Local funds are critical to the financing of affordable housing. The combination of bank financing and tax credits will always leave a gap in high-cost markets like the Washington, D.C. region. As a result, very- and extremely- low income housing communities are most in need of a wide variety of gap funding. Federal resources, including CDBG and HOME funds, are frequently used to partially close that gap, but in recent years many jurisdictions have seen cuts to these financing tools. Locally-generated funds have become increasingly important to help bridge the financing gap, and are becoming a growing component to affordable housing funding, overall. In fact, several jurisdictions within the region—including the city of Alexandria and Arlington and Prince William counties—generate more than half of the current public funding for affordable housing from local sources.
After decades of public housing development that segregated people by race and income and led to pockets of enduring concentrated poverty – housing advocates, government officials and others now promote the development of mixed-income housing to help meet affordable housing needs. With the release by HUD of the affirmatively furthering fair housing (AFFH) rule, there is renewed attention to the feasibility and effectiveness of fostering communities that include households of all incomes. Through the HOPE VI and Choice Neighborhoods programs, the Federal government supports the development of mixed-income housing developments. Outside of these Federal programs, developers have found creative ways to build communities that include housing affordable to a range of incomes. Some neighborhoods have become mixed-income through rapid gentrification and private investment.
Over 20% of DC’s households make less than $25,000 per year. About the same number make over $150,000. That first group has has shrunk since 2000, when it accounted for over 30% of the population, while the number of high-income residents has more than doubled.
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High-cost regions around the country have become increasingly unaffordable to many of the workers who serve the community, and there can be repercussions for persistent high housing costs and a lack of a sufficient supply of affordable housing. Recent reports have demonstrated that more young workers are deciding to pick up and movefrom high cost cities to places with more affordable housing. Insufficient housing that is affordable to the workforce puts at risk the sustainability of the economy as high-cost regions have increasing difficulty attracting and retaining workers.
One key reason rental affordability remains a challenge in the region is that we are not building enough overall housing in these places. Indeed, recent research and commentary have suggested that limited housing development has propped up housing costs in high cost cities. A plethora of reasons—including high land costs, local zoning and land use regulations, NIMBYism, and insufficient federal and state resources—contribute to the difficulty of producing enough affordable rental housing in high-cost places like Washington DC, San Francisco, and Boston.
In addition, in high-cost areas, if is very difficult to build housing that is priced at levels affordable to low- and moderate-income households. As federal subsidies for affordable rental housing continue to fall short of the need, the role of local governments in the development and preservation of affordable housing has become increasingly important. Jurisdictions in high cost regions need to be particularly innovative and strategic to find ways to evolved considerably.
Here are several approaches that have been adopted by some high-cost jurisdictions to increase the supply of affordable housing.
1. Tie affordability requirements to increased density
In many places around the country, height and other zoning restrictions could be relaxed to expand housing supply, and these development incentives could be linked to the provision of affordable housing. “Inclusionary upzoning,” which links affordability requirements to increased density, is a policy used in jurisdictions across the Washington DC region, including Arlington and Fairfax counties, and other high cost markets have adopted policies that aggressively push for the development of affordable housing as market of re-zonings, including New York, Los Angeles, and San Francisco.
2. Make use of public land for affordable housing
Reducing the land costs of a residential project can be a valuable way to foster housing affordability for lower-income residents in high cost areas. Across the country, local jurisdictions are taking a broad view of public land development opportunities, exploring the potential for affordable housing on not just vacant publicly held sites but also under-utilized parking lots, sites where no-longer-needed public facilities are located, and—increasingly—as part of the development of new public facilities such as community centers, libraries, fire stations, and police stations.
A recent report prepared for ULI Washington highlights some of the best practices in local public land policy and development in the Washington DC region. Other innovative and effective public land policies have been adopted in San Francisco and in King County, Washington, among others.
3. Consider establishing commercial linkage fees to fund affordable housing development
Commercial linkage fees are a form of impact fee assessed on new commercial developments or major employers based on the need for housing generated by new and expanding businesses. Revenues generated by the fee can be used to help fund the development of affordable housing opportunities within the locality. A variety of methods can be used to determine appropriate linkage fees; many jurisdictions have adopted as Jobs-Housing Nexus Analysis approach.
