Affordable housing: a foot in the door

An innovative state program to make reasonably priced housing available for low-income families fell short of passage in the General Assembly this spring. Backers of Rep. Arthur Turner's (D-18, Chicago) effort to establish an affordable housing trust fund pledged to renew their push when the 86th General Assembly convenes in 1989. And in the unlikely event that an income tax increase is pushed through this fall's veto session, affordable housing proponents say they will make a final pitch to the 85th General Assembly.

Supporters contend that Illinois confronts a dual crisis of housing availability and affordability. Existing housing is getting older and being torn down. New housing is being built and existing units rehabilitated too slowly to replace those that are demolished. Low- and moderate-income persons who cannot afford the new units get squeezed because what is left costs more. On top of that, federal funds to build and maintain low-income housing have been slashed. The budget for the U.S. Department of Housing and Urban Development plummeted from $35.7 billion in 1980 to $14.2 billion in 1987. States are being pressured to move into the vacuum, and seven have already established housing trust funds.

Soon after legislators convene for the veto session, supporters are planning an "Affordable Housing Week" to promote their cause. Educational events are being planned for most of the state's metropolitan areas during the week of November 20. "We hope to build more of a downstate awareness than we've had in the past," says Barbara Shaw, coordinator of the Campaign for Responsible Ownership. Shaw says many people think it is only a Chicago issue, but notes that a recent survey shows that problems also exist in East St. Louis, Joliet, Peoria, Springfield and Champaign.

That study, done last spring by the Woodstock Institute of Chicago for the Statewide Housing Action Coalition, shows more than one-third of renters in 20 Illinois cities spend more than 30 percent of their income on housing. The federal government considers housing costs higher than 30 percent of income "excessive." This study boosted efforts to pass affordable housing legislation. Turner's proposal would have created an affordable housing trust fund that could have been used to make low-interest loans to corporations willing to acquire or construct affordable single- and multi-family housing. Other possible uses of the funds could have included Illinois-produced manufactured housing or conversion of public housing to tenant ownership. There was also the possibility that the program could subsidize renters who move from substandard housing.

But those are only possibilities. The legislation merely stated the purpose or intent: "developing and coordinating public and private resources targeted to meet the affordable housing need of low- and very low-income households in Illinois." What actual programs would be adopted and how the money would be spent would be based upon recommendations of an advisory committee. The 11-member committee would include the di­rectors of the Department of Commerce and Community Affairs (DCCA) and the Illinois Housing Development Authority, along with nine members recommended to the governor by groups promoting affordable housing. The program itself would be run by DCCA.

Eligibility for the housing was specified in the legislation. To be eligible for the affordable housing provided under the new law, family income must be lower than 80 percent of the av­erage median income in the county. Families with incomes below 50 percent of the county average would be given priority.

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The legislation proposed setting up a trust fund to finance the program. The money for the trust fund would have come from an increase in the real estate transfer tax that is estimated to generate $13 million per year. Revenues from existing state and federal programs would produce another $12 million per year. And the supporters argue that the $25 million could be used to attract another $75 million in investments annually. The total $100 million pot could build or refurbish 2,500 housing units per year.

Supporters looked to double the state share of the real estate transfer tax. Before 1979 the state received $. 50 for every $500 of assessed valuation at the sale or transfer of a home or other real estate. In 1979 the General Assembly lowered the state's share of this tax to $ .25 per $500 but kept the tax of $ .50, giving the difference to county governments. Proponents of the affordable housing program want to return the state's portion to $ .50, but keep the county's the same. In other words, the real estate transfer tax would be $.75 per $500 of assessed valuation. The state and county tax on the sale of a $100,000 house, would rise from $100 to $150.

Tom Frost, director of government affairs for the Illinois Association of Realtors, opposes the plan. He says people do not realize the amount of real estate transfer taxes they pay. Besides the current combined state and county tax of $ .50 per $500, he notes that several home-rule units impose an additional tax of their own. For instance, Chicago currently taxes real estate transfers at about $4 per $500 and Evanston at $2.50 per $500. "Our policy is normally to oppose increases in the transfer tax," Frost says.

As the push to pass the legislation began last spring, Senate Minority Leader James "Pate" Philip (R-23, Wood Dale) declined to embrace the bill. House Minority Leader Lee A. Daniels (R-46, Elmhurst) was troubled by the increase in the real estate transfer tax. But Senate President Philip J. Rock (D-8,Oak Park) and House Speaker Michael J. Madigan (D-30, Chicago) both signed onto the idea. Meanwhile, representatives of Gov. James R. Thompson's office, who helped to develop the concept, put it on the back burner when they got caught up in pushing the governor's super priorities: an income tax hike, Chicago school reform and saving the White Sox.

After affordable housing legislation funded with the increase in the transfer tax failed twice to receive support in the House this spring, mainly due to the realtors' objections, Madigan proposed an alternative funding source — a sales tax on computer software. His proposal came late in the session during a summit on the income tax issue. To Thompson, who was pushing for an increase in the income tax, Madigan's newly announced support of the limited computer software tax seemed a political ploy. Thompson asked Madigan if he would support any tax increase. Madigan mentioned the computer software tax. Thompson, though supportive of the affordable housing program, said angrily that the state's needs required more revenue than the computer software tax could provide.

"Frankly I didn't care where the money came from," says Sen. William A. Marovitz (D-3, Chicago), who sponsored the affordable housing proposal in the upper chamber. He believes pit would have passed if Madigan had not proposed the computer software tax two days before the Senate vote. But Madigan spokesman Steve Brown said Senate approval would have been meaningless since the House had already defeated the measure, although by only four votes.

Aside from the financing issue, there is concern that the legislation is too broad and too vague. "The bill lacked a number of specifics," Frost says, questioning whether people would know if they were eligible or not, or if they would know where to go to get assistance. Shaw counters: "There's a reason for having broad language in the bill." Shaw says that the best way to implement such programs is not exactly known and that the legislation was drafted to allow the commission created by the bill to make those determinations: "We did not attempt to set priorities." Shaw predicted that most of the money would probably go to aid people renting housing.

While the realtors do not like tinkering with the real estate transfer tax, they support the concept of the program and plan to meet with the proponents of the plan this fall to work out compromise legislation. At the same time, both Marovitz and Turner say they plan to retain the proposed increase in the transfer tax.

Although the package failed in the spring session, proponents claim a small victory: The idea was mentioned in the sales tax reform package signed by the governor. That package included a new tax on photo processing to provide money to downstate communities that need to meet federally mandated waste-water treatment standards. Since Chicago and East St. Louis already meet federal standards, the legislation encouraged those cities to use their share of the new revenue for affordable housing programs. The cities are not bound to honor that legislative recommendation, but at least the words "affordable housing" were included in one bill that was passed.

Proponents are optimistic that the legislature will approve the affordable housing plan. Both Marovitz and Turner have promised to introduce legislation next year, and spokesmen for both Rock and Madigan believe it will pass. Organizations supporting the program are equally confident. Larry Pusateri of the Statewide Housing Action Coalition notes how far the legislation got this past session — its first test in the spotlight. "It was a real close vote in the House when originally voted on," he says, "and it was not considered dead until the end of the session."

With a new General Assembly convening in January and events planned to enlighten the public this fall, the optimism may be on target. There certainly is determination by supporters. As Sen. Marovitz says, "I'm going to reintroduce this thing next year and we're going to pass it."□

Brett D. Johnson was a reporter for the Illinois Issues Statehouse Bureau during the spring session.

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