Affordable Housing - Greater Greater Washington

Will "filtering" keep housing affordable?

Wed, 08 May 2013 15:22:00 EDT

The rising supply of high-end apartments has slowed the rise in prices (at least outside the hottest areas). Will that make housing more affordable for people who can't afford the fanciest apartments?

Photo by granite-charlotte on Flickr.

Real estate consultant Maeve Gallagher writes in Capital Business that vacancies have risen in the metro area, to 4.4% from 2.2% a year ago, though DC's vacancy rate continues to fall. That means rents in DC are still rising, but have declined in Northern Virginia.

Most people can't afford the highest-end or "Class A" apartments in new apartment buildings, but one theory holds that if we build more Class A housing, other rents will also fall through a process called "filtering."

If the top tier isn't full, rents won't go up there so fast. People who can afford those luxury units will want to buy in a new building, so the owners of an older building will have less incentive to renovate and less market upside from doing that. That will keep lower-tier rents more reasonable, and "filter" down to successively lower-price levels of the housing market.

However, that doesn't happen if the Class B and C apartment building owners instead respond in something of a counter-intuitive yet psychologically sensible way. They could decide to renovate their buildings to Class A, with new granite countertops and other high-end finishes, so they can get Class A rent.

Gallagher writes,

As deliveries of Class A units increase in 2013, pressure on Class B market rents could mount if owners of the higher-end buildings offer concessions to lease their new projects quickly.

In other words, if a new building owner can't get the building leased, they will offer specials like 2 months' free rent. An apartment that's a little cheaper, but not so nice or in a less desirable location, doesn't now seem like a better deal. That could lead the Class B owner to decide now is a good time for a renovation.

Some Class B building owners have responded by refreshing their units. Nearly 32,000 units are under renovation at this writing, at an average renovation budget of $21,000 per unit.

If the market pressure is affecting the owner's bottom line, they might look at the property and think about how they could turn it into more of a money-maker. Even if Class A rents are not extremely strong, they're still considerably better, and there's a good chance they will rise again in the future (and even if they won't, some owners will decide to take the risk).

Gallagher points out that building owners will make more money if they're renovating a building not when higher-tier rents are leveling off, but when they are sky-high, because there's a bigger upside. But not everyone responds that way. I spoke to one developer who said that often as long as a property is bringing in a good return, the owner will just pay it little heed, but then take notice if the margins drop.

Another obstacle to filtering is that demand is rising at all tiers of the housing market. Gallagher says,

Low-wage jobs are expected to grow at a rapid pace, particularly in the retail trade and the construction sectors, increasing demand for Class B apartments. ... In sum, the Class B apartment market in the Washington area faces obstacles in the near-term because of the amount of new supply being added to the Class A market. However, Class B vacancy should remain low, driven by demand from newly created jobs in modest-wage industries.

Few people are building Class B anywhere in the region, least of all in popular areas like DC, Arlington, and downcounty Montgomery. Owners (perhaps rightly) feel they can get top dollar for their properties. Lenders most want to finance luxury projects. And even if the market doesn't quite support Class A in an area now, people may (perhaps rightfully) think they can wait a little while.

Unfortunately, the effect is that almost all of the new supply is in the Class A tier. If we build enough, it might soak up demand for Class A, but as long as more and more people are coming into the market who want Class B, then those units will get more expensive as well.

This isn't an argument not to add more housing. However bad this problem is, it's worse if we aren't adding housing. There's even more profit in renovating a Class B building. The demand at many levels of the housing market will outstrip supply even more than it already does.

It's great we are building housing at a rapid pace. If Gallagher's research is right, we are still not doing enough to ensure that people can find a place to live, near transit if they wish to be, at a price they can afford.

102 comments

Raid affordable housing for summer school

Wed, 08 May 2013 08:50:00 EDT

by Nick Casey

The DC Council approved $4 million to keep summer school open to more kids. But the funds came out of the $51 million Mayor Gray pledged to increase the amount of affordable housing. (Post)

Comment

Don't let affordable housing become a victim of speeding (Nov 19, 2012)
Truxton Circle school and youth housing in doubt (Jan 23, 2011)
At rally, leaders promise action on affordable housing (Jan 28, 2013)
DC 2010 budget would end Saturday free parking (Mar 24, 2009)
DC Council: Don't choose parking meters over people (May 18, 2011)

Candidates want affordable housing, balk at more housing

Mon, 15 Apr 2013 13:53:00 EDT

by David Alpert

One of the most significant ways to ensure some affordable housing is to provide more housing. It's not the only way and not sufficient on its own, but the clear connection between housing supply and price appears lost on multiple candidates for the April 23 DC Council at-large special election.

Photo by james.thompson on Flickr.

At a Chevy Chase Community Association meeting last week, many candidates affirmed support for affordable housing, according to a report on the Chevy Chase listserv, but then wavered or even outright opposed allowing people to rent out basements, garages, or parts of their homes to create new housing opportunities.

Lorrie Scally wrote:

Patrick Mara said "No" to the rentals because he feared they would result in an overflow of students into already crowded schools.

