Affordable Housing and the OZ Policy

Kate Cooney (00:00):

This is CitySCOPE.

Camilo Monge (00:01):

A new podcast from the Inclusive Economic Development Lab at the Yale School of Management.

Lauren Harper (00:05):

Where we learn about what might be possible in our city by talking with others about what is happening in theirs.

Liam Grace-Flood (00:11):

Are we ready?

Paul Bashir:

Let’s go.

[Music]

Lauren Harper (00:00:28):

Hi, and welcome to episode two of CitySCOPE. My name is Lauren Harper and I’m an MBA candidate at the Yale School of Management.

Christian Rodriguez (00:00:34):

And I’m Christian Rodriguez; I’m also an MBA student at SOM.

Lauren Harper (00:00:37):

Today we will be talking about Opportunity Zones and affordable housing. Most of us have heard of affordable housing but many of us don’t really know how it works. We’re going to start off by doing an overview of what affordable housing is and then we’re going to dig deeper, asking questions to a couple of affordable housing professionals.

Lauren Harper (00:00:55):

So let’s start at the beginning. What is affordable housing? Affordable housing is housing which is deemed affordable to those with the median household income or below, as rated by the national government or a local government by recognized housing affordability index.

Lauren Harper (00:01:11):

According to the National Low Income Housing Coalition, no state in the US has an adequate supply of affordable housing for the lowest income renters. A question you might have is, if there are people who need housing at that price point, why does supply not keep up with demand? Christian’s looked into this. What did you find?

Christian Rodriguez (00:01:27):

Thanks, Lauren. Let’s review some high level points. According to The Pew Charitable Trusts, media national rents have risen by 32% in inflation adjusted dollars from 2001 to 2015 while comparatively speaking, wages have stayed flat. As rents have risen in most American cities working class people from places such as California and New York are escaping to lower cost areas. And in the process they’re driving up rents for local residents who are also having a very difficult time adjusting to this new reality.

Christian Rodriguez (00:01:55):

And another equally alarming stat is that from 2001 to 2013 housing units for the low income segment decreased by 10%, while during the same time the high income housing stock increased by 36%. This is double whammy in balance because there’s less supply and more demand, and since real estate is such a slow asset class the pricing surges can be very dramatic and very swift.

Christian Rodriguez (00:02:18):

It’s routinely cited that there are just around 35 affordable housing rentals available per hundred low income families, and on average there’s more than half a million American homeless each night. We have a need for over seven million more rental homes for low income families. There are a few ways to describe this other than that we are in a crisis right now and it’s right in our backyard.

Christian Rodriguez (00:02:41):

It wasn’t always like this though. In the 1960s, only around 25% of renters were spending more than 30% of their wages on rent, and there was a surplus of affordable rental homes across the country. So the question we need to ask ourselves is how did we find ourselves in the situation that we now face?

Christian Rodriguez (00:02:59):

Post the Great Depression, there was a strong push towards social safety nets and this included housing assistance. Karen DuBois-Walton, president of Elm City Communities in New Haven recounts this history.

Karen DuBois-Walton (00:03:11):

The history of public housing has been a very interesting and complicated history in terms of what public housing was initially intended to do, and what some of the intended and unintended consequences of the model of public housing over time. When I sit in my seat now and look back and look at the decisions of my predecessors, I do… being very generous and not be judgmental about what we have currently because I truly believe that what was designed in that time worked for that time. Public housing authorities came out around after the 1937 US Housing Act, which sought to eliminate slums and tenement style housing and ensure that people had safe and decent housing.

Karen DuBois-Walton (00:03:54):

And New Haven was one of the early housing authorities founded in 1938 by an act of the state and local government, hoping to address those very issues in this community. The First public housing developments in New Haven were built in 1940. Elm Haven, which is now known as Monterey Place, after a complete redevelopment was one of our first developments.

Karen DuBois-Walton (00:04:13):

It was this model of a mix of high-rise tower style buildings and some low-rise buildings. And while I got to know it in the mid-’80s and coming to New Haven as a place that didn’t feel like a place of opportunity, I’m always struck by hearing long time New Haveners talk very fondly about having grown up in Elm Haven and what that community offered. So it’s really clear to me that it did what it was meant to do in its time, and I was seeing it when it was sort of past its useful life and it couldn’t judge it by that.

