Obstacles to Policies that Encourage Low-Priced Housing

By: Krista Franks Brock, DSNews.com

Inclusionary housing policies—those which either require or encourage developers to provide low-priced housing within market-rate developments—have largely survived the recent housing downturn. However, several obstacles now stand in their way, preventing them from reaching their full effectiveness, according to a recent report from the Center for Housing Policy.

Major hindrances to these policies include shifts in development pattern, new restrictions regarding rental housing, and rising homeowner association fees, among others.

Inclusionary housing policies are often enforced through zoning codes, although some are voluntary and offer incentives for participating developers.

Proponents of these policies favor their “ability to harness the energy of the private market to create affordable homes while enabling economic integration and social inclusion” as well as their “ability to produce affordable homes without the need for public subsidies,” according to the Center for Housing Policy.

About 400 mandatory inclusionary housing policies currently exist in 17 states and the District of Columbia. California claims almost half of these policies, according to the Center, which found only about eight policies eliminated during the housing crisis.

However, “while most policies survived the housing downturn nationwide, few saw much inclusionary housing production over the past five years,” the Center for Housing Policy stated in its report.

Shifting development patterns account for part of the lull. “While suburbs remain the predominant location for new housing construction, development patterns are shifting toward compact, transit-served neighborhoods closer to the regional core,” according to the report.

This shift poses a challenge because land in these densely-populated areas tends to be much more costly, and there are several stipulations for buildings in these areas that can also increase the cost of construction.

Additionally, a California appellate court determined in Palmer/Sixth Street Properties, L.P. vs. the City of Los Angeles in 2009 that inclusionary rental policies, when applied to rental housing, violate state laws against rent control.

Much of California’s new development is taking place in the multifamily market; thus this decision is having a large impact on inclusionary policies.

California has also eradicated its redevelopment agencies. Many inclusionary policies were connected to redevelopment, meaning inclusionary policies have been further stagnated in the state.

While existing inclusionary policies have lost some of their effectiveness, the Center also finds it is becoming more difficult to pass new inclusionary policies.

Rising homeowner and condo association fees also present challenges for inclusionary housing policies. While initial costs might be affordable to lower-income families, when associations raise their fees in later years, some homeowners find themselves with “substantial fees that can sometimes rival mortgage payments,” the Center stated.

The Center sees some hope for inclusionary policies in the future as HUD has begun to draw increased attention to the issue of affordable housing across the nation.