If city manager Ruffin Hall’s budget is any indication, Raleigh is finally getting serious about affordable housingand just in time for the countywide transit referendum that will be on the ballot in November. The city’s plan envisions new affordable housing developments located within a half mile of existing or proposed rail or bus rapid transit stations. Indeed, for the policy to work, it will have to be plotted in tandem with the Wake County transit plan; if you can rely on public transportation and don’t need a car, life in the city becomes more affordable.

Under the “penny for housing” proposal pushed by council members Mary-Ann Baldwin and Corey Branch, the city will collect an additional $5.7 million in property taxes each year specifically for affordable housing. Property owners currently pay a tax rate 42 cents for every $100 of assessed value, or $842 a year for a home appraised at $200,000. With a one-cent property tax rate increase, those homeowners will pay an extra $20 a year. The proposal means that a dedicated, permanent funding source will be available, something Raleigh has never had before.

“The ‘penny for housing’ tax is a progressive tax that helps people in low-income communities to access affordable housing that they’re being priced out of,” Erika Moss, a field organizer for PowerUp NC, which advocates for housing equity, said at a city budget meeting two weeks ago.

Larry Jarvis, director of the city’s Housing and Neighborhoods Department, says that, of the $5.7 million, $5 million will be used to support the creation or preservation of affordable rental units in areas near employment hubs, near existing and proposed transit lines, and in areas in and around downtown.

The city’s goal is to prevent further concentrations of minority and low-income people and subsidized housing; thus, new subsidized developments won’t be allowed in census tracts with high percentages of minorities or low-income residentswith a few exceptions, like developments near transit lines.

The remaining $700,000 will go toward the city’s homeowner rehabilitation program, particularly in southeast Raleigh, Jarvis says. Low-income homeowners who want to make repairs to their homes can apply for a zero-interest loan they will pay back on their own timetable.

Hall’s budget, which the city council adopted Monday afternoon, estimates the city will be able to build an additional 125 rental units each year, which would bring the city’s total annual output to 325. Right now, the city builds two hundred units each year using federal funds.

Affordable housing advocates say the proposal is a good startand far better than doing nothing. But in a city where nearly thirty-two thousand renters and nearly thirteen thousand homeowners pay more than 30 percent of the annual median income for housingthe benchmark for whether housing is affordableand about half of them pay more than 50 percent of the AMI for housing, the city still has work to do.

Samuel Gunter, the director of policy and advocacy at the North Carolina Housing Coalition, says a Raleigh resident would have to work the equivalent of two-and-a-half minimum wage jobs, full-time, to afford an average two-bedroom apartment.

“We are so far away from meeting the need,” says Kevin Campbell, director of Habitat for Humanity of Wake County. “It’s a great step, it’s a huge step, in many ways it’s a game changer. But we are still far off from meeting the need. And the need is growing so substantially, and the market forces are so strong.”

The “penny for housing” model was introduced in Durham in 2012 and in Chapel Hill in 2014. The city’s budget will actually lower the property tax rate slightly, but, factoring in countywide property reappraisals, most people will pay more.

In the past, Raleigh has issued affordable housing bonds on an unpredictable schedule: four bonds since 1990, including the last one in 2011, worth $16 million. Projects built using bond money include Taft Development Group’s Wakefield Commons, CASA’s Sunnybrook Village, and DHIC’s Booker Park North.

Raleigh could have chosen to do what Charlotte doesthe city issues affordable housing bonds worth $15 million every two yearsor to create a tax increment financing district across downtown, in which a portion of the increasing tax revenue associated with new development is collected for affordable housing.

But Hall opted to raise the property tax after council members pushed for it.

“What I like about the ‘penny for housing’ concept is that, as the overall tax base grows, that penny amount grows, so it’s a way to keep pace with the need,” says Campbell.

Advocates say securing affordable housing in conjunction with developing the Wake transit plan will be crucial.

“Raleigh is the biggest piece in the transit plan, and committing funding to affordable housing is critical to making the plan a success,” says Gunter.

He compares Raleigh to Austin, which, as it grew, saw an influx of low-wage jobs into its downtown. Those workers couldn’t afford to live in downtown Austin, which led to terrible traffic conditions.

“Now, it is a nightmare to get around Austin, and the affordable housing crisis is crazy,” Gunter says. “Raleigh hasn’t blown up like Austin yet, but we’re preparing for it.”

Still, Raleigh is going to have to look at other revenue options for affordable housing down the line, Campbell says. Demand for housing is far outweighing supply, which drives up prices.

“The other side of it is peoples’ income and wages come into play, and wage growth hasn’t kept up with the cost of housing,” he says. “But there is a good affordable housing community here in Wake that we are proud to be part of. The development capacity is here, so it’s really about funding in whatever ways we can. A penny for housing is a start.”

This article appeared in print with the headline “Penny Ante”