Day #074: The good, the bad, and the future of gentrification; part 2

The rent is too damn high.

October 9, 2014; 9:05 AM • by Aaron Williams

Inspired by Michael Bierut’s 100 Day Project, 100 Days to a Better RVA strives to introduce and investigate unique ideas to improving the city of Richmond. View the entire project here and the intro here.

Idea: Reframe the discussion about affordable housing. Embrace inclusionary zoning, encourage a change in mortgage standards, and favor housing vouchers.
Difficulty: 5 — Housing problems are the manifestation of several serious issues like education and transportation, and we are still in search of the game-changing solution.

Author’s note: Housing is the most difficult issue I’ve tackled in this project. It’s impossible for anyone one person to truly even begin to understand the breadth of this issue. Through research, two things have become apparent. 1) We are not doing an effective job and in order to do better we need to abandon our preconceptions and start with our first order principles. 2) YouTube videos will show that members of the East End are some of the most thoughtful and engaged members of the city. This really had an impact on me.

America is on the front half of a serious movement toward urbanism. Neighborhoods are transforming at a breakneck pace that is improving lives, but others are being left behind. Like free trade and automation, the benefits of gentrification outweigh the losses, but the losses are disproportionately placed on a few. Yesterday’s piece focused on averaging taxable real estate assessments to protect longtime homeowners in transforming neighborhoods. Today’s article will focus on policies for helping aspiring homeowners and renters in transforming neighborhoods.

While Richmond’s affordable housing problem pales in comparison to cities like San Francisco and New York City, the issue is still serious. In the coming decade, the conditions exist for the problem to get worse. Moving forward, we need to reframe our discussion about “affordable” housing while choosing the least worst policies like inclusionary zoning.

The Fallacy of Providing Affordable Housing

In certain American cities, housing is scarce. If there is a shortage of housing, then providing affordable housing is a fallacy. Public housing, vouchers, grants, and tax credits simply shift the costs of expensive housing on to others. Our language needs to represent this distinct difference.

Notice how this language change doesn’t involve any discussion of what ought to be. Instead it acknowledges more of the true cost so we can effectively place housing programs in our hierarchy of public services.

Failure to Create Affordable Housing

The Richmond Redevelopment and Housing Authority has a $72 million annual budget. 82% of that comes from the US Department of Housing and Urban Development. The rest comes from other sources like the city and resident fees. These costs are paid by income taxes and real estate taxes that in turn make it even more difficult to afford housing.

Rent controls¹ act as price ceilings. Lower prices means less housing supply which in turn raises prices on non-rent controlled housing stock and creates waiting lists. Rent controls make it more difficult to leave government housing, and they make it difficult for younger generations and new arrivals to find housing.

Public housing that costs $72.30 per month and rent controls don’t create affordable housing. Unfortunately, government leaders and policy setters frequently speak in absolutes about the subject: “Transformative Project X will create affordable housing.” This is a huge roadblock to creating better policy.

The worst except for all of the others

One way to increase housing supply without increasing costs is reducing zoning and regulations. Inclusionary zoning allows developers to build denser projects than legally allowed in exchange for committing a certain number of units to affordable housing. 10-30% of units are usually designated to be affordable for prospective buyers or renters earning 80-120% of median incomes.

Montgomery County, Maryland pioneered inclusionary zoning. Since 1974 developers have created 10,000 units of affordable housing despite building in one of the most affluent counties in the country. Unlike Section 8 housing which has concentrated poverty in the East End, inclusionary zoning doesn’t concentrate poverty or segregate cities.

Virginia law allows for weak inclusionary zoning. A strong system should be adopted that actually encourages participation. Expedited permits and inspections is just one idea that could be offered without expanding legislation.

The cost of housing needs to be financially attached to the issue of transportation. Housing loans should account for transportation costs. Individuals who can forgo car ownership because of ease of walking, cycling, or riding public transit should see that reflected in the ease of getting a mortgage or borrowing limits. This would also mitigate the impact of rising property values near access points to public transit like subways stations and BRT. These kinds of decisions are made by mortgage originators, and Fannie Mae and Freddie Mac, but Richmond should be vocal about the changes.

Fixing problems from the kitchen in the dining room

Housing problems are the manifestation of several serious issues like education and transportation. Some individuals’ struggles are the product of factors well beyond their control. Policies creating opportunities and promoting equity are essential in modern society. Despite being constrained by the Dillon Rule and HUD rules, the city should make every effort to expand cash vouchers while reducing public housing.

Individuals are rational optimizers. In other words, individuals know their needs better than anyone else and are the better at satisfying them. By moving exclusively to vouchers, individuals are better able to self-optimize.

This would move as many individuals as possible into the real housing market. Development in Richmond isn’t constrained by geographic factors like the ocean or multiple major rivers so these vouchers would send signals to developers to build a certain level of housing. It would also limit some of the administrative burden of public housing which would free up resources to work on other issues: disabilities, employment, education, and transportation.

This policy would encourage diverse neighborhoods while not forcefully breaking up the support and social structures of public housing. Care should be taken to disguise vouchers to avoid discrimination. While not as unlimited as a charity like Give Directly, housing vouchers remove many of the downsides of paternalism while encouraging the reintegration of our neighborhoods.

— ∮∮∮ —

Housing and gentrification are serious issues with complicated and ambiguous policy responses. Most policy doesn’t actually create affordable housing. We need to reframe the conversation of public housing while returning to our first order principles in order to create a system that is affordable and equitable.

Love this idea? Think it’s terrible? Have one that’s ten times better? Head over to the 100 Days to a Better RVA Facebook page and join in the conversation.

Photo by: taberandrew