Greater Greater Washington

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Worried about DC gentrification? A new bill would speed it up and lose affordable housing

As housing prices rise, the few affordable units in booming neighborhoods become even more important. But a new bill in the DC Council would cut the period of time when such a unit has to remain affordable, removing affordable housing in some of DC's fastest-changing neighborhoods.


Photo by Mr.TinDC on Flickr.

Right now, when the city subsidizes a new housing unit for sale, that unit has to remain affordable for at least 15 years. If an owner wants to sell the unit during that time period, he or she must sell it at a price that another similarly low-income buyer can afford. After 15 years, the owner can sell it for any price.

But a bill by Councilmember Anita Bonds would cut that affordability period to five years in neighborhoods classified as "distressed," where the poverty rate is 20% or more. That includes neighborhoods like Mt. Pleasant, Columbia Heights, and Bloomingdaleareas that were affordable 15 to 20 years ago but have quickly become out of reach for low-income households without subsidies.

The 15 year limit helps maintain a stock of low-cost units for current (and future) low-income home buyers, and helps keep affordable housing in neighborhoods whose prices might rapidly rise.

If the bill passes, within five years much of the affordable housing being bought now in these neighborhoods could be lost. The existing affordable units cost less to build than they would today, meaning it's very unlikely the city could replace the lost units without major additional public money.

There might be specific DC neighborhoods where the housing market is so slow that residents need incentives to buy even affordable units there, but that's not the case in these areas. A good bill would carefully weigh the market conditions and how much affordable housing would be lost. This bill doesn't do that.

The proposed law would also give the nonprofit developer who originally built the unit the first right to buy the unit back, but after 5 years it would be at market rate. In any of these rapidly gentrifying neighborhoods, that means the nonprofit would spend much more money to get the unit than it earned by building it. It would need an extra subsidy (on top of the original subsidy) to make the unit affordable to the next low-income buyer.

In these still-tough budget times, what jurisdiction can afford to pour brand new subsidy into the same units every five years?

Other cities and counties don't do this

The proposed change is out of step with affordability best practices across the country, and also with jurisdictions in our own backyard. It positions DC, which has in the past been a leader both locally and nationally in affordable housing policy and funding, to have some of the most lax affordability restrictions in the region when it comes to homeownership.

Arlington imposes a 30-year affordability restriction on units developed with its Affordable Housing Investment Fund. Homeowners using the mortgage assistance program (MIPAP) have to share the proceeds of a sale to help the next low-income buyer afford the property.

Montgomery County, which notably started out with 5-year restrictions back in the 1970s, has increased its affordability period to 30 years on many of the properties in the Moderately Priced Dwelling Unit (MPDU) program. According to a National Housing Institute report, the county had lost two-thirds of the affordable units it had created by the time it enacted the 30-year requirement.

The proposed DC change also breaks rank with other progressive jurisdictions around the country like San Francisco and Seattle (King County) that have typically been DC's housing peers.

What about truly distressed neighborhoods?

There may be places where long-term restrictions truly inhibit homeownership. Potential residents might refuse to buy a unit in such a neighborhood if they can't sell it for a substantial profit in a short period of time. But to find them should require a much more detailed approach than looking at the poverty rate.

Plus, poverty data can be as much as five years old by the time we get it. A gentrifying neighborhood could take more than a decade to stop being defined as "distressed." Columbia Heights, Mount Pleasant, and Bloomingdale above all began transitioning more than ten years ago. A better definition of distressed could look at current data about home values, sales price, and number of transactions.

Why have a restriction on resale at all?

Those pushing for this change argue that since a market-rate homebuyer can turn around and sell his or her house for more money when the market rises, so should anyone who purchases a subsidized unit.

If public subsidies were unlimited and the government could fund enough affordable housing for everyone, or there were enough naturally-occurring affordable housing to meet people's needs at any income level, then there wouldn't be a problem.

But in the real world where we have limited resources, it seems to make sense to say that if someone shares with you, you should share with the next person. In affordable homeownership terms, we call this concept "equity sharing."

Equity sharing models don't say that subsidized buyers walk away with no gain at all, but they don't get to walk away with everything either. Data and research from restricted homeownership models tell us that homeowners in these units tend to sell their homes at the same rate as other homeowners, within 5 to 7 years, and that about two-thirds of them are able to build enough wealth in the process to buy their next homes at market price with no deed restrictions. Brett Theodos explained this in more detail in a previous post.

A Center for Housing Policy report about affordable homeownership strategies says that well-designed programs can both protect limited public resources while also giving buyers the benefits of homeownership. Through them, the city can both help low-income buyers build wealth and keep the unit affordable for the foreseeable future.

The Coalition for Smarter Growth and City First Homes, an affordable housing nonprofit, have weighed in with a full set of recommendations to make this proposed bill less harmful. Meanwhle, the DC Affordable Housing Alliance has drafted a sign-on letter to encourage the council to support these changes; email me to sign on as an individual or an organization.

Besides Bonds, the bill's author, cosponsors include Muriel Bowser (ward 4), Kenyan McDuffie (ward 5), and Marion Barry (ward 8). Councilmembers will hear from the public about this bill on May 29th at 10:00 am. Contact Judah Gluckman to sign up to speak or to submit written comments.

