Category Archives: workforce housing

Capital ideas

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This country’s shortage of affordable rental units runs into the millions, and Vermont’s is in the thousands. Where’s the money going to come from to build or rehab our way out of this hole? Government spending falls chronically and abysmally short, but there’s a glimmer of hope that a growing fraction of the massive need can come from an unlikely source: private investors. finance1

But first, consider the scale of the need. According to the recent Harvard report on rental housing, 11.4 million renter households are “severely burdened,” paying more than 50 percent of their income for housing. (An additional 9.9 million are simply “burdened,” paying more than 30 percent.)

In Vermont, 26 percent of the 75,000 renter households are severely burdened — that’s 19,500 households living in places that are far beyond their means. And in Burlington, 35 percent of the 9,500 renter households are in that position – about 3,300 households.

The federal government’s primary subsidy for affordable housing development is the Low Income Housing Tax Credit, which produces in about 100,000 affordable rental units a year. Then of course there’s the challenge of maintaining affordability for units whose tax credits expire, a challenge that Vermont’s housing nonprofits and state agencies contend with annually as they marshal limited public resources to preserve the affordability of what’s here. And even though they’ve been largely successful, what’s here isn’t anywhere near enough. Yes, the private market is turning out new rental housing to meet the growing population of renters, but the great majority of those new units are high-end.

A new report from the Urban Land Institute and NeighborWorks America, “Preserving Multifamily Workforce and Affordable Housing,” describes a range of new financing vehicles that seek to create or preserve affordable housing. Sixteen partnerships o investment companies – some new, some well-established — are profiled. One thing they have in common is that they offer returns to their investors– who include philanthropies, university endowments, pension funds and private individuals in the single digits, below what the typical real-estate investor might expect to receive. These entities include private equity funds and two real estate investment trusts (REITs) that focus on affordable multifamily developments.

The hook is that this investment sustains a social good: affordable housing. If “socially responsible investing” is popular among Vermont’s progressive monied class, why can’t affordable housing be one of their fiduciary causes? A creative financier might even find some way to enlist the UVM endowment or the state pension fund in support of affordable housing development.finance2

The report also mentions another possible funding source for affordable housing — the EB-5 program, which pulls in big investments from foreigners (typically from East Asia) in exchange for green cards, and which we’ve harped on before. Yes, EB-5 is supposed to be a job-creation program, but it turns out that real estate development developments are among the most popular EB-5 projects, in part because the construction jobs count. (Check out this article, “Real Estate: Still the Darling of EB-5.”) True, affordable housing isn’t the typical EB-5 project, but it has been done – in San Francisco’s Hunter’s Point Shipyard, and in Seattle, near the Seahawks’ stadium. Next up, Miami.

How about Newport, Vt.? 

Good news, mostly

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  • Little backyard houses — aka “accessory dwelling units” — are springing up all over Vancouver. vancouver This is a partial remedy to the affordable rental shortage that afflicts municipalities all over North America, including Vermont. It also affords an optional living arrangement for older people who want to age in place. In Vancouver, these appendages are called “laneway houses,” and some of them are pretty handsome. There’s plenty of room for additions like this in Burlington, even if we don’t have alleys — and in plenty of other Vermont communities, too.
  •  A “mobility program” in heavily segregated Baltimore moves families from high-poverty public housing complexes in the city to higher-rent, higher-opportunity suburbs. This is an initiative very much in the spirit of affirmatively furthering fair housing, but it serves a small fraction of the subsidy-eligible families in need and it operates largely under the radar, to minimize opposition. One obstacle: a shortage of affordable housing in suburban communities.
  • Plattsburgh has a new 64-unit affordable housing complex, called Homestead on Ampersand.  plattsburgh2It’s just a couple of miles from the neighborhood where complaints about a proposal for a smaller affordable housing complex prevailed.
  • Columbus, Ohio, plans to transform a vacant downtown building into “workforce housing” – which in this case means housing for people who make $40,000 to $60,000 a year. The made-over building would feature micro units – apartments of 300 square feet or so and targeted, presumably, to single Millennials. We’ve touched on the micro movement before, which seems to be taking hold mostly in bigger metro areas (here’s a roundup with a national map; for a more substantial study of the phenomenon, click here).   But it has also spread to Kalamazoo and, as we’ve noted, Syracuse, so there’s no reason it couldn’t work in an over-priced city like Burlington, where officialdom is forever wringing its hands about how young professionals have trouble finding affordable accommodations.

