Affordable Housing

Delaware’s affordable housing crisis affects middle class, too

Charlie Megginson Government, Headlines

Affordable Housing

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Evidence continues to pile up that Delaware is struggling to provide affordable housing:

  • Data released Thursday by Housing Alliance Delaware says the state faces a shortage of more than 18,000 affordable and available rental homes for extremely low-income renters. 
  • Also Thursday, Delaware State Housing Authority announced that eligible Delaware renters can now receive up to 18 months of rental and utility assistance — instead of 15 — through its Delaware Housing Assistance Program, commonly known as DEHAP.
  • An annual household income of $46,846 would be required to reasonably afford a two-bedroom rental home in Delaware according to the National Low Income Housing Coalition. 
    • The fair market rate for that home would be $1,071 per month, according to the U.S. Department of Housing and Urban Development.
    • There are currently only 27 rental properties on Zillow in the entire state of Delaware for $1,071 per month or less.
  • In 2019, 38% of Delaware households struggled to make ends meet, according to the United Way of Delaware.

While many programs are aimed at Delaware’s lowest-income earners, people in all segments of the economy are affected.

Steve Lenhoff, a marketing professional for a large Wilmington bank, has lived with three roommates in a four-bedroom apartment in Bear for the past couple of years. 

Recently, the four roommates decided it was time to go their separate ways. Lenhoff quickly learned that finding a rental home in Delaware would not be as easy as it was just a few years ago.

“I started with a list of probably about 10 to 12 apartment complexes that I would be happy living in,” Lenhoff said. “I narrowed it down to 3 or 4 very quickly just because there was no availability at a majority of them.”

He began exploring his options and ultimately found that buying a home would cost about the same as renting. He decided to go in that direction instead.

“I had to have a decent amount of savings built up for it and that’s the first hurdle that so many people are not able to overcome, unfortunately,” he said. “The monthly amount I’m going to be paying in a mortgage probably lines up with what I would be paying in rent for an apartment.”

With rising costs and stagnant wages, others who live paycheck to paycheck often do not have spare money to contribute to savings.

That’s just one of the many factors that contribute to the crisis Delaware — and the rest of the country — faces in terms of providing affordable housing for low- and moderate-income earners. 

There are many causes, experts say, including insufficient government investment in affordable housing, burdensome regulations on landlords which result in higher prices, rising costs throughout the economy, and stagnant wages. 

Surprisingly to some, there’s one group of people who most experts don’t point to when assigning blame for the crisis: Landlords.

“I don’t think we can put the blame on developers or landlords,” said Sarah Rhine, housing unit manager with Community Legal Aid Society, Inc., which monitors fair housing violations. “We need more subsidies, we need more vouchers and we need more public housing, but we also have to think of subsidies more broadly. We need more investment in the development of units that are accessible, too.”

Landlords, however, feel that they’re being targeted, and the narrative that rising rents are the result of landlord greed has been perpetuated by two Democratic bills moving through the Senate.

“Being a landlord is really important work,” said Debra Burgos, president of the Delaware Apartment Association. “You are responsible for someone’s home, where they live. Ultimately you do need to make sure that your business is making money because you need money to maintain and take care of that asset.

“But that asset is someone’s home, and it’s something that most landlords take very seriously,” she continued. “They want to provide safe and affordable housing.”

What is affordable housing?

Affordable housing doesn’t only refer to income-restricted units or ones that accept Housing Choice Vouchers, formerly known as Section 8. 

Housing is affordable when someone is able to spend 30% of their income or less on it, including utilities, said Dr. Ann Aviles, associate professor of human development and family sciences at the University of Delaware. 

a person posing for the camera

Dr. Ann M. Aviles, associate professor at the University of Delaware

One could calculate an affordable monthly rate for rent and expenses by dividing annual income by 12 and calculating 30% of that figure. 

“When we say affordable, I think people just assume public housing,” Aviles said. “That is important — people who are really struggling financially definitely need that support. But I also think those middle-income folks are being left out of the conversation.”

Those low- to middle-income earners who struggle to find affordable housing are characterized by United Way of Delaware as “ALICE” households.

ALICE is an acronym for Asset Limited, Income Constrained, Employed. 

Individuals in that group live above the Federal Poverty Level but don’t have enough income to meet their basic needs. They often earn too much to qualify for government and non-profit assistance but aren’t financially stable.

