Some Raleigh leaders want 1-cent tax hike for affordable housing

As the city prepares its spending plan for the next budget year, some Raleigh leaders want to do even more with affordable housing.

Raleigh’s affordable housing plan for the year starting in July calls for using $5.9 million in federal funds and $4.2 million in city money to complete 200 rental units and issue 20 homeowner rehabilitation loans, among other initiatives. But city leaders want to do more.

During a budget workshop Wednesday, council members Mary-Ann Baldwin and Corey Branch said they want to bump up the property tax rate one-cent, creating an additional $5.7 million that the city could use on affordable housing. The money would pay for 125 more rental units and 10 more homeowner rehabilitation loans.

The council should add affordable housing soon so that it complements the Wake Transit Plan, Baldwin said. The transit plan, which county commissioners want to fund through a sales tax referendum this November, would add new bus routes and a commuter rail system between Raleigh and Durham by 2027. Housing low-income residents along the transit line makes sense, Baldwin said, so the city should look for development opportunities before property values rise along the corridor.

“If we have to make the commitment to transit, we have to make the commitment to affordable housing,” Baldwin said, adding that the council could raise even more through a bond referendum next year.

Branch endorsed the increased tax, saying the city should be bold. Redevelopment has claimed some affordable living projects and rising land values may soon price the city out of potential housing locations near downtown.

“There’s a need and there’s a cry,” Branch said. “I want other cities to benchmark against us.”

Raleigh property owners currently pay a tax rate of .42 cents for every $100 in assessed value, which equates to about $842 a year for owners of homes valued at $200,000. That figure would jump $20 under a one-cent property tax rate hike. A two-cent tax increase would generate $11.4 million in city revenue and cost that homeowner an extra $40.

The topic of affordable housing arose Wednesday afternoon as city staff presented the council with its budget projections for the next fiscal year, which starts in July. Other council members said they support the idea of boosting funding for affordable housing but withheld support for a property tax increase until they evaluate other options.

Mayor Nancy McFarlane said she wants to see the city manager’s budget proposal, scheduled for a public presentation on May 17, before committing to additional affordable housing money. City staff estimates that it will have only $9 million available in the next fiscal year budget to address $20 million in staff-identified needs, which include buying police body cameras, adding emergency dispatch staff and planning for Dix Park.

Complicating matters: Raleigh’s growing population is putting a strain on city services. And separately, city employee health care costs are rising so rapidly – a projected 18 percent next fiscal year – that the city is considering a surcharge for employee spouses who use the city government plan even though they have access to health insurance through another employer.

Despite the drawbacks, several City Council members want to act on affordable housing soon. Without a more consistent local funding source for affordable housing, the city relies on the federal government at a time when its interest in funding housing is waning, said Larry Jarvis, the city’s Housing and Neighborhood Department director.

Apart from funding new housing units, McFarlane said the city should come up with a new way of protecting existing housing from redevelopment. “We can’t change market conditions, but ... is there some way that people who are involved in the market can participate with us and help build more affordable units?” she said.

This year’s plan aims more than previous years at increasing the supply of affordable housing, revitalizing neighborhoods like College Park and South Park and housing more homeless people. The city has a growing number of homeless single women and women with children who sleep in their vehicles, as well as families with kids living in hotels because they are unable to put down security deposits, according to a new city report to the U.S. Department of Housing and Urban Development.

Council members said Wednesday they hope additional housing will reduce the city’s number of transient students. They asked city staff to find out how similarly-sized U.S. cities have addressed affordable housing. Councilman Russ Stephenson asked staff to also come up with a strategy for publicly explaining the economic benefits of investing in more affordable housing, such as freeing families to spend money on other things, Stephenson said.

“I think we’ll be able to come out with a strong message about why this is important,” he said.

This story was originally published April 7, 2016 at 7:02 PM with the headline "Some Raleigh leaders want 1-cent tax hike for affordable housing."