Meanwhile, according to Scally, "Matthew Frumin expressed his support for ADU rentals in all residential neighborhoods," while Elissa Silverman said she wants to ensure they don't impact neighbors much (similar to what she said on Let's Choose DC).

Yet, Scally said, "The candidates' presentations gave support to DC education issues and affordable housing for residents." Mara has endorsed affordable housing spending in the past; on one of the Let's Choose questions he actually answered, he said, "I'm certain we can find the millions need to fund libraries and affordable housing initiatives." He told the DC realtors, "The cultural diversity of DC is at risk if we do not protect and build affordable housing."

Anita Bonds did not attend the forum.

Adding housing must be a part of the housing strategy

About 1,000 more people move into the District each month than the number who leave. Moreover, the demand to come into DC is even greater than this.

Absent enough new housing, many people who want to come here will rent or buy units in gentrifying neighborhoods where prices are still lower than elsewhere. That raises housing prices in those neighborhoods, hastening the problem of some longtime residents being or feeling priced out, and others deciding to take a windfall and sell their houses at a big profit.

If we want longtime residents to stay, an important element of the equation is to find somewhere else for the people to live who want to come into DC. Basement and garage apartments are one important potential source. We already have large single-family houses with one or two retirees who aren't actually using the whole house. Letting them rent the space is a win-win for everyone except for those who want to keep the neighborhood exclusive and underpopulated relative to its 1950 size.

A lot of people in Ward 3 would rather the population growth go somewhere else. A lot of people vote in Ward 3, and several candidates are clearly seeking their votes. But letting a whole section of the city opt out of growth is not the right policy. It harms poorer neighborhoods by diverting more housing pressure to other areas, hastening gentrification.

How do the candidates stack up?

Four years ago, when I endorsed Patrick Mara, I perhaps assumed too readily that because he lives in a denser neighborhood and bicycles, he also supports a growing city. He might, but he came out strongly against a new matter-of-right building in Chevy Chase, opposes accessory dwellings, and refused to answer either of the two Let's Choose questions on growth. That's disappointing and a little surprising for someone who claims to want less government regulation.

I'm also disappointed Elissa Silverman has not been stronger on smart growth. She has less reason to try to pander for votes in Ward 3, when Ward 6 has become the highest-voting ward. Many of Ward 3's supposedly-liberal residents and newspapers nonetheless seem to go for whomever will lower their own taxes. As a supporter of affordable housing and equity for all neighborhoods, she also shouldn't tolerate some residents west of Rock Creek trying to redline growth and change solely to the east.

Unfortunately, while Matthew Frumin has been willing to stand up for (reasonable) growth more vocally than others, this morning's poll seems to confirm that he is most likely to play a "spoiler" role. Our readers, contributors, and I myself have often wrestled with how to think through the game theory of a race, and decide how much to weigh various policy positions or trade off candidate strengths versus electability.

This post is not an endorsement; our policy is to decide endorsements by a poll of recent, active contributors, which came out clearly for Silverman. On balance, I'm still going to vote for her, too. Besides, zoning isn't the only issue that matters, and she has some definite strengths on workforce development, oversight of city agencies, and more.

But just because we've endorsed should not prevent us from helping inform readers about candidates' positions, whether or not they comport with our endorsement (in this case, it's mostly a neutral effect), or holding candidates responsible for staking out good positions.

242 comments

And...

Sat, 30 Mar 2013 09:55:00 EDT

by David Alpert

Landlord discrimination against people with section 8 vouchers has declined. (City Paper) ... MARC tickets and the website will look different. (Examiner) ... The most beautiful room in DC? The Library of Congress reading room, say BeyondDC readers.

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Affordable housing needs money every year

Wed, 27 Mar 2013 08:34:00 EDT

by David Alpert

The $100 million Mayor Gray pledged for affordable housing is a lot, but only if it keeps up in future years. (City Paper)

Comment

Streetcar won't make Columbia Pike unaffordable

Fri, 15 Mar 2013 12:14:00 EDT

by Canaan Merchant

Some residents have expressed concern that the Columbia Pike Streetcar will bring changes to the Columbia Pike area. Besides traffic impacts, another oft-repeated criticism is that streetcar-oriented development will harm the relative affordability of many areas along Columbia Pike.

Photo by cliff1066â„¢ on Flickr.

The price of housing has soared in the areas of Arlington that are close to the Metro. It is likely that the streetcar will create a similar effect. Meanwhile, Arlington has the second-lowest amount of affordable housing in the Commonwealth of Virginia.

In response, the county has devised one of the more aggressive responses to providing affordable housing in the region. The Arlington County Board passed the Columbia Pike Neighborhood Plan last July to address many questions surrounding the future of Columbia Pike, including housing affordability.

The neighborhood plan covers much more than affordable housing. It deals with zoning, transportation, open space, schools, parking, preservation, and more. The plan is comprehensive and ambitious because it is a plan by the county to preserve 100% of the "Committed Affordable Units" (CAFs) currently in the planning area of the Neighborhood Plan. This is much higher than the county-wide requirement to retain 50% of CAFs in any redevelopment project.

Committed Affordable Units (CAFs) in Arlington. Image from the plan.

