block Grants (CDBG), the Home Investment Partnership (HOME), and Low Income Housing Tax Credits (LIHTC) to name a few, provide resources for construction or rehabilitation. Pennsylvania’s Housing and Redevelopment Assistance (HRA) program has done the same.
In 2007-08, when HRA was fully funded at $34 million, HRA helped repair or build 2,600 homes. In addition, HRA projects created or sustained 4,200 jobs, generated $26 million in tax revenue, and had an economic impact of $50 million. Housing development programs not only create homes for our neighbors, they also
create jobs. In fact, every dollar invested in the housing market turns into $1.62 – $2.28 because of its impact on the economy. The lower end figure is related to new single family construction; the higher end is remodeling.
There are other successful programs that do not create new homes but rather help keep people in their current homes or help those without to find homes.
- Accessible Housing Program modifies homes for low-income seniors and people with disabilities so that they can remain in their homes. For every $15,000 spent on a home modification, it saves the state $40,000 per year in nursing homes cost.
- Homeless Assistance Program prevents and reduces homelessness by assisting families to stay in or move into homes. $900 to a family can prevent homelessness by paying first month’s rent, a security deposit, or back rent, compared to $900 per person per month in a homeless shelter.
- Human Services Development Fund is used by counties for a variety of programs, including services for people experiencing homelessness, victims of abuse, people with disabilities, and the elderly. HSDF has helped to reduce the number of homeless Pennsylvanians from 16,220 in 2007 to 14,516 in 2010 despite the poor economy.
- Homeowners Emergency Mortgage Assistance Program (HEMAP) provides loans to help homeowners pay their mortgages until they get back on their feet, saving 45,000 homes since 1983. Repayments EXCEED appropriations ($243,926,000 appropriated since 1983; $259,539,509 repaid) and revolve back out to help more families.
So what has happened to these very successful programs? At the same time that the federal programs are being cut, Housing and Redevelopment Assistance was eliminated. HRA was the only state investment in the creation of affordable homes. While there may have been legislative concerns about HRA, eliminating this program rather than reforming it and leaving the state with no state funded housing development program is simply poor public policy.
Accessible Housing’s tiny $1 million appropriation was merged into the new Keystone Communities line item. It is no longer a stand alone program. We believe home modifications will continue to be funded but need to see how the program works when combined in this new line item.
Homeless Assistance was cut from $22.8 million to $20.5 million. The Human Services Development Fund was cut from $23.5 million to $15 million. Both of these programs are urgently needed at a time when people are losing their jobs, losing their Unemployment Compensation, and losing their homes.
HEMAP was cut from $10.5 million to $2 million. With repayments down due to the recessions, $2 million is barely enough to support the loans on the books prior to July 1, 2011. Therefore, HEMAP has been shut down to new applicants. In the midst of the worst foreclosure crisis in 80 years, HEMAP, a national model, is closed. Last year, 148,592 foreclosure letters were sent to Pennsylvania homeowners. All forecasts point to several more years of high foreclosure. But HEMAP has been shut down. While some homeowners will find help through the federal program modeled on HEMAP, that program ends September 30. Then there will be nothing. We respectfully submit that for $10 million, restoring HEMAP should one of the highest priorities for the General Assembly.
We understand that there were difficult decisions to be made, but some cuts are penny wise and pound foolish. Reductions to these housing programs will cost the state money in the long term.
Moreover, just as every family that has seen a reduction in income needs to tighten its belt, it also needs to look for new income. As we see it, Pennsylvania has taken an unbalanced approach to this year’s budget – making cuts without seeking new revenue. This is not an appropriate way for a family to act and it is not appropriate for the state. It is incumbent on all of us to make every effort to ensure that our most vulnerable neighbors are not literally left out in the cold.
Thank you.