Christian Rodriguez (00:04:44):

Due to intense lobbying from the real estate associations, and due to the endless back and forth on the ideological battles of whether the government should provide aid and to what extent the laws enacted were heavily regulated and very rigid.

Karen DuBois-Walton (00:04:57):

And they also hampered by a number of encumbrances that made it difficult for the public housing program to figure out other ways to bring in dollars.

Christian Rodriguez (00:05:06):

That’s not even mentioning how many of the rules were also racist in nature.

Karen DuBois-Walton (00:05:10):

They also initially were segregated developments, so there were developments that were built for white families and there were different developments that were built for black and brown families, and they were designed initially as workforce housing and many people who live there were working jobs in the factories of Winchester and Olin, and the gun factory industry that was thriving in New Haven at that time.

Christian Rodriguez (00:05:34):

Changing administrations since then have failed to provide sufficient funding towards housing projects, and with time the number of housing projects began to fall and the remaining ones began falling into disrepair. Programs such as Section 8, which is a voucher program that allows residents to pay only a third of their income for housing, and government subsidies covered the rest were unable to meet the rising demand for affordable housing, and only a fraction of the people who needed the vouchers from Section 8 ended up receiving them. In the case of the Reagan Administration in the 1980s the department of Housing and Urban Development, otherwise known as HUD, saw its budget cut in half. These cuts were done in part to reduce the government’s involvement in the financing of housing projects.

Karen DuBois-Walton (00:06:18):

But the reality of public housing in New Haven is that there were a range of developments built all over the city, some obviously as early as 1940 that by the mid-’90s were still standing but were in need of a lot. They were the victim at that point of federal disinvestment in the public housing program, so they had suffered decades of underinvestment in terms of the both operating costs and the capital improvement or repair costs funding that would come from the federal government.

Karen DuBois-Walton (00:06:43):

As a result of suburban development and redlining and mortgages that were made available to white families and not available to black and brown families, you started to see white working class families and middle class families have more opportunities to look at other housing options, move to suburbs, move to other kind of housing.

Karen DuBois-Walton (00:07:02):

And over time public housing became more and more segregated pockets of black and brown poverty, and we started to become places where the poorest of the poor families were concentrated. And it’s no surprise what happens when you segregate and block people from access to the kinds of things we all need to survive and have a lot of barriers placed in front of them.

Karen DuBois-Walton (00:07:24):

And so over time they became places that physically suffered in terms of their needs and then had all these host of other social challenges that developed in time.

Lauren Harper (00:07:34):

That history helps us understand how we got to where we are today. Something that might be underappreciated is how much that history of redlining and housing discrimination shapes our current regional realities. Here’s Karen DuBois-Walton again, talking with Professor Kate Cooney about a recent affordable housing task force completed this year by the city of New Haven on this topic exactly.

Kate Cooney (00:07:54):

Let’s talk more about the regional dynamics. So one thing that’s very striking in the affordable housing task force report, it’s just the data that talks about the percentage of affordable units by across the 15 towns in the region. And I’m just looking at the list now; there are only three of the 15 that meet that 10% requirement. New Haven comes in very much at the top with 31.7% of our units are affordable. West Haven with about 13% and Meriden with 16.

Kate Cooney (00:08:38):

But across all the other towns, Woodbridge 1.2%, Orange 1.3%, Guilford 2%, Madison less than 2%. This really is the legacy from the era of redlining where these suburban towns were created, the properties were built out, and there were racial covenants on those properties in many cases that didn’t allow the black working class to move into that new housing stock and sent the white working class to move into that housing stock.

Kate Cooney (00:09:20):

And in the era after redlining became illegal by the Fair Housing Act, many of those communities codified their current state through zoning regulation. So zoning became a kind of new redlining according to many who have studied this history. What are those zoning hurdles and what does it take to overcome them when attempting to undo the legacy of that history that we’re all still living within the confines of?