We're talking about two types of affordable housing

There are two types of affordable housing in the plan. CAFs are housing owned by a non-profit organization or subsidized at some level of government.

"Market Rate Affordable Units" (MARKs) are housing units that are not subsidized in any way, but whose market price is low enough to be affordable to families or individuals making below the Area Median Income (AMI). For MARKs, there is no obligation for the landlord to keep the price below the market rate.

Critics of the Columbia Pike Streetcar usually contend that the streetcar is meant as a tool to gentrify the corridor and eliminate affordable housing on Columbia Pike. This ignores the county's commitment to preserve and expand CAF's throughout the corridor. Moreover, when critics speak of the loss of affordable housing, they mean the loss of MARK's that the private sector isn't obligated to provide.

Actually, absent the fixes prescribed in the Neighborhood Plan, all of the MARKs located in the corridor will disappear regardless of whether the streetcar is built or not. That's because, due to Arlington's location just outside of Washington, DC, Arlington is a very popular place to live.

Photo by cliff1066â„¢ on Flickr.

The staff report on the Neighborhoods Plan has a table that lays out what county officials expect to happen. By 2040, Columbia Pike will not be able to retain MARK's affordable at a level of 60% AMI. Apartments at 80% AMI will likely increase with the number of overall units.

To counter this, the county aims to triple the number of CAFs at 60% AMI from the current (as of 2010) 1,120 units to 4,730 by 2040. This is a huge part of the projected 14,000 new units by 2040.

So while the number of apartments today compared to 2040 is expected to grow three times its current size, the number of affordable apartments will also grow to twice its current number. Arlington County believes it will be able to achieve that growth through both financing incentives to developers to keep and add CAF's and through the adoption of a Form-Based Code that will allow for greater and mixed-use density along Columbia Pike and its commercial areas.

Moreover, proposed buildings can get density bonuses if they provide more housing that meets the target of 80% AMI. Projects that share land with historic properties can also get density bonuses to preserve the older buildings.

Currently, the area defined in the Columbia Pike Neighborhood Plan only has 19% percent of the county's total number of CAF's. Meanwhile the county is planning on increasing the number of CAF's in the area more than other areas of the county. This includes providing housing that is priced at 40% of AMI where no units in the planning area currently exist.

The county is also redeveloping its own facilities as the Arlington Mill Recreation Center which will provide 122 new housing units for families making below 60% AMI.

Photo by Brett VA on Flickr.

Affordable housing concerns go beyond the streetcar or other development issues

Arlington County is a geographically small county located in the middle of a fast-growing area. Many other jurisdictions effectively provide affordable housing by allowing development farther from the core, but that is not an option for Arlington. This has forced the county to look at new ways of providing affordability. It wants to do so to preserve the county's diversity.

Critics of the streetcar plan contend that the streetcar will eliminate MARKs along Columbia Pike, but that fails to recognize that much of that housing would be lost regardless, even with no streetcar, because of the overall market pressures on the entire region and the desire to live both closer to work and in more urban settings.

Trying to prevent any and all development would not help the area's affordability either. Instead, it would eventually work against affordability by restricting the number of places for people to live. This is why it is important to lay out strategies to preserve the existing affordable housing and provide opportunities to plan for more. The Neighborhood Plan is a good start toward this goal.

26 comments

Task force sets goal of 10,000 affordable units

Wed, 13 Mar 2013 14:26:00 EDT

by Elizabeth Falcon

Over the last two years the issue of affordable housing has been raised in many forums, but with little action. Mayor Gray recently committed $100 million for affordable housing; now, the Comprehensive Housing Strategy Task Force has issued its report on the District's housing direction.

Photo by Mr. T in DC on Flickr.

The first two of the report's three goals focus on affordable housing. They call on the District to build and preserve 10,000 units of affordable housing and preserve the 8,000 units of housing made affordable by federal government subsidy.

In addition, the report offers many regulatory reforms and process improvements to support the construction and preservation of housing, and includes an emphasis on affordable housing near streetcars and transit hubs.

The core goal of the Task Force is to produce and preserve of 10,000 units by 2020. A target like this needs to have the tools to meet the goal. The report recommends using and significantly increasing existing affordable housing programs, including stabilizing the Housing Production Trust Fund.

The Trust Fund is an important program that builds and preserves affordable housing which residents fought for over a decade to create. Over the last few years, it has suffered from low levels of funding. Stabilization and increased funding will be key for the Trust Fund to be used to meet this production and preservation goal.

In the Task Force research, they learned that the greatest need for affordable housing is for people who make less than 30% of Area Median Income (AMI). Programs that make rents affordable to extremely low income people will be needed in addition to Trust Fund investment.

The Local Rent Supplement Program, when used with the Trust Fund, can produce housing for extremely low income residents. DC should increase it along with the Trust Fund to make sure we are building housing that meets the area of greatest need.

The Task Force identified the need for increasing the Local Rent Supplement Program, but like the Trust Fund recommendation, did not include a number of how many people should be served or a target funding level that should be made available.