The Burlington College land deal

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Burlington College’s intent to sell off much of its lakeside acreage drew opposition when it was announced two years ago. Now, as a development plan awaits City Council approval, the grumbling continues. Some of the grumblers apparently cling to an obsolete fantasy: namely, that most of the property could be spared development and conserved as greenspace. Burlington-College

Thumbnail history: In 2011 the college bought 32 acres from the Catholic diocese for about $10 million, then came to the realization, after a couple years of stagnant enrollment, that it couldn’t afford the payments. To survive, the college would have to sell off a big chunk of the land, and it revealed its plan to do so to housing developer Eric Farrell a little over two years ago.

The deal wasn’t done, though, and there was a window of many months when someone else — someone like the Nature Conservancy, say, or a land trust — could have stepped forward to offer the $7 million or so that would have been necessary to buy the developable land for conservation purposes. No one did, though. That’s why the greenspace fantasy is obsolete.

Not developing the land was not an option, at least if Burlington College wass to stave off bankruptcy. And if the college were to go belly up, well, then ownership of the property  would have reverted to creditors (principally a bank), leading to a development scenario perhaps less palatable than Farrell’s.

If there’s anything reasonably left to grumble about, it’s in the details of the agreement the City Council will review next week. Among those details, as we understand them: The city is acquiring 12 lakeside acres for $2 million to be maintained as parkland (a parcel, by the way that has been appraised at $2.9 million). Farrell will develop about 550 housing units on 16 acres, of which 160 will be affordable to families of income below 65 percent of the median, with other units targeted to people of moderate income, while the rest are market-rate; and 200 beds for students on a parcel the college will retain for its campus.

This much is clear: The city is in desperate need of more affordable housing, and it has its inclusionary zoning ordinance to thank for the affordable units in this scheme, and (2) This inclusive new neighborhood, as planned, will be one of exemplary economic diversity.

Surprise! Some rents going down

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Burlington’s chronic housing-affordability problem is bad enough — more than a third of the city’s 9,500 renting households are paying more than half their income for rent and utilities, which puts them in the “severely burdened” category — but guess what? It’s getting arguably worse. burlingtonapt

HUD just came out with its 2016 fair market rents for the Burlington/South Burlington metro area, and they’re lower than they were for 2015. This despite the fact that actual rents in this area have been going up every year. (The 2016 numbers are up and down across the state, as Vermont Housing Finance Agency’s news blog helpfully details.)

If you really want to know why Burlington’s numbers went down, you can go to the HUD page to see the methodology. The unfortunate upshot, though, is that anyone with a Section 8 housing voucher is going to have less to choose from in 2016 than they do this year. That’s because apartments that cost more than the “fair market rent” are off-limits for subsidy. (If it makes you feel any better, remember that majority of Burlington’s “burdened” households don’t have vouchers anyway. Nationally HUD rental assistance extends to only about one-fourth of the people who are income-eligible.)

OK, let’s consider a two-bedroom apartment. The 2016 “fair market rent” is $1,172 (as compared to 2015’s $1,302). What are the offerings on Craigslist?

Here are the first 10 listed rents for two-bedroom apartments in Burlington and environs (South Burlington, Colchester) that we found at noon Monday. (Craigslist is constantly updated, so if you do the search the results will vary):

$2,500, $1,600, $2,500, $2,100, $1,425, $2,400, $2,025, $2,000, $2,000, $1,650.

How “fair” is that market? Now, perhaps Craiglist rents tend to be above average (are there studies that document this?), but there’s not much consolation in that, especially if you have a housing-choice voucher.

Unease Down East

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Burlington and Portland, Maine, have a few things in common. They’re the biggest cities in their states, they both pride themselves in their trendy livability (as measured by magazine rankings, food-trucks per capita, those sorts of things), they both experienced negligible development of rental housing for many years, they both worry about gentrifying neighborhoods, and they both have a housing affordability problem.

Portland’s problem might seem a bit more acute, thanks in part to a six-part series in the Portland Press Herald that elaborates on what the mayor-elect calls a “housing crisis.” portland1The themes echo other crises around the country – soaring rents (up 40 percent over the last five years), stagnant or declining incomes, middle-income renters priced out and fleeing to the burbs.

The average two-bedroom apartment in Portland, according to the newspaper, is $1,560. That’s too bad, because an apartment like that is out of reach for anyone with a housing voucher. HUD puts the fair-market rent for a two-bedroom in Portland at $1,074 – which happens to be well below Burlington’s $1,309. What’s more, landlords in Portland can capitalize on the hot rental market by charging non-refundable application fees, which their counterparts in Vermont cannot.