Karen DuBois-Walton (00:09:48):

One of the things that draws me to housing policy is my desire to work in ways that create more equity for families and address a social justice wrong that needs to be righted. And the more I understood housing policy, the more it became clear that what we see in terms of communities where there’s disinvestment, what we see where there’s segregated poverty, where we see the segregation in general, where we see tremendous wealth gaps between white families and families of color. That these are the legacy and remnants of such a long history here.

Karen DuBois-Walton (00:10:30):

And a history that wasn’t … Richard Rothstein lays this out so clearly in his book the Color of Law. This was not just a small-minded mortgage broker somewhere that didn’t want to write the mortgage for somebody, but that these were policies that were on the books, these were regulations that were government regulations and banking policies that people were dreamed up and enacted and followed.

Karen DuBois-Walton (00:10:57):

And so when I thought about it from that perspective it was, well this is something that was created by government and banking and this is something that’s going to need to be dismantled by government and banking. And that there’s real harm that was done to families and that there is a restitution or a reparative piece that has to go along with how you heal those wounds and how you restore wealth to people who’ve had wealth stolen from them.

Karen DuBois-Walton (00:11:22):

And so housing is so key to this. And I’m also concerned about things like educational outcomes and school segregation, and these things are very much connected to housing policy. Connecticut being the land of steady habits and a place of 169 little towns and municipalities that get to a significant local control without the perceived encumbrance of a County level government that would do some of this sort of regional planning and siting that you see in other places, has been able to through its local control and local decision-making over zoning been able to design itself in such ways that some of these patterns have been codified and continue into present day in ways that may seem benign on the surface, and may not have been benign in their crafting, but people, a generation removed from it may not have made the connection that, “Oh, when my town says that only a single family house can be built on a lot of this size, that my town is also saying that I can’t build multifamily, I can’t build something with more than one unit there.” And in effect is saying that I can’t build something that could conceivably be affordable housing because the best way to serve affordable housing is going to be by building some multifamily developments, not a one unit here, one unit there sort of approach.

Karen DuBois-Walton (00:12:45):

So the result is that affordable housing gets literally zoned out of many communities. This gets coupled with, even where zoning relief could allow it, this gets coupled with people’s concerns, prejudice, myths, misperceptions about what it would mean for their town. So you get what the industry refers to as nimbyism or not in my backyard, where folks out of their fear or concern of what it will mean to have, families of lower economic means come into their community often gets closely intertwined with racial and ethnic biases as well about what it means to change their town often come out in force to sort of provide resistance to efforts to provide more housing.

Karen DuBois-Walton (00:13:25):

We’ve looked at if the towns in our 15 town region with the exception of West Haven, Meriden and New Haven that are already above the 10% threshold with New Haven, three times that amount. If we looked at the other 12 towns and if they were to go from the number of units they have currently just to get to the 10%, that would create over 7,000 new affordable housing opportunities in this region.

Karen DuBois-Walton (00:13:54):

Now, I’m not saying that that’s sufficient either for what the need is, but it’s a step toward right - getting where we need to be.

Kate Cooney (00:14:01):

Richard Rothstein has powerfully told this history and he’s talked about the importance of going around the country, and I think he’s really been doing that on his book tour, taking the opportunity to educate a new generation to the realities of that history and the way that that history carries forward and shapes the landscape of the way we all live in this country today.

Kate Cooney (00:14:28):

So he feels very powerfully that the first step toward undoing that history is really educating people about that history. You’ve talked about the power of story. What are some of the stories you might want to communicate or what are some of the things you would want to be known about affordable housing for those communities that might feel resistant to this idea that they need to go from a 1% to a 10% in their town?

Karen DuBois-Walton (00:14:57):

You know as I followed Richard Rothstein’s book tour around the Color of Law, I was struck by hearing him talk about when he brings this to audiences and talks about it as having sort of uncovered this history and bringing this history to people. And when questioned and pushed a little bit, it becomes clear that the audience that is surprised by this tends not to be an audience of color. That people of color know this history, live this history, that these are the stories that are told, that are passed down from generation to generation.

Karen DuBois-Walton (00:15:34):

The notion of living on one side of the tracks or the other side of the tracks. This is not a history that was lost on particularly African-American families over time. And so to hear his audiences be surprised about it, just reinforces for me what’s lost when we live a segregated life. I like to bring forth to people stories that I think challenge their assumption of who I get the pleasure of serving every day.