Angie Rodgers is Principal of Peoples Consulting, LLC and a co-convener of the DC Affordable Housing Alliance, a coalition of individuals and organizations dedicated to promoting the development, preservation and operation of affordable housing in DC. 

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Remove the price controls, let all housing hit market price, and then provide housing vouchers based off of household income, perhaps making allowance for family size, etc.

That way, people could live where they want to live, as opposed to where urban planners tell them they will live.

If we did with food what we did with housing, then instead of food stamps (which is basically cash for food, and I proposed cash for housing), you'd either have a government-run grocery store (traditional public housing), or a brand-name grocery store, but with a separate section with price-controlled goods, and presumably lower quality goods (affordable housing mandates).

by Realism on May 22, 2014 12:05 pm • linkreport

The question is whether the goal of AH is to provide housing for poor people at the lowest price/most flexibility, to allow existing poor residents to stay in the neighborhood and get the wealth building benefits of the transition, or to maintain diversity.

We already have voucher programs that are not location specific (or less location specific) so this really is about addressing the latter two goals, and in this case, the conflict between them. The Bonds bill will be great for building the wealth of the existing residents of these units (which I guess is why it has the political support it has) but will weaken the goal of maintaining SES diversity in each neighborhood. I am not sure how important that goal is to the people of diverse with their diverse values and interests.

by AWalkerInTheCity on May 22, 2014 12:22 pm • linkreport

Realism, would the housing vouchers be for renting or buying? I think the point of the program is let people buy homes, and if you subsidize buying homes, it gives people a chance to cash in on a government investment.

Now whether or not people who need subsidies should be buying homes is a good question. Personally, I think the idea of home ownership has gotten all wrapped up in the idea of the American Dream and that therefore it is better for everyone to own their homes. I remain very skeptical, and so I'm not convinced that encouraging home ownership among the poor is a good idea. So, I also think we should move to some sort of voucher system for housing, but I don't think it solves the problem that this program is meant to address: i.e. home ownership.

by David C on May 22, 2014 12:27 pm • linkreport

This is possibly the best idea than Bonds has put forward.

The big barrier to affordable housing in DC isn't the height limit -- it is keeping such a huge chunk of goverment subsidies housing for people who make 20% of the area income.

(Well, that as future councilmebers taking advantage of goverment programs for low-income poeple.)

But yes, the sooner we start closing up the IZ housing and section 8 and return it to a market rate the better a chance to find a rental for under $1000.

by charlie on May 22, 2014 12:27 pm • linkreport

I agree with Realism and charlie - in my opinion, so-called "affordable housing" actually contributes to the problem of high housing costs rather than mitigating it. It's a self-destructive cycle.

Developers are required to make X% of their housing "affordable," or subsidized, at a significantly lower cost than the rest of the housing. This "affordable" housing is then only accessible to those in extreme poverty, who meet or exceed the arbitrary definitions of what "poor" is in terms of being eligible for assistance.

Developers then turn around and recoup some of their "losses" on these subsidized housing units by inflating prices on every other housing unit. So, while those who are "poor" receive a break, those who are struggling but not yet at the point of "poverty" - those who don't meet the standards of eligibility for assistance but who also can't afford 'market rate' - they are priced out. Only those with the wealth required to make $1500+ rent or those who are in the very bottom of the gutter of poverty - the truly rich and the truly poor remain. The average middle-class person, the average recent graduate, the lower-middle class who are not "poor" but may be struggling to stay afloat - they all become priced further and further out of the city. The rich and richer who can afford "market" rent continue to replace them, the "poor" hang on to their subsidized housing, advocacy groups and other outsiders hand-wring about how tough it is for the non-wealthy to find a home in the city and call for more and further "affordable housing" - and the cycle continues.

This wouldn't happen if there was 100% "affordable" housing - price fixing, in other words, a regional ceiling on what you can charge for rent. This also wouldn't happen if, per Realism, housing assistance was cash/vouchers instead of some arbitrary percent of units designated as "for the poor." In other words, there should either be 100% affordable units, or 0% affordable units.

by Ryan on May 22, 2014 1:02 pm • linkreport

I would like to see more investment in downpayment assistance. I think that is a much simpler process and doesn't distort the market as much. If I can buy a property for $150k when it's value is $250k then that just introduces too many problems with regard to who ultimately pockets the difference in value.

Ultimately, affordable housing should be built in affordable neighborhoods. I don't think it makes sense to spend a bunch of money so a low income person can live in Columbia Heights. There are more affordable neighborhoods in DC and the suburbs. People of modest means get priced out of neighborhoods all the time. We should focus our tax dollars on keeping a roof over people's heads, not keeping the poor in expensive neighborhoods.

by TakomaNick on May 22, 2014 1:04 pm • linkreport

A hearty "Amen!" to those pushing back on these convoluted
Rube Goldberg-type market distortions on housing.

A few thoughts:

- How about we start with the low-hanging fruit like changing historic preservation law to allow more, newer, and lower-cost housing in desirable areas. Tell the noisy jabberers of the Committee of 100 to go pound sand.

