Affordability: the local menu
Elsewhere I’ve written about the increasing innovation taking place at the local level, as economic growth, immigration and emigration, restrictive development policies, exclusionary zoning, and state/ local property tax and incentive structures. A recent Baltimore Sun article, focusing on Howard County, Maryland,
provides a handy menu of the initiatives that local government may use:
“I say, chaps, how can we solve this housing muddle?”
The context is a task force report on housing alternatives presented to County Executive James Robey:
He asked for it, and he got it
Higher densities and a relaxation of construction restrictions are needed to address
“The cost of housing in
No more homes alone!
As I’ve previously demonstrated, land value (and the value of existing property) is a residual, so the rise in prices faster than incomes signals an increase in demographic demand — richer people or more people, some of whom are richer. In the face of this rising economic tide, what is a locality to do?
The organizing principle is … density is the driver.
But the draft report also underscores a consensus that the problem cannot be effectively confronted without increasing housing density — the number of housing units per acre.
Without higher density, you cannot support an urbanizing population. You’d think this would be obvious, but it is often obscured.
The more pigeons in a space, the less space per pigeon
“Zoning changes need to be made throughout the county, encouraging building and redevelopment at higher densities, and broadening the ability to add housing to commercial sites,” the report says.
Higher density also makes land more valuable, so it benefits incumbents who already own homes, and it benefits localities, for it increases their tax base. Yet, unsurprisingly, the incumbents’ club wants to keep everything the same:
Greater density is a politically explosive issue as illustrated by the recent public opposition to it at
You’re proposing to let those people move in?
The task force authors, who don’t have to face the voters, have the luxury of being clear:
The report, however, says, “If we are serious about this problem, changes and some hard decisions need to be made.”
It says that the county-imposed limit of 1,850 new housing units annually “is too restrictive to begin to make a dent in keeping up with the affordable housing gap as it grows.” The report urges approval of additional moderately priced homes above the cap.
Here we have a classic pretzel hold. The county is artificially restricting growth in supply, but it can do nothing to restrict growth in demand. Something’s got to give, and what gives is affordability.
Among the report’s key recommendations are:
1. Creating a land trust program. These typically develop or acquire homes and preserve them as affordable units.
A home, after all, is both a cubic environment (an enclosed space that is personal, private, and secure) and a land or site right to occupy that cubic. In homeownership, the most common form of separation is in the condominium, where the individual owns his flat and a right of access via the condominium’s land. Earlier forms include long-term leasehold (most prevalent in
You own the house, I own the color group
The more modern forms, preservation land trusts (for open space) and community land trusts (for affordability), seek to provide a measure of over-riding economic use of control on the property. Here their value would be to buy the land before it appreciates further, in effect taking some of the inventory out of a pure-market environment and seeking to capture those homes for long-term affordability.
Fundamentally, a sound idea.
2. Requiring developers who receive density bonuses to provide housing that includes the “full spectrum” of prices.
Previously I’ve discussed inclusionary zoning at length. It’s one of the more potent, prevalent, and rapidly spreading tools whereby localities can aerate the local residential ecosystem by injecting a measure of affordability into each neighborhood.
Inclusionary zoning is effectively a tax on the increased value of granting development rights on urban land. Coupling that with a density bonus in effect (a) increases the land value (density bonus) and then (b) taxes away a portion thereof (inclusionary affordable homes). Properly calibrated, it can produce managed growth and a certain continuing stream of new affordable homes.
3. Expediting the regulatory reviews and processing of developments “that address affordable or full-spectrum housing” and waiving fees for developers when their projects include affordable housing.
Speedier review should lower the cost to develop, which in turn either increases developer profit or allows the lower cost to be passed through in more affordability.
If only development zoomed like that.
Further, if the affordable homes are only a portion of the total development, there can be a multiplier effect: that is, if in a development with 20% affordable the locality saves the developer $2,500 per home in time and expense cost of securing approval, logically that should translate into $12,500 per affordable home of additional affordability.
You may think that’s not much — and you would be right. Thus, expedited review is valuable either (a) in extremely development-hostile jurisdictions, or (b) when combined with other initiatives.
Most of these initiatives, in fact, work better together, as a solution suite, than by themselves.
4. Establishing more “overlays,” or areas where a mixture of commercial and residential development is permitted, and changing zoning regulations to encourage more development of affordable housing.
Zoning is destiny. And I’m a strong believer in mixed use, mixed tenure, and mixed income. The more mixing, the messier yet better our cities are and will be.
Property always glows when it’s mixed use
5. Extending the county’s moderate-income housing program to existing units, in return for density bonuses.
Although at one level this is simply a variant of the preceding, at another it recognizes that existing housing is a source of affordability, and that focus solely on new production obscures the vast majority of the housing stock.
6. Increasing funds for affordable housing by (a) increasing the transfer tax or by (b) tapping surpluses in the county’s general fund.
It’s evident that the report writers knew what they were about, for they opened with the most palatable initiatives. As the list lengthens, the dubiousness level rises, starting with this one.
Because of the cost-value gap, affordable housing always costs money, more money (of whatever type) is good. (Profound, eh?)
“Good is more money.”
Where can we get more money, O wise one? Why, we can tax the voters.
Pick a year, any year
Real estate transfer tax is a politically insidious approach — it taxes the person who is moving out — that is, the person who will no longer be voting in our jurisdiction. In this it follows the glorious principle and precedent set by airport taxi fees, hotel fees, and city sales taxes — sock it to the guys who don’t vote in our town. Compared with these minor traveling indignities, a transfer tax hits closer to home — literally! Hence it’s politically combustible … which is why the report authors offer another way of getting that more money which is good: draining the rainy day fund.
But elected officials really like having a rainy day fund, that they can spend when they need to top up their personal political capital. All this brings us back to the central challenge: more money is good, but raising it is bad.
“Don’t tax you, don’t tax me, tax that fellow behind the tree.”
— Senator Russell Long (son of the fiery Huey)
7. Giving the county a “right of first refusal” when apartment complexes are being sold, to protect affordable rents.
Throughout our public and private lives, there are some number of unprovable facts — things everyone instinctively knows are true but the proof of which can be denied by those who want to claim them false. Rights of first refusal are one such. Everyone instinctively knows they are a device to chill sales, push down prices, and generally discourage or hobble an owner from exercising her property rights. But when challenged on this point, defenders recoil in astonishment, swearing they intend their process to be fair, transparent, genuine, non-confiscatory, blah blah blah … and when the reporters’ notebooks and TV cameras look away, they settle down to write downwardly biased rules.
Then there’s that second stinger: “to protect affordable rents.”
Now, this proposal is gonna sting …
How can we do this, Batman? How can we protect affordable rents?
“It’s easy, Boy Wonder …”
It’s easy, Boy Wonder; either the county uses grant funding to reduce the carrying cost of its purchase price, or it finds a way to buy the property for less than fair market value.
Holy subsidy, Batman, that sounds like Option 6 in disguise!
“And I think … there is worse … to come.”
8. Increasing protections against rent increases for the low-income and elderly, although that would require changes in state law.
“Protections against rent increases” is a journalist’s euphemism for rent control — which, as I’ve documented several times, is just wealth-transferring confiscation by slow means. And for that reason, it requires the state to embrace rent control, something very unlikely to happen.
Since rent control will be a non-starter in
Does
The final report is scheduled to be presented to Robey on Nov. 13 - time that assures that the issue will be left to Robey’s successor and a new County Council.
Electoral politics 101: announce the good news, leave the bad news as a legacy.
“I bequeath all my problems to whomever was rude enough to defeat me.”
