Who Gets the Subsidized Apartments?

NY Times editorial.

"Federally financed affordable housing developments do not typically include yoga studios or rooftop clubs with spectacular skyline views. But in recent years, developers have been using public subsidies to build affordable apartments designated for artists that include such amenities.

A new study of this kind of housing in Minnesota suggests it might worsen racial segregation by bypassing black and Latino people in favor of younger, white tenants.

Such artist developments, which receive federal tax credits, became much more common after 2008, when developers in Minnesota persuaded Congress to exempt these projects from a law that required subsidized buildings to be open to anyone in the general public who met income guidelines. The exemption applies nationally but is heavily used by developers located in Minneapolis and St Paul.

A new study by the Institute on Metropolitan Opportunity at the University of Minnesota Law School criticizes the decision to lavish public subsidies on buildings that draw mostly white tenants and benefit few of the region’s most economically vulnerable people. According to the authors, nearly all of the artist units were in buildings that were more than 80 percent white. By contrast, about 80 percent of the residents of traditional subsidized housing in Minneapolis and St. Paul are members of minorities. The artist developments represent “the whitest, youngest and highest-income subset of subsidized housing in Minneapolis and St. Paul — by a wide margin.”

The artist exemption has allowed developers to build in well-to-do neighborhoods where they would have faced objections to housing for poor minority families. With the use of housing tax credits, historic buildings like the former Pillsbury flour mill in Minneapolis and the former Schmidt Brewery in St. Paul have been transformed into attractive buildings that help to revitalize the surrounding areas.

While public subsidies keep rents affordable in these buildings, the study argues that these developments cost far too much per unit to build. The result is fewer units produced and fewer low-income families served.

The study calls the Pillsbury mill development “the most expensive subsidized housing project in the history of Minnesota” and says 251 apartments were developed at an average cost of $665,000 each. The authors also raise troubling questions about whether screening committees are shutting out families with children, the very poor and the elderly — three groups that are more likely to need affordable housing.

The Minneapolis Star Tribune said in a recent editorial that, given a severe shortage of affordable housing, “it verges on irresponsible to squander federal housing tax credits on projects that benefit so few.”

In a previous study, the institute found that the Twin Cities region had become more segregated in recent decades compared with demographically similar regions like Seattle or Portland because a very large share of traditional affordable housing projects had been dumped into economically desolate minority communities."