- In re "It seems to make sense to say that if someone shares with you, you should share with the next person. In affordable homeownership terms, we call this concept "equity sharing." Well...the problem here is that the people providing the subsidies that make this system work are not "sharing." Taxpayers have to pay their taxes or they go to prison. Sharing is voluntary charity; "sharing" is politicians giving away other people's money.

- Can we please do away with the term "affordable housing"? The housing is affordable to some people; it's just not affordable to the RIGHT people. So let's call it..."subsidized housing" or "affirmative housing" or "restricted to certain income groups housing." But calling it "affordable housing" is Orwellian and reality-denying.

Hayek said it best: big government programs (like those that interfere in the housing market) always create problems; but, somehow, the people that proposed the original program always see the solution as more government instead of realizing that the best solution is to scrap the original program.

Rent control, affordable housing...that is the path to madness. Let's stop going down it now.

Hill Dude

by Hill Dude on May 22, 2014 1:12 pm • linkreport

allow existing poor residents to stay in the neighborhood and get the wealth building benefits of the transition, or to maintain diversity.

There's a difference between allowing poor residents to stay in neighborhoods and allowing diversity and forcing those things. Give poor people vouchers and let them choose if they want to stay in the neighborhood or move somewhere else for that money. Let them choose where to live rather than telling them where they have to live.

They're people after all. Not some commodity that can be told where to go so others can enjoy the benefit of diversity.

Vouchers and choice work when it comes to food and schools. It can work for housing too.

by Falls Church on May 22, 2014 1:18 pm • linkreport

Also, I think there have been 5 (maybe less) IZ units SOLD -- the majority of them are being rented.

by charlie on May 22, 2014 1:18 pm • linkreport

There is no reason that poor people must live in particular neighborhoods. In fact, common sense tells you that poor people should (for their own economic sake) live in cheaper areas, like suburbs. The problem is that many people cling desperately to the failed policies of the 70's and 80's and try to keep poor people ghettoized in the city, rather than making the burbs admit that they hold the highest numbers of poor and that they have to improve their social services and public transit to help them get from place to place.

by LeDroit on May 22, 2014 1:25 pm • linkreport

"There's a difference between allowing poor residents to stay in neighborhoods and allowing diversity and forcing those things. Give poor people vouchers and let them choose if they want to stay in the neighborhood or move somewhere else for that money. Let them choose where to live rather than telling them where they have to live."

I presume a poor person currently residing in Deanwood would get the same level of voucher as someone currently residing in Mt Pleasant. The level of voucher required to make it possible for poor people remain in Mt Pleasant would, when given to the folks who live in Deanwood, etc, be very expensive. It would also, arguably, be an unwarranted windfall to the folks who live in Deanwood. That is not a feasible formula for making it possible for poor people to remain in transitioning areas, much less to maintain the long term SES diversity of those areas.

"They're people after all. Not some commodity that can be told where to go so others can enjoy the benefit of diversity."

Any person is free to refuse affordable housing. No one is being forced anywhere. Its a question of what it is we are trying to buy with AH. And if you are a firm supporter of free choice, why give a housing voucher? Why not just write a check to poor people and let them spend it as they wish?

"Vouchers and choice work when it comes to food and schools. It can work for housing too."

Leaving aside the complexities with schools, housing has specific externality aspects (that does NOT mean the laws of supply and demand do not work, but that in evaluating policy we need to take into account those externalities)

There are two relevant externalities. 1 is the benefits to poor people of their social networks, which can help them with social stability and rising out of poverty. The cost of losing those means that a poor person who has to move from Mt Pleasant to Deanwood, is in fact worse off than an existing poor resident of Deanwood - because the latter maintains their networks, while the former loses theirs. 2. The (arguable) benefits of diversity itself. Many people move to the city precisely for that (though of course some people prefer to avoid it) Its not unreasonable that citizens may be willing to expend public resources to maintain that.

by AWalkerInTheCity on May 22, 2014 1:27 pm • linkreport

"The problem is that many people cling desperately to the failed policies of the 70's and 80's and try to keep poor people ghettoized in the city,"

In fact AH programs are keeping poor people in neighborhoods that are increasingly wealthy, so its hardly ghettoizing them - and as their numbers in those places decline, while some scatter across the suburbs, AFAICT they end up in the remaining poor areas of the city (which in DC are mostly EOTR) or concentrated in the poorest suburbs. IOW ghettoized.

by AWalkerInTheCity on May 22, 2014 1:32 pm • linkreport

Home ownership has been a powerful force in creating personal wealth. This bill allows people of moderate means the chance to build up capital, that they can use to start businesses, get an education, or retire.

by Crickey7 on May 22, 2014 1:34 pm • linkreport

"Rent control, affordable housing...that is the path to madness. Let's stop going down it now."

To tyranny. Thats who Communism emerged you know - Tsarist Russia had affordable housing programs that required developers in St Petersburg to include 20% units with less than 60% AMI, that raised the price of housing for students, and as a result those student became lenists and started running gulags. Hayek had it exactly right.