At the State of the District Address, Mayor Gray announced $100 million for affordable housing. At the release of the Task Force report he called the $100 million a good start, and it is. The $100 million will allow the District to produce and preserve hundreds of units. But DC still has to make a long-term commitment for additional money to meet the goal of 10,000 units by 2020.

14 comments

Where do young adults live in Montgomery County?

Tue, 12 Mar 2013 10:11:00 EDT

by Dan Reed

Montgomery County community leaders want to draw more Millennials, members of the generation born between 1982 and 2000, hoping that they'll stick around when they're older. As they explore ways to attract twenty- and thirtysomethings, from new transit projects to more nightlife, it's worth looking at where they live in Montgomery County today.

Where Millennials live in Montgomery County.
Click on the image for a larger version, or see it without the rankings.

According to the 2010 Census, Montgomery County has about 186,000 residents between the ages of 20 and 34, making up about 19% of the county's population. In a recent Washington Post article about the county's Night Time Economy Initiative, reporter Bill Turque notes that young adults make up a lower share of Montgomery County's population than other places in Greater Washington.

Why is that? Trends show that Millennials want an urban lifestyle, but are often stymied by limited funds and a dearth of affordable housing.

As a predominantly suburban, affluent county, Montgomery doesn't seem like the kind of place where young adults would want to live. However, if you look at individual neighborhoods, you'll find substantial concentrations of Millennials, suggesting a way forward for Montgomery County as it seeks to draw more of them.

Millennials flock to areas near transit, jobs, affordable housing

The map at the top shows Census tracts where the percentage of 20-to-34 year old residents is higher than the county's 19% average in the 2010 Census. The county's largest concentrations of Millennials are along the Red Line in places like White Flint, downtown Bethesda and downtown Silver Spring, where young adults are a slim majority. Notably, these are also the places where walking, biking and taking transit to work are most common.

Young adults also seem to gravitate towards shopping and entertainment districts like the Washingtonian Center in Gaithersburg. Even though it's not near a Metro station or major bus route, Washingtonian Center is a pretty walkable area where one can shop or grab dinner without a car.

We can also conclude that many Millennials are trying to live as close as possible to their jobs. Here's a map of where people under 29 work in Montgomery County:

Where Millennials work in Montgomery County. Click to enlarge.

Compare it to the first map and you can see that clusters of young people coincide with the county's biggest job centers, White Flint, Bethesda and Silver Spring. Yet there are also large concentrations of Millennials in places with fewer jobs, like Briggs Chaney in East County and Germantown in the Upcounty.

Not surprisingly, these communities are also more affordable. According to the 2006-2011 American Community Survey, the median monthly rent is $1,565 in Census tract 7048.06 in Bethesda's Woodmont Triangle, compared to $1,344 in Census tract 7008.18 in the Middlebrook section of Germantown.

Both of these neighborhoods have some of the county's largest concentrations of Millennials, suggesting that there may be more to it than affordability. If we take a closer look at different segments of the county's young adults, we can get a better understanding of why they live where they do.

Educated and single Millennials move closer in

Here's a map of 18-to-34-year olds with at least an associate's degree:

Where college-educated Millennials live in Montgomery County.
Click on the image for a larger version, or see it without the rankings.

The general distribution of young people is the same, but there's a slight shift towards the Downcounty. College-educated people tend to have higher incomes, which might explain why there are more of them in expensive areas like Bethesda and Friendship Heights.

Where young singles live in Montgomery County.
Click on the image for a larger version, or see it without the rankings.

However, the county's single Millennials have decidedly chosen to live closer in, settling in and around downtown Silver Spring, downtown Bethesda, Friendship Heights and White Flint. These neighborhoods have almost everything that a young single person would want: they're close to Metro, major employers and the District, they contain a fair number of bars and restaurants, and they have a variety of housing options. Silver Spring in particular has a number of group houses.

Millennials with families move farther out

Where young families live in Montgomery County.
Click on the image for a larger version, or see it without the rankings.

While singles are flocking to closer-in neighborhoods, Montgomery's young families, defined here as households led by individuals under 34 and related by marriage, blood or adoption, are moving farther out. All ten of the county's largest concentrations of young families are well outside the Beltway, particularly in Gaithersburg and Germantown. Just one is near a Metro station, Twinbrook.

This fits the long-held stereotype that once you get married and have kids, you move to the suburbs in search of larger, more affordable housing. Not only is it cheaper to rent in the Upcounty, it's cheaper to buy: the median home value in Middlebrook is just $294,000, compared to $516,800 in the Woodmont Triangle.

Yet families who choose to move farther out will pay considerably more for transportation than they would elsewhere. That might explain why young families appear to have settled in neighborhoods like Fallsgrove in Rockville, which were designed to encourage walking and biking, near shopping areas like Washingtonian Center or employment areas like the Shady Grove Life Sciences Center.

Meanwhile, young families still make up one-tenth of all households in downtown Bethesda and downtown Silver Spring, suggesting that some are interested in an urban lifestyle. This isn't a new trend: I grew up in an high-rise apartment building in downtown Silver Spring in the 1990s, and there were plenty of kids around. Of course, my mother chose to live there because it was "affordable and quiet," which I'm not sure characterizes the area today.

What does this mean?

