The New Orleans City Council wants to direct more than $30 million into a new fund that would help finance affordable and workforce housing development.
The proposed ordinance would establish a fund for gap financing on such projects. The council would direct $8 million in federal pandemic relief money to the fund, along with $22 million from bond sale proceeds and $2 million from the Neighborhood Housing Improvement Fund, which is used for housing development and blight remediation.
Councilmember Joe Giarrusso, who introduced the ordinance last week with the support of the full council, said the city should help bridge financing that makes such housing projects feasible for developers. “Everybody recognizes affordable housing as part of what the city needs to be looking at for public safety and having enough housing for people to live in given how much they’re earning and the market conditions,” Giarrusso said.
Giarrusso estimates that projects in various stages of development in New Orleans need about $42 million in local subsidies to create another 1,500 affordable units, and the proposed $32 million fund would help streamline and centralize the process of providing those subsidies. The city’s Office of Community Development would administer the fund.
“It’s not a significant part of the financing or subsidy the developers are needing,” Giarrusso said in an interview. “It is providing predictability for people who are looking to see where city’s funds are and how they’re being spent.”
The council and Mayor LaToya Cantrell’s administration are hammering out a final spending plan for the last of the city’s undesignated American Rescue Plan Act dollars, which total more than $50 million. Giarrusso’s proposal — using $8 million in ARPA dollars for the housing fund — would be part of the $10 million the administration has requested be spent on eliminating homelessness; the remaining $2 million would go toward the city’s low-barrier shelter and for homelessness outreach, the councilmember said.
Gregory Joseph, director of communications for the Mayor’s Office, said on Tuesday the allocation of funds would allow the city to help subsidize 14 construction projects that would yield about 1,000 affordable units for low-to-moderate-income families. Those projects have stalled amid increased construction, labor and supply costs, along with high interest and insurance rates, Joseph said.
The fund also includes a portion of a $500 million bond sale approved in 2019, about $25 million of which was earmarked toward affordable housing at the time. So far only two projects have made use of about $6.8 million in gap financing from the bond sales, according to Giarrusso.
Finally, Giarrusso’s plan would move funds out of the mostly dead Neighborhood Housing Improvement Fund. That fund lost its primary revenue source when voters decided in 2021 not to renew the local property tax that generated $3 million to $4 million for the fund each year.
The fund, which can be used to help finance homeownership and rental housing, as well as to tackle blight, held about $2.3 million as of March 31, according to a budget presentation last month. Its only remaining funding mechanism is through nightly fees collected from short-term rental bookings.
Cashauna Hill, executive director of the Louisiana Fair Housing Action Center, pointed out that just the $8 million ARPA component is “new” money, or funds not already earmarked for affordable housing. Though the city has only $54 million in unassigned ARPA funds, it has an unusually large balance of unspent general fund dollars — more than $300 million as of April — largely as a result of federal pandemic aid, though Chief Administrative Officer Gilbert Montaño told councilmembers this month that much of that money is already earmarked, including about $100 million for a city reserve fund. Hill urged the council to commit additional city money to affordable housing.
“This is an important first step from the City Council, especially as more and more New Orleanians are pushed onto the street by rising housing costs,” Hill said in a statement. “We hope that Councilmembers and the Mayor will treat this as the crisis it is and prioritize ten times as much of our federal American Rescue Plan dollars for the construction of affordable homes.”
The group, along with other community organizations, has pushed for the city to commit $70 million of New Orleans’ unused pandemic aid and fund balance to build new affordable housing.
Oji Alexander, CEO of the nonprofit affordable developer People’s Housing+, said a dedicated, well-administered gap fund helps developers be more flexible, given the high interest rates that are limiting their borrowing power. Alexander thinks such a fund could be particularly beneficial for smaller projects, such as one plan People’s Housing+ is working on to convert the old firehouse on Louisiana Ave. into seven affordable rental units and an early childhood education center.
“To have another source of reliable financing to fill some of these gaps to make a project like this works means that we can replicate it,” Alexander said.
Note: This article has been updated to include a comment from the Cantrell administration.
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