I would be delighted if we could discuss the details of this particular program and bill, and not argue, for the umpteenth time, the general merits of AH.

by AWalkerInTheCity on May 22, 2014 1:35 pm • linkreport

"Home ownership has been a powerful force in creating personal wealth. This bill allows people of moderate means the chance to build up capital, that they can use to start businesses, get an education, or retire. "

It does so for the current residents of the transitioning areas, (who already had that opportunity, they just needed to wait longer to cash out)

by AWalkerInTheCity on May 22, 2014 1:37 pm • linkreport

[Deleted for violating the comment policy.] This entire analysis is based off of the assumption that low-income people will automatically try and flip their homes as soon as the vaule rises is crazy. I certainly understand the need for a plentiful stock of affordable housing, but is taking the fundemental benefits of homeownership away the only way to do it? Seems like throwing the baby out with the bath water to me.

by Nile Clements on May 22, 2014 1:38 pm • linkreport

Right, then. We'll just tell the kids to wait an additional 10 years for that education, and hope nothing happens in the interim.

An opportunity deferred is an opportunity devalued or destroyed.

by Crickey7 on May 22, 2014 1:44 pm • linkreport

I presume a poor person currently residing in Deanwood would get the same level of voucher as someone currently residing in Mt Pleasant.

Doesn't the person residing in Deanwood have the same opportunity to buy a subsidized unit as the person living in Mt. Pleasant. If so, vouchers are similar to the status quo. If not, you could also design a voucher system that gave a preference to the Mt. Pleasant person if that person today enjoys privileged access to subsidized units.

Any person is free to refuse affordable housing. No one is being forced anywhere.

True, I guess they could refuse to live in subsidized units and instead choose to be homeless. Not much of a choice but I'd agree that subsidized housing doesn't work *exactly* like internment camps.

There are two relevant externalities. 1 is the benefits to poor people of their social networks, which can help them with social stability and rising out of poverty.

If the benefits of social networks are sufficiently worth it, with vouchers a poor person could live in a smaller unit in Mt. Pleasant instead of a larger unit in Deanwood.

2. The (arguable) benefits of diversity itself. Many people move to the city precisely for that

Policies regarding poor people shouldn't be determined based on what's best for the wealthier newcomers.

Leaving aside the complexities with schools, housing has specific externality aspects

Health care has lots of externalities but we're using vouchers successfully in that case (obamacare provides vouchers to poor people who can use them to purchase private health insurance through federal and state run websites).

Why not just write a check to poor people and let them spend it as they wish?

Because they might spend it on something other than food, housing, schools or healthcare. That would be bad for them and make the program unpopular in the eyes of the public, harming their sustainability.

by Falls Church on May 22, 2014 1:47 pm • linkreport

huh? They can't get an education in places like Mt Pleasant? I don't know the details of the schools there, but that sounds really odd. And note, the disappearance of AH units in places like MtP and CoHe will mean more poor kids getting education EOTR and in Capital Heights. I don't want to diss the schools in those places, but is that really an improvement?

Obviously for the folks who own the AH units in the transitioning areas who want to cash out quickly there are many advantages to this bill. From education to (quicker) wealth building, I suppose. Thats why, it has the support it does. If everyone from the Cato fans to Marion Barry like it, it will be hard to beat.

by AWalkerInTheCity on May 22, 2014 1:49 pm • linkreport

You cannot get higher education for free. Even if tuition is free, there are other, significant expenses.

The point is that this is an avenue for residents to improve their lives dramatically. This bill enables that more than the current law, and it still forces residents to put down some roots in the community. You can't flip a property if you are required to hold it for 5 years.

by Crickey7 on May 22, 2014 1:55 pm • linkreport

"Doesn't the person residing in Deanwood have the same opportunity to buy a subsidized unit as the person living in Mt. Pleasant. If so, vouchers are similar to the status quo. If not, you could also design a voucher system that gave a preference to the Mt. Pleasant person if that person today enjoys privileged access to subsidized units."

I'm not sure. I don't know who bought those AH units or how they were selected. If the AH purchase program does NOT help existing residents to stay in their communities, than thats no longer a benefit.

"True, I guess they could refuse to live in subsidized units and instead choose to be homeless. Not much of a choice but I'd agree that subsidized housing doesn't work *exactly* like internment camps."

IIUC there are currently poor people in the region who do not live in designated AH units, who are not homeless. To some degree thats because we already have housing vouchers in the form of Section 8, and to some extent its because we still have some very cheap housing in parts of the region - and to some extent its because multiple families share apts (which is how many undocumented poor people who are ineligible for housing subsidies manage to remain housed in NoVa)

"If the benefits of social networks are sufficiently worth it, with vouchers a poor person could live in a smaller unit in Mt. Pleasant instead of a larger unit in Deanwood."

I am guessing that a larger voucher would be needed to get the legally required space in Mt P (including having opposite gender children in seperate BR's)

"Policies regarding poor people shouldn't be determined based on what's best for the wealthier newcomers."

