Group Title: Affordable housing issues
Title: Affordable housing issues ; vol. 13 no. 2
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Title: Affordable housing issues ; vol. 13 no. 2
Series Title: Affordable housing issues
Physical Description: Serial
Language: English
Creator: Shimberg Center for Affordable Housing
Publisher: Shimberg Center for Affordable Housing
Place of Publication: Gainesville, Fla.
Publication Date: February 2003
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Bibliographic ID: UF00087009
Volume ID: VID00019
Source Institution: University of Florida
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M.E. Rinker, Sr., School of Building Construction College of Design, Construction & Planning PO Box 115703,
University of Florida, Gainesville, FL 32611-5703 TEL: (352) 273-1191 SUNCOM: 622-7697 FAX: (352) 392-4364

Volume XIII, Number 2

February 2003

The Housing Facts & Findings newsletter published by Fannie Mae Foundation in
January (Volume 5, Number 1) carried the following article authored by Arthur C.
Nelson. Nelson is Professor and Director of Graduate Studies in Urban Affairs and
Planning at Virginia Tech's Alexandria Center. He is also Fellow of the American
Institute of Certified Planners and Senior Fellow of the Metropolitan Institute at
Virginia Tech. The article has been reproduced here, with the permission of the
Fannie Mae Foundation, because the strategies discussed may be of value to
Florida's counties and cities seeking ways to meet the state's growing shortfall in
affordable housing. Requests to be added to the mailing list for Housing Facts &
Findings should be sent to

Surveys show that Americans are increasingly
concerned about the availability of affordable
housing, and yet housing tends to be low on most
policy agendas. One reason might be that policy
makers mostly think of addressing housing needs
by spending money on subsidies but there are in
fact many policy and program actions that can
stimulate production of more affordable housing
at little or no cost. It is imperative that housing
move up on the policy agenda to meet the grow-
ing challenge posed by changing demographics.
Consider these facts that illustrate our nation's
evolving housing needs:
Despite the 1990s economic boom, the supply

of housing fell 30,000 units below demand.
* Housing overcrowding increased by one-
third in the same decade.
* It is estimated that by 2010, the number of
families with children under 18 will fall by 3
percent, the number of non-family households
will increase by 17 percent, and households
without children will increase by 19 percent.
* The baby boom generation is aging, and the
number of empty-nester households (ages 55
and older) is expected to double between 2000
and 2020. Some studies indicate that most of
this group prefers town house or condo-style



housing to traditional single-family detached
Because of the changing ethnicity of the U.S.
population much of it driven by immigration
the number of minority homeowner house-
holds will grow by 10 million from 2000 to
2020, with another 15 million new minority
renter households.

As housing supply lags demand, essential
workers often cannot afford to live in the com-
munities where they work. My analysis of
suburban communities in metropolitan Atlanta,
for example, shows that production of housing
affordable to schoolteachers and public safety
officials in counties where they work can meet
only about half the demand.
Frustrating efforts to expand housing supply
to meet demand is NIMBYism. Not-in-my-
backyard sentiments discourage especially
moderate- to high-density housing. This may be
one reason why the share of total housing units
in structures of five or more units fell during the
1990s despite apparently growing demand.
In the face of growing demand for housing,
especially of somewhat higher-density forms,
but given a weak economy that shows few signs
of returning to its 1990s level of production,
combined with NIMBYism, what can be done to
meet the housing needs of the next decade or
two? Perhaps two things: 1) Recharacterize
housing needs to get YIMBYism ("Yes, in my
backyard") and 2) Identify options to better meet
housing demand through mostly non-subsidized
state and local solutions.

Let us consider how public policies and
discussions characterize housing needs. First we
had "public housing" operated by the govern-
ment, with some infamous and costly failures a
term that now carries a lot of negative baggage.
Currently, the emphasis is on "affordable hous-
ing," which is supposed to mean privately

provided housing affordable to the masses but
this concept seems to have gotten stuck with the
subsidized housing tar baby. Inevitably, subsi-
dized housing will continue to be needed for the
lowest-income populations but in fact, much of
the housing constructed today is not affordable to
most middle-income households. Often over-
looked are the housing needs of productive indi-
viduals or families whose life-cycle situation or
income, or both, limit their housing options in the
current marketplace. The term "workforce hous-
ing" is gaining popularity in reference to school-
teachers, public safety professionals, medical
technicians, and the like. It does not, however,
include the fastest-growing group: retired house-
holds on fixed incomes, who can be labeled collec-
tively as "pensioners." Thus, focusing attention on
"workforce and pensioner" housing needs may be
the most effective communications approach to get
the public to say "Yes, in my backyard" to afford-
able housing.


