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Pittsburgh’s affordable housing bond is far more modest than earlier proposals

Katie Blackley
90.5 WESA

By late summer, the City of Pittsburgh and the Urban Redevelopment Authority hope to issue a bond to raise millions of additional dollars to preserve and create affordable housing. Last week’s announcement brought to fruition an idea long touted by Councilors Ricky Burgess and Daniel Lavelle, and that was ultimately adopted by Mayor Ed Gainey.

But the $25 to $40 million officials expect to raise falls far short of the $100 million or even $60 million bond issues once envisioned.

It may not seem like much money in the context of Pittsburgh’s need for affordable housing: A 17,000-unit shortfall was estimated almost a decade ago, and that was before the pandemic destabilized thousands of families, and material and labor costs pushed building costs into astronomical territory. But Lavelle said the money is far more than the city currently has on hand to address an urgent need.

“I absolutely believe [the bond] can have a meaningful impact,” he said.

Lavelle added that the city is grappling with a hugely complex and expensive problem “on the government dime, and government money is not the big money.”

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“If our corporate and our private partners and some of our large nonprofit partners would partner with us,” Lavelle added, “we could probably triple what we’re doing.”

UPMC Health Plan has a couple of affordable housing programs: both aim to preserve affordable units, one in the city and another in the county.

Currently, the city’s budget allocates $10 million annually to the Housing Opportunity Fund, which supports a range of programs to build affordable housing, as well as to help keep people in their homes to lower the risks of homelessness and rising prices. In 2023, the mayor and city council added an additional $2.5 million to the budget in order to support a bond issue. It’s essentially a loan, and the cost to repay it over the next 25 years will be roughly $60 million.

That could look like a raw deal, considering the bonds are likely to produce less than two-thirds of that money for investment. But Emily Brock, who directs the Government Finance Officers Association’s Federal Liaison Center, said getting the money now is a hedge against future higher borrowing costs, which could make funding projects even more difficult.

That concern is real “especially when you’re talking about vulnerable populations and making sure that the underhoused receive the benefit of housing sooner than later,” she said. (Brock was speaking broadly of how cities conceive of funding various projects, and did not comment directly on Pittsburgh’s plans.)

Kyle Chintalapalli, the city’s chief economic development officer and chair of the URA board, acknowledged that there is an additional cost to taking on a bond, but he said the need for housing had to be addressed now.

The city wants “to maximize the resources available … in responding to the urgency of the problem before us,” he said.

Quianna Wasler, the URA’s chief housing officer, added that most of the money the city expects to raise from the bond will take the form of not grants but loans, which get repaid.

“So that money will revolve,” she said. “We’ll be able to continue to fund projects beyond the next three years.”

By 2026, the URA must also spend $30 million in federal pandemic aid the city allocated for housing. The URA used the money to create new programs to preserve affordable housing, to convert Downtown office space to residences, and to help people afford the down payment on their first homes.

Burgess commended the Gainey administration for moving ahead on the bond idea, which he’s promoted for years. But he said he hopes this year’s bond issue is just the first of “two or three borrowings, so that we will get to that neighborhood of $60 to $100 million needed to really jumpstart low income housing and affordable housing in our city.”

In early 2023, Jake Pawlak, deputy mayor and director of the city’s office of management and budget, said he also hoped to issue at least two rounds of bond financing. At the time, he said the goal was to invest enough in affordable housing over the next six years so that “we’ve got the crisis of affordable housing, not resolved, but in hand.”

While Chintalapalli didn’t totally rule out future bond issues, he said that consideration of future investments would have to “play out in the budget process,” and would depend on city council’s ability to set aside the money to pay off additional debt.

Council is accustomed to issuing bonds to pay for projects; it is one of the primary ways that governments fund investments in assets that provide long-term benefits to residents, such as bridges, roads, and parks. And in local surveys about the capital budget, nearly 50 percent of respondents in 2022 and nearly 60 percent in 2023 said that affordable housing projects were “most in need of attention.”

A slew of market forces will determine exactly what Pittsburgh can expect to raise from its bond issue later this year. But Brock, of the Government Finance Officers Association, said it’s been a pretty great time for municipal bonds.

Traditionally, bonds have been like the down-to-earth best friend in a rom-com: sincere, dependable, and not so exciting that they distract from the plot line. But the pandemic, with all its impacts on financial markets, flipped the script. Interest rates went up and the federal government flooded local governments with cash. They didn’t need to issue as many bonds to make needed investments, which dropped the supply of new bond issues. Suddenly, that dependable, un-flashy best friend became a scene-stealer: Buyers were willing to accept smaller returns in exchange for a safer asset, which allowed local governments to invest more in their communities.

“There were like fistfights for our bonds,” Brock said with a laugh. “I mean, there is no hurting for investors in our space right now,” so governments could see great returns from a bond issue.

The URA and the city certainly hope to get good prices for their bonds. But while the dollars and cents of the bond issue are important, “this is about people,” Wasler emphasized. “Getting them into homes and stabilized and being able to realize a better future for themselves.”

The URA board will vote to authorize the agency to issue a bond at its regular meeting Thursday. City council must also pass legislation of its own; a bill was introduced on Tuesday.