I wonder if a referendum of poor people only would support this bill? Clearly the poor folks who own the units would, but I am unconvinced the poor folks who do not would. I don't think its fair to position this that way. Maintaining the AH in these areas gives a big benefit to the poor folks who want to live in them and otherwise could not, while at the same time providing a side benefit to the non-poor folks (recent newcomers or long established residents) who DO value SES diversity. The externality is why the more market forused outcome may not be optimal -it is NOT the only benefit.

"Health care has lots of externalities but we're using vouchers successfully in that case (obamacare provides vouchers to poor people who can use them to purchase private health insurance through federal and state run websites)."

And it provides poorer people medicaid. And the voucher receivers, like everyone else, are subject to mandates and restrictions designed to address externalities - not to mention that medicine in general is filled with restrictions on choice - if I want prescription drug X, I have to find a doctor who is willing to write the Rx (and is supposed to make sure its the best choice for me) I cannot just say I'd like some, and get it cause I have a voucher.

"Because they might spend it on something other than food, housing, schools or healthcare. That would be bad for them and make the program unpopular in the eyes of the public, harming their sustainability."

Well, then, if they can make unwise decisions on what to spend it on, they could also make unwise decisions on where to get housing (note we could give them a general voucher for housing food health care and education). And if popularity with the public matters, well, does not the popularity of AH with folks value SES diversity matter? Or does it not, simply because such folks are likely outnumbered by the new comers who want nothing more than to reduce SES diversity in their neighborhood?

by AWalkerInTheCity on May 22, 2014 2:03 pm • linkreport

Nile Clements and Crikey7, all of the research on this topic shows that low-income people in subsidized homeownership units sell their homes in the same 5 - 7 years that all other homeowners do. You can call that flipping, or just regular market behavior. The point is that if a buyer in a gentrifying neighborhood gets a subsidy to buy in, and they sell on the same timeline that most homeowners tend to sell, we will need more subsidy to get the next low-income buyer in. The 5 year churn is aggressive for our housing market, where prices can escalate wildly and the cost to get the next person in can be substantial. Further, keeping the affordability period long, and even making it permanent, does not mean that subsidized homeowners cannot use their home to "put their kids through college." If they sell at any point they can take the equity they've built by paying their mortgage, the equity built by making improvements, and part of the equity associated with the home rising in value. They just can't take 100% of that last piece if they sell too early. There aren't very many models that suggest a homeowner walk away with nothing just because they got a subsidy, and there are none that I know of in place in the DC region.

by Angie Rodgers on May 22, 2014 2:07 pm • linkreport


@AWalkerInTheCity, I hear you. It does get tedious to continue to argue about AH. But, I just cannot stand by w/o saying something when the whole premise of this bill is so flawed. It's an interesting conversation in the comments right now but I am still not close to convinced that there is a net upside for the train wreck that some call "affordable housing."

Separately, I am glad to see Angie Rogers jumping in and mixing it up. I really do find the GGW comments to be some of the most thoughtful and best moderated out there.

H.D.

by Hill Dude on May 22, 2014 2:19 pm • linkreport

Soooo let me get this right.
Building a nice house in low density neighborhood = Sprawl.
Rehabbing an old house in a high density neighborhood = Gentrification.

by ironchef on May 22, 2014 2:29 pm • linkreport

I am not sure it's always been a train wreck (perhaps being from NYC I am more aware of the horrors that the provide marketplace provided, which were the initial motivation to public housing way back in the 1930's) Much of the train wreck, where it was one, was a combination of high poverty concentrations (100% low income projects) indefensible spaces, and in the 1960's and 1970's, lax enforcment of rules requiring obedience to law etc as requirements for residence. I do not think its fair to pin those problems om mixed income developments, IZ, on the better non-profit managed developments, or on various kinds of vouchers (which despite my exchange with FC, I think are often a good idea.) Thats not to say any of those are optimal - they may not be, depending on our goals, and on various empirical realities. But they do not deserve to be conflated with the Pruitt Igoe's that, in large measure, they were designed to replace.

by AWalkerInTheCity on May 22, 2014 2:32 pm • linkreport

Is it reasonable to analogize this to student loans?

The buyer gets all the appreciation (higher earning potential) but most of the subsidy gets paid back if and when the buyer has the money (gets out of school), unless the buyer takes more than 15 years to get out of school, in which case the loan is forgiven.

Makes that 5 years.

by JimT on May 22, 2014 2:35 pm • linkreport

Home ownership has been a powerful force in creating personal wealth. This bill allows people of moderate means the chance to build up capital, that they can use to start businesses, get an education, or retire.

True, but there's just one problem with this: it doesn't have anything to do with affordable housing.

Remember: there is 'affordable housing' and 'Affordable Housing.' Lowercase affordable housing is simple: housing that one can afford. It is a relative measure, usually expressed in terms of the cost of housing relative to income.

Then there is Affordable Housing, which is in reference to a series of programs that subsidize housing. Rent control, Inclusionary Zoning, etc, they are all elements of Affordable Housing.

The use of the same language is both an excellent way to broaden the appeal of a program, but it also causes problems because it conceals the goals for any such program.

