Partners (Number 3, 2007)
Partners (Number 3, 2007)Spotlight on the District
Affordable housing challenges in Miami
While eyes are drawn to Miami's growing skyline of high-rise developments, a housing crisis is festering in its shadows. Residents of Miami-Dade County are facing myriad affordability woes that are affecting every socioeconomic rung of the housing ladder.
Following several years of unbridled housing appreciation and one of the most expansive development booms in the state's recent history, Miami-Dade County is now struggling to absorb the thousands of mid- to high-end new housing units coming to market. At the same time, county residents are seeing more of their monthly income eroded by rising housing costs.
Housing affordability deteriorating
The spike in annual housing expenses is being driven by escalating insurance costs and property taxes throughout South Florida. In addition, the rate of existing home value appreciation has drastically outpaced the growth in median incomes throughout the area. This has been further exacerbated by the exorbitant land values in the fully developed strip of southeast Florida, which drives up the cost of all new construction.
|The rate of existing home value appreciation has drastically outpaced the growth in median incomes throughout the area.|
The City of Miami has one of the country's lowest area median incomes so many of its residents are feeling the squeeze to find affordable housing. However, housing options are becoming harder to find. The area's inventory of rental units has been depleted by condo conversions during the building boom and the high cost of property maintenance that makes new rental development difficult to finance. More individuals and families are sharing homes either to help meet the costs or because affordable housing is not available.
A flow of middle- and upper-income families are leaving the area or the state completely, to find more affordable places to live. This trend contributed to the area's median income being adjusted downward by the Department of Housing and Urban Development (HUD) in 2006.
HUD takes over local housing agency
Further complicating the situation, the affordable housing programs in the area underwent significant restructuring this summer. Changes came in the wake of a series of articles titled "House of Lies" in the Miami Herald that uncovered alleged mismanagement of the Miami-Dade Housing Agency (MDHA).
In August, HUD announced it was taking possession of MDHA saying the agency had "demonstrated a pattern of financial irresponsibility and mismanagement of its Section 8 rental housing voucher and public housing programs."
Miami-Dade County and HUD reached an agreement in October that would give HUD control over all MDHA's activities, including its public housing and Section 8 programs. Donald Lavoy, a HUD senior advisor in the Office of Public and Indian Housing, was appointed to oversee MDHA's day-to-day operations. "I look forward to this opportunity to help the most vulnerable citizens of Miami-Dade County," said Lavoy.
This article was written by Ana Cruz-Taura, regional community development director in the Atlanta Fed's Miami Branch.
Capital for rural Tennessee's small businesses
Access to capital is one of the greatest challenges facing small business owners in the state of Tennessee, especially those in rural communities.
Southeast Community Capital (SCC) is addressing this need by creating the Tennessee Rural Opportunity Fund (the Fund), which will provide below-market-rate loans to small, disadvantaged and start-up businesses in rural communities throughout the state.
This $10 million perpetual revolving loan fund—structured as a public-private partnership between SCC, Governor Bredesen's administration, several state departments and member banks of the Tennessee Bankers Association (TBA)—is the first of its kind.
The Fund will be capitalized through investments by TBA member banks. The state will facilitate the Fund by offering incentives to encourage banks to participate, including:
- A 10-year, 10 percent annual franchise and excise tax credit based on the amount each bank invests. At the end of 10 years, the bank will have received a total tax credit equal to 100 percent of its initial investment. The bank will grant this amount to the SCC to provide a perpetual revolving loan fund. Because SCC has nonprofit status, the bank will receive a federal tax deduction for its contribution.
- In addition, a $1.5 million forgivable loan to the Fund will serve as a loan-loss reserve.
The state will also provide a $250,000 operating grant to SCC each year for five years to help establish the Fund.
Still more incentives exist for banks to invest in the fund. First, SCC will pay the banks 3 percent interest annually on their investment. Second, SCC is a certified community development financial institution (CDFI), so a bank's investment will receive consideration as a CRA qualified investment.
The Tennessee Rural Opportunity Fund will not compete with banks for customers; rather it is designed to provide banks with an alternative to turning down a small business loan application. SCC provides technical assistance to small business owners with the goal of transitioning their clients into bankable customers within three to five years.
"Rural communities across the state have not experienced the recent growth seen in urban communities in Tennessee, and a key barrier for rural businesses is the lack of access to capital," says Matt Kisber, commissioner of the Tennessee Department of Economic and Community Development. "The Tennessee Rural Opportunity Fund is an innovative strategy leveraging public and private resources to fill this critical financing gap, and it is an important element of the state's broader economic development strategy for rural communities."
For more information on Southeast Community Capital and the Tennessee Rural Opportunity Fund, please visit the Web site.
This article was written by Jessica LeVeen Farr, regional community development manager in the Atlanta Fed's Nashville Branch.