In which preserving older housing actually worsens affordability
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SJ City Council and Housing Dept recently raised eyebrows by gifting a local nonprofit a cool $5m to "preserve" some older affordable housing in ESJ. Turns out, such a strategy may run counter to Best Practices for cities that want to decrease the overall cost of living and housing. From Local Housing Solutions.
Many subsidized housing developments are reaching the end of their required affordability periods, including HUD-assisted housing built between the 1960s and the 1980s and housing developed under the Low Income Housing Tax Credit program 15 or more years ago. As affordability requirements expire, owners have the option to convert affordable units to market rate rentals, condominiums, or some other non-residential use.
The potential loss of these affordable rentals has prompted many localities and non-profit organizations to target their efforts (and resources) on preserving the long-term availability and affordability of these properties. Since housing development resources and capacity are largely finite, a greater focus on preservation may require a reduced focus on new construction. How should cities, towns, and counties approach this trade-off?
It is important to consider the location of an affordable property in determining whether it should be targeted for preservation. Affordable rentals in resource-rich neighborhoods will likely be high priorities for preservation—particularly those located in neighborhoods with good schools (for families with children) or in close proximity to services (for seniors and persons with disabilities).
Properties located in areas of concentrated poverty may be less of a priority for preservation unless the neighborhood has been targeted for substantial investment through a formal redevelopment plan. The same holds true for areas with an abundant supply of affordable housing units. In many cases, the subsidy associated with the affordable units can be transferred to another part of town, and the subsidy can be used to create affordable housing opportunities in areas where there are few.
When private owners of existing affordable developments are interested in continuing to participate in subsidy programs, it is important to consider the overall market context. In cases where there is a critical shortage of affordable housing throughout the market, there are few alternative locations to which those subsidies can be transferred, and families with housing vouchers are having difficulty finding housing outside areas of concentrated poverty, the preservation of dedicated affordable housing in such areas may be worth considering.
In high-cost areas, deep housing subsidies are often required to help extremely low-income renters afford their housing costs. However, the loss of an affordable rental property does not necessarily mean that the subsidy attached to that property will be lost as well. In most cases, cities have the option to move housing subsidies, including project-based Section 8, to another property and property owner.
There may be other properties nearby and in better condition than an existing building nearing the end of its affordability period. Acquisition and redevelopment of these properties as affordable rentals could be comparable or even lower in cost than preservation of the existing development. In some regions, new construction opportunities in greenfields locations may also be available. The cost of new construction in these previously-undeveloped areas may be similar or even lower than the cost of rehabilitating an existing affordable housing development in a different location.
In considering all available alternatives, and the relative costs, localities should be mindful of the relative merits of the two locations in terms of public resources, amenities and other neighborhood characteristics. Wherever possible, cities should try to evaluate the cost tradeoffs of preservation and new construction on the basis of actual, ripe development opportunities, rather than hypothetical development costs that may not reflect current market conditions.
Apart from the factors described in this brief, there are a number of circumstances in which cities, towns, and counties may wish to focus on new construction in particular as an approach for producing affordable housing. Examples include:
The municipality wants to create low-cost housing in a particular neighborhood in which there are no existing buildings that are available and suitable for acquisition and rehabilitation.
The city has identified a specific site that would be an advantageous place on which to build affordable housing—for example, because the land already has the appropriate zoning or is a , or for some other reason.
On a large parcel of land, redevelopment of existing lower-density buildings would not yield the economies of scale that could be achieved through new construction of a large mixed-income or mixed-use complex.
Read the whole thing here.
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