wamu.org/story/18/10/24/isnt-affordable-housing-d-c-area/#.XD0PdKROnYU
Why There Isn’t More Affordable Housing In The D.C. Area When Troy Holley was looking for a new place in the D.C. region, he found himself drowning in listings for luxury apartments.
“I was kind of amazed that you couldn’t really find anything that wasn’t ‘luxury’ in the title,” says Holley. Even buildings that didn’t seem especially high-end were marketed as “luxury,” with rents grazing $3,000 for one-bedroom apartments.
Become a sponsor ? “I was just kind of shocked,” he says.
So Holley turned to WAMU for an explanation. In a question submitted to the station’s “What’s With Washington?” project, the Arlington resident asks, “Are any developers in the D.C. area making non-luxury apartments?”
The simplest answer? Yes. But there’s a big caveat: They’re not building anywhere near enough.
That’s not a result of sheer greed or government complicity, however. The main issue is that a lot of people want to live in the Washington region, there isn’t enough housing for everyone, and demand is driving up real-estate values. That affects people at every level of the housing market — from developers to everyday apartment seekers.
And right now, no local jurisdiction is doing enough to fix the problem.
But first: Yes, non-luxury apartments do exist
It can be tough to find them amid a skyline increasingly crowded with fancy high-rises, but new, affordable apartments are being built in the D.C. region.
Most of that housing is cropping up in D.C. proper, where the District has helped usher in more than 6,000 affordable housing units in the last four years, according to city data. (For comparison, that’s more than three times the amount Montgomery County has funded in the same period of time..) Mayor Muriel Bowser has attended two groundbreakings and one grand opening for new affordable developments in downtown D.C. just in the last four months.
MAP: Where Is Affordable Housing Being Developed in D.C.?
Are affordable homes being built or preserved in your District neighborhood? Click to see the interactive map from the D.C. Fiscal Policy Institute.
But the need for affordable housing is so severe, even local leaders’ best efforts feel like a drop in the bucket. According to the National Low Income Housing Coalition, D.C., Maryland and Virginia need to add around 350,000 housing units to fill the current affordable-housing gap.
It’s a chasm that would cost billions of dollars to fill, mostly because of those high real estate costs. As a result, local governments have taken baby steps (more on those later) instead of aiming high for comprehensive solutions.
How does affordable housing get built?
Affordable housing is far more complicated than the government snapping up a piece of land and dropping a building on it. It’s usually a multiyear process, involving developers (both for-profit and nonprofit), local and federal agencies, lenders, millions of dollars and lots of acronyms.
“It’s not easy to build these things,” says Ramon Jacobson, director of the D.C. office of the Local Initiatives Support Corporation, or LISC, a nonprofit lender. “It’s an orchestra.”
That orchestra is usually conducted by people like Julia Moran Morton, vice president of affordable housing development at nonprofit developer Housing Up. It’s her job to identify potential locations for new affordable housing in the District. That was easier to do in the 1990s, she says, when the city abounded with cheap, vacant property no private developer wanted to touch. Today, nonprofits like hers compete for real estate with luxury builders.
“It’s a competitive market out there,” Moran Morton says. “Gone are the days that we did have that leverage, where there were properties just [sitting] for years and years, boarded up, waiting for some TLC. … Now the developers are coming into neighborhoods that only nonprofits would develop in 20 years ago.”
As the frenzy pushes up prices, nonprofits have to gather more and more subsidies to make their projects financially feasible.
According to Fernando Lemos, executive director of nonprofit developer Mi Casa, an average 20-unit affordable building in D.C. can run between $8 and $10 million. Large affordable projects — like the 104-unit Capitol Vista building under construction downtown — run $50 million.
“When I started to do housing in the District of Columbia, we would purchase a unit for $11,000,” Lemos says. “Now, to find a unit — one unit in a building — for less than $100,000 is almost impossible.”
What does “affordable” mean?