There have been back-and-forth op-eds on this site between proponents of DC's IZ law (which aims to create permanently affordable units as a part of any new development - e.g. geographic distribution of subsidized housing) and those that favor assistance for poor first-time buyers so that they can build equity. There were lots of arguments about which 'Affordable Housing' strategy is best with acknowledging that the goals of the two programs are entirely different.

So, first: if we're going to talk about affordability, are we talking about affordable housing, or Affordable Housing?

Second: if we're talking about Affordable Housing, what are our goals?

If we can't answer those questions, any discussion of policy will inevitably lead to people talking past one another.

by Alex B. on May 22, 2014 2:44 pm • linkreport

Alex B's point I is good, but I would add some nuance

As if often pointed out, all housing is affordable to someone. While we may discuss what, say, a family earning 200% of median income can afford, we in the policy arena do not use the term affordable housing (small a) for housing that is unaffordable by those below 120% of AMI (or depending on context, lower incomes) So we generally distinguish between market affordable housing (housing that is not guaranteed affordable to those income levels, but is still affordable to them) and Guaranteed Affordable Housing. As an example of this discoures, in South Arlington it has been noted that the amount of market affordable housing is declining. By increasing densities along the Pike, but with IZ, we may lose the market affordable units even faster, but we will gain offsetting guaranteed AH - and we will in fact increase the supply of market rate units more than had we not densified (though less than if we densified with no IZ requirement.)

In Arlington its sometimes hard (at least for me) to distinguish those who want higher density without IZ (and hence to maximize market rate units) from those who oppose densification AND IZ as both threaten their suburban lifestyle. These groups are often allied, in the inner suburbs.

In both case the folks supporting IZ and other guaranteed AH programs in majority non-poor areas have a mix of motives. I do think there is value in trying to understand which policies best address which goal, but its a difficult conversation to hold, especially when we cannot seperate it from larger arguments against all guaranteed AH, whether those arguments stem from libertarian positions, or socio-economically conservative positions.

by AWalkerInTheCity on May 22, 2014 2:59 pm • linkreport

Alex B., Proponents of IZ who tend to favor long periods of affordability when there is a public subsidy in place (and of which I count myself as one) also believe that low-income buyers should be able to build (and use) the equity in their homes. The two strategies are different, but not inherently at odds. They can be used together, in fact, to both preserve public subsidies so that as many households as possible get to take advantage, and to make sure that low-income buyers can either refinance or sell and make something out of the transaction. I don't think a subsidized buyer should be able to take ALL of the equity out of a home. If they got help, I think they should leave something behind for the next low-income buyer. That's not the same thing as saying they should be able to take NONE of the equity out.

by Angie Rodgers on May 22, 2014 3:04 pm • linkreport

JimT, That is an interesting analogy, and I think it works for the most part. I think what some people on the thread are getting caught on, though, is this (erroneous) idea that when you graduate, you would not just pay back the subsidy you got, but that you would forfeit all of your higher earning potential unless you took the whole 15 years to graduate.

by Angie Rodgers on May 22, 2014 3:08 pm • linkreport

The bill is targeted to specific areas where there is a need for more investment. Allowing residents to not just earn, but accrue in the wealth creation sooner seems reasonable to me.

As to affordable housing, I'm very familiar with the history of the various efforts nationwide, and count myslef among the sceptics. I favor reducing the regulatory barriers to the construction of affordable housing, including zoning, environemental, historic preservation and building code.

by Crickey7 on May 22, 2014 3:15 pm • linkreport

The two strategies are different, but not inherently at odds.

No, they're not. But we have to explicitly discuss what the strategies are, what we're trying to accomplish with them and why.

Lumping everything together under the rubric of Affordable Housing isn't very illuminating - particularly when proper-noun Affordable Housing gets conflated with lowercase affordable housing.

by Alex B. on May 22, 2014 3:20 pm • linkreport

"The bill is targeted to specific areas where there is a need for more investment. Allowing residents to not just earn, but accrue in the wealth creation sooner seems reasonable to me."

With 20% of poverty being the threshold, the bill would actually cover more than a third of the city. In the original post, I suggest that using measures like value, sales price and number of transactions would more accurately tell us what areas of the city are truly distressed and in need of more public investment.

Also, keeping the affordable period longer does not prevent households from building wealth.

by Angie Rodgers on May 22, 2014 3:31 pm • linkreport

It's the difference between acrued and earned. They accrue, but don't earn. Can't use as equity. So I would say they are not building wealth until they've earned it.

by Crickey7 on May 22, 2014 3:40 pm • linkreport

There are many unsubstantiated claims and missing details from this analysis. First and foremost, the legislation allows developers to place their own covenants on their developments. So, units can still have 15 years restrictions, if the developer chooses. The supporters of this legislation simply believe it shouldn't be required across the board - there should be room for models that allow asset building and recognition of the reality and needs of affordable ownership development in different parts of DC. Also, could you provide the research that details affordable owners of restricted units are able to move into the open market after they sell, I've researched this extensively and of the studies I've seen, there is no data in higher-priced cities of where affordable owners move to if they have to sell to another income eligible buyer. It would stand to reason that if housing cost increases outpace income increases to the extent they do in the District, and they do not have access to equity appreciation, then it stands to reason that these owners will not be able to continue as homeowners in the open market. Here is a link to a blog post that further debunks are authors claims http://bit.ly/1nvTqeJ

by Stanley Augustin on May 22, 2014 4:13 pm • linkreport

Stanley Augustin, developers can put on longer covenants, but then they are competing in a market where organizations like yours don’t put on the longer covenants. If given the choice, of course owners would choose the units with fewer restrictions, giving those models the competitive edge. And the point of good public policy is to be just that – good public policy – and not to make boutique decisions to appease one or two housing developers. The research on this topic as well as the experiences of the jurisdictions around us and across the country point to the need for longer term affordability periods, and demonstrate that they do not interfere with homeowners’ ability to build and use equity.

