New regulations needed to keep housing supply adequate, ULI says

The nation's supply of affordable rental and owner-occupied housing will continue to shrink unless more flexible zoning regulations are adopted at the local level to allow greater production of mixed-income housing, according to the Urban Land Institute.

Local barriers to affordable housing production were discussed during a forum at ULI's recent fall meeting, featuring William H. Hudnut III, ULI senior resident fellow/Joseph C. Canizaro Chair for Public Policy; Paul S. Barru, president of BHI Inc., in Littleton, Colo.; former ULI Chairman J. Ronald Terwilliger, national managing partner of Trammel Crow Residential in Atlanta; William A. Fischel, professor of economics at Dartmouth College in Hanover, N.H.; and Gus Bauman, an attorney with Beveridge and Diamond in Washington, D.C.

Hudnut opened the forum with an overview of the affordability crisis, citing recent statistics from the National Housing Conference indicating that 4 million working families in the United States have critical housing needs, meaning they are spending up to 50 percent of their incomes on housing.

Despite low mortgage interest rates, many families are continuing to "slip through the cracks," as the income gap between the rich and poor grows wider, Hudnut said. Unless more incentives are provided to the private sector to enter the affordable housing market, and misunderstandings about affordable housing can be cleared up, "the housing crunch will continue to get worse, threatening the economic and social stability of urban areas," Hudnut said.

According to Barru, a major local obstacle to affordable housing production is the widely-held belief by municipal governments that lower-priced housing represents little more than a drain on city resources, in terms of the tax revenue generated versus the need to provide occupants with public services.

"When decisions are made on the type of development that is in the best interest of the community, municipalities will shoot down affordable housing," Barru said. He pointed out that officials often overlook the probability of commercial and retail development following such housing. "They are not making the connection between job generation and the provision of housing," Barru said.

An extensive effort to raise awareness among the public of the multiple benefits of affordable housing is needed to convince local officials to overhaul outdated zoning regulations that exclude a variety of land uses, and which shut out mixed-income projects, Barru said.

Without a fundamental change in the public mindset, there will be a continuous rise in the number of communities nationwide that need lower- to middle-income workers, but offer them no housing opportunities, he said.

The industry estimates that approximately 1.7 million new housing units nationally are needed per year to meet anticipated population growth and household formation over the next two decades. Viewed only in terms of supply versus demand, Terwilliger said the housing industry is capable of building a sufficient number of units to meet the need. However, the problem is "what they cost and where they are being built," he said. "We've got to find more ways to get affordable housing in the right places, closer to where the jobs are."

In many urban jurisdictions, particularly close-in suburbs, excessive land costs and impact fees push upfront costs so high that developing low-cost housing is "nearly impossible," Terwilliger noted. As a result, most affordable housing development occurs in the outer edges, stretching commutes and increasing transportation costs for workers.

However, although this housing-job gap has been well documented, and private sector incentives are available to develop more close-in affordable housing, progress remains very slow, he said.

"Communities who want affordable housing have the tools (such as housing trust funds, tax abatements) to cut costs. But with no comprehensive plan permitting inclusionary zoning, you wind up with low-density development. The residents tend to want larger houses on big lots to hopefully elevate the value of their own homes," Terwilliger said.

The restrictive zoning still prevalent in many communities is the result of municipalities attempting to respond to residents' demands for protection of their property values, Fischel said.

"Homeowners express so much anxiety over their property values because they have so much at stake in their homes. People of ordinary means are willing to put all their savings into housing, and they cannot diversify that investment," Fischel said. "That makes them (development opponents who embrace the not-in-my-backyard' sentiment). We need to respond to their fear of financial risk."

Hudnut noted that the best way to diffuse public opposition and give local officials sufficient political cover to advocate flexible zoning and housing choice is to engage all community stakeholders in every step of an alternative development proposal, and to educate them on what affordable, higher-density housing is and is not.

"Affordable does not mean undesirable. Higher density does not mean towers," he said. "Projects can get built when you work with the community. But it (the environment) has to be politically safe enough for politicians to take a stand for change."

Bauman discussed the development of the American Planning Association's model land use code, released earlier this year, which revamps codes developed in the 1920s. The model code, which contains provisions for more flexibility and a greater mix of land uses, is being issued to state legislatures as a guide for implementing smart growth measures through legislative procedures, Bauman said.

As the model code was being developed, "the issue of affordable housing and inclusionary zoning kept coming up," he said. The purpose of the model code is to assist in the development at the state and local level of a comprehensive plan for land use, and "help reduce the number of ad-hoc decisions" that impede better growth patterns, he noted.

The Urban Land Institute is a nonprofit education and research institute supported by its members. Its mission is to provide responsible leadership in the use of land in order to enhance the total environment. Established in 1936, the Institute has more than 17,000 members.