A Primer on Housing America

Last week, I provided a brief, if somewhat snarly, history of affordable housing in the United States. Today, I offer an overview of the strategies and mechanisms available to create affordable housing today.

Part Two: Creating Affordable Housing Circa 2021

330+ million Americans live in approximately 141 million housing units in the United States. Over two million of us live in public housing, 4.7 million live in Section 8 housing, and a smattering live in other kinds of subsidized shelter. Still, there are only 36 affordable housing units available for every 100 low-income households. Almost two thirds of qualified families either pay too much for a roof overhead, or suffer subsistence housing. What mechanisms do individuals, organizations, and governments have to alleviate this situation?

Public Housing and Section 8. Over 3,000 public housing authorities own and maintain the nation’s public housing stock, much of which is now over fifty years old. Housing Authorities also manage local Section 8 programs, which are split between project-based vouchers (the subsidy belongs to a specific housing development, which is owned by a non-profit rather than the housing authority) and portable vouchers, which a family can use to rent an approved unit of their choice. If you are low-income person lucky enough to land either a public housing unit or Section 8 voucher, you pretty much stay put, as wait lists for these opportunities often span more than ten years. The number of new public housing units being built is nil; the number of new Section 8 vouchers tiny. These are steady-state programs, at best, that won’t make a dent in unmet affordable housing needs.

Non-profit Developer Housing. Since the federal government stopped actually creating new housing, non-profit developers utilize a web of economic development grants, housing set-aside funds, tax-exempt bonds, Community Development Block Grants, low-income housing tax credits, and community reinvestment loans to create affordable housing. These efforts probably do more to provide cover for politicians who want to be able to champion the idea affordable housing than actually generate it. The complexity of permitting and financing affordable housing is a significant reason why affordable housing units cost 25% more to bring online than privately financed housing.

Affordable Home Ownership. Over the past fifty years, the rate of home ownership in America—65%— has been pretty consistent. The percentage shifts in a narrow range in sync with economic cycles, but the average barely budges. Unfortunately, home ownership rates for Blacks and Hispanics are well below 50%. One attempt to increase home ownership rates is to provide affordable home ownership opportunities for moderate income people. Financing these programs is as byzantine as rental programs, but the incentives of ownership are strong. However, most of these programs cap a family’s ability to accrue equity and deny passing a dwelling on to their heirs. As a result, they do not provide the same ladder to economic security that people who purchase houses in the private market and pay them off over their lifetime enjoy.

If there is any bright spot on the affordable housing horizon it inhabits a single word: zoning. More individuals and communities are coming to realize that traditional zoning is environmentally unsustainable, increases sprawl, and exacerbates economic inequality. In the 21^st century there have been small, yet significant, moves to reverse restrictive zoning. This can be as simple as reducing parking requirements from two cars per unit to one car per unit, thus increasing the number of units a particular site can accommodate. Several communities now allow accessory-units in any district, including single family zones. This allows folks to make in-law apartments, add a small studio, or create a basement rental unit. Accessory-unit zoning can immediately increase the potential number of dwelling units in a community by 25% or more, while spreading them out among existing structures with almost no additional infrastructure.

There are also two zoning trends specifically targeted at creating affordable housing. The most common is ‘inclusionary zoning.’ Inclusionary zoning requires developers to set aside a certain number of units in new projects for moderate income households. The percentage is pre-determined, and is usually a function of what a ‘hot’ real estate market will bear. In Cambridge, MA, where rents and housing prices are sky-high, developers must provide 20% inclusionary units. In a cooler market, like Des Moines, that threshold requirement doesn’t fly.

Inclusionary zoning provides the ancillary benefit of economically integrating housing on a project level. I’ve met enough people who live in subsidized housing to know that some people welcome this, while others prefer to live among their peers, even poor peers. Inclusion in Cambridge is clear: the subsidized units must be within the development. In other cities, like Boston, direct inclusion is optional. A developer can make a ‘set-aside’ payment to an affordable housing trust fund to build housing elsewhere rather than include subsidized units in their project. Thus, the shiny Seaport District of Boston includes almost no apartments for poor people, while Seaport developers underwrite housing in Mattapan and other traditionally poorer neighborhoods.

Another zoning mechanism for increasing affordable housing is allowing more generous development options for projects in ‘overlay’ districts. Cambridge recently created an ‘affordable housing overlay district’ that increases density, reduces setbacks, and lowers parking requirements for any project that is 100% long-term affordable. This makes the approvals and permitting process easier, and increases the capacity of a given site.

Despite a lot of talk about affordable housing in our nation in 2021, our nation’s political apparatus is hardly primed to invest in directly in building housing, and the financing process for affordable housing remains, well, unaffordable. Many housing activists have redirected their focus from pressing for affordable housing to simply pressing for easier development standards, under the assumption that if more housing can be built, housing will become more affordable as a result. This is a logical argument, but smacks of supply side economics, which leaves me justifiably skeptical.

At this moment, we are losing the battle of creating enough affordable housing. Zoning freedoms may offer increased affordability. Will that be enough to address the need? I doubt it. Next week I’ll suggest some other strategies.