Could DC Inclusionary Zoning Benefit Neediest Residents?

I’d never though much about the District of Columbia’s inclusionary zoning program. For one thing, it hardly made a dent in the affordable housing shortage during the first four years after the District completed final program rules.

The program’s generating more units now — 600 open and roughly 1,120 more on the way, I’ve heard. Still not a large impact in a city that’s lost roughly 31,880 units that rented for $1,000 or less in 2002.

More importantly, given my interests, such affordable housing as the program has produced isn’t affordable for the lowest-income residents — those with incomes no greater than 30% of the median for the D.C. metro area.

That’s a feature of the law, not a bug. IZ, by design, benefits households that are technically low-income, according to the definitions used by public agencies and analysts, but not really low-income at all.

Consider, for example, that the vast majority of units thus far produced are priced for households at 80% of the area median — currently $78,624 for a three-person family or nearly four times the federal poverty line.

A brief by a local coalition nevertheless makes a good case for IZ as a program that can benefit the lowest-income residents. It also recommends some rule changes the Zoning Commission could make.

How the IZ Program Works

The IZ program offers private-sector developers an incentive to include some affordable units in new or significantly renovated and expanded multi-family housing. Instead of directly subsidizing their projects, it permits them to pack in more units than zoning would otherwise allow, thus making the projects potentially more profitable.

In exchange, developers must set aside a modest percent of the residential floor for units that will rent or sell at prices those technically low-income households can afford.

The IZ units must remain affordable, according to the same income standards for as long as the building remains residential. Only recently has any other District housing program preserved affordability beyond a date certain.

Why IZ Doesn’t Mandate Units Affordable for Extremely Low-Income Residents

The story here is fairly simple. Rents affordable for the lowest-income (technically extremely low-income) households don’t cover the costs of operating and maintaining a building. Owners need ongoing subsidies in the form of vouchers to compensate for the shortfall.

That, of course, requires continuous funding. And the money would have to come out of the District’s budget because federal policymakers aren’t going to plow enough extra into so-called project-based vouchers to support a growing number of affordable units — at least, not in the foreseeable future.

Even the President’s proposed budget would merely cover the costs of vouchers already in use. This steady state funding seems to date back to at least Fiscal Year 2010 — except when the voucher program, like all programs dependent on annual appropriations got whacked by the across-the-board cuts in 2013.

We do need increasing investments in project-based vouchers. Better, the argument goes, to pair them with the financial support the shored-up Housing Production Trust Fund provides. By law, 40% of the funds spent must help finance units affordable for ELI households.

How IZ Could Benefit Extremely Low-Income Households

The very structure of IZ means its not inclusionary for ELI households. Yet it can benefit them, supporters say.

The notion here is that moderate-income families will move to the new units they can, in theory, afford. Those units will attract them because they’re more conveniently located, spiffier, close to high-performing schools and the like.

That will free up cheaper units they’re occupying now and/or make them less likely to rent or buy them when they decide to move. It’s surely the case that a goodly number live in those units now.

About a third of rental units District ELI households could have afforded roughly four years ago were occupied by higher-income households, according to an in-depth Urban Institute study.

This is one, though far from the only reason that 64% of ELI households spent at least half their income for rent in 2013. They’re disadvantaged in the competition for the low-cost units, the Institute says, because landlords tend to prefer renters with “greater financial stability,” e.g., steady, well-paying jobs, strong credit records.

IZ arguably reduces the competition by luring those renters to housing that affordable for them, but not their lower-income counterparts.

Not THE Answer, But an Answer

What I think we see here is that no one program can solve the acute and growing affordable housing problems in the District — or in many other communities. IZ shows instead how affordable housing programs are — or should be — thought of together.

As with some of our household repairs and more ambitious projects, we often need more than one tool to get the job done.

I didn’t see how IZ could help do the job for the District’s lowest-income residents. But I’m persuaded now, though I also see how the Zoning Commission could make the tool more effective.

The coalition has half a dozen recommendations, many of which would shift the program toward less well-off households — and even ultimately the ELI. Seems like a blueprint for reform to me.

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