Want to Keep Cheap Housing Out of Your Community?

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It's simple: Urge your elected officials to require developers to set aside part of their projects as affordable housing.

Here's why:

[S]o-called inclusionary zoning ordinances have backfired in 13 Southern California cities where the laws were enacted to force developers to build more below-market housing.

Each of the 13 cities saw housing construction decrease after adopting the zoning laws, [a new study] reported. And the cost of new homes jumped $33,000 to $66,000 to compensate for discounts on the mandated below-market housing.

The study -- published by the Reason Public Policy Institute, a nonpartisan think tank funded by Reason Foundation, the nonprofit that also publishes Reason magazine -- is available here.

NEXT: We're From the Government and We're Here to Help

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  1. That's what you get when you couple affordable housing requirements with zoning restrictions that essentially prohibit truly affordable housing (try to get a permit to build a 2-bedroom, 1-bath house today).

  2. I look forward to reading this study.

    In my experience (especially in New Jersey) when these "experiments" are conducted what always appears to happen is that the units are built, but the low income set asides are the first sold. Often to the children of the developer, their employees, neighbors, friends, etc. Once the development goes in, those early buyers quickly sell the units at regular free market rates, splitting the immense profits with the developer (who recieved a nice tax break in the first place for agreeing to the scheme).

    From what I seem to recall, a similar initative was tried in Arlington, VA where the county wanted to provide affordable housing prices to its employees. If I recall correctly (there was a big tv news story on this last year) the county employees who bought into the homes quickly turned around and sold them for a nice profit (very nice, it was arlington) and then moved out to Loudon County anyway.

    Is that recollection correct? Does the study examine the impacts of these types of actions?

  3. We figured that one out in Westchester County, NY twenty (or more) years ago. Wait 'til you guys see the new International Building Code that just came out. It's a misnomer, it's really the new nationwide building code. The Property Maintenance section is interesting.

  4. I love how the city council guys made sure to cite that the study was libertarian, thereby discounting its findings in most "normal" people's minds.

  5. I work for a home builder that is based in Fairfax County, VA (suburban DC). According to Fairfax County regulations we have to build Affordable Dwelling Units as part of each new subdivision in the County. These smaller, adjoined units have to be sold via a County-run lottery at a set price (often between $400,000 and $700,000 less than the rest of the houses in the neighborhood). The County mandates a maximum household income of about $46,000 for a two-earner family and buyers cannot resell within 10 years. We lose money on every ADU we sell. But it's OK, because we more than make it up on the rest of them.

    But of course the funniest aspect of the program is that the super-rich who bought into one of our neighborhoods in McLean are neighbors with a toll-taker and a 7-11 manager. I hope they knew that going in, because most rich folks spend $1 million on a house to get away from the poor people.

  6. I love how the city council guys made sure to cite that the study was libertarian, thereby discounting its findings in most "normal" people's minds.

  7. Christina, you'd think people would realize that we could, bit by bit, disperse/dismantle violent inner-city communities by doing just what Fairfax is doing.

  8. Christinia, thats interesting that Fairfax is trying to legislate around the fiar market problems I've seen with these types of approaches.

    Of course, what happens if said low income family needs or simply wants to move. I can't think of any right Fairfax can raise to force someone to live where they otherwise don't want to? Didn't the 13th Amendment clear that up?
    Does this apply to all housing in Fairfax? I was pretty involved in the Evans Farm quagmire as both a neighbor and local politico and don't recall anything such as that occur there. The cheapest units at Evans Farm were much lower.

    Also, how does the county then assess property tax values on the property? Do they incorporate a different system/appraisal calculation for these properties. Seems that might run into some constitutional problems as well (VA and Federal)

    If you have a cite to the Fairfax Code I'd love to read it.

  9. Just checked out your web page Christina. Which homes in the Reserve are for low income families?

    Also, in my previous post I ment to state that the cheapest homes at Evans farm were much HIGHER (not lower) than a family making $46k could afford

  10. And those "poor people," at least in So Cal, are your teachers, firefighters and police officers. In California, there are set-asides for "very very low income," "very low income," "low income," and "median income." Typically, you will not find the landscapers buying into the million dollar neighborhoods. For them, their low income housing is rental, not purchase. "Affordable housing" includes both rental and purchase units.

    One of the things I thought interesting which was not addressed in the report, was a recent article which reported that the So Cal homebuilders were purposely not building homes until they were in contract to sell and that there was no completed inventory available. (See http://www.latimes.com/business/la-fi-builders13jun13,1,3045766.story. Use password twotears/bucket to avoid registration.) This, too, skews demand, which keeps homes high. Last year I saw another story which reported that new homebuilders reap a profit of 7% to 25% on each unit sold.

    Also, as a resident of Irvine, I can say that much of the reason affordable housing isn't built in OC is because of political pressure, not profit. The locals who don't want to live with "poor people" whip their neighbors into a frenzy and get them to show up en masse at the planning commission and city council meetings. (Seriously. I have had flyers delivered to my door by a local real estate agent telling us that "those people will be going to your schools...")

