Why Indianapolis still doesn't have enough affordable housing

Mayor Joe Hogsett's administration has made efforts to increase affordable housing development in the past five years, but Indianapolis still is severely short of homes that very low-income families can afford.

Hogsett acknowledged in his mayoral bid announcement for a third term that he knows "the best way to end the violence in our streets is by helping our families stay in their homes."

But affordable housing development still falls short of what is needed, hampered, in part, by a lack of federal money and state laws, advocates said.

A recent study by IUPUI’s community information system SAVI found that for every 10 extremely low-income households of any size, there are only six affordable rental homes in the region.

There is also virtually no vacancy at that price point of units, meaning it is very hard for extremely low-income households to find an available unit, the SAVI study stated. 

Here's what you need to know about how has Indianapolis done on affordable housing development and what still needs to happen.

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There still is a shortage of homes for extremely low-income individuals

Since 2017, the city has supported the construction of 3,842 units of affordable rental housing and 887 permanent supportive housing units by private and nonprofit developers, according to an IndyStar analysis of city data. Permanent supportive housing units are a type of housing for formerly homeless people that includes social services and often cover rent with housing vouchers.

Of the affordable rental units, no more than about 744 are reserved for and required to be affordable to very low-income individuals, who are those making $32,000 for a one-person household or $41,000 for a three-person household.

The city has also supported the creation of 333 affordable homes for lower-income households to own.

The money has come from a menagerie of sources, including federal Department of Housing grants, city tax abatements, the payments in lieu of taxes program, tax increment financing and the city's Housing Trust Fund, which funnels fees collected from recorded documents to support social services in housing for formerly homeless people.

But there still is a shortage of 33,600 homes for extremely low-income individuals in Indianapolis, according to the SAVI study.

“I don’t know that it’s ever enough,” Deputy Mayor Jeff Bennett told IndyStar when asked if the city is building enough affordable housing to meet the shortage. “When we talk about pipeline, there’s not an end cap to that.”

Indiana has a shortage of affordable homes

This problem extends far beyond the Circle City to the whole state. Indiana has a shortage of homes affordable to very low-income and extremely low-income renters or those who earn less than 50% of the area median income, which is about $41,000 for a four-person household.

For every 100 households in this income group, there are only 78 homes, according to an April report released by the National Low Income Housing Coalition (NLIHC) and Prosperity Indiana.

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The situation is most dire for extremely low-income renters – those earning less than 30% of the state area median income, or about $24,000 for a four-person household.

The report found that Indiana has the highest housing cost burden among all Midwest states for the lowest-income residents, with 72% of these households spending more than half their income on housing.

There is a shortage of 135,000 homes for these renters.

Indiana legislature may be prioritizing affordable housing

The statehouse might be making moves to increase the supply of affordable housing, with legislators indicating it will be a priority this upcoming session.

It also passed a bill last session creating a new statewide affordable housing tax credit that the city said will be a huge boost to its ability to build low-income housing using the federal low-income housing tax credit program, which is the nationwide affordable housing program.

But that might not be enough. Prosperity Indiana recommended in its report that federal legislation also be adopted to increase housing stability.

Indianapolis is hamstrung in what it can do to control or stabilize rent prices, and thus increase the supply of affordable housing through that method, because the Indiana General Assembly banned cities in 2017 from regulating rents in the private market.

“Why is it that Indiana is getting hit with so many different types of housing burdens?” Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said. “It just seems like it’s (state) bills like that that are causing people so much distress in being able to find safe, affordable housing options.”

In cities like New York and San Francisco where rent control exists, it’s the largest source of affordable housing, a 2019 report on the effectiveness of rent control found. But the majority of states, like Indiana, ban local governments from implementing rent control.

Solution must include preservation of existing affordable housing

The solution now must lie beyond simply constructing new affordable homes, Andrew Bradley, policy director of Prosperity Indiana, told IndyStar.

“To think about supply simply as building new units," Bradley said, "is going to be so expensive.”

Advocates say that the solution must include the preservation of existing affordable housing, most of which only remains affordable for a fixed period, typically 10 to 30 years.

“If you have units that have fallen into disrepair and lack the resources for owners, renters, or property managers to keep them up, then they’re no longer part of supply of truly affordable and available housing,” Bradley said.

Of the approximately 7,500 affordable housing units with mandated affordability in Indianapolis, 992 units will reach the end of the required affordability period by the end of 2026, the 2020 Inclusive Growth and Anti-Displacement Policy Agenda by Grounded Solutions Network found.

Beyond Indiana, other counties and cities have successfully undertaken efforts to preserve affordable housing. Cook County, Illinois, preserved 6,200 affordable units from 2007 to 2017 through a preservation compact, which is an organization that seeks to help apartments preserve low rents by lowering property taxes and utility costs, according to the 2020 anti-displacement report.

Indianapolis does not have a preservation compact but has initiatives with the same goal, such as its owner-occupied home repair program to keep residents in their homes.

Looking for new housing solutions

Housing researchers also said Indianapolis' current model of developing affordable housing through tying financing for private developers to affordability requirements has not been successful in solving the affordable housing crisis.

City-County Councilor Ethan Evans, who represents District 4 encompassing a northeast portion of Marion County and parts of Lawrence, said the current affordability requirements under the city's tax increment financing policy are too low.

He said the city should require a higher number of units to be reserved for lower-income households when it gives out tax financing.

Contact IndyStar reporter Ko Lyn Cheang at kcheang@indystar.com or 317-903-7071. Follow her on Twitter: @kolyn_cheang.