If you are looking for more detailed research, you can click on some of the links in the article. For example, a link to a piece done last year on GGW by Brett Theodos is in the original post. Brett is a researcher at the Urban Institute, and did this case study a few years ago of a bunch of shared equity models - http://www.frbsf.org/community-development/files/CI_Temkin_et_al.pdf

Also of interest might be Cornerstone Partnership (at NCB Capital Impact), which provides research and models on shared equity homeownership programs. (http://affordableownership.org/) Cornerstone offers evaluation tools, and examples of different resale models for homeowner IRR & subsidy preservation.

In addition, the Center for Housing Policy has an extensive body of research and analysis on shared equity homeownership. (http://www.nhc.org/publications/Shared-Equity-Homeownership.html)

This is just the tip of the iceberg; as I indicated in the original post, this legislation is inconsistent with where many jurisdictions around the country are headed on this issue, and so there is a lot of research and many working models being documented.

Longer term affordability periods do not prevent equity building. Homeowners in restricted models have access to “some” of their equity appreciation. Continuing to push this black and white notion where homeowners get no equity at all if there are any restrictions is misleading. Further, invoking this notion that opponents of this legislation somehow don’t want poor people to succeed or build wealth to leave to their children (as you do in your own blog posted in response this) is also misleading and really just dishonest. In over a decade of doing housing work in DC, I have worked alongside your organization to push both policy and budget reforms, as well as working with you all on an actual affordable housing development, so I care about the same people you care about!

Finally, if the homeowners you work with tend to stay in their homes for long periods of time, then why are you spending time trying to get shorter periods of affordability?

by Angie Rodgers on May 22, 2014 5:30 pm • linkreport

and people say few activists follow GGW!

by AWalkerInTheCity on May 22, 2014 5:41 pm • linkreport

You all are greatly mistaken and miss informed. Maybe you all should visit City First Homes to learn more about the subject of Permanently Affordable Housing instead of using assumptions and lack of knowledge. We can write in the comment section of this board but a better option would be to properly educate yourselves. Since I don't see any other nonprofit in the District creating permanently affordable homes, I suggest you visit those who are actually practicing this method. Everyone can tell you what might be wrong with your car but only a mechanic can fix it for you. Education is power.

by Rahim on May 22, 2014 6:13 pm • linkreport

I am tired of subsidizing slackers. I was born here and no one paid for my college, my mortgage etc. WORK

by NE John on May 22, 2014 8:30 pm • linkreport

other than myself!

by NE John on May 22, 2014 8:31 pm • linkreport

I'm torn between whether it's better to insist on on-site affordable units vs. many more units off-site. Ordinarily I'd favor on-site for diversity but with so many homeless people at DC General, etc. I sort of think we should get as much housing as possible a.s.a.p. for those people wherever it is.

by Tom Coumaris on May 22, 2014 9:34 pm • linkreport

What is missing again is that housing is NOT the road to "Wealth".

Housing is a bad to medicore investment.

What makes it a decent one is threefold:

1) The biggest is that someone will loan you -- at insane low rates right now, but decent over time -- somewhere between 80 and 98 of the purchase price. It is about the only investment that someone is able to do that for.

2) The reason people will loan you the money is that the investment is relatively liquid and impossiible to move out state.

3) It is very hard to get someone to loan you the money to buy an IZ unit because of the lack of liquidity and other conditions. Also, by nature, they don't appreciate as much.

I keep on insisting there isn't a bubble in DC real estate. Condo prices are high but relative to income ok. Single family housing is terrificialy high but there are real supply problems there. Where people are really hurt is the lack of entry level untis where they can build up some equity -- otherwise saving up 120K for a down payment in cash is not going to be easy. That may be unfair but it isn't bubble terrority.

by charlie on May 23, 2014 9:04 am • linkreport

Housing is a bad "investment" if you are using it as an investment.

Housing is not a bad investment if it is for building equity. It is a road to "wealth" if wealth=equity and the resulting security.

You take money you have to spend on housing anyway, and put it into something that retains some value, instead of that money just disappearing.

The biggest is that someone will loan you... somewhere between 80 and 98 of the purchase price. It is about the only investment that someone is able to do that for.

Of course that's the case; housing is one of the most basic needs. People will spend a large portion of their income to have a place to live. People will delay spending on nearly anything else in order to keep it.

by MLD on May 23, 2014 9:24 am • linkreport

Hi, Angie. There is much we all agree on, and I know you have advocated and worked to create opportunities for folks to stay and live well in this city.