“Sometimes we refer to the ‘working poor,’ but that’s not exactly right because ALICE folks are not necessarily poor,” said Dan Cruce, chief operating officer of United Way of Delaware. “These are folks who are working hard, who are unable to save, unable to find stable housing and unable to plan to buy. That is a crisis in and of itself.”

a man wearing a suit and tie smiling and looking at the camera

Dan Cruce, chief operating officer at United Way of Delaware

The number of ALICE households in Delaware is greater than the number of households below the Federal Poverty Level.

According to United for ALICE, a United Way project, in 2019, 38% of Delaware households struggled to make ends meet. While 11% of those struggling households were living below the Federal Poverty Level, 27% were ALICE households.

The data is old, but Cruce said “it hasn’t gotten better.”

ALICE households are especially vulnerable as a result of record inflation and stagnant wages. The cost of household essentials, such as housing, education, child care, food, transportation and health care, are rising faster than the cost of other goods and services. 

That has a disproportionate impact on Delawareans living paycheck to paycheck, Cruce explained. Those individuals and families can quite literally observe the effect of rising costs on their weekly budget. 

“Many of the folks who need our help are not the folks that we see on certain campaigns,” he said. “We actually work with them. We interact with them on a daily basis.”

Experts point to a number of factors when assigning blame for the affordable housing crisis. 

Among those factors:

  • A hesitancy on the part of developers to build new housing after the 2007-2008 ​​subprime mortgage crisis
  • Irresponsible planning and zoning
  • NIMBYism, or “not in my back yard-ism,” opposition by residents to proposed developments in their local area
  • Burdensome regulations on developers and landlords
What’s happening to landlords

Democrats in the Delaware General Assembly have responded to the housing crisis by crafting legislation they say will protect renters and expand housing inventory.

Senate Substitute 1 for Senate Bill 101 would guarantee tenants the right to legal counsel in eviction proceedings and establish an eviction diversion program aimed at resolving disputes after a landlords files for eviction.

Proponents say the bill is necessary to protect tenants, most of whom cannot afford legal representation and are outmatched when they arrive in court for their eviction proceedings.

Opponents say the bill will force landlords to retain legal counsel for procedural eviction hearings — a cost that will inevitably get passed down to tenants in the form of rent increases.

A second bill recently passed in the Delaware Senate — SB 90 — would mandate that landlords accept Housing Choice Vouchers, formerly known as Section 8 vouchers.

Advocates say landlords should not be able to discriminate against potential tenants simply because their rent is subsidized by the government. Making all rental units accessible to voucher recipients will drastically increase the inventory of affordable housing options, they say.

Detractors say Housing Choice Voucher recipients are not the problem, but rather the system itself, which they say imposes burdensome requirements and administrative costs on landlords and is marred with delays and inefficiencies. 

a person wearing a blue shirt and smiling at the camera

Debra Burgos, president of the Delaware Apartment Association

The Delaware Apartment Association’s Burgos said landlords should have a choice whether to accept vouchers or not. 

Her association is a non-profit trade organization that represents about 60% of all multifamily rental owners and managers in Delaware. 

The group opposes SB 101 and SB 90 and argues the bills will have the opposite of the intended effect, driving up rents and forcing mom and pop landlords out of the business. 

“Housing Choice Vouchers, in theory, are a great program and a great tool to make housing more affordable,” Burgos said. “I can’t make it any clearer from a landlord’s point of view: It is not the people who receive housing choice vouchers that are the problem. It is the program.”

The issue with the program, Burgos said, is that it’s administratively burdensome, difficult to navigate and subjects all landlords, whether they like it or not, to the unpredictable timelines of government agencies.

“With a market-rate apartment, if it’s vacant and ready for move-in, I can move somebody in today,” she said. 

But with vouchers, landlords are required to fill out a packet called a Request for Tenancy Approval after selecting a tenant. Once received by the relevant agency, a mandatory inspection is scheduled. 

“None of this is done as timely as they claim and throughout that whole time, an apartment that would otherwise be occupied by someone who needs a home is sitting vacant and not collecting income while we sort through the bureaucracy,” Burgos said. 

While testifying before the Senate on SB 90, Wilmington Housing Authority director Ray Fitzgerald claimed the system works much more smoothly than Burgos has experienced.