What can be done to expand the supply of
housing affordable to working families and pen-
sioners? The federal government is probably
tapped out, shifting the burden to state and local
governments. But it needn't be viewed as a
burden: A number of innovative, mostly non-
subsidized, steps can be taken to stimulate the
private sector to build more workforce and pen-
sioner housing. In many cases, simple actions such
as code or zoning changes can make it possible for
more affordable homes to be built; in other cases, a
modest investment can offer a big payback in more
housing. Here are my top ten innovations that
state or local governments can use to address the
housing need-production mismatch:

Changes in Local Codes, Zoning
Regulations, Fees, and Procedures

1. Streamlined Permitting. Oregon and Florida
provide two examples of streamlined permitting to

promote production of housing affordable to
working families and pensioners. Oregon may
have the most favorable climate in the country for
facilitating affordable housing production. State
law there requires local governments to meet their
"fair share" of the region's affordable housing
needs, adopt clear and objective (rather than
vague and subjective) review standards, and
render land use decisions within four months of
application. A special Land Use Board of Appeals
hears appeals and gives decisions expeditiously -
faster than in any growing state in the nation.
Florida is more specific: Any housing develop-
ment project meeting broad definitions of
"affordability" is automatically entitled to expe-
dited review by local government, even to the
point of delaying decisions on other development
proposals technically ahead in the queue.
2. Accessory Dwelling Units. Known variously
as "granny flats," "garage-over" units, and the
like, accessory dwelling units (ADUs) can provide
affordable rental housing options, especially for
young or elderly singles. But ADUs are com-
monly prohibited by local codes, apparently
because homeowners fear renters or higher
densities in their neighborhoods. Some communi-
ties appear to be rethinking their approach,
however. Portland, Oregon, has developed a
model for ADUs for different types of neighbor-
hoods based on a variety of design templates that
minimize neighborhood impact. The State of
Washington goes one step further by requiring
jurisdictions with more than 20,000 residents to
adopt ADU ordinances.
ADUs may be added to an existing home, such
as through a basement conversion, or be included
in a newly constructed home. New Urban News
reports that many "New Urbanism"- style devel-
opments are offering ADUs in new homes, often
above a garage or on an alley. An ADU can
provide rental income to help pay the owner's
mortgage, while offering future flexibility to use
the space as a home office, lodging for teenagers
or elderly family members, or guest quarters.
ADUs, typically 500 to 600 square feet, have
appeared in new housing developments in

Florida, California, Oregon, Colorado, Illinois,
Maryland, and North Carolina. In some cases, the
developer sought local code changes to permit
3. Development Agreements. Master-planned
communities offer the opportunity to meet afford-
able housing needs in ways that smaller-scale
subdivisions probably cannot. But few such
communities are designed exclusively for
affordability. One exception is Timberleaf in
Orlando, Florida, a 188-acre mixed-use develop-
ment where most of the 1,800 housing units are
affordable, especially to Disney World employees.
The city and Timberleaf developers negotiated the
major questions of scale, timing, facilities, and
density in one master plan that is implemented by
a development agreement between the developer
and the city. Although those negotiations took
more than a year, individual approvals for stages
of the development occur within 30 days. In
contrast, similar approvals in the average subdivi-
sion in urban Florida take up to 18 months. The
streamlined permitting process is managed by a
review committee (DRC), which is given specific
authority to permit development in Timberleaf.
The DRC provides a single forum for all city
departments that have a role in the permitting
process. It includes local bankers and developers,
thereby ensuring sensitivity of permitting to the
4. Relaxed Floor-Size Minimums. When
homeownership became possible for the Ameri-
can masses in the post-war years, a typical
Levittown house the quintessential starter home
- had 750 square feet. Today, many communities
have zoning codes that require a much larger
minimum housing unit size. A survey of metro-
politan Atlanta suburban communities, for ex-
ample, shows that nearly all limit detached
housing to 1,200 square feet or more. Such mini-
mums have no relation to the public health and
safety provisions of building codes, which allow
smaller units. In such communities, Habitat for
Humanity cannot build homes because its largest
home is smaller than 1,200 square feet. Simply
eliminating the minimum size for homes and