These maps have implications not just for Montgomery County, but the whole region. They show that the District and Arlington aren't the only places that can attract Millennials, so long as they can be near neighborhoods near transit, shopping and jobs. While many young families are choosing to live farther out, they're still seeking a semi-urban experience.

They also show that one of Montgomery's greatest strengths remains its diversity of neighborhoods, allowing it to attract both singles and families. However, two distinct challenges lie ahead. One is to preserve a supply of affordably-priced housing in the county's urban areas, both established places like Bethesda or emerging ones like White Flint. The other is to create more walkable neighborhoods and improve access to jobs, shopping and transit in the Upcounty and East County, where young families continue to settle.

Of course, Millennials aren't the only ones who want an urban or semi-urban lifestyle. But if Montgomery County wants to attract a new generation of residents, it needs to start listening to young adults. Without us, the county doesn't have much of a future.

Cross-posted at Friends of White Flint.

35 comments

Gray: build 10,000 affordable units

Wed, 06 Feb 2013 08:48:00 EDT

by David Alpert

In his State of the District speech, Mayor Gray pledged $100 million toward creating 10,000 units of affordable housing. (City Paper) ... Except for credit card readers in taxis, transportation did not come up. (Veronica Davis)

Comment

At rally, leaders promise action on affordable housing (Jan 28, 2013)
How will Gray's budget address affordable housing? (Mar 19, 2012)
Don't let affordable housing become a victim of speeding (Nov 19, 2012)
Vince Gray talks IZ, New Communities, and rent control (Jul 7, 2010)
DC public land must yield affordable housing, says report (Oct 12, 2012)

A few steps can fix Inclusionary Zoning

Fri, 01 Feb 2013 10:06:00 EDT

by Cheryl Cort

DC's Inclusionary Zoning (IZ) affordable housing program has suffered from serious administrative problems in its start-up phase. As a policy, however, it is still sound, and is the right policy for DC's future.

Photo from 2910 Georgia Ave.

A handful of IZ units are on the market, along with over 900 units in the pipeline. There are also 1,000 units that came through the Zoning Commission's Planned Unit Development (PUDs) process since 2000, using the same policy standards as IZ.

Unfortunately, 2 early IZ units sat on the market for more than a year, and the developer has sued the city to get out of the IZ requirement. This doesn't reflect a fundamental flaw in IZ; rather, it arises from understaffing at the DC government and rigid local and federal regulations. There's not much time to fix the sputtering implementation of this important affordable housing policy tool.

IZ brings many benefits

IZ sets aside 8-10% of new housing construction for households earning 50-80% of Area Median Income (a 50% AMI household of 3 earns $49,250 per year, a 80% AMI household earns $78,221 per year). IZ is worth fixing because we have plenty of evidence that this kind of program can produce results beyond what other housing programs can. IZ provides affordable housing in mixed-income and wealthier neighborhoods throughout a jurisdiction rather than concentrating it in a few neighborhoods.

This benefit of economic integration has been documented. Low-income children in programs like IZ perform better in school than their peers, because they live in low-poverty neighborhoods and attend local low-poverty schools. Another other advantage of IZ is that it does not require a direct subsidy from the government to construct the affordable unit, but rather lets the developer to build extra market-rate units, and uses that value to pay for the below-market ones.

Other than a nominal administrative cost, IZ is a very cost-effective way to sustain the city's production of new moderately-priced homes. There are many successful similar programs throughout the country, including Montgomery County's long-running IZ program, Moderately-Priced Dwelling Units (MPDUs).

DC IZ also has a sister program which creates affordable dwelling units through PUDs and public land deals. (Confusingly, these are often called ADUs, which is the same acronym, but not the same thing, as Accessory Dwelling Units, market-rate basement or garage units inside someone's house). This program does not appear to have problems filling units at the same income levels. That success shows that IZ can also overcome its challenges with some concerted attention.

Three problems have stalled IZ

Three debilitating problems with the program's administration can be fairly easily corrected and get it back on track: severe understaffing, rigid regulations, and rigid FHA lending rules.

Severe understaffing: Only 1-2 people administer the program inside DC's Department of Housing and Community Development (DHCD). Without a few more staff people, IZ and the sister affordable dwelling units (ADUs) cannot be administered effectively. The Mayor and DC Council need to provide a few more staff positions to manage these programs.

An alternative to administering the program entirely inside the DC government would be to give responsibility for the for-sale units to a nonprofit experienced in managing permanently affordable homeownership programs. CityFirst Homes is already doing a similar job with the District's first major housing land trust. Evidence suggests that more hands-on assistance from a non-profit like CityFirst Homes can drastically cut foreclosure rates and yield more successful homeowners.

The other component that requires sustained support is the housing counseling agencies who educate applicants and help them through the process. Ensuring the city's budget provides for this is another key ingredient to success. In all, these administrative costs amount to a modest budget item and are a fraction of what it costs to subsidize new affordable housing construction.

Rigid IZ regulations: DHCD manages a process for connecting a person who qualifies for affordable housing to available units. This involves a centralized application and lotteries. Details of that process have proven too rigid to accommodate the realities of matching housing seekers and available units.