Karen DuBois-Walton (00:16:04):

First of all, nobody around me is allowed to use the word “projects” because it plays into this stereotype and belief people have about what it means to live in the projects. And I think people believe, first of all, that everybody who lives in the projects is black or brown. I think people believe that everybody live in the projects lives there rent free. I think there are people that believe that folks don’t work, that they’re unemployed and receiving public benefit.

Karen DuBois-Walton (00:16:31):

And so one thing I like to do in the stories is to help people know that one, if that was the case that those people are still worthy of safe and decent housing and quality housing and we need to be figuring that out. Two, that that’s not actually the story of families, that the average family that I serve works two jobs and still lives in poverty because those two jobs don’t pay them either enough hours where that could be a livable wage, don’t pay them benefits or even at full-time isn’t getting them out of poverty.

Karen DuBois-Walton (00:17:08):

That most of the families don’t receive any public benefit around income, that they’re receiving affordable housing subsidy but aren’t “on welfare”. And that a whole huge part of our portfolio are folks that are elderly and disabled. I like people to understand a little bit about what can happen for people when their housing is stabilized and they’re able to think about other parts of their lives.

Karen DuBois-Walton (00:17:32):

And to hear the story of a man that spent much of his adult life driving for other people’s limousine services until he was given an opportunity to dream about maybe one day owning his own company, and given a little bit of support on a startup loan that would allow him to buy his first limo and was not given a little bit of support around how to come up with a business plan that would allow you to market that business and get it off the ground, and is now the proud owner of his own limo service that will run you to the airport or anywhere else that you know what you need to do.

Karen DuBois-Walton (00:18:09):

And has moved his family to a point that he’s now figuring out where to purchase his home because he’s not going to need affordable housing anymore. And that’s what affordable housing can do for families, because until you’ve stabilized housing, until you know that you’ve got a safe and decent place that you can live, that you can afford, where you are not worried about eviction or you’re not worried about homelessness, or you’re not worried because you made the rent payment that you can’t now keep the lights on, that you just don’t have the psychic energy to be able to focus on other things.

Karen DuBois-Walton (00:18:40):

And so stabilizing that allows people the opportunity to do what any of us want to do for ourselves, for our kids, for our loved ones.

Kate Cooney (00:18:49):

You recently told a story about one of the towns in the region where this pitch about the need for affordable housing was actually, to your surprise, received quite positively and there was a real sense, I think it was Madison, there was a real resonance that this indeed was a need that the town leadership were hearing from their current business owners and current residents. Could you talk a little bit about that experience?

Karen DuBois-Walton (00:19:15):

Following the New Haven Affordable Task Force Recommendations, we’ve started to make some concerted efforts to engage our neighbors in the other towns in the region around this conversation. And what we’d like to do is have an opportunity to have representatives from each of those towns commit to a committee that would work together to build relationships, to explore what some of the barriers and hurdles are and to figure out some set of recommendations that can move us forward as a region.

Karen DuBois-Walton (00:19:45):

And I had opportunity to talk with the first selectperson in  Madison recently as we were planning sort of how we’d move forward in this. And you know this was something that resonated for him and Madison is a community that would be considered a community of very high opportunity. The Open Communities Alliance in Connecticut has done some good work sort of mapping the state around places that have the strongest educational outcomes for children, places that have the greatest economic opportunity in terms of jobs and wellbeing, and also are accessible for families and sort of targeting some certain areas as anywhere from high to very high, and opportunity is areas that we should really be focusing on how to get affordable housing there.

Karen DuBois-Walton (00:20:27):

And so Madison is one of those towns that should be targeted as a place that would be great for more affordable housing options for families that may choose to live there. I don’t know if he thought about it from that perspective necessarily, but he had certainly thought about it from the perspective of how this was tied to economic growth in his town. And so I did an example of solid good employer that’s been in his town for years that would like to expand and is feeling hampered in its expansion because of the challenge and being able to get the workforce.

