How do we solve the housing affordability crisis?

This is the last in a 5-part series about how the Washington metropolitan area can provide housing options for its growing workforce. Read part 1, part 2, part 3, and part 4.

The Washington region is a victim of its own success when it comes to housing affordability. Our region’s strong and steady economic growth continues to generate high demand for housing from new workers. Higher wage workers compete for units, pushing up prices and rents, and leading to affordability problems along the entire income spectrum.

Coupled with this high level of demand is a slate of obstacles to housing production, including a difficult regulatory environment at the local, state, and federal levels for the construction of new housing units, fear of growth and change among current residents, and lack of regional coordination.

What will it take to solve the housing affordability problem in the Washington region? There is no single simple solution, of course, but there are ways to address many of the factors hampering housing affordability.

Demand. Prices and rents are particularly high in parts of the region that have attributes and neighborhood amenities that are in demand. Increasing the supply of these types of neighborhoods would help alleviate price pressures. When the supply of something goes up (and demand stays the same), prices fall.

While we can’t move existing neighborhoods closer to job centers, we can facilitate development around transit, encourage amenity-diverse development, and incentivize high-quality construction. Places like the Rosslyn-Ballston corridor — where demand and rents are very high — could serve as a model for the types of neighborhoods most in demand (although each locality will want to place its own flavor on these desirable places to live).

Whereas in the past we built single-family houses on suburban lots, future demand will be for more urban and smaller units, close to jobs, shopping, recreation, and other amenities. If local governments and developers are aware of this new demand, and set up the appropriate framework to achieve that type of development, the overall supply will increase and price pressures will not be as extreme. Their ability to do so will in large part depend on solving the next four issues.

Planning, zoning, and application processes. Counties and cities in the Washington area need to get ahead of the demand by preparing master plans and sector or neighborhood plans that allow mixed uses, higher densities, and transit infrastructure in certain areas where jobs and housing will concentrate. Once the right plans are in place, it is much easier for developers to tailor their development plans in the desired direction and also easier (in terms of time and money) to get plans approved.

Local governments also need to review and revise their zoning ordinances to provide more flexibility, allow mixed uses where they were previously prohibited, and encourage the development of more affordable housing. Montgomery and DC are currently reviewing their zoning ordinances, and it is likely that these two jurisdictions will be able to make the right types of adjustments to support more appropriate levels of housing development which will encourage housing affordability.

Developers recognize that their projects need to pay for some public infrastructure and community amenities. Done right, these contributions enhance their projects’ chances for market success. The problem has been the complexity of development approval processes, and their lack of transparency and predictability. Developers would prefer to know up front what they need to contribute (whether it is a fixed dollar amount per unit or per square foot) rather than to think they have reached agreement only to find a new reviewing agency has additional requests.

When plans, zoning, and development applications align, it reduces costs and timeframes for development. This provides some margin to reduce housing prices.

Neighborhood opposition. Fear of change is natural and understandable. The demand for more urban lifestyles is increasing. Yet we are trying to undo more than 30 years of sprawl and suburban living — which many people have enjoyed and want to perpetuate.

One solution is to defuse the fear of the unknown. Our suburban housing stock will continue to be available to people who prefer that lifestyle. But there are places in the metropolitan area that are well suited to a more urban form of development, and those places are the ones where more and higher density housing close to transit and jobs can be built. Each jurisdiction should clearly identify those places in master plans, legalize them through zoning changes, and educate residents about them.

To educate people, leaders and developers need to share information about successful projects, defuse fears of traffic impacts by making data on traffic counts widely available, and document environmental and lifestyle benefits of this new (though old) form of development. Financial and economic data exist too, but tend to be less persuasive to current residents. Education, information, and understanding won’t happen overnight, but it is important to have an ongoing conversation.

State and federal regulations. Reducing the impact of state and federal transportation and environmental regulations on the cost of housing production is a bit more difficult, and seems out of reach of the local jurisdictions.

Perhaps the best way to do this is to elect representatives to state houses and the US Congress who are conscious of the impact of regulations on the cost of providing new housing units. This will require the local population gaining an understanding of the relationship between regulation and housing affordability. It is time for advocates of housing affordability to transcend the local government level and be heard at higher levels of government.

Regional coordination. The region’s political fragmentation makes coordinated action difficult, but regional coordination and cooperation are necessary to ensure the continued high quality of life in the metro area. Furthermore, regional coordination needs to include all groups that have a stake in the economic vitality and housing availability in the region — local governments, affordable housing advocates, and businesses.

Groups like the Metropolitan Washington Council of Governments that convene local leaders to discuss regional issues are critically important to keeping these policy concerns in the public eye. However, the problem cannot be solved by discussion alone: regional coordination on housing issues requires true commitment in the form of money and leadership.

The Washington DC metro area would benefit from the creation of a regional housing trust fund¹, a source of dedicated funding not tied to a particular jurisdiction and contributed to from both the public and private sectors. The fund’s resources could be used to subsidize construction of affordable housing in the locations around the region where there is the greatest need.

Although the District of Columbia and the states of Maryland and Virginia also have housing trust funds (with different funding mechanisms — some dedicated, some not — and supported activities), the Washington DC region needs a regional trust fund because the people living and working here are all interrelated and support the economic health and well-being of the region. A regional housing trust fund would be different — and perhaps more challenging to establish — from those mentioned above because we live in a region with three states. Challenging, but not impossible.

Our region’s trust fund should also be supported by both the public sector (e.g. local governments) and the private sector.² The business community has a tremendous stake in the availability of housing in the region.

We must meet the challenge

There are no easy answers here, but there is a set of approaches that could individually and together ease the housing affordability crisis and to ensure that we produce enough housing to support our region’s economic vitality and sustain our quality of life.

Just as we need DC, Maryland, and Virginia to work together, and the region’s component counties and independent cities, we also need the public and private sectors to collaborate on regional housing needs. Regional leadership, setting housing affordability as a priority over other priorities, and education of existing residents are all prerequisites to solving the problem. If we don’t put these solutions to work soon, our region runs the risk of diminished economic prospects in the future.