The city is in the process of revising the regulations to give the program necessary flexibility. This revision should be in effect in a few months.

An alternative to the current lottery system would be to let the developers market the units to qualified households, and simply have the District housing agency certify the applicants as qualified and provide general oversight. This is already the process for the PUD and public land "ADUs."

With sufficient support from housing counseling agencies, residents in search of an affordable home should be able to get enough help to conduct that search, especially with the city's useful website, dchousingsearch.org.

Rigid FHA lending rules: The Federal Housing Administration has emerged as the predominant mortgage backer in the post-2008 affordable homeownership world. Nationwide, most local housing programs have encountered a critical conflict with FHA rules where local programs (like IZ and ADUs) often require that the affordability provisions survive foreclosure. FHA does not allow for this.

The only way to deal with FHA mortgage lending standards that conflict with local program requirements is to change the program to conform to FHA's standards, and get FHA to sign off on the changes. DC is acting to change its standards to comply with FHA. The timeline for receiving FHA's approval is uncertain but the city hopes it will happen shortly, we hope in the next month or so.

If a unit goes into foreclosure and then sells on the market, the city would lose its investment in an affordable home. There are other safeguards the city could put in place that do not conflict with FHA. They would at least allow the city to recover the value of the affordability of the unit, should a foreclosure occur and the unit sell on the market.

With these three administrative fixes in place, DC should be ready to smoothly operate a program to place the right applicant in the right unit as 900 more IZ units come online.

Mend it, don't end it

IZ's growing pains have led to some calls to more fundamentally modify or scrap the IZ program. We should consider and debate these suggestions only once DC fixes the immediate problems and the program administration is running smoothly.

Some opponents continue to question the policy itself, but experience across the country points to IZ as a valuable and effective tool to create moderately-priced housing in strong markets with virtually no direct cost other than a small budget for staffing the program.

44 comments

Keep inclusionary zoning housing affordable (Sep 22, 2010)
Inclusionary zoning will soon be making a difference in DC (Jul 12, 2012)
Forty days and forty nights without inclusionary zoning (Mar 19, 2009)
Still not inclusionary: Council blasts Fenty's inaction (May 1, 2009)
Urbanist economists should cheer inclusionary zoning (Jun 19, 2012)

The American Dream can be an urban dream, too

Wed, 30 Jan 2013 15:02:00 EDT

by Sarah Lewis

The classic image of the "American Dream" is, for many, a house with a big yard, 2 cars, and so on. Is that image still relevant, even as many people choose to live in walkable urban neighborhoods? Sarah Lewis argues that it's the ideals, not the trappings, that matter and remain strong.

Photo by Robert Gourley on Flickr.

During Inauguration Day, I found myself (an immigrant, a naturalized citizen) feeling reflective and full of national pride, regardless of what the President's next term may actually focus on, and regardless of partisan politics.

Has the "American Dream" really changed? Are Life, Liberty, and Happiness no longer noble pursuits? I say that the American Dream has simply gone from a set of ideals to an outdated consumer shopping list. I believe the ideals remain the same.

James Truslow Adams, in his book The Epic of America, which was written in 1931, stated that the American dream is

that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.

Notice "everyone" and "opportunity"—incredibly important words. According to Merriam-Webster, an opportunity is a favorable juncture of circumstances. So in its most basic form the American dream is a time or set of circumstances that makes it possible for all people to do something that gives them a good chance for advancement or progress. Possibilities, options, and choices for all.

This is where we, the urbanists, excel—economic possibilities, community options, and environmental choices. We are open-minded, fair, and adaptable. "We recognize that physical solutions by themselves will not solve social and economic problems, but neither can economic vitality, community stability, and environmental health be sustained without a coherent and supportive physical framework."

Economic possibilities

While it is often difficult for urbanists who are inclined to focus on the built environment to think about economics, given what we have all experienced professionally and personally in fiscal arenas over the past few years, this is changing. We have developer clients that cannot obtain loans due to the banking crisis and jurisdictions that have reduced funding due to local, state, and federal deficits. We need to concentrate is on creative thinking and problem solving more than ever—making available resources go further and be used more wisely.

We have had some real economic-based successes such as the Live/Work/Walk: Removing Obstacles to Investment initiative. In September 2012, the Federal Housing Administration revised rules that limited the cap of commercial space in mixed-use condo buildings to an updated 35% commercial use, with possible waivers up to 50%. While this is great for our walkable urban places, it does not yet address a jobs/housing balance that is required for full livability.

It is easy for us to encourage start-up entrepreneurs, telecommuting, and self-employment possibilities presented through digital technology. These occur in places and forms with which we are already familiar. Similarly, the physical manifestation of new forms of commerce (namely shopping) is taking shape in smaller footprint stores and increased online ordering with delivery. However, some of the reports say that this country is seeing a return to manufacturing and that alternative power is going to be a major employment sector in the coming years. What does this mean for our work to give equal employment opportunity across the transect?