Karen DuBois-Walton (00:20:55):

And that folks, if they can’t afford to live in Madison, can’t take these jobs because the confluence of lack of affordable housing near the job and inadequate public transportation system makes it challenging for somebody to take a job that may require them to work a shift that isn’t well-served by the bus line or the bus times.

Karen DuBois-Walton (00:21:15):

And so he’s definitely been thinking about it in terms of am I going to grow in Madison and bring in more tax dollars because this, this employer expands. And because I’ve got this economic growth happening, if I don’t have the workforce to take the jobs, how am I going to keep young families in my town if everything we build are these McMansions because of the zoning and in the town. And that’s not typically somebody’s first home.

Karen DuBois-Walton (00:21:43):

How are folks as they retire and as they age going to be able to maintain residency in Madison if they can’t afford that big acre lot zoned house anymore and want to be able to find an affordable unit in the town? So it’s got real consequences for the growth of the town and how to just maintain the current population who may want to may stay in the town.

Karen DuBois-Walton (00:22:05):

So I was encouraged to have that conversation because again, it’s sort of story, it’s like what’s the story that resonates for residents in Madison? I think we need to know that so that we can move forward in a way that creates a win for folks who need affordable housing.

Lauren Harper (00:22:23):

There’s a lot to unpack here. It seems like it comes down to a few key issues. The problem of supply - how do you get enough housing built to meet demand? And just as important as building housing, there’s a question of where to locate subsidized housing.

Lauren Harper (00:22:35):

Christian, on the supply side, both Karen DuBois-Walton from Elm City Communities and Brandon Weiss Visiting Professor at Yale Law School whom you and Professor Cooney interviewed, talk about the Low-Income Housing Tax Credit Program and its role in boosting the supply of affordable housing. First, here’s Karen.

Karen DuBois-Walton (00:22:52):

The Low-Income Housing Tax Credit Program is actually the most powerful generator of affordable housing in this country. And although we spend a lot of time focused on Housing and Urban Development, HUD and the HUD budget and HUD funding, the reality is most of the housing that’s being developed is being developed through the Tax Credit Program, which is an IRS program, Treasury program.

Karen DuBois-Walton (00:23:14):

And through that, investors who are looking to reduce their tax burden can purchase tax credits and they get a reduction on their federal tax owed because they’re making a contribution to something that meets a public need and in this case, affordable housing.

Christian Rodriguez (00:23:29):

Yeah, that’s right. And because the LIHTC program is a tax credit program, just like the Opportunity Zone program, we began our conversation with Brandon by asking him what we could learn about the investor tax credit program from LIHTC.

Brandon Weiss (00:23:42):

So my background is primarily in the Low-Income Housing Tax Credit program which, not unlike Opportunity Zones, is a program that tries to leverage private sector investment to achieve some public good, in this case, specifically low-income housing. It’s a federal program but it’s administered by the states. So each state gets an allocation of Low-Income Housing Tax Credits, per capita tax credits so larger, the more populous states receive more tax credits. If you’re a developer of housing and want to build, say a 50 unit development here in New Haven, you apply to your State Housing Finance Agency for an allocation of these credits, and at least for the more valuable of the credit, what’s known as the 9% credit, there’s a competition. The project that scores most highly based on state rules receives this award, but typically the developer of the project can’t actually make use of these tax credits because they need to have a tax liability to make the tax credits worth something to the taxpayer.

Brandon Weiss (00:24:37):

So and this was the vision of the program is they typically go out and market or syndicate these credits to investors, right? Which are often big banks or other large financial institutions that you could say buy the credits, they don’t actually sell them, they’re not transferable. What they really do is they enter into a partnership, the agreement which states that the lion’s share 99.99% typically of the tax credits are allocated to this investor entity.

Brandon Weiss (00:25:02):

In exchange for that, the investor’s going to put capital into this partnership to build affordable housing. And what’s thought of as sort of the brilliance of that program, the Low-Income Housing Tax Credit program, is that if for any reason something goes wrong with the development, so they don’t comply with the required rent restrictions, or they rent the units to households that are over income eligibility rules, the IRS can actually come back in and recapture the tax credits.

