One of the biggest determinants of a failing school is transiency—the movement of a student out of a set learning environment after only a short period of time—and one of the biggest predictors of transiency rates in a community is a lack of safe, affordable housing. Vulnerable and with limited economic resources, low-income tenants are forced to move when rates increase beyond affordability. In an environment of rising rents, a typical low-income apartment community loses 60 to 75 percent of its tenants in any given year, and if the landlord implements a major rental increase, then the apartment community could lose 100 percent of its tenants. Heightened criminal activity can also impact transiency, as concerned parents move their children to safer environments. The interconnection between such housing instability and school performance is direct and immediate.
In Atlanta, 83.5 percent of renters have an average income below $35,000 (slightly above the poverty line of $24,600 for a family of four). Based on federal guidelines, it is estimated that a family of four living at the poverty line can afford to pay $683 per month in rent, or one-third of their monthly gross income. Yet, fewer and fewer options exist within this price point for working poor families, with the average rental rate for a modest, 2-bedroom apartment in the city of Atlanta at $949 per month. Between 2010 and 2014, the Atlanta Federal Reserve published metrics showing that the city lost more than 5,000 affordable housing units offering rents under $700 per month, while in the same period rents increased an average of 23.4 percent.
Where affordable housing communities still exist, they are often characterized by unpredictable increases in rent, high crime rates, mold, and general decay and disrepair. Under these adverse conditions, many low-income working families are forced to move quickly and often, relocating their children to new schools with each move. These moves often result in families losing access to basic health care and other resources that support academic success.
A key component of the 3Star model is its pricing flexibility. The existing “affordable housing” environment rewards landlords for new construction which, requires enormous capital investment of $120,000-$150,000 per unit and does not meet the current demand in exchange for a modest set aside of 10-15% of the new development at “affordable prices”. The 3Star model can purchase and operate properties at 30 percent of the cost of new construction for 100% “affordability”, thus sustaining a more affordable operating model. 3Star looks for existing “Class C” properties (older complexes in marginal condition) near low-performing schools, to purchase and quickly rehabilitate, often in less than 18 months, with the assistance of private philanthropy to make the numbers attractive for affordability. Wherever there are existing large apartment complexes (150+ units is ideal), low-performing schools (in the bottom third of published rankings), and families in need of affordable housing, the 3Star model can be implemented. There is a significant availability of property in the metro Atlanta area that meets these metrics. 3Star’s ability to provide affordable housing w social programs can lead to better learning and health outcomes, greater civic involvement, and consistent employment. Stability becomes a multiplier effect, and it allows for opportunities that set the foundation for success.
The success of the 3Star financial model hinges on its ability to purchase complexes at less than $35,000 per unit, with any costs above that per unit amount supported by philanthropy – a onetime subsidy. After initial philanthropic or investment dollars are leveraged to help purchase and renovate the property, 3Star’s holistic model of affordable housing and ongoing programmatic services is entirely self-supporting. Rates are kept affordable and are tied to accommodate those at or below the federal poverty level or an average of $683 per month as determined by the 2017 Federal Poverty Guidelines. This commitment by 3Star is documented through a set of covenants to further guide the purchase, management, and operations of its properties, outlining target communities, board composition and governance, ownership, rent and tenant composition, Star-C programming, transparent financial reporting and metrics, and proceeds. With such covenants in place, 3Star ensures the sustainability and replicability of its model.