In the world of subsidized housing, a home is considered “affordable” if the rent or mortgage doesn’t exceed 30 percent of a household’s income. But many affordable housing units are only available to people in a particular income band. “Deeply affordable” refers to housing that’s priced for families earning no more than 30 percent of Area Median Income (AMI), which in the Washington area is $35,160 a year. “Workforce housing,” meanwhile, is usually priced for households earning at least 60 percent of AMI, or $70,320.
How is affordable housing funded?
In the early stages, funding usually comes from a mixture of government-backed loans, loans from mission-based lenders, tax credits, grants and private investment.
“In a typical affordable housing project, we might have five different sources of financing,” says Elin Zurbrigg, deputy director of Mi Casa.
Once a building opens, it collects rent or sales revenue, though rents can be subsidized with federal housing vouchers or other government sources.
In D.C., the city’s Housing Production Trust Fund is an important source of funding. Other sources include nonprofit lenders like LISC as well as the Low Income Housing Tax Credit (LIHTC), a federal incentive that’s responsible for the vast majority of new affordable housing construction in the U.S. (But LIHTC credits are usually used to finance workforce, not deeply affordable, housing.)
While small-scale developers are running around finding money, luxury development marches on at a relentless pace. It’s relatively easy to build market-rate housing; all a developer needs is a big loan and tenants willing to pay high prices. That might explain why more than 90 percent of new residential construction in the D.C. region last year was high-end, according to apartment listing website RentCafe.
So what’s being done to solve the problem?
Local governments, at least, are taking baby steps.
In Maryland, Montgomery County has its Housing Initiative Fund, and council members recently passed a pair of bills that could bring some new affordable units to the county. In Virginia, lawmakers in Alexandria increased the meals tax to pay for more housing. Fairfax County put $18 million in its affordable housing fund this year, and it has a “housing blueprint” with a 10-year plan to end homelessness. Arlington County allocated $14 million for its own affordable housing investment fund in 2019.
D.C. is the region’s biggest spender on subsidized housing by far: Its 2019 budget includes $230 million for affordable housing construction and preservation, with $100 million for its Housing Production Trust Fund.
Yet it’s still not enough, says Ed Lazere, director of the progressive D.C. Fiscal Policy Institute.
“We just have a huge imbalance, a huge mismatch in our economy, between where housing prices are because of the overall demand, and where incomes are,” Lazere says. “If we really are going to take it as a serious civic responsibility to create more affordable housing and make sure that everyone can have a decent and safe place to live, we need to think about housing the way we think about schools and public safety — as core government functions that take a lot of resources.”
Some say there are other solutions that could nibble away at the problem, like updating zoning to accommodate denser, taller development in neighborhoods dominated by single-family homes. Dense construction is more cost-effective, and it could help satisfy demand, thereby lowering housing prices. But densification is no easy fix: It tends to set off local resistance — often called NIMBYism — among residents who fear increased traffic, noise or changes to neighborhood “character.”
Other solutions could come from the private sector. Many for-profit entities have already embraced affordable housing. Mega-developer JBG Smith, alongside the Federal City Council, recently launched the Washington Housing Initiative, with a goal to support construction of “workforce housing,” or homes priced for local families earning between $70,000 and $117,200.
“We’ve been concerned about what we used to call the ‘missing middle’ for a long time,” says JBG Smith’s AJ Jackson. “Affordable workforce housing is essential to the continued vibrancy of the Washington region.”
But there are profits to be tapped, too. According to Ramon Jacobson of LISC, for-profit developers can — and do — make money on subsidized housing.
In fact, now might be a great time for developers to start building more affordable homes, Jacobson says. After all, the luxury market can be risky. If wages stop rising, the economy takes a hit, another upscale development steals your tenants, or people simply get sick of paying high rents, luxury buildings lose renters.
Meanwhile, lower-cost homes are in perpetual high demand. For that reason alone, they’re fairly safe investments.
“If you have a two-bedroom apartment priced at $900 or $1,100, you know there are an ample number of potential residents who are eager to move into it,” Jacobson says. “You’re never without another tenant who really wants and needs that apartment.”
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Mary Bolton 202-390-1208