The Dilemma of Affordable Housing: Will We Take the Moral High Road?

Affordable housing is in crisis. Countless articles and studies, both nationally and locally, have been released in the past year on this topic, and the media buzz is still building. The buzz is valid and as it has escalated, different perspectives and narratives have emerged. City planners’ demographic interpretation, the federal government’s struggle with the efficiency of its programs, developers’ dilemmas with increasing regulations and construction costs—all these issues add to the challenge. While these individual components are informative, the focus is typically on the problem immediately at hand and rarely on understanding the fundamental underlying issues or viable solutions to the crisis.

What’s the Problem?

The problem at hand is simple enough, yet the causes and consequences speak to a systemic pattern that is difficult to change. John Greenan, executive director of Central Dallas Community Development Corporation (CDC), sums up the current situation: “The basic problem is just economic. It costs more to build housing than people can afford to pay.” In Dallas, as much as 40% of the population can’t keep up with current housing prices. When a large percentage of the entire city’s population cannot afford housing, the overall quality of life of the population is impacted. This equation leads to a scenario where a third party (typically the federal government) must step in to provide subsidies to help people find housing. As non-profits and developers scramble to build affordable housing, a growing wage gap, increased regulation, and dwindling subsidies are rapidly escalating the affordable housing shortage into a crisis.

What Do We Do?

To better understand the issues, the first thing to remember is that access to safe housing is considered a basic human right. Where market-rate housing fails the lower-income populations of a city, affordable housing seeks to fill the gap.

In rental housing, affordable housing is mostly an extension of the standard multi-family market. The affordability primarily comes from government subsidies that bridge the gap between what it costs to build a project and what lower-income tenants can afford to pay.

Home ownership brings another level of security into the fold; purchasing a home allows a family a deeper sense of stability and empowerment. A house is not just a home, but also a financial asset that, over time, helps a family build equity and can allow them to break out of the cycle of poverty, says Cyndy Lutz of Dallas Area Habitat for Humanity. Habitat’s mission reiterates that “with a missing middle class and declining rates of home ownership, revitalizing our neighborhoods and increasing access to home ownership is more important than ever in bringing back lost purchasing power, the tax base, and associated neighborhood stability.”

Developers focusing on affordable single-family housing utilize different mechanisms to achieve a similar effect. For example, they may purchase land at discounted rates from the city’s Land Bank and finance mortgages with subsidized interest rates.

To better understand the issues, consider reading Evicted: Poverty and Profit in the American City by Matthew Desmond. The 2017 Pulitzer Prize-winning book follows the lives of eight families and then offers ideas for solving housing issues for those struggling to get by.

Too Little Too Late?

There is growing demand for affordable housing and countless developers ready to develop affordable projects; however, due to decreasing resources and existing housing stock that is aging out of usability, the nation is faced with the dilemma of more affordable living units coming offline than online annually, studies have revealed. This statistic is the underlying indicator that America is heading towards a housing crisis, and that any solutions we attempt to implement may be too little, too late.

How did we get here? As Karen Crosby of Dallas City Homes explains: “The biggest challenges we face today are rising land and construction costs. These increased costs create larger financial gaps between what the project costs to build and the income an affordable project can generate to service debt. So, affordable housing developers need more equity dollars to fill that gap, which requires spending a lot of time and energy raising money to structure a deal that may need four or five levels of financing. It’s a totally inefficient system.”

Few things impact the balance between budget and revenue, as construction costs are set by growing labor costs. In order to maintain affordability, rents cannot be adjusted to generate more revenue. In turn, developers are increasingly dependent on scarce federal subsidies to finance and operate these projects. A report and calculation model developed by the Urban Institute last year illustrates the inflexibility of these variables in getting a project to work.

The regional consequences of this dynamic are vast. “Affordable housing production suffers, demand in the sector rises (especially in high growth areas like North Texas), affordable occupancies are at an all-time high, and rents are rising at a pace that outpaces the income growth of the average household,” Crosby says. 

Following a series of corruption lawsuits involving the inappropriate use of Housing and Urban Development (HUD) funds, the City of Dallas has been forced to take time to re-evaluate its position on affordable housing. The ability to develop affordable projects “was further complicated by the fact that the city froze its approval of Low Income Housing Tax Credit (LIHTCs) projects for the last two years while it worked to write a housing policy,” Crosby explains. “These credits are the largest source of private equity in the country [for affordable projects]. Without them, projects can’t get built.”