relying on standard building codes (such as the
Uniform Building Code and the Southern Build-
ing Code) to ensure safe housing would expand
housing opportunities. The concern that smaller
homes might detract from the value of larger
homes in the neighborhood has not been demon-
strated significantly: indeed, neighborhoods with
a wide range of housing sizes tend to appreciate
better over time than those with uniform sizes.
In Shoreline, Washington, near Seattle, two-
bedroom "cottage homes" detached houses with
just under 1,000 square feet provide an afford-
able homeownership opportunity. As reported in
The Seattle Times, Shoreline adopted a cottage
home ordinance in 2000. In the Meridian Park
Cottage Homes development in Shoreline, the
condo-style homes are close together but not
attached, and the price tag is significantly less
than the area's median home sale price. Yet, no
one has claimed that these homes detract from
neighborhood values.
5. "Proportional" Impact Fees and Waivers.
Impact fees are one-time charges assessed on new
developments to help pay for new or expanded
infrastructure to serve them. The trouble is that
they are typically flat charges imposed on all
housing units of the same type, such as detached
homes or apartments. Yet, census and other data
show clearly that, on balance, larger homes have
more people living in them (and hence have
greater impacts on facilities) than smaller homes.
In some situations, for example, the impact on
schools of homes larger than 3,000 square feet is
three times larger than homes of 1,000 square
feet, yet both could be charged the same impact
fee for schools.
The solution is "proportional" impact fees that
adjust the size of the fee to the size of the housing
unit based on local studies that establish the
relationship between house size and occupants,
vehicles, school-aged children, and other factors.
In addition, impact fees can be varied by location
so that more expensive locations, such as those at
the urban fringe, are charged more than those
where costs may be lower. Such proportional
refinements to impact fee practice may stimulate

production of more affordable housing. In
addition, policies can be adopted to waive impact
fees for qualifying low- and moderate-income

Policy Initiatives

6. Affordable Housing Trust Funds. Housing
trust funds are powerful tools for providing
locally targeted and managed assistance for
affordable housing. There are nearly 300 housing
trust funds in the United States 37 states have
trust funds and the rest are mostly run by coun-
ties and cities. The funds have a variety of rev-
enue sources, but among the most common are
some portion of the local real estate transfer tax,
penalties on late payments of real estate taxes,
and fees on other real estate-related transactions.
In a few cases, private-sector employers whose
workers face a shortage of affordable housing
support housing trust funds the Silicon Valley
Manufacturing Group in California is one of the
founders and a key founder of the Housing Trust
of Santa Clara County, a public-private partner-
Each housing trust fund has a governing body
that decides how the funds are used. Some
support demand-side solutions, such as subsidiz-
ing the down payment on a home purchase by
low- to moderate-income residents. But housing
trust funds are often used to increase the supply
of affordable housing, such as by providing zero-
interest loans or gap financing for affordable
housing new construction or rehabilitation.
7. Apartments Can Support Single-Family
Housing Values. There is the popular perception
that multiple-family or attached housing per se
reduces the value of nearby single-family or
detached housing. In the past there was ample
evidence for this, but with current building code
and site-planning requirements this may no
longer be the case. For example, there is growing
academic evidence that new apartment develop-
ments may increase values of nearby single-
family homes for three reasons. First, the mere
fact that higher-density housing is attracted to an
area by market forces signals higher values for all