How Portland is going to relieve its “crisis” is an open question. The mayor-elect has appointed a committee. The city is examining municipally owned land with an eye toward potential sites for affordable housing. New developments are supposed to make some units affordable for middle-income renters, but that inclusionary policy apparently doesn’t extend to the working poor. Here, as elsewhere, the remedies seem to pale before  the problem.

Modest proposal revisited

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At first glance, The Times’ recent  exposition on the surfeit of Chinese residential real-estate investment seemed exotic, distant. The money seems to be flowing into hot, upscale regions to the south, and one of the investors even asserted, “Chinese people like newer areas.” china1

But before you conclude this phenomenon has nothing to do with us, in graying old Vermont, consider this: Chinese students are enrolling in U.S. universities in increasing numbers, the story pointed out, adding: “Their parents often buy homes in college towns.”

“If you look at the stuent populations of any major or nonmajor university,” the Times story quoted a Chinese real estate executive as saying, “you’ll get a really good indication of what property prices are going to do.” What he apparently meant is that Chinese buyers, who more often than not pay cash, bid prices up.

This brings to mind the University of Vermont – never mind whether it qualifies as a major or a nonmajor institution. It’s eagerly stepping up its quotient of international students – part of the strategic plan, don’t you know – and the lion’s share of those students come from China. These are students, generally, whose parents can afford to pay full fare.

Here we pause and pivot to point out two independent trends:

  • Chinese investors are pouring money into American residential real estate, and many of them hanker to live in this country.
  • Vermont is desperately short not just of affordable housing, but of the capital needed to fill that need.

All of which suggests that we revive the EB-5 idea we floated a few months ago. Why not tap the profusive cash of Chinese investors who yearn for green cards to build affordable housing for Vermonters – affordable housing in upscale, high-opportunity areas, no less. With their residency established, the parents could then find accommodations for themselves near their collegiate offspring. China2

We can’t resist noting, again, that the Vermont regional EB-5 office is headquartered in the same state agency (Commerce) that hosts the Department of Housing and Community Development.

Extracurricular accommodations

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There’s a particular form of workforce housing that’s getting a lot of attention lately: affordable housing for teachers. Much of that attention is being paid in California, of course, where many school districts are having trouble recruiting and retaining teachers who can’t afford the prohibitive housing costs (in Silicon Valley, for example, or San Francisco, where the mayor has announced plans to build 500 affordable units for teachers). Similar plans are afoot in Oakland, San Mateo, L.A.

But housing complexes for teachers have arisen on the East Coast, too, mostly in bigger cities — Newark (pictured),teachersvillage  Baltimore and Philadelphia, with a development in Springfield, Mass., in the pipeline. These are projects aimed at Teach for America recruits for these cities — recent college graduates who spend two or three years in public or charter schools before they move on to other pursuits.

Not all the teacher-housing initiatives are urban, though. Several counties in North Carolina have provided, or pledged to provide, affordable housing for teachers, as has McDowell County, W. Va., in a project carried out with the American Federation of Teachers. In West Virginia, the hope is that the housing will help attract teachers to a place where they otherwise wouldn’t be inclined to settle.

Other states use housing as a teacher-recruitment tool in different ways. Oklahoma offers low-interest loans, for example. Texas offers mortgage assistance for teachers, and Mississippi subsidizes down-payments and closing costs. These happen to be states with pronounced teacher shortages.

Vermont has a teacher shortage, too — perhaps not as dire as those states’, but a shortage nevertheless. According to the Agency of Education’s “Designated Shortage Areas” for 2015-16, teachers of English, Spanish and special education were needed in all counties, and math teachers were needed in half the counties. Could it be that Vermont’s housing costs are a barrier to teacher recruitment? And if so, would it make sense for school districts — which are being encouraged to merge anyway — to collaborate in finding ways to ease the housing burden?

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Another line of argument is that school districts, instead of futzing with housing benefits, should simply pay teachers well enough so that they can afford to live in those districts.

In any case, teacher villages, or housing complexes, come in different forms, and it’s not  always  clear how they gibe with affirmatively furthering fair housing standards. The one in Newark, for example, has been criticized as an oasis for transient young white professionals in a gentrifying neighborhood. (For a nice overview of these programs in The American Prospect, click here.) Still, Vermont communities would do well to think about how they can make affordable housing available to middle-income people – such as teachers – who are hard pressed to pay market rates.