Choosing Between What’s Right and What Makes Money

To make matters worse, a crackdown on predatory landlords that was intended to protect low-income tenants has had an ironic and unfortunate outcome. Faced with new regulations that would require these landlords to pay exorbitant fees to the city for non-conforming properties, numerous landlords have opted to take their rental units off the market instead, leading to many more displaced families and significantly fewer affordable rental units across the city.

In single-family housing, Lutz points out that a direct threat to affordability is the current booming multi-family market. As developers buy up “cheap” single-family lots, tear down homes, and consolidate them into multi-family developments, they have a two-tiered impact on affordable housing stock in that they are both decreasing the number of affordable units in the city and simultaneously creating more demand for affordable housing from the resulting displaced families. Furthermore, by replacing affordable single-family homes with primarily luxury multi-family units, these developments rob low-income families of long-term assets in favor of short-term pay-outs that often get spent on rent.

To this day, the city has not made much progress in terms of addressing the decreasing availability of affordable housing and is complicit in the multi-family boom. The consequences of this stagnancy have exacerbated the shortage of housing and many people will argue that it has directly contributed to the growing issues of homelessness the city faces.

So Much Land Is Just ‘Off Limits’

Federal and local regulations and policies create another set of challenges that are more pervasive in nature.

In multi-family housing, the federal restrictions on tax credits make housing in Dallas a near impossibility. “Right now, the way the tax credit rules are set up, they're not favorable at all for a city like Dallas. You either have to have good schools, which don't exist in many places in Dallas, or higher income areas. And you also have to get support of the neighborhood and city council and state representative for the area,” adds Greenan. “And as you know, convincing neighborhoods is a very long piece of work … between areas where we can't access the funding because of fair housing and areas we can't work in because we can't get neighborhood support. A very, very large portion of the city is almost off-limits.”

Greenan further explains: “There are certainly areas that want to see development, and there are parts of town where a typical tax credit development would be the best housing in the area. But currently, for fair housing reasons, almost all of those areas are not eligible for tax credits, and without them you really can't make the economics work on any significant development. But that's just the way the current system is set up, so where they want it, we can't build it.”

With single-family developments, the affordable lots the city provides as part of the Land Bank program often come hampered with years of liens on each title. Before any project can start, the liens have to be cleared—a bureaucratic and financial undertaking that can be more trouble than it is worth, according to Lutz. In order to make affordable single-family housing more appealing to developers, the Land Bank program would have to find a different way to deal with these liens since they are currently prohibitive for most smaller developers. This sentiment is echoed in buildingcommunityWORKSHOP’s recently released 2017 State of Dallas Housing Report, which identified the Land Bank program in its current state as detrimental to the development of affordable housing.

Local politics is the final hurdle any project faces—and where the ugly side of public opinion towards affordable housing comes to a head. Since Dallas still operates by aldermanic privilege, “Nothing goes forward in a council member’s district without their approval,” says Greenan. “So, you may have a pretty good project that a majority of the council thinks would be good for the city, but it's almost certain to get some neighborhood opposition (due to the stigmas associated with affordable housing) and it takes a very small number of people to get the attention of a city council member and ultimately to shut a project down.”

Where’s the Answer?

“In order for our projects to succeed, we need community support, financial partners that really understands our business, well-developed projects, and strong property and asset management,” says Crosby. “The first question is what do the neighborhood residents want and why do they want it?”

The Cottages of Hickory Crossing were created in 2009 when the W.W. Caruth Jr. Foundation brought together six community agencies to collaborate on a model housing development for the homeless. The result is 50 homes plus a community building where service providers give aid and assistance to the residents. Photos: Craig Blackmon, FAIA

Lutz and Greenan echo this sentiment, but with different perspectives on partnership. “With just a few exceptions, most of our significant work is done in partnership,” says Greenan. Partnerships are necessary for larger, more nuanced projects that might be less financially appealing to lenders. This includes projects such as the work for the previously homeless that Central Dallas CDC prioritizes. For example, “At one point we had gotten money from 26 different sources in order to build CityWalk. [In this situation,] the complexity of handling the numerous requirements of the various funders was an enormous job.” These concentrated efforts get the work done, but also create a project that is painstakingly complicated.