properties. Second, and more subtle, multifamily
housing may increase the supply of potential
buyers for nearby single-family homes. Third,
when part of a mixed-housing and mixed-use
development, higher-density housing adds choice
to an area that by design is made more attractive
than nearby developments. But owners of single-
family detached homes may remain anxious
about attached housing developments in their
communities. One response may be a "home
equity assurance' program. Such a program was
pioneered in the late 1970s in Oak Park, Illinois,
to discourage panic selling in the face of racial
transition. It has apparently been successful, and
similar programs are now operating throughout
Illinois. An equity assurance program enrolls
property owners near higher-density residential
projects and pays the difference between the
appraised value and the sale value if it is nega-
tive. Oak Park has yet to pay out under its
program. While experimental, the Oak Park
solution may be worth considering elsewhere.
8. Inclusionary Housing Requirements. Mont-
gomery County, Maryland, and Fairfax County,
Virginia, are geographically contiguous and have
many similarities, including that both face the
problem of providing affordable housing, yet
they have very different governmental contexts.
Both counties are in the Washington, D.C., metro-
politan area, have nearly 1 million residents each,
and are among the nation's wealthiest counties.
They also face significant growth pressures. Why
are they different? Maryland is a "home rule"
state that gives cities and counties substantial
discretion in managing such local affairs as
planning and zoning, while Virginia is a "Dillon
Rule" state, meaning that local governments need
specific permission from the state to assume most
responsibilities. Despite their institutional differ-
ences but because of their similarities in manag-
ing growth, both have devised roughly similar
approaches to meeting at lease some needs for
affordable housing.
Montgomery County's Moderately Priced
Dwelling Unit ordinance requires developers of
more than 50 detached residential units to set

aside 12.5 to 15 percent of all units for price-
controlled sales over 20 years, in exchange for
density bonuses of 20 to 22 percent; the exact
numbers are determined on a sliding scale relative
to project size. After initially being struck down
by Virginia courts, the Fairfax County Affordable
Dwelling Unit ordinance was crafted to survive
future court tests. It gives a density bonus of up
to 20 percent to developments of more than 50
units that voluntarily set aside 6.25 to 12.5 percent
of them for "affordable" housing. Unlike Mont-
gomery County, the Fairfax County ordinance
applies to all residential developments, not just to
for-sale developments. In both cases, a coalition
of housing advocates, businesses, and civic
leaders championed the need for inclusionary
9. Housing Enterprise Zones. For several
decades, Atlanta's population has declined as
households moved to the suburbs. There were
several reasons for this, not the least of which was
that suburbs simply offered better value in new
housing relative to the older stock in the city. To
induce new residential development in targeted
areas near downtown and other commercial
nodes, and near public transit, the city created a
housing enterprise zone program. Within these
zones, new owner-occupied dwellings receive a
100 percent property tax abatement the first year,
a 90 percent abatement the second year, and so
forth over 10 years. In addition, impact fees are
waived for new housing of all types including
rentals built in enterprise zones; payments in
lieu of those fees are financed from a special
housing trust fund created by the city's impact fee
program. Property tax abatements have long been
used to provide incentives for commercial devel-
opment. For housing, the return on investment in
forgone taxes and fees can be more stable neigh-
borhoods, a stronger future property and sales tax
base, and an increased supply of all housing,
including units affordable to working families and
10. Leveraging the Low-Income Housing Tax
Credit. Created in 1986, the Low-Income Housing
Tax Credit (LIHTC) program gives investors in

qualifying projects a credit against their federal
income taxes. A rental property allocated tax
credit is required to be affordable to low-income
households for at least 15 years. The manner of
implementation is left up to individual states.
With the program now more than 15 years old,
however, units built 15 years ago may revert to
market-rate housing, thereby reducing supply.
In some states, new LIHTC approvals are simply
replacing older units that move to market-rate
housing. However, in some states, such as
Washington where 20,000 units have been
provided under the program since 1987 tax
credit recipients agree to make units affordable
to low-income households for 40 years instead of
the federally required 15-year minimum. Even
with a 40-year contract, there is a waiting list of
investors. States that meet just the minimum IRS
terms may consider the example of Washington
and other states to maximize production of
affordable housing; otherwise, after 15 years or

so, all many may be doing is using new tax credits
to replace units moving to market rate.

According to census data, the United States
loses about 0.6 percent of its housing stock annu-
ally. Within a generation, by 2025, it will lose
about 15 million units. Between 2000 and 2025,
the United States will add nearly 30 million
households. A total of about 45 million new
housing units will need to be built, or about half
as many units as existed in 1990. Where will these
units go? More important, will all those units
even be built? A comprehensive assessment of
long-term housing needs, at least at the level of
metropolitan areas, needs to be undertaken, and
each community needs to be a constructive part of
the dialogue to meet future housing needs for a
rapidly changing society.

Affordable Housing ISSUES is prepared bi-monthly by the Shimberg Center for Affordable Housing for the purpose of
discussing contemporary issues facing affordable housing providers. Reproduction of this newsletter is both permitted and
encouraged. Comments or questions regarding the content are welcome and should be addressed to Robert C. Stroh, Director.

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