    Then there are the folks flipping property for profit. There is nothing wrong with that, but it artifically decreases the supply of housing stock, which also drives prices higher.

    Although the Reason Foundation study has a valid point, I wouldn't look at it in a vaccuum.

  11. Why would the cost of market-priced new construction homes "jump" tens of thousands of dollars to "compensate for discounts on the mandated below-market housing"? Isn't the selling price of market-priced new-construction, you know, a price arrived at by the buyer and seller?

    Was it because the developers in the study claimed they moved upmarket? If so, why wouldn't builders have moved their projects upmarket for the increased revenue anyway?

  12. But, joe, those suburbanites are only exercising their collective power to protect their children from the demonstrably more criminal and violent lower classes. The zoning regulation is not a stupid state interference, but the voice of a compassionate and caring group of citizens. With price controls, the state is merely refining the regulations to achieve an outcome closer to the desired ideal. After all, there is no law that will not be improved with a bit of tinkering.

    And you call me a loon?

  13. I'm not really that knowledgeable about Fairfax's ADU program, so I hope the links below answer your questions. I'm at work and don't have the time to dig.

    Here's the link to Fairfax County's ADU provisions: http://fairfaxcounty.gov/gov/rha/adu/keyprovisions.pdf

    Here's the link to Fairfax County's info for developers on ADUs: http://fairfaxcounty.gov/gov/rha/adu/aduprogram.htm

    The subdivision I was referring to earlier is called Carrington. Because it is such a swanky neighborhood, the ADUs there are remarkably attractive too (if you go for the Colonial on Steriods look so popular in the area). My company, Edgemoore Homes, has a partnership with Diane Cox Basheer Communities (Basheer & Edgemoore) and we built The Reserve with them. We didn't build ADUs there because the zoning density was not changed as a part of the land development and therefore the County could not force us to build ADUs.

  14. Thanks a lot. Thats helpful information.
    As far as Evans Farm, is did a bit more digging the other night and it appears that they built some condos, that are part of the senior citizens home next door, to meet these requirements.

    I wonder what happens if the purchaser passes away within 10 years. Is the estate prohibited from selling the home?

  15. "Garcetti said the Reason Foundation looked only at homes for sale, not rental properties." That's a pretty big oversight, considering that the vast majority of affordable units are rental units. If I didn't know any better, I'd think RPPI was tinkering with parameters to get the results they want. But that can't be...I mean, look at all those reports that draw conclusions that don't support libertarian philosophy. Nevermind.

    "Reyes said the foundation looked at inclusionary zoning in isolation, whereas city officials are considering it as part of a package of measures to enlarge the city's stock of affordable properties." Well I should hope so! Sqeezing developers' profits, without providing anywhere for them to make them up (like density bonuses), will get you either higher sales prices (to make up the revenues), or fewer providers entering the market.

    "The solution is to allow more construction. When the supply of homes increases, existing homeowners often upgrade to the newly constructed homes. This frees up their prior homes for other families with lower income...If more affordable housing is the goal, governments should pursue policies that encourage the production of new housing." Like eliminating the regulations that forbid the construction of more affordable housing, for example?

    The thing is, there is a brilliant hook in this issue for libertarians to hand their argument on - that the affordable housing crisis is a government-created problem, which the government tries to solve with more intervention, rather than repealing the regulations that contributed to the problem in the first place.

    "Ending the price controls of inclusionary zoning would be a good start." No, ending the price controls of inclusionary zoning would be a tiny, barely noticeable blip in the housing market, whereas allowing two families and rental housing in the single-family suburbs would be revolutionary development, that would yield massive results almost immediately. Of course, that would mean denouncing the exclusionary zoning that restricts supply and drives up per-unit costs in the first place. And clearly, the Reason Institute has not intention of allowing libertarian, market-based, property-rights principles from interfering with its defense of suburban snobbery.

    As long as the reader doesn't actually know anything about housing markets and zoning, I bet this is a very persuasive report.

  16. countertop,

    I don't know about Virginia, but in Massachuetts, affordable units have to have some kind of long-term affordability guarantee to count as affordable. For example, the buyer gets a "soft second" mortage. That is, he pays the first mortage, on the construction cost of the building, and has a second mortgage for the difference between that price and the actual market value. If he sells for more than is considered affordable, he has to pay off the second mortgage, but if he does not, it is forgiven in 20 years.

  17. I live in an ADU in Fairfax County and take particular offense to people who consider ADU buyers "poor people" or 2nd class citizens. Believe me, if you saw me and talked to me you'd never even consider that I bought into the ADU program. I'm white, have a college degree, married with two children, my husband works so I can stay home and we live in a neighborhood with housing assessed at over $800k. We get along fine with our neighbors, there is no crime and our children all play together. You know, its just that type of NIMBY attitude that makes the rest of the world consider Americans snobbish, borish, shallow and just downright unpleasant people. Get over it. Fairfax county is not the norm in America and there are a lot more of us "poor people" than you "richies". You just can't see us because we resemble you so much. And just for the record, I'm a native of Fairfax County and wish you transplants would learn to drive.

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