Community options

Christopher B. Leinberger, in DC: The WalkUP Wake-Up Call, says "there is such pent-up demand for walkable urban development—as demonstrated by rental and sales price premiums per-square-foot and capitalization rates—that it could take a generation of new construction to satisfy." Combine these statistics with the population changes being brought about by the two largest generations in history—the Baby Boomers and the Millennials, more than 150 million people to dictating the housing market.

Both of these generations, for very different reasons, have similar housing needs. Yet "affordable housing" may as well be a four-letter word in many locations. It is often misinterpreted as strictly "projects" or subsidized apartment complexes instead of communities with options for elderly couples on a fixed income or recent college graduates in their first job can live.

Real affordability is a key factor—I'm sure even the infamous 1% are concerned with affordability as a concept or they likely wouldn't have reached that financial bracket! Today we hear terms such as "social equity" and "environmental justice," but is the underlying concept really any different than civic responsibility or citizenship?

We focus on transit-oriented development and smart growth in our conversations and work but infill construction only represents one-fifth of new housing construction according to the EPA's Office of Sustainable Communities Smart Growth Program. Greenfield construction is still over 50% of new homes in most of the country. This means that motor car ownership is still a requirement rather than an option making new housing inaccessible to a large segment of our population. How can we encourage more of our fellow citizens to realize that a suburban house does not represent the only dream?

Environmental choices

Transit-oriented development—it is unfortunate that it still exists as terminology or jargon rather than being standard practice for development throughout the nation. Compact, connected, and complete is the most environmentally sustainable form of development. We know that it is common sense. The closer all aspects of daily living are located to each other, the less energy used, the fewer emissions discharged, and the reduced damage to the climate.

The original allure of cars as part of the American Dream was freedom of movement. Do we truly have a freedom if it is not available to the many? Access to safe mobility should be a constant. We know our development patterns have hindered our choices but we all stood on our own two feet and walked when we were very very small and our parents and grandparents celebrated. Remember how excited we were when we got our first bicycles and were taught to ride? It's not trendy or old-fashioned, it's simply mobility.

At the same time automobiles have changed from Packard to Prius or Lincoln to Leaf so why isn't alternative fuel-powered transit becoming more even commonplace? While compressed natural gas buses are seen in cities fairly frequently, hydrogen fuel cells only emit water and even solar panels can provide power-assist. Invention is part of the American spirit but have we considered how our urban places might change to accommodate these fuel sources and technologies?

In short

Leinberger hits the nail on the head when he says, "...the creation of economically successful WalkUPs [walkable urban places] with high social equity is a huge challenge, possible the largest domestic challenge U.S. society currently faces. This research shows that economic success tends to lead to lower social equity performance. Many citizens would like to see high economic and social equity performance. This is the dual goal that urbanism must embrace."

It's the same dream, the concept endures, but it's not the one-size-fits-all that it had been interpreted to be. It's the option of numerous locally-owned shops versus a Walmart. Now is the time for us to be even more focused on our principles and remember that they, just as the ideals that founded this country, still apply—it's only the physical manifestation that has to constantly adapt.

7 comments

At rally, leaders promise action on affordable housing

Mon, 28 Jan 2013 15:11:00 EDT

by Elizabeth Falcon

Over 300 people rallied for affordable housing this weekend with the Housing for All Campaign. The packed house drew Mayor Gray and Councilmembers Muriel Bowser and Jack Evans, all of whom were unified in their commitment to stem the tide of displacement in the District.

Photo by THCdc on Twitter.

Evans said, "We need to make sure the people who were here in the difficult times get to stay for the good times." But the three differed on how to respond to this need.

Mayor Gray promised a big housing announcement at his State of the District address next week, so he didn't make any commitments at this time. The Comprehensive Housing Strategy Task Force, which the Mayor commissioned nearly a year ago, has recently finished its work. Their report is expected soon, so he's likely waiting for its publication before making a statement.

He did take the opportunity to praise key housing programs that have struggled in the recession, including the Housing Production Trust Fund and Local Rent Supplement Program.

Bowser, however, challenged the Mayor on his housing record. "You can't say you're for affordable housing and take $40 million out of the Housing Production Trust Fund," she said referring to the DC budget in 2012 and 2013 when the administration proposed $18 and $20 million in cuts to the program, respectively.

The Housing Production Trust Fund has created 7,500 affordable housing units in its 10-year history and is respected as a model across the country. It remains to be seen if the Mayor's strategy will include a continued commitment to this highly-successful program.

The next few months will be critical for housing funding. The task force is scheduled to release its report in the next few weeks, and Mayor Gray will announce his housing plan. The Mayor will then submit his budget to the DC Council, which many hope will offer increased investments to make housing affordable to District residents.

"It is time to act," said Bob Pohlman, Executive Director of the Coalition for Nonprofit Housing and Economic Development. "More than a thousand newcomers are flooding into the District every month, putting more and more pressure on the cost of housing. If we don't face this reality and act now, affordable housing will be out of reach for tens of thousands of DC residents."

What does seem clear is that after years of accelerating housing need and limited political interest in the topic, affordable housing is becoming a key political issue again.

21 comments

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Can Silver Spring build enough housing to stay affordable?