CityWalk @ Akard

Conversely, for Habitat, partnering with market-rate developers reduces the pressure to find neighborhood support for the Habitat portions of each project and simplifies the construction process.

For Habitat, volunteer labor is another factor that allows projects to save costs, whether it be new construction or renovation work. Photos courtesy of Dallas Area Habitat for Humanity

Can It Get Worse?

Unfortunately, there is no clear, one-size-fits-all solution for the growing problem of lack of affordable housing in Dallas. Too many variables, not enough resources, and a precedent for slow action on the city’s part indicate the problem will get worse. “I’m afraid what we're going to see is maybe some cost-cutting measures that are reasonable, and smaller units and more density and things of that nature, but we're also going to see more substandard housing, more people doubling up, and maybe more homelessness with people forced out of the city of Dallas because there's nowhere for them to live,” says Greenan.

Following the applauded, yet fairly abstract, Neighborhood Plus plan, the city is now working on a comprehensive housing policy that will aim to lay out a plan of action. However, another plan, no matter how comprehensive, will not be enough on its own. The city will have to follow up with action, which has caused struggles in the past. This includes not only freeing up channels to develop both multi-family and single-family affordable projects, but also catching up on existing shortcomings in the city’s infrastructure, such as ensuring that all parts of the city have access to basic utilities, something which is missing in parts of South Dallas.

“I’m convinced that we can’t make any serious progress on affordable housing in Dallas without putting the infrastructure in place to do it,” says Crosby.

Furthermore, according to Lutz, the city has to re-evaluate its overall attitude towards housing, re-focusing its priorities to better understand and provide for constituents’ direct needs. Currently, the housing situation is entangled with discussions of economic growth and improvement, “and that tells you where the city’s priorities are, in the economics,” Lutz adds.

At a panel following the presentation of bcWORKSHOP’s 2017 State of Dallas Housing Report, Bernadette Mitchell, director of housing at the city, stated that the powers that be are aware of these issues are studiously working on a specific strategy to address housing challenges, not just create a vague plan. She also stressed that “the next big bond election in 2018, which is being worked through the city right now, will request $60 million in both housing and economic development.” This commentary, although optimistic, reinforces the facts. The city will have to holistically restructure its attitude towards housing and develop an understanding that economic development and housing are not the same category for improvements, that housing has to be its own priority—one that is about the most basic quality of life for its constituents and completely separate from the overarching economic viability of the city.

“Even if it used all the resources that are available, I don't know that the city would have enough to end the problem, but it certainly would mean making more affordable housing,” Greenan pointed out. To ultimately solve the affordable housing crisis, a larger top-down change has to be implemented throughout the country. Federal policies have to be reevaluated and expanded,- whether it is further affordable subsidies, restructured programs, or finding a completely new approach.

Per Greenan, rather than taking on the impossible task of rebooting a full federal department, an alternative and significantly more straightforward solution would be to raise the minimum wage so that the income gap decreases and the spectrum of what is considered affordable grows.

As the issue of affordability in housing becomes more pressing, innovative thinking that reevaluates the country’s relationship to the housing market could be indispensable. The situation is such that quickly developing both short-term fixes and long-term solutions should be of highest priority to all those responsible for the affordable housing needs of the population. Crosby muses, “We need well-funded, organized teams working together and challenging each other to solve this problem in the same way research teams around the world work collaboratively to solve difficult challenges.”

As Debra Stein so aptly states on The Citizen's Handbook website, “The ethics of NIMBYism and affordable housing aren't simple. Opponents of affordable housing aren't all evil, and project sponsors aren't universally righteous. Through a better understanding of citizens' moral concerns, you can help neighbors appreciate that support for affordable housing is the ‘right' thing to do. At the same time, housing providers need to carefully evaluate their own moral position to make certain that ethical issues aren't used as an excuse to avoid responsible community outreach.”

As architects, what is our responsibility? What is our moral obligation? What should we do to be part of the solution?

 

Mia Ovcina, AIA is an architect with DSGN Associates.