Seattle has debating thesuitability and specific design features of a commercial linkage fee policy, which advocates claimed could produce five to 10 times the amount of affordable housing the city gets under its current incentive program. In Boulder, city leaders have considered a commercial linkage fee—on top of their existing capital facilities impact fee—to mitigate the upward pressure on home prices and rents resulting from strong job growth. It is estimated that the fee could bring in between two and three million dollars a year for affordable housing in the city of Boulder.
4. Require or incentivize mixed-income developments near transit
In many cases, investments in transit and other infrastructure catalyze increases in the values of properties that are well-located near the new amenities. While this growth can be positive for the overall neighborhood, it can also threaten the continued availability and opportunities for the construction of new affordable housing, especially for families with very low incomes.
Chicago recently amended its affordable housing ordinance to provide incentives to developers that build more than half of a project’s required affordable housing units in transit-served locations. The new incentives would result in a greater number of mixed-income properties near transit and would benefit lower-income households, who are more likely than higher-income households to use transit.
The city of Denver implemented a Transit-Oriented Development Fund in 2010 designed to help create affordable housing in transit-accessible locations. The city expanded investments to the fund in December 2014, recognizing the growing need associated with the city’s fast-rising rents.
5. Revise and/or streamline the development review and re-zoning process
A report by the Urban Land Institute and Enterprise Community Partners offers a set of recommendations for how to make the development review process more efficient to make it easier and less costly to produce below market rate housing. Some of the key recommendations related to the development review process include coordinating steps in the review process, creating clarity in the public engagement process, and making explicit the incentives associated with affordable housing provision.
In Los Angeles, the Planning Department is rewriting the city’s 70-year old zoning codeto better reflect the community’s needs and the market realities developers face. The goal is to create clearer standards and more focused community plans that will help expand the supply of affordable housing in the city.
6. Review and revise parking requirements
Minimum parking standards can make it more difficult to build affordable housingby increasing the overall cost of the development and by reducing the amount of housing that can be built on site. To help ensure that parking requirements do not impeded new affordable housing construction, local jurisdictions can revise parking standards for all new development or reduce or waive standards for certain types of housing (i.e. affordable or housing for older adults, or units located near public transit) on a discretionary basis. Short of making changes to parking requirements, jurisdictions could consider studying the current parking policies and local parking demand to better understand residents’ parking needs, particularly in developments located near transit.
The city of San Diego conducted a parking study in 2011 that analyzed local parking needs, reviewed best practices from other places around the country and made recommendations for how to modify the city’s parking requirements. Key considerations from the report include differentiating parking requirements based on building type and with consideration of access to transit and walkability of the neighborhoods.
7. Experiment with new building types
As housing needs grow and change, there are opportunities to encourage experimentation around building types. Many high-cost jurisdictions have adopted accessory dwelling unit (ADU) ordinances, which outline the requirements for creating small housing units set aside either within or attached to a single-family home or located on the same lot. Portland, Oregon is just one example of an ADU ordinance that has successfully create smaller, less expensive housing units throughout the city. Other jurisdictions have explored zoning changes that would allow for the construction of so-called “tiny houses,” which have gained popularity in recent years.
In San Francisco, one way that has been suggested to spur affordable housing development is to provide developers with an opportunity to experiment with different housing models, including co-housing and other shared housing models. While not allowed under typical zoning regulations, the experimental projects can offer some evidence about the viability of new housing models to expand affordable housing options.
Like transportation and environmental quality, housing is a regional issue. However, unlike with those other areas, a regional approach to housing policy has been largely a non-starter, despite its importance to the region’s overall well-being. We know a lot about the region’s housing needs. Researchfrom the George Mason University Center for Regional Analysis has analyzed the amount and types of housing that will be needed to support sustainable regional economic growth. New data from the Census Bureau shows that last year population growth in the region slowed; that slowdown has been attributed to weaker economic growth as well as to the region’s high cost of living.
A lack of a regional approach to affordable housing exacerbates income and racial inequality throughout the region. According to a recent report by the Urban Institute, there is a severe shortage of housing regionwide that is affordable to extremely low income individuals and families. Lower-income households that access affordable housing with a voucher tend to be concentrated in higher-poverty, lower-opportunity neighborhoods. Richard Florida and his collaborators have shown that the Washington DC region has a relatively high level of economic segregation compared to other US metro areas. And this map of poverty by race shows that poor African Americans—and to a lesser extent Hispanics—are concentrated in certain parts of the region.