Mon, 28 Jan 2013 10:10:00 EDT

by Dan Reed

Economists say one of the best ways to provide more affordable housing is through filtering, a theory that as expensive new homes age and decline in value, they'll become low-cost homes tomorrow. But this requires building enough housing to keep up with demand. Is that possible?

Photo by dan reed! on Flickr.

I analyzed trends in downtown Silver Spring, where over 600 new apartments and condominiums were built last year. Another 1,300 apartments are under construction as we speak. Almost all of them are high-end, luxury rentals.

While there are more affordable alternatives, the area as a whole has become more expensive in the past 10 years. Persistently low vacancy rates suggest there's a lot of demand for housing as well, further pushing up rents. It appears that for filtering to take effect, the area may need even more housing than it already has.

I looked at 32 market-rate (as opposed to entirely subsidized) apartment complexes within a mile of the Silver Spring Metro station, which includes downtown Silver Spring, South Silver Spring and East Silver Spring. I found their advertised monthly rents and unit sizes on the landlords' websites and sites like apartments.com, apartmentguide.com and rent.com, and used everything from Historic Silver Spring to aerial photos from the 1950's to find out when each building was built.

Click the image to see a larger version.

Rents varied dramatically across the 32 complexes, and as predicted, age appeared to be a factor. Apartments at the Solaire on Ripley Street, which opened last year, rent for an average of $2.87 per square foot, more than twice the $1.36 rent per square foot at Hillbrook Towers on Thayer Avenue, built in 1961. Typical 2-bedroom units at both buildings rent for $3,023 and $1,250 a month, respectively.

It's said your annual income should be 40 times the monthly rent for an apartment to be truly affordable. Thus, you'd have to make $120,000 a year to live at the Solaire, or $50,000 to live at Hillbrook Towers.

Click image to see a larger version.

Next, I plotted each building's age and its average rent per square foot and found a trendline. As it turned out, each year since a building was built takes off about 1.19 cents in monthly rent per square foot, or $11.90 for a 1,000-square-foot 2-bedroom apartment. That may not seem like much, but over time, it adds up to a $595 difference between a unit built this year and one built in the 1960's.

According to the 2007-2011 American Community Survey, 25% of the apartments in and around downtown Silver Spring were built during the 1960's, and another 33% before that. This period was the first big apartment boom in Silver Spring, with even more units constructed than during the 2000's. Shouldn't this mean that there are lots of cheap apartments like at Hillbrook Towers? Not quite.

Click the image to see a larger version.

Low vacancy rates in and around downtown suggests that the market is absorbing any new apartments that get built. According to the 2000 Census, just 2.5% of the then-8,200 apartments in the area were vacant. In 2009, that rate had doubled as several new buildings opened. By 2011, with 9,100 apartments in the area, the vacancy rate fell back to 3.35%. In Census Tract 7025, which contains several recently-built apartment buildings in downtown and South Silver Spring, just 1.67% of all apartments were vacant in 2011.

For filtering to work, there have to be enough new apartments to soak up the demand for new housing. Without it, landlords will upgrade their older buildings to draw those potential tenants.

That's what happened at the Blairs, the massive 1960's-era apartment complex across from the Silver Spring Metro station, whose owners recently completed a major LEED-certified renovation. While it's made the complex more environmentally sustainable, it's also resulted in higher rents. A renovated 2-bedroom apartment was recently advertised on their website with rent of $3,060 a month, comparable to new construction.

A combination of new, high-end buildings and old buildings that are essentially being made new means that rents overall continue to rise. In fact, rents in and around downtown Silver Spring have increased by 75% since 2000, 3 times faster than inflation.

Click the image to see a larger version.

In 2000, the median rent for all apartments in the area was $808 a month, which would be $1,042 today. In 2011, it was $1,410 a month, which suggests that apartments like the one at Hillbrook Towers are the exception, not the rule.

It's true that downtown Silver Spring has grown a lot in recent years, so much so that some residents say they've had enough. But the area isn't even growing as fast as did a half-century ago, and even after a global economic recession, the demand to live here remains strong.

Silver Spring prides itself on its diversity, but that's threatened by rising rents. Filtering isn't the only tool we have to protect affordable housing, but it's one we should take advantage of. Especially given opposition that crops up to most new apartment buildings, we will see whether Silver Spring can build enough housing to gain the benefits of filtering, or if it will soon move out of reach for many people and families.

53 comments

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Legalize two-family houses in Montgomery County (Jul 31, 2012)
Toronto's "tower renewal" could point the way for East County high rises (Apr 29, 2009)

An affordable little neighborhood

Tue, 15 Jan 2013 08:28:00 EDT

by Thaddeus Bell

An affordable housing "pocket neighborhood" in Little Rock clusters 9 small single-family homes around a shared green space in a 1 acre infill development near downtown. Could this translate to the DC area? (Switchboard)

Comment

Skip the housing, get the affordable housing tax credit? (Jan 12, 2009)
"Saving" a neighborhood in order to destroy it (Jun 29, 2007)
Burtonsville residents protest affordable housing (May 18, 2009)
Affordable housing clashes with the suburban mindset in Wheaton/Kensington (Dec 1, 2008)
DC poised to relax affordable housing in Waterfront deal (Dec 20, 2010)