“The State of the Nation’s Housing 2017 report by Harvard’s Joint Center for Housing Studies” is out and as far as Affordable Housing, we’re in trouble. The good news is there are solutions, namely incentivize, incentivize, incentivize.  Chris Herbert, Managing Director, Joint Center for Housing Studies, Mayor Catherine E. Pugh, City of Baltimore, Maryland, Terri Ludwig, President & CEO of Enterprise Community Partners, and Robert C. Kettler, Chairman & CEO of Kettler, participated in a solution based panel discussion -moderated by Kriston Capps, who is a Staff Writer, for The Atlantic/”City Lab” (which is excellent by the way) and was captured in “video.”  The presentation was sponsored in part by the “National League of Cities” which gives a voice to 1,700 direct city members nationwide, 49 State Municipal Leagues and 19,000 towns, cities and villages nationwide, all to inform local officials of their communities needs.

Mayor Pugh, Ms. Ludwig and Mr. Kettler all described strategic and applicable ways to progress in lieu of the findings. Mayor Pugh described several steps already taken in Baltimore and suggested ways to think of the needs of future households, across varying areas, where the needs are different, as did Ms. Ludwig. Mr. Kettler, who is a Developer, made some very crafty decisions in order to offer lower rents to the communities he serves and there were lots of discussions by all to incentivize building Affordable Housing units.

So what’s the problem? The housing supply is down, demand is up. 9 million units were built over the last 10 years, which is the lowest it has ever been. Affordable Housing Supply is down, high end/luxury construction is up, and too many people, a little more than 11 million, across the country are spending about “half their income on rent.” This means people have to decide on what to cut out of the budget at any given time, as Ms. Ludwig called “Toxic trade offs”, where people have decide what not to spend money on between health care, transportation, or food.

A summary of the video presentation indicates that the cost of construction has gone through the roof, and developers can’t get enough on their return to provide Affordable Housing, even if they wanted to – at least not without some pretty crafty steps. Mr. Kettler stated the reason for the problem “…the bottom line is cost.” Some years back, the cost of construction in the locals he serves per unit, could run anywhere from $200,000 to $300,000. Now it’s $450,000 to $550,000″ and that is not including the cost of land.  Still, he has ideas about how to lower costs which can eventually lead to more affordable housing. 

Further to the video summary, Mayor Pugh discussed that people aged 18 to 34 and 55+ are the two fastest growing groups of people. Additionally, persons aged 18 to 34 are not buying homes the way this same age group did many years ago and persons aged 55 and up are looking for actually, the same things, which means:

“…We need a whole new way of looking at housing needs…Colleges, Universities, Hospitals, Museums, Parks and Water, that’s what people want…these two growing groups want the same things, they both like walking…” Looking at it another way, it would be the “…least expensive to build” for cities, “…you don’t have to worry about transport.” This was connected to a discussion about retail also, and what kind of stores are being thought of for building locations.

There are additional concepts to think about. That, yes, there is the internet, though for some things, like getting  your hair done, you need to be there.  These things, if taken into consideration, can be used to evaluate how to shape housing to meet needs, and also fill in a check box we might not have considered, like people who like to walk to get to everything.  Ms. Ludwig, stated “…You have to look at Housing Plus Transportation Costs…” This from a discussion about the emergence of poverty stricken households moving to the Suburbs or ExUrban locations and what this means.

Some Additional Thoughts on Solutions:

Find tax incentives, including vacant property tax incentives. Build smaller units, one example was by Mr. Kettler, for units he called “Flats.” The units he builds usually, cost $950,000, now he’s cut that back to $625k. Mitigate costs, he suggests, with this plan, they’ve been able to serve person(s) with incomes between, $45k and $80,000. This is better now because it is $350,000 investment. Additionally appliances can be purchased that are still great, stainless steel appliances for example, though they don’t have to be super high end appliances. The idea is to continue building this way until you can get to serve lower and lower incomes, to begin to address the problem, especially in urban areas.

There was encouragement for Developers to opt to achieve long term goals and do it through private funding which helps build affordable housing, rather than going for the short term goals, which caters more to high end units. Minimize quick flips, and go back to traditional Real Estate. Get Tax Credits and Market Rate units in the form of Private Partnership yields as per Mr. Kettler.  Additionally, it was suggested that regulatory reform would help to minimize the 8 to 10 months it takes for some approvals, as a shorter time period would generate faster returns.

Inclusionary Zoning was also stated as being is key so that more affordable housing units can be built in more neighborhoods! To address the problem of gentrification, which squeezes more areas of neighborhoods into divisions of poverty, and take a look at communities practicing Exclusionary Housing. Major Pugh raised solutions around a focus on behaviors people do not want in their back yard. The idea is to look to services the community needs, or may need access to, like drug treatment and other services.

The video presentation was great and the report is filled with information to help keep us on our toes moving forward. With all being said, the report’s findings indicate: “…state and local governments have a central role to play in defining specific community needs…and marshaling resources…But only the federal government can provide funding a scale necessary to make meaningful progress towards the nation’s stated goal of a decent home in a suitable living environment for all.”