by Jeffrey Lubell, Executive Director of the Center for Housing Policy
1. Housing affordability problems are worsening. HUD recently reported that the number of very low-income renter households with worst case needs increased by 20 percent in just two years. The Center for Housing Policy similarly found that housing affordability problems have worsened for working renters and owners. (A brief summary of both reports is available here.)
2. Budgetary pressures are increasing. The talk in Congress is about cutting discretionary spending, not adding to it. To state the obvious, there simply is no political will right now to substantially increase funding for government housing programs to meet the nation’s growing housing challenges.
So what can we do?
There are a number of different ways to approach this question. I’d like to focus on one—the development of strategies for effectively assisting more families with available funding.
In thinking through some of the initial ideas I have for doing more with available funding, I’ve noticed they have three things in common:
- First and foremost, they all involve working across silos to achieve a set of goals shared by multiple policy communities and constituencies – for example, housing and asset-building, housing and the environment, or housing and transportation. Bridging these silos is obviously very difficult, but also critical for developing more comprehensive solutions and expanding the base of political support for needed changes.
- Second, they all involve a form of “value capture,” taking advantage of expected changes in property values or incomes to implement solutions that are paid for in whole or in part by those increases.
- Third, they all require thinking very differently about some aspect of current practice.
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Here’s one specific idea: In many (but not all) cases, the development of new transit stations or lines leads to higher housing prices as developers bid up the price of land around planned stations and develop higher-priced housing. (See, for example, this recent report from the Dukakis Center for Urban and Regional Policy at Northeastern.) There are undeniably some environmental and economic benefits to this form of reinvestment. But in my view we can do better. Much better.
Imagine if before construction began on the transit line, a proactive housing strategy were developed to ensure that families of all incomes could afford to live within walking distance of the stations expected to experience residential development. The strategy might focus on some or all of the following elements:
- preserving the affordability of existing multifamily rental developments,
- helping low-income homeowners afford expected increases in property taxes,
- acquiring and banking land adjacent to planned stations for future development,
- providing density bonuses and other incentives to increase residential density and ensure that a share of new residential development is affordable to moderate-income families,
- working with public housing agencies to attach deeper subsidies to a portion of these units to reach lower-income families,
- setting up a tax-increment financing district with a mandatory set-aside of a share of the proceeds for affordable housing, and
- planning for long-term affordability.
Such an approach would have many benefits—reducing displacement of existing residents, maximizing ridership for the transit line, ensuring that families of all incomes have equitable access to the new transit service, and reducing energy use and greenhouse gas emissions by increasing the number of residents that live within walking distance of the transit stations. Moreover, if adopted early enough in the process, much of the costs of the strategy could be paid for through “value capture.” For example, a community might offer a 30% increase in residential density in exchange for a commitment by owners to ensure that 15% of the units are affordable over the long term to moderate-income households. Or a community might dedicate 20% of the revenue from a planned tax increment district to fund affordable housing. Remaining costs could be met by prioritizing these locations for a portion of existing housing resources.
Such a strategy is much more cost-effective if put in place early, before land prices rise. More often than not, however, the political will to adopt a comprehensive housing strategy does not materialize until after the station has been built and housing prices have risen dramatically.
Fortunately, there’s a relatively straightforward fix to this timing problem that would carry little or no cost to the federal government and may well save local communities money over the long run. Through the New Starts program, the Federal Transit Administration (FTA) awards funds to state, regional and local agencies to cover a portion of the costs of major public transit investments. By modifying the New Starts competition to reward applicants that commit to developing and implementing an effective housing strategy to ensure that families of all incomes can afford to live near planned stations over the long term, the FTA could create a strong incentive for communities to create effective housing plans early in the process, when low-cost solutions are still feasible.
Changing the New Starts award criteria would carry no out-of-pocket costs for the federal government. It would be desirable, however, to make a small amount of funding available to New Starts applicants to help them coordinate the development of an effective housing strategy as housing is unlikely to be their forte and they will need to work with many different local agencies to pull together an effective strategy. Among other approaches, this could be accomplished by prioritizing New Starts applicants for HUD’s Sustainable Communities planning grants or other existing resources.
So that’s one idea for how to do more with available funding. In this case, it turns out that a modest change in transportation policy would have major benefits for affordable housing. But it’s a win-win for all, advancing transportation and environmental goals as well.
I plan to share other ideas for ‘doing more with available funding’ in my next few columns and then broaden the focus in future columns to consider different ways to think about the federal role in housing (in contrast to the roles of states and localities) and long-term market and demographic trends worth keeping an eye on.
In the meantime, please join the conversation by commenting on this post!
Moving Forward is a new monthly column about ideas for the future of U.S. housing policy by Jeffrey Lubell, Executive Director of the Center for Housing Policy. The column offers perspectives on the government role in housing and on broader housing market trends likely to shape future housing policy.