Significant Subsidy for Affordable Housing in Washington D.C. Planned

Looking to buy a home in Washington D.C.? You better have a lot of cash on hand to afford the mortgage financing on such significantly appreciated houses.

That is, until a new plan offered by D.C. officials kicks in.

These legislators are pitching a subsidy strategy that would leverage $10 million in city funds to build about $300 million worth of affordable housing.

The program, which is aimed at government workers and first-time home buyers, would provide up to $75,000 per unit, for a total of about 1,000 units citywide. The subsidy would be available to individuals and developers.

The city wants to subsidize specific properties with the idea that they would remain “affordable” in perpetuity, says Michael Hodge, chief operating officer in the Office of Deputy Mayor for Planning and Economic Development.

In past programs, he says, the city had offered one-time cash subsidies, which initially helped buyers get into the market, but once people sold their homes the properties became market-rate houses; i.e. future home purchase loan applicants could not afford them.

Under the proposed new program, the city would select an organization to operate an independent land trust. Then the trust would find qualified buyers - families earning no more than 120 percent of the area’s median income, which is $95,000 for a family of four.

The city would kick in $10 million in cash, and the trust would use an additional $65 million in privately controlled federal tax credits. The $75 million could be leveraged to produce about $225 million in mortgage loans for the creation of new housing units.

In exchange for the subsidy, buyers would have to agree to recoup only 25 percent of the proceeds from the resale of their homes, in addition to their down payments and payments toward the principal.

The remaining proceeds would be tied to the property and ensure it stays below market rate.