No one has ever said long term restrictions prevent any equity build up. But we have said it is divorced from market appreciation and therefore makes moving into the open market difficult as prices rise faster than incomes and folks who used purchase assistance loans won't have access to those loans again. It also takes away access to equity while living in the home, which many of our buyers have used to for personal, educational, work and family issues.

In working to develop and sell properties in distressed areas, homeowners are taking a risk and we have had many people walk away when we explain the restrictions, some of which include not being able to simply deed the property to a family member. And lowering restrictions is important in these areas because it rewards risk and people have used their equity for important purposes. We've seen it time and time again. A home is not just a roof over one's head, it is an investment, a commitment to a neighborhood, a responsibility and a way to pass wealth and generational homeownership along, without continual government subsidy. And all of the government subsidies and more get paid back.

In our latest talks together about defining distressed areas, we spoke about number of sales being an inappropriate measure as there are investors buying property in different parts of town, and rate of appreciation could also be misleading as some parts of town were so underwater and are now just starting to come up. The most recent median sales data from DC's Office of Tax and Revenue has been floated as a compromise position. In some of the measure offered in your piece and in talks we've had, they did not include areas we and other affordable homeownership developers have had issues selling units. And we do not want to artificially depress prices in areas that need investment.

We have looked at Mr Theodos' research and others and when looking at the numbers and ability to move into the open market, they do not add up. First of all, the 7 different programs he analyzes in his research use vastly different models. The ARCH program in King County, WA provides the largest share of equity to the homeowner and 2/3 of resold units require a real minimum income that is at least 10% greater than the first buyer (thus selling to higher income categories), whereas San Francisco’s resale model led to only a 0.3% increase in required minimum income (which is more similar to DC's restricted formula). San Francisco, one of the only high priced markets in the study, doesn't keep data on where owners move to after they sell. And in looking at the calculations of what an owner in San Francisco would make off of the resale of their home and if that owner would be able to afford another home in the area, a couple things are left out. If an owner used a downpayment assistance loan (median amount of $35,000) to purchase their unit, they would not have access to that loan again and the median return on their unit at resale would be a little over $20,000. You can't move into the open market with that, and we are looking at similar numbers here in DC. Most studies don't have actual data about where people move to and every market is different.

by Sarah Scruggs on May 23, 2014 9:59 am • linkreport

Ugh. I'm so sick of people that have such strong opinions about affordable housing but very little personal knowledge as to what 'affordable housing' means or how it works.

As a case manager that assists those with both HCVP (formerly known as Section 8) vouchers and locally funded DC vouchers, I can assure you there is not a mountain of affordable housing in Columbia Heights, Bloomindale, Eckington, etc, etc. The vast majority of my clients end up choosing apartments in far less desirable neighborhoods simply because there isn't inventory to place them elsewhere. The city doesn't 'hold' apartments for people with vouchers in the way that most imagine. Vouchers are also subject to what DCHA considers 'rent reasonableness' meaning that even if there were thousands of available units in Columbia Heights (or a similar neighborhood) it wouldn't matter unless I could find a one bedroom for less than $1200 with all utilities included.
Additionally, the whole point of integrating neighborhoods with many different income levels is to avoid creating low income ghettos. You know, like the entire eastern side of the Anacostia river? Imagine what could be done for property prices if more people would move over there? Imagine how many more units would be available for rental, how many more people could afford to buy a home with all that extra land to use? Instead we as a city seem relegated to continue pushing our poor away into little pockets. Out of sight, out of mind I guess?
Also, I'd like to point out that affordable housing in this case seems to mostly be geared towards not those on vouchers or those below the poverty line, but to people such as myself. Young professionals that are educated, have a professional job but for the most part have written off ever owning a house due to the astronomical prices in this housing market. H St, Columbia Heights and Eastern Market didn't gentrify overnight. They gentrified because people like myself could afford to move there and so they did. And with them they brought businesses and improvements and life. So perhaps it is best to view these governmental subsidies as an investment in both the neighborhood as well as the people.

by EBanks on May 23, 2014 11:12 am • linkreport

You could have a lot more affordable rentals in the city if the tenant laws were not leaning so far in favor of the tenant and were more balanced between tenants and landlords. With the laws now no landlord wants to rent to anyone not making substantial money and near perfect credit for fear they won't be able to remove bad tenants for 6 or more months. This is easy solution to at least open up more affordable rentals to everyone in the city.

by mona on May 23, 2014 11:14 am • linkreport

Agreed, Mona. We run into that problem quite often. And not everyone has a housing case manager to assist with rent being paid on time, keeping the property in good repair, etc.

That being said, I have known people that make fine money that are terrible tenants.

by EBanks on May 23, 2014 11:24 am • linkreport

EBanks--completely agree, high income doesn't guarantee good tenant. Sometimes they are a little over privileged and demanding. I think landlords feel like they are betting on the odds. If at least good credit and decent income they might have a chance of getting rent or at least the person maybe concerned about credit score to at least pay rent on time. It is all a gamble either way.

by mona on May 23, 2014 11:38 am • linkreport

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