Consider educators in the Burlington metro area. The National Housing Conference’s interactive “Paycheck to Paycheck” matches housing costs (the annual salary needed to afford a house of median price, $225,000) and the salary needed to afford a one-bedroom or two-bedroom apartment.

When you run the model for three educators – preschool, primary and secondary school teachers — you find that:

They can’t comfortably afford the median mortgage…

p2phomeowner

 

 

 

 

 

 

… or the two-bedroom apartment…

p2prenter

 

Good news, bad news

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First, the bad news:

  • The city council in Parsippany, N.J., faced a stark choice –- affordable housing or Whole Foods — and picked the latter. Just how it happened that the fate of a 26-acre site called Waterview came to this is no doubt a story in itself, but this much seems clear: the powers that be leaned against a 600-plus unit affordable housing development, contending it would be a drain on local taxes. whole-foods1This might not be in the spirit of affirmatively furthering fair housing. That site, next to a neighborhood of single family homes, might well be a “high-opportunity” location for affordable housing in a city with a median family income of $81,000. Whole Foods, we suspect, does not as a general rule move in to low-opportunity areas.
  • The Illinois Housing Appeals Board was established six years ago to hear pleadings by developers contending they’ve been unfairly prevented from building affordable housing projects. The appeal process was created in connection with a law requiring municipalities to submit affordable housing plans to the state if less than 10 percent of their housing units were affordable. Well, it seems that municipalities ignore the law with impunity, the board has no authority, and it has yet to hear a single case. Back to the legislative drawing board? In the Chicago metro area, low income tax credits are issued preponderantly in lower-income areas, an analysis found. Among the wealthy suburbs where opponents are showing up in force is Wilmette (pop. 27,000, median household income $130,000), where a hearing on a 20-unit development drew a crowd the other night.

The good news comes in two forms, tangible and intangible.

  • On the tangible side, 19 units of affordable housing are back on the rolls in Montpelier, thanks to a rehab projectbarre-st-construction by Downstreet Housing and Community Development, with an array of collaborators. These are studios and one-bedrooms on Barre Street, all a short walk to downtown. This is the sort of transit-friendly positioning that we’d like to see more of.
  • One of the collaborators was the Vermont Housing & Conservation Board, an affordable-housing mainstay that has been underfunded for years. A report to the governor from the Council on Pathways to Poverty calls on the state not only to fund VHCB at its full statutory rate ($19.5 million), but also to restore the money meant for VHCB that has been diverted to fill budget gaps since 2001 ($41 million). With full funding, VHCB might be able not only to support more low-income housing, but workforce housing for people who make “middling” wages of $13 to $25 an hour. The report also calls for a $2 lodging fee, half of which would be reserved for affordable housing and homelessness-aversion. This is intangible good news, in the sense that somebody is saying and pushing for the right things that have yet to happen.
  • Speaking of workforce housing, people in Bend, Oregon, are realizing that middle-class people ineligible for subsidized housing are shut out, as housing prices soar. So the City Council is starting to give some serious thought to what can be done for them in addition to low-income people. Again, nothing has happened yet, but we take the fact that this discussion is underway as more (intangible) good news.
  • This item might seem like a stretch for the good news category, but at least it’s of the intangible all-talk variety: A prominent Republican has emerged to say that the housing crisis deserves more attention in the presidential campaign. That’s Scott Brown, the former senator, scottbrow who also happens to be a member of the board of J. Ronald Terwilliger Foundation for Housing America’s Families. In an opinion piece, Brown lamented that housing has been missing from the debates, and said that if he were moderator, he’d ask the candidates what they’d do about the shortage of affordable rentals. Meanwhile, another opinion piece, by foundation president Pamela Patenaude in a housing industry publication, calls for an increase in federal support for the low-income housing tax credit. Hear, hear.

Learning from Massachusetts

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The Greater Boston Housing Report Card 2015 is out, and it’s an eye-opener. Prepared for the Boston Foundation  by the Dukakis Center for Urban and Regional Policy at Northeastern University, it’s a detailed analysis of Massachusetts’ housing-unaffordability crisis –a crisis that results, in part, from not enough housing being produced. What accounts for the insufficiency?Mass2

“We have failed to meet housing production targets because there is no way to do so given the high cost of producing housing for working and middle-income households.”

