Why Affordable Housing Is Hard to Build
There are lots of ideas out there. None of them are working very well.
In just about every political constituency in the country, there are things you can’t say and expect to get elected. You can’t endorse gun control in Tennessee. You can’t make light of climate change in Seattle. In Arlington, Va., where I live, you have to watch what you say about affordable housing.
To question the suburban county’s ambitious subsidized housing goals is to risk alienating what is perhaps the most vocal lobby in town. I know that the citizens of Arlington who advocate for expanded housing opportunity don’t think of themselves as power brokers. They don’t put big sums of money into campaigns. They’re almost always quiet and polite. But they are in possession of a sacred cow, and they know how to milk it.
I don’t say this as a criticism, just an observation. There are worse things for a county to be obsessed with than providing decent shelter for working people who need it. But the uniformity of elite opinion sometimes precludes constructive debate on a subject for which the best policy choices are far from clear.
There’s no doubt that Arlington has a housing problem. Back in 2000, it had more than 20,000 places to live that were deemed affordable to low- and moderate-income residents just on the basis of market price. Since then, more than 13,000 of these units have disappeared, casualties of Arlington’s emergence as an upscale destination for affluent young professionals. That leaves at least 7,000 less-fortunate people, many of them employed in the county, who can’t afford to live there.
Arlington’s elected officials have been promising to do something about this for more than a decade. In 2005 the county board passed an ordinance directing residential developers either to create affordable housing in their new projects or to pay a fee into an affordable housing fund. The majority of them chose to pay the money, and by 2014 the county had amassed more than $12 million in the fund while falling far short of the annual affordable housing targets.
So in 2015 the board unanimously approved an affordable housing master plan, committing to the creation of 400 new units every year, eventually reaching the number that existed before the rapid decline began. Some of this housing would be created through loans to private developers who agree to make their apartments affordable; some would rely on “bonus density” awarded in exchange for making portions of a new project rent-reduced.
The master plan won widespread approval even though it wasn’t apparent how the target of 400 units per year might be reached. Over the previous five years, Arlington had been averaging about 220 new affordable units annually and in some years far less, despite relatively generous outlays from the housing fund. There was no estimate of how much the county might need to spend in coming years to reach its goal.
There is one way to create affordable housing without spending much public money, and that’s through mandatory inclusionary zoning. It’s a simple idea: You just require a developer to promise a fixed number of affordable units in order to get a project approved.
It’s not hard to see the appeal of this to financially strapped communities, but it’s a risky game. If you set the mandate too high, projects don’t pencil out and buildings don’t get built. If the developer agrees to participate but there’s a high ceiling on income eligibility, then the project may be a nice gift to a few middle-income families but do virtually nothing for the poorer ones who need help the most.
These are issues that local governments all over the country are wrestling with right now. This month, San Francisco will vote on a ballot measure that would mandate developers to set aside 25 percent of new dwelling units in designated parts of the city for rent-burdened families. In San Francisco, 45 percent of all tenants are paying more than half their incomes for rent; anything above 30 percent is generally considered a burden. We’re not necessarily talking about poor people here: Some units would be available to anyone making less than 140 percent of the median area household income. For the San Francisco area, that comes to $128,000 for a family of four.
The ballot measure has drawn the opposition of Mayor Ed Lee, who thinks more can be accomplished through density bonuses than through rigid set-asides. Lee fought against putting the 25 percent mandate on the ballot, but lost the argument to the Board of Supervisors. In Lee’s view, a quarter of all the projects currently being planned in some neighborhoods won’t be built if the measure passes.
San Francisco actually has had an inclusionary zoning law since 2002, and it has been a flop. It mandates a 12 percent affordable set-aside, but allows developers to escape the mandate by paying a fee to the city. As in Arlington, this is what they have done. A study by the research firm BAE Urban Economics found in 2014 that after 12 years the San Francisco law had brought in $58.8 million in developers’ fees and had generated 1,560 units. That’s better than nothing, but it’s a drop in the bucket for a city facing an affordability problem in virtually every neighborhood.
Just about every city that has tried an inclusionary zoning law in recent years has had a similar experience. In some cases, the results have been much worse. According to BAE, Chicago’s inclusion law produced $19 million in 11 years, but only 760 affordable units. Thirteen years of inclusionary zoning in Seattle brought the city $31.6 million in fees and a grand total of 56 units. As the urbanist Daniel Hertz wrote recently, inclusionary zoning has been “more powerful as a symbol than as a way of helping people.”
Of course, it’s possible to argue that the problem isn’t inclusionary zoning but flabby and loophole-ridden laws. Virtually all the laws passed since 2000 have allowed developers to pay their way out of the mandate. Maybe if you passed a law with some real carrots and some real sticks, you might get somewhere. That question may be answered in the coming years in New York City.
After winning election in 2014 on a platform that pounded away at affordable housing, Mayor Bill de Blasio pushed through the city council a law that imposes mandatory set-asides of 20 to 30 percent in a whole range of neighborhoods that will be rezoned to encourage the construction of multifamily projects. The goals of this effort aren’t merely ambitious; they’re enormous. The mayor’s plan aims to create or preserve 200,000 units of affordable housing over a period of 10 years, at an estimated cost, public and private, of $41 billion. “Years from now,” the mayor declared as he signed the bill into law, “we will look back on this as a watershed moment when we turned the tide to keep our city a place for everyone.”
Whether 200,000 is an achievable number is open to debate. No one disputes that New York’s law will generate quite a bit of subsidized housing -- far more than any city has been able to build in the recent past. What else it may generate is also a debatable question.
Among those who have opposed the law are community activists who argue that it will mostly produce housing for the middle class, not the neediest class. The median income for a family of four in the New York area is $86,300. Some of the new units will go to people earning more than this amount -- as much as 115 percent of the median in some cases. The exact numbers will be determined by the city council members representing each district. But families with an income of $40,000 or less may get only about a fifth of the new or reclaimed units.
Making New York affordable for the middle class is, on its own, a desirable objective. But critics of the law believe the true beneficiaries will be affluent renters who will occupy 70 to 80 percent of the units in buildings built under the set-aside. Many of them will pay whatever the market can bear to live in luxury units in projects that wouldn’t have been built prior to the law’s passage. Critics worry that it will drive up rents of the older properties in the surrounding neighborhoods, displacing more of the poor than will be affordably housed under the new rules. They may or may not be right; at this point, nobody knows.
Despite the uncertainties, there’s little doubt that mandatory inclusionary zoning is emerging as the solution du jour for a lot of large cities. This will continue even in the absence of any solid evidence that it works. I’m inclined to agree with Daniel Hertz and his fellow urban critic Joe Cortright of the City Observatory that the affordable housing problem may not be fully solvable at the local level. Hertz and Cortwright argue that the ultimate answer might have to be federal action: Curtailing the federal tax deduction for home mortgages and using the money to pay for moderate-income rental vouchers, for example, would raise billions of dollars almost instantly. Of course, that isn’t politically possible, so there’s limited value to discussing it at this point.
But debating the issue in all its complexities is something any community ought to do as it ponders options for confronting a worsening problem. That discussion will be painful in itself, but it’s better than starting with assumptions whose validity no one has yet managed to establish.