This issue of the Cohen Report is based on a speech given at the annual meeting of the Housing Association of Nonprofit Developers on June 23rd at the Omni Shoreham Hotel in Washington, D.C. The theme of the conference was, “Connected Region, Connected Future.” Rick Cohen presented these comments in the opening plenary session on “Public Private Strategies to Increase the Region’s Affordable Housing Development and Preservation.”
After interviews with a cross-section of housing experts from the public, nonprofit, and private sectors in the metropolitan Washington, D.C. region, and after reviewing affordable housing production and preservation strategies from around the nation, this much was learned: There is no silver-bullet answer to the problem of generating sufficient affordable housing to replace units being lost from the housing inventory, much less generating new affordable housing to accommodate people who want to live and work in the area. The notion that someone, somewhere is going to find the innovation that answers the challenge once and for all…that is not possible. But what is possible is that the combined efforts of elected and appointed officials, public agency directors, regional employers, and especially nonprofit housing developers and nonprofit housing advocates, can make important headway.
Political scientist Ben Barber has major faith in the power and wisdom of local government in addressing these and other issues. Barber says, “We live in a 21st-century world of interdependence, and brutal interdependent problems.” If there is any problem that crosses more boundaries of municipalities and counties than housing, it is hard to imagine. Barber believes that local governments are simply closer to the people and better able to engender trust than national governments. They are pragmatic, non-ideological, and, in contrast to Capitol Hill where both parties will cut their noses off to spite their faces—and their opposition—local governments tend to be defined, in Barber’s words, above all by “collaboration and pragmatism, by creativity and multiculturalism.” But in our experience, that collaboration and pragmatism is frequently the result of nonprofit organizations, housing developers, and others that understand the issues deeply because, unlike the other parties to the problem, they know their constituents, they know the people in need, and they can authentically convey to mayors, city councils, and housing departments what it will take to create affordable housing.
Solving the Washington, D.C. region’s affordable housing problem doesn’t mean creating new layers of government and new hurdles for affordable housing developers to leap across in order to get things done. It means finding solutions that live up to the rubric of the words used by President Obama just last week: “In the conflict of ideology and reality, you should opt for reality.”
Based on the impetus of the Greater Washington Housing Leaders group, this discussion explores four categories of program ideas for addressing affordable housing in the metro Washington region but are applicable to metropolitan areas nationwide:
- How to increase sources of capital for affordable housing
- How to increase the availability of land for affordable housing
- How to reduce the costs of affordable housing development
- How to build the political will to get things done
What became obvious in examining the research is that much of what experts might recommend for the Greater Washington region is already being implemented to greater or lesser degrees throughout this entire area. The challenge is to up the game, to do more, and significantly increase production and preservation simultaneously.
In terms of capital for affordable housing, given limitations and reductions in federal funds such as Community Development Block Grants and HOME Investment Partnership funds, as demonstrated in the following chart, there is little question that localities in the metro Washington, D.C. area have to continue and increase their commitment of local resources on the table.
For housing trust funds, which the District of Columbia, Montgomery County, and Arlington have already implemented, more is needed. Nonprofit advocates ought to be advocating for new potential revenue sources including unclaimed property funds (“escheats”), local hotel taxes, commercial developer linkage fees, and capital from the sale of surplus public properties.
While the federal government is difficult to count on given the plunge in HOME and CDBG funds, the potential is there for the state governments of Maryland and Virginia to come up with incentive programs that build upon the efforts of local jurisdictions. And even at the federal level, given the housing needs of the large military population in this area, the Department of Veterans Affairs under Secretary Bob McDonald has taken a pragmatic and increasingly effective tack toward getting VA funds to localities and nonprofits.
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Two other sources of capital need to be leveraged and increased. One is getting pension funds to invest in affordable housing, based on the model of pension fund investment into New York City’s Community Preservation Corporation’s lending program, with its special interest in assisting smaller property owners and developers, who are often overlooked in many affordable housing incentive programs. The other capital source is the tax-exempt assets of philanthropic institutions. That means not just turning to foundations for grant support, which they should be doing—and doing more of—to support nonprofit housing advocacy, capacity building, and general operating support. That also means looking to the tax-exempt endowments of foundations for program related investments that can be used for predevelopment loans, investment in housing bonds, loan guarantees, and mission related investments. Unlike governmental jurisdictions, foundations do not face the obstacle of government boundaries and therefore can plan and act on a regional level with great effectiveness.
For land and property for affordable housing development, it is pretty evident that the jurisdictions in the Washington metro area ought to undertake comprehensive inventories of public properties attached to schools, hospitals, fire and police stations, and other facilities that might be reasonably developed as affordable housing. Secondly, due to in some cases an excess of commercial office space, there are commercial office properties that might be reasonably repurposed as housing or for mixed uses. The essential mix of ingredients to make such projects work will be a combination of developer creativity and local government regulatory flexibility, though one can imagine that nonprofit partnerships in these developments would be a huge boon. Overall, planning for any region’s expanding transportation infrastructure must incorporate planning for affordable housing at transitway nodes and hubs. It is simply common sense to be doing master planning for transportation that makes affordable housing development part and parcel of the process.