That’s from the executive summary, which goes on to make the same point in another way:

“(T)he cost of developing new housing for working and middle-income households has become prohibitive in Massachusetts. Radical remedies will be needed to overcome the barriers to housing production …”

And what are the barriers? High development costs, of course ($274 per square foot for urban projects, of which $159 is construction and $41 is land acquisition). And zoning regulations that limit density and where multi-family projects can be built.

Now, you might be thinking, what does any of this have to do with us, up here in our little, rural, unprepossessing state? Metro Boston is another world — far pricier and denser than any place around here.

Well, we’d argue that the problems that Massachusetts is facing are problems we share — albeit on a smaller scale. And remember, Massachusetts has an affordable housing zoning law (Chapter 40B) that’s arguably stronger than what’s on Vermont’s books.

Yes, it would be nice if we could get a comparable report card for housing in Vermont, but failing that, perhaps we can learn something from what the one for Massachusetts.

The report notes that “Although there is a lot of vacant land, most vacant sites are not zoned for multi-family residential development.”

As for zoning:

“Highly restrictive zoning, present in virtually every one of the state’s 351 municipalities, creates an artificially high barrier to development. It pushes developers to propose smaller projects (i.e., fewer units) and smaller units (i.e., fewer bedrooms per unit) in order to reduce the perceived impact on the neighborhoods and — in the case of larger units attractive to families with school-age children — the perceived impact on the town or city’s education budget. The complexity of getting zoning changes approved dramatically extends the development period and increases carrying and soft costs. The cumulative effect drives up both the cost of development (seen in the high level of site costs, financing, and soft costs) and rents.Mass1

“Thus, significant resistance to any change in the local community ambience has also meant that local support has heavily favored low-density, smaller projects, both of which are far more expensive to produce. Higher density housing maximizes the efficiency of land use, and larger projects create economies of scale in development and construction. Massachusetts residents opposed to zoning for multi-family housing at 20 units per acre are astounded to learn that the city of Paris — a pretty nice place to live with undeniable “character” — has a density of approximately 120 units per acre!

“When developers are given permission only to build projects of very low density, they will do so. As a result, the housing that is built will be expensive and affordable only for the very well-to-do or, if public subsidies are involved, to people with very low incomes. Working and moderate-income families will not be able to afford these units. This state of affairs, of course, causes the average cost of producing multifamily housing in the Commonwealth to increase.”

Here we note that merely increasing the housing supply (as some are advocating) isn’t going to solve the affordability problem if the added supply happens to be … luxury-scale and thus … unaffordable to all but the wealthy.

More brainstorming: self-building

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The housing-unaffordability problem is too big, pervasive and complex to yield to single, simple remedies. Yes, government at all levels has to play a substantially bigger role than it does now. But without substantial new federal funding and subsidies — which can’t be found on mainstream politicians’ lists of spending priorities — we might as well brainstorm about piecemeal, alternative solutions.

Having touched on co-living and cohousing in the last post, we bring you a continental variant of this idea: collective building.baugruppe1

This intriguing headline in the Guardian, “The do-it-yourself answer to Britain’s housing crisis,” offers an entrée: community members, with help from a land trust, building their own affordable homes. Britain even has an organization, the National Custom and Self-Build Association, to promote such efforts.

Self-building seems to be an even bigger trend on the continent. In Germany, baugruppen, or building groups, are active all over, and reportedly account for 10 percent of new homes built in Berlin. baugruppe3These are groups of people who come together, often with something in common (they might be musicians, say, or share a political philosophy), and take responsibility for acquiring land, hiring architects and contractors, and creating their own housing. For a summary of how it works, click here, or another brief description, here.

The baugruppe is a well-established form of organization in Germany and apparently gets a good deal of institutional support, including financing from a state bank. Whether something like this could work in this country is an open question.

Mike Eliason, a designer who was author of a seven-part series on baugruppen, seems to think it could, at least in a place like Seattle. For the first article, on the website of a Seattle advocacy organization called The Urbanist, click here. As Eliason describes it, baugruppen projects cost less than traditional models because they do without developers and marketing, as well as real estate agents.baugruppe2

It all sounds reminiscent of cohousing, except that it’s commonly done in an urban setting — as the photos in this post reflect. It also sounds like a fairly middle-class phenomenon, considering how much of a personal investment it requires of its participants. Who has the time and energy necessary to do all the meeting and planning and hiring and so on? Probably not someone who holds down two minimum-wage jobs. Not that we don’t need affordable housing, sometimes called workforce housing, for middle-class professional types, too.