“When a tenant with a voucher finds a landlord willing to rent, they let us know,” Fitzgerald said. “There’s some information we gather from the landlord. That generally doesn’t take too long and we schedule a uniform inspection. Our inspection agent will get there within, you know, 72 hours.”

That’s not reality, Burgos said. 

“If I could get an inspection in 72 hours with Wilmington Housing Authority, I would be tickled pink,” she said. “Because it typically takes several weeks before we can get an inspector out to our properties.”

In Wilmington, “​​pre-rental inspections only occur on Wednesdays,” Burgos explained. “If I have an application and I approve them on a Thursday, I fill out all the paperwork and get that over to them and request an inspection, it can’t get done any sooner than the next Wednesday. That day is usually full, so you’re waiting at least a week or possibly even two.”

She said she would be eager to accept Housing Choice Voucher recipients if the process were less burdensome. A large portion of their rent is guaranteed, after all.

“I would love to have all of those residents living with us if I didn’t have to jump through so many hoops to collect that rent,” she said. “Having someone in an apartment, paying rent is the best-case scenario.”

Potential solutions

There are many different policy proposals to address the affordable housing crisis. The proposals vary in contention. Some — like rent control — have become increasingly political in nature and spark outrage when proposed or even discussed.

Others have few detractors at all. 

One area of relative agreement is a proposal to increase the availability of direct rental and utility assistance, like DEHAP, which benefits both tenants and landlords and helps avoid evictions.

Another area of common ground is the notion that the government should be investing more in the development of affordable housing for voucher-holders and ALICE households too. 

One such subsidy comes in the form of a tax credit, aptly named the Low-Income Housing Tax Credit. 

That credit offers developers nonrefundable and transferable tax credits to subsidize the construction and rehabilitation of housing developments that have strict income limits for eligible tenants and their cost of housing.

Karen Speakman, executive director of NCALL, a Dover nonprofit that specializes in affordable housing development, education and lending, said her organization applies for those credits, then sells them to developers.

Karen Headshot

Karen Speakman, executive director of NCALL

“Investors then use the tax credit and the development, in turn, gets cash or equity to reduce the amount they have to either borrow from the Housing Authority or from a bank for permanent financing,” Speakman said.

In addition to affordable housing development, NCALL offers housing counseling, foreclosure prevention and financial education.

Another front-end federal subsidy is the Community Development Block Grant Program, which provides annual grants on a formula basis to states, cities, and counties to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, especially for low- and moderate-income folks.

These programs incentivize developers to build affordable housing by making it profitable for those developers.

Additional investments must be made in these areas, including investments that expand inventory for ALICE households who don’t hold vouchers, said Patricia Kelleher, real estate development director at NCALL.

“If the investment isn’t made in housing and the investments are made in everything else like education and recidivism and so on, all of those things lose their impact if people are not stably housed,” Kelleher said. 

“If you have children who are living in motels, children who are couch surfing with their parents, it’s not impossible, but they’re not going to do well in school,” she continued. “If you have people leaving the prison system and they have nowhere to live, you’re likely going to find them back in jail in a couple of months.”

Housing instability is the root cause of so many problems, Kelleher said.

“If you’d look at the front end and ensure Delawareans are decently housed in communities where they have access to needed resources and amenities, that investment is going to have a great impact on the state’s economy,” she concluded. 

The American dream

Homeownership, Kelleher said, has traditionally been the method the middle class and the lower-middle classes have used to build wealth and take care of themselves and their families. It’s the American dream.

When homeownership becomes inaccessible to an entire class of Americans who are then forced to flood the rental market, the results are disastrous. 

It’s NCALL’s mission, Speakman said, to give Delawareans the tools they need to eventually get to the point Lenhoff is at, where they can begin building equity in something — tangible equity in the house, but also metaphorical equity in the American dream. 

In the meantime, Burgos said, legislative leaders must remember that landlords are not the enemy.

Passing legislation and imposing regulations that restrict the profitability of the rental market is bad for renters and bad for the economy, she said. 

“We want to provide safe and affordable housing,” Burgos said. “We want to be able to reinvest into our properties on a routine basis — not just when the roof is leaking, but before the roof leaks. And most importantly, our residents are the lifeblood of what we do. Having residents in our apartments and being able to pay rent is at the core of our business.”

 

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