The Local Solutions in Action series highlights strategies for expanding housing options and increasing housing affordability. The focus is on land use, zoning, financial and other regulatory tools that are available to cities, counties and towns that can be used to meet the housing needs of their residents and workforce.
Housing Preservation Programs
Preserving affordable housing is a critical component of a local housing strategy. Both subsidized and non-subsidized (i.e., naturally occurring or market-rate) affordable rental housing may be at risk of being lost from the affordable housing stock. Subsidized housing are housing units that are supported by a federal, state or local program where rents and incomes are restricted based on program rules. Affordability periods are also set by program rules. Naturally occurring, or market-rate affordable housing, are properties where rents are affordable to lower-income households by virtue of the size, age, location or other characteristics of the properties; there is no public subsidy and no affordability guarantee. Recent analysis by the Urban Land Institute and RCLCO has found that about half of the affordable rental units in the U.S. are naturally occurring or market-rate affordable units.
Subsidized affordable housing becomes unaffordable due to expiring affordability contracts. Naturally occurring affordable housing can become unaffordable as a result of market pressures that can lead to redevelopment, rent increases, or condominium conversion. According to the National Preservation Database, nearly 500,000 subsidized housing units in the U.S. are at risk of being lost from the housing stock in the next five years due to expiring affordability contracts.
It is harder to measure losses in the naturally-occurring affordable housing (NOAH) stock. In Northern Virginia, Arlington County has lost over 14,500 NOAH units (affordable at or below 60% AMI). The City of Alexandria has lost 16,000 NOAH units. These figures represent 80 to 90 percent of the naturally occurring affordable housing stock in these communities.
There are several reasons to focus on housing preservation. In many cases, it is less expensive to rehab existing housing than to build new affordable housing. Existing affordable housing can be an important source of family-sized units (e.g. units with 3, 4 or more bedrooms). In many communities, naturally occurring affordable housing is located in gentrifying neighborhoods where there are increasing services and amenities that would be a benefit to lower-income families.
Preservation policies can target resources to specific units or buildings, or can more generally focus on preserving residents’ access to a certain number or share of affordable units in a particular neighborhood or area. Preserving units can mean preserving rents at specified below-market levels or can go further to require that rents remain low and that units be occupied by renters with incomes below a particular threshold.
Some examples of best practices in housing preservation include the following:
Property tax exemption and abatement programs offer property owners a reduction of property taxes in exchange for keeping units affordable to lower-income renters. Minneapolis’ 4d program is an example of a local effort that promotes the state’s property tax exemption policy and assists property owners in taking advantage of the incentive.
Rehabilitation programs provide technical assistance and/or financial resources to owners of (usually) smaller rental properties to renovate their properties to help ensure that their units have rents affordable to low-income households and are kept safe and up-to-code. St. Paul, Minnesota’s Rental Rehabilitation Loan Program provides financial resources to responsible landlords desiring to upgrade their properties by making property improvements that increase the safety and quality rental units.
Right of first refusal policies are local policies giving local governments, public housing agencies, nonprofit organizations and/or tenant groups have the right to match contracts on affordable multifamily rental housing being sold. Montgomery County, Maryland and its combined public housing and housing finance agency, the Housing Opportunities Commission (HOC), or any tenant organization, have the right to match contracts on multifamily rental properties built before 1981 or on rental buildings being sold for conversion to condominiums.
Housing preservation districts are an overlay to a community’s zoning code designed to encourage, incentive or require housing preservation. Arlington County, Virginia recently adopted new overlays that allow a “context-appropriate spectrum of development, ranging from renovation and addition to infill and redevelopment in exchange for dedicated affordable housing units.”
Preservation funds provide a dedicated pool of resources targeting housing preservation efforts. A new regional initial spearheaded by JBGSmith and the Federal City Council in the Washington DC area, the Washington Housing Initiative, has been established with the goal of bringing private-sector resources to preserve 2,000 to 3,000 units of affordable rental housing throughout the region. The Impact Pool, a vehicle managed by JBGSmith to provide capital for the acquisition and development of affordable workforce housing in High-Impact Locations. Capital from the Impact Pool will bridge the gap between traditional mortgage financing and charitable contributions with mezzanine investments that provide sufficient investor returns coupled with long-term affordability and neighborhood services.
Let us know if we can provide additional information on housing preservation programs. Email firstname.lastname@example.org or call 703-598-1220.