Without a doubt, every expert and every source seems to recommend the continuation and expansion of inclusionary zoning and density bonuses for affordable housing development. The key is to determine how to take the existing inclusionary efforts of the jurisdictions here and make them more attractive to developers and more effective in generating a maximum number of affordable units. For example, in New York City, Mayor Bill de Blasio’s administration has examined the existing structure of inclusionary zoning and proposed a comprehensive program to extend the geographic applicability of inclusionary zoning to areas undergoing redevelopment. At the same time, notwithstanding efforts to increase the stock of new affordable housing production, there’s also a need to preserve the existing affordable stock through programs such as the tenant purchase options and through interventions to maintain affordability in developments whose affordability subsidies might be expiring.
How to reduce the cost of producing affordable housing? Without falling prey to dubious solutions such as repurposing unused buses for housing or turning shipping crates into tiny homes, the reality is that the only means—and they’re limited—for reducing the development cost of affordable housing take the ingenuity of program administrators. Housing and community development professionals, particularly nonprofit developers, recommend doing what ought to be done:
- Reducing development fees for affordable housing developers
- Fast-tracking affordable housing developments through the permitting and approval processes
- Facilitating more efficient deal assembly, including public subsidies
- Getting different agencies to coordinate their underwriting, due diligence, and monitoring
- Reducing requirements on affordable housing that, if planned appropriately, might not be necessary, such as excessive off-street parking requirements
- Aligning the incentives available for affordable housing
- Encouraging all jurisdictions in the region to adopt permitting and processing approaches for affordable housing that are as standardized as possible
- Clarifying the rules, eligibility, and processes for obtaining public subsidies for affordable housing
- Making major efforts to incorporate energy efficiency into developments from the start
None of these should be all that surprising, but the fact that to a greater or lesser degree they still are raised by people in the know suggests that doing what is really necessary to prune excessive costs and delays from affordable housing has yet to be done.
Finally, we come to the issue of political will, or political capital, for affordable housing. Ultimately, what is needed is a constituency of private and public sector actors, of government officials, private developers, local employers, and nonprofit developers, to coalesce and mobilize around the need for affordable housing. As one observer said, the case for affordable housing is pretty self-evident. What is often missing is the political will to do something. Around the nation, multi-jurisdictional advocacy campaigns have come together to promote housing bonds in New Jersey, in Texas, and in North Carolina, and new capital sources for housing trust funds in other states and localities. In some areas, the effort is taking the shape of looking at housing much the way we look at other kinds of infrastructure. Like the necessary infrastructure of water, sewer, and roads, without affordable housing, the economic advance of metropolitan regions will slow, without question.
If there is to be regional political will, even if local jurisdictions do things their own way due to local and state laws, the elements ought to include the following:
- Every jurisdiction should assess and commit to addressing its fair share of the region’s housing need.
- Each jurisdiction should commit to expanding their housing trust fund investments, both for the importance of their role as subsidies and for the political signal they send about the importance of affordable housing.
- Each jurisdiction should conduct a soup-to-nuts review of their development processes to reduce the time and increase the predictability and reliability of reviews and permitting for both nonprofit and for-profit developers.
- The economic development units of the jurisdictions should learn to speak about and commit to affordable housing, uniting rather than divorcing economic development and housing development.
- The jurisdictions should be maximizing their resources—and the resources of the philanthropic sector—to build the capacities of nonprofit developers and mission-focused for-profit developers and, with the help of foundations, investing in the developers’ core operating support needs.
- The chief executives of our localities should be working with institutions managing tax-exempt endowments, whether foundation or university endowments or pension funds, to find ways to invest those dollars behind affordable housing.
All of this adds up to a strategy that has been articulated by Brookings Institution scholars Bruce Katz and Jennifer Bradley about how a metropolitan region of multiple jurisdictions can collaborate effectively to achieve multijurisdictional, shared goals. They recommend to advocates that they “build [a] network” in which “leaders…work together in a concerted way to drive change.” They say that we need to “begin [with] a vision…bold enough to redefine the identity and image of the metropolis,” look for and focus on the kinds of “intervention(s) [with] the potential to alter the trajectory of an economy,” and “bankroll” the changes needed through “new forms of public-private partnerships to design, finance, deliver and operate core elements of metropolitan infrastructure.”
The key is to do what works, what we know works. Sean Donovan, the former Secretary of HUD, said that there are two big challenges. One is to avoid focusing on what he called “shiny new toys” and forgeting to emphasize “the core business and legacy of our agencies.” In other words, doing what we know can work and has been demonstrated to work is key. The other challenge, he said, was the need to “build momentum, you have to get started, to get early win, try things, and constantly reassess and refine.”
It should be crystal clear that this all adds up to an advocacy agenda for nonprofit organizations. As nonprofits, they are much closer to neighborhood residents than any of the other players might be. They know what neighbors want and need; they know the community appetite for affordable housing, and they’re willing to make it all work. Even in metropolitan Washington, D.C., if there is going to be affordable housing developed, especially for families with incomes below 30 percent of median income, it is going to fall to the nonprofits to develop on their own or to cut deals with private developers. To realize any of these ideas, the real basis of determining what works is looking and seeing, not collecting empty metrics, exploring with real people what they need and want. Hopefully, this is the agenda ahead for the metro Washington, D.C. nonprofit affordable housing community.