In the Washington DC area, we are fortunate to live in a prosperous region with a myriad of opportunities that can support individual and family economic well-being and success. Thus, we are better positioned than some other regions to create real regional tools to expand housing options. There are challenges, of course. We have less governmental fragmentation than some other parts of the country, like the northeast; however, we face the challenge of three separate states (or state-like bodies) with different rules and priorities. But we can overcome that and other obstacles to regionalism. A regional approach to meeting the region’s housing needs allows for the intentional connection of affordable housing to employment opportunities, access to transportation and transit options, and quality schools in a way that is more comprehensive than what individual jurisdictions can achieve on their own. When jurisdictions act collectively, the region as a whole benefits.
The Washington DC metro area is widely recognized as being one of the highest cost regions in the country. Recent reports show that it is more expensive to live than either New York or San Francisco. According to data from the American Community Survey, the median rent in the Washington DC region (which includes more than 20 local jurisdictions in Maryland, Virginia and West Virginia, along with the District of Columbia) increased by more than 42 percent between 2005 and 2014 while median earnings grew by only 12 percent. A detailed analysis of the region’s housing supply has found that there is a critical shortage of housing that is affordable to low- and moderate-income families and individuals. Economic and demographic trends suggest that the demand for lower-cost housing will only grow over the next decade. The region needs more overall housing, and in order to build inclusive, diverse and sustainable places, we must proactively plan for the coming housing needs and to think creatively about solutions that help expand affordable housing opportunities.
There has been a lot of new residential construction recently in the Washington DC region and in the District specifically. However, the vast majority of new construction has been high-end, luxury apartments, which meets the needs of only a small part of the overall housing demand. Between 2005 and 2012, the number of rental units available for over $1,500 a month doubled in the District, while the number of units priced under $800 dropped dramatically.
Over the next 20 years, we will need more than a half a million net new housing units in the Washington DC metro area, simply to accommodate new workers. A range of housing types and prices are needed to house workers and families all along the income spectrum. Several economic and demographic trends will drive the need for lower-cost rental and multi-family housing in the Washington DC region over the next 20 years:
The local economy. The Washington DC metropolitan area is expected to add hundreds of thousands of new jobs over the next 20 years, but there is a structural shift underway in the economy where growth in the region’s high-wage government and professional services jobs will slow while lower-wage service sector jobs will be a growing part of the economy. Health and education services, construction and leisure and hospitality jobs have recovered while higher-paying Federal government jobs have been on the decline and growth in the professional services sector has slowed. When workers have lower wages, they can afford to spend less on housing.
The age of the population. The Millennial population is currently between the ages of 18 and 33 and is beginning to reach the age where they are starting careers and families. They are also starting out in difficult economic conditions and with mounting student debt. Many are still living at home or are doubled- or tripled-up. When they are ready for their own place, they will be limited in what they can afford. At the same time, the leading edge of the Baby Boomer population is just reaching their mid-60s, many entering retirement age with fewer resources saved and less equity built up in their homes. Many Boomers who are looking to downsize when they shift to a fixed retirement income will also be on the market for lower-cost, smaller housing.
More one person households. As Millennials delay marriage and childbearing—and as older adults live longer—there will be a rise in the number of one-person households, which means a lower income to spend on housing. As a result, these one-person households will be looking for smaller and less expensive homes.
Growing preference—and necessity—for renting. Because young workers will constitute a growing share of the region’s population over the coming decade—and because young people are more likely to rent than older people—there will be strong demand for rental housing. At the same time, many households who faced foreclosure or who have difficulty accessing the current tight mortgage market have become renters by necessity. A study I did while at the GMU Center for Regional Analysis showed that 44 percent of the new housing that will be needed in the Washington DC region over the next 20 years will be rental, compared to just 36 percent of the existing housing stock.
Forecasting the future can often be difficult. However, there are clear demographic and economic signs pointing to growing needs for lower-cost housing. Housing that is affordable to lower-income households is very difficult to build without significant subsidies or incentives. Local commitment of dedicated funding for affordable housing can help facilitate the development of lower-cost housing. Modifications to land use and zoning regulations can encourage higher density housing, which can be built at lower per-unit costs. And much of the more affordable housing that will be needed in the future is existing, rather than new, housing, which means preservation is also key. The risks of not having enough affordable housing are a loss of economic and demographic diversity, a potentially slower-growing economy, and a decline in our communities’ overall quality of life.