Affordable Housing Becoming More Scarce
Why is the denial of Code Capital’s affordable housing development such a big deal? Context is key, and in today’s housing market the lack of affordable housing options has become a real problem that must be faced head on.
The lack of supply for affordable housing options and the ever-increasing housing affordability gap of existing homes continues to widen, reaching near-crisis levels across the U.S. According to a 2017 report by the National Low Income Housing Coalition, there is a supply deficit of more than 36,000 affordable housing units in Jacksonville alone. The lack of affordable housing is particularly alarming among extreme-low-income renter households (known as ELI households), those that have income of less than 30% of the area’s median family income. In Jacksonville, there are only 37 affordable housing units for every 100 ELI households.
This isn’t a problem constricted to so-called “welfare queens”. Working families earning between $25,000 to $50,000 per year, young families just starting out, and elderly families that have worked hard their entire lives face increasingly scarce housing options. These numbers represent an objective scarcity of affordable dwellings for families of various income levels who are cost-burdened (spend 30% of their income on housing) and extremely cost-burdened (spend over 50% of their income on housing). For these working families, finding an affordable home is the biggest factor of whether or not they and their children will spend a lifetime living in deep poverty.
If demand is so great, then why aren’t more developers building affordable units? Quite simply, in today’s environment affordable housing is not affordable to build.
Housing labor, building supplies, and land costs have all risen sharply since the Great Recession. In the decade since the housing bust, more than 1.5 million residential construction workers have left the industry. Less than half of those workers have re-entered the labor force. To make matters worse, today’s construction labor force is aging. The average age of the typical building trade worker is now around 50 years old.
This chart shows that despite a booming economy, the number of construction employees working today are still below the number employed during the last two housing peaks in 2000 and 2007. There are more than 1 million fewer people employed in the housing labor market today than there were in 2006/2007.
Increasingly scarce and expensive subcontractor labor have also led to longer build times, resulting in more delays bringing housing supply to the market. Housing starts below $200,000 have steadily decreased locally over the past several years, leading to even greater supply challenges within the middle and lower end of the housing spectrum.
All of this means that the cost to construct an affordable building is much more than renters of both average and moderate means can pay. Developers simply can’t recoup the cost to build, and that is why the majority of apartment buildings being constructed around Jacksonville charge rents that are higher than what the average Jaxson can afford to pay. This means hard-working families are finding it increasingly harder to find a home that costs less than half of their take-home pay.
In order to build a better Jacksonville, we need an inclusive housing market that caters to a broad range of incomes. An adequate supply of housing stock that is affordable for working families (who make up a large share of the city’s overall population and workforce) contributes to positive outcomes for job creation and a sustainable, healthy, local economic environment. As David Smith, CEO of the Affordable Housing Institute once quipped, “Housing is where jobs go to sleep at night. Affordable housing is where essential jobs go to sleep at night.”
Local Solutions Needed
The lack of affordable housing solutions underscores the need for sweeping reforms. Unfortunately, policy makers have either not recognized the severity of the problem or have been slow to react with any meaningful regulatory relief. But where local policy makers may not have shown the will to create more affordable housing, the good news is they certainly have the means to do so.
Jacksonville’s zoning code heavily favors the construction of single-family homes. The type of missing middle housing so prevalent in Jacksonville’s once-booming urban neighborhoods have been largely outlawed. Entire working-class neighborhoods like Hansontown and Sugar Hill have been wiped off the map. The willful elimination of this housing stock coupled with zoning restrictions to build new such structures, have virtually eliminated what is called “naturally occurring affordable housing” (NOAH), or perfectly serviceable market rate housing that is widely affordable (without subsidization) because of its design characteristics.
The structural housing constructs favored by the local zoning code are increasingly at odds with the needs of how people are choosing to live today. Gone are the days of the McMansion and the market is rapidly adapting with the proliferation of smaller housing arrangements, despite being at odds with regulatory constructs. Homeowners are renting out spare rooms in single-family homes and more young families are co-habitating with older family members. A correction is long overdue, and a more diverse mix of residential housing choices needs to be legalized in Jacksonville’s land development code.
Local affordable housing strategies currently single in on the use of housing subsidies. However, city and state budgets simply do not have the capacity to fund future building subsidies on a scale that would produce enough housing units to meet market demands. To that end, local zoning laws should be encouraging moderately higher density. Allowing for more units on smaller lots, enables developers to realize an economies of scale on both building and labor costs and thereby produce housing units with lower costs that can ultimately be sold or rented at lower prices. Unlocking hidden supply allows for the construction of more market-rate homes that require no financial assistance from the state or local government.
Residents are now moving into the Vestcor Companies’ and TVC Development’s Lofts of Monroe, a $20-million, 5-story affordable housing project with 108 apartment units at the intersection of Monroe and Davis Streets. The development is one of three affordable housing projects that Vestcor has either constructed or is in the process of building in the La Villa neighborhood using the LIHTC
Beyond eliminating missing middle housing solutions from building codes, the denial of Code Capital’s hotel redevelopment proposal is a glaring example of how placing arbitrary restrictions on a sheer unit/acreage scale limits innovation in the marketplace and squashes the imaginative creativity of developers to find new uses for old buildings. Moreover, arbitrary density restrictions increase housing costs for affordable housing developers. A report released in 2018 by the National Association of Home Builders and National Multifamily Housing Council found that regulation constraints and compliance represent up to 32 percent of multifamily development costs. In a study released in 2018 by the Government Accountability Office (GAO) which studied the LIHTC program, it was revealed that the average per-unit cost for affordable housing developments with more than 100 units was $85,000 less than those with fewer than 37 units. These numbers support the notion that density limits further constrain the affordable housing supply chain.
The hotel and lodging industry is undergoing a period of rapid change. Aging roadside motels are becoming a less preferred choice among travelers, who are now opting for three-star hotels or other forms of short-term rentals like Airbnb. Today the number of operating motels nationwide have fallen by roughly 80% from their peak in 1964.
Buildings such as the former hotel standing in ruins on Cagle Rd have become blighted nuisances. However, real estate developers are finding new useful lives for these structures. Yesterday’s roadside lodging establishments, often located near major thoroughfares that provide convenient access to employment centers, are perfect candidates for affordable housing rehabs. Ask yourself if the Cagle Road hotel could legally provide 151 hotel rooms for 34 years, then why should it be illegal for that same building to now provide 109 homes for people who struggle to find housing that is affordable enough to not have to make the unfortunate choice to go without food or medicine to make ends meet…all within the same building and site footprint?
While no one can blame the good intentions of the Planning Department and the Planning Commission, seeing as though the denial seemingly revolves around concerns that the higher density sought would lead to blighted conditions. Because the housing market produces few options for them, households with low incomes are vulnerable to predatory behavior. Before local and federal officials intervened, the Westside’s Eureka Gardens apartment complex was a perfect example of such abuses. The previous landlord raised rents and deferred maintenance, knowing that their tenants had few options and little means to move away.
However, the denial of this application simply does not stand up against the arguments made for denial, when comparing similar zoning exceptions granted nearby along with an examination of the context of the property site in question. These types of regulatory delay and restrictions are quite simply doing more harm than good.
The bottom line is that local housing policies are placing serious constraints on housing affordability. We must amend our land use policies in ways that provide a sufficient supply of housing at various price points in proximity to employment centers. The Cagle Road hotel redevelopment proposal would only make a small dent in the local affordable housing deficit, but the challenges the developer faces bringing this idea to market perfectly illustrates the power a few keystrokes to the zoning code could have on providing working families with housing they can reasonably afford.
Editorial by Mike Field