Brandon Weiss (00:25:30):

And the last thing, Bank of America or the large financial institutions want, is to have their tax credits recaptured. So the idea behind the program is that you’ve leveraged private market oversight of our affordable housing programs, right? So it was a response to public housing and prior programs that were perceived as generally in some cases unfairly failed housing programs for reasons of poor underwriting, poor financing, poor development, poor management.

Brandon Weiss (00:26:01):

Well now you’ve got these, what are perceived as highly efficient, highly proficient, financial institutions that have vested stake in your 50 unit development, not failing in New Haven. It’s not entirely unlike the Opportunity Zone program, the idea that we’re leveraging from the private market investment in exchange for benefits they’ll be given to the investor. I would say in the Low-Income Housing Tax Credit program there’s pros and cons. So it’s been incredibly productive, it’s produced nearly three million units over 30 years.

Brandon Weiss (00:26:32):

It’s politically popular, right? Because it’s not just low-income housing advocates that support it. It’s a wide spectrum of the real estate industry and others that also like the program. The housing’s of good quality, there’s very low foreclosure rates. So I think one thing we learned from the LIHTC program is that leveraging private sector investment can lead to some good results. It also has ushered in some challenges, some problems, and this is some of what I research and write about. But one of them being what you get from the private market is limited to exactly what you’re contracting for. So if you enter into say, a 15-year or 30-year contract to keep housing affordable, that’s what you’ll get.

Brandon Weiss (00:27:16):

At the end of the term all bets are off. So it raises the public policy question of, “Okay, what exactly are we getting from this private investment?” And what we’re getting is we’re getting some capital upfront, we’re getting whatever we pinned down in the deal, but what we’re not getting is what we may be had in prior programs, which is a true public agent or public steward of the asset.

Brandon Weiss (00:27:36):

So I would say with respect to Opportunity Zones could be quite helpful in an era of sort of restricting federal, state and local resources to leverage some investment in low-income communities. At the same time the questions I would ask are, who’s actually receiving these benefits and who is the long-term steward of whatever the investment is.

Christian Rodriguez (00:27:59):

I was really struck by the ideas about long-term stewardship given investor ownership and market dynamics. I mean on one hand it makes sense that investors would want to take advantage of rising rents, right? So I dug a little deeper.

Christian Rodriguez (00:28:12):

It’s rational that if market prices for rental properties are going up, that after this compliance period that landlords would, like the owners of these properties would increase the rent. Has that been like seen in practice? Can you give some like backdrop as to like the time frames? Like how long has this program been around and has it been seen essentially?

Brandon Weiss (00:28:34):

It’s a great question. So the program was part of the 1986 Tax Reform Act, really got going in 1987. Originally it was a 15-year term, right? But in 1990 Congress extended, put on this extended use requirement for another 15 years. 30 years from 1990 is 2020. So we’re just about to get to this year where I fear we may start to see this phenomena of use restrictions expiring; owners then being able to take rents up to market.

Brandon Weiss (00:29:03):

And interestingly, this isn’t the first program that’s leveraged private investment. So a whole slew of affordable housing programs starting really in the late ’50s, going into the ’60s and ’70s with all alphabet soup and numbers. The Section 236 program, project based Section 8, new construction program, a variety of programs similarly use this model of giving a variety of benefits, either grants or more frequently subsidized loans to private for-profit developers in exchange for recording use restrictions on title of who could live in this housing.

Brandon Weiss (00:29:38):

So some benefit given to the developer in exchange for achieving this public goal of getting more affordable housing. But again, for time-bound periods. Under these programs, typically 20 to 40 years. So there we have a little case study that has come to term, right? Fast forward 20, 40 years into the future from those programs.

Brandon Weiss (00:29:57):

And what we saw was a nightmare, right? If you worked at a legal aid office, your phone started ringing from a tenant saying, “Hey, I just got this notice from my landlord that my rent’s about to double. Why is this the case?” And if you look into the documents, well it’s because 40 years ago your landlord received some money from the government, it’s now expired. And so barring other say state or local protections, you might face eviction and displacement.

Brandon Weiss (00:30:24):

When some… HUD’s done some research on those programs and non-profit owners of those projects behaved much differently than for-profit owners. So something around the ballpark of 90% of for-profit owners, at least in one program studied by HUD, took rents to market, raised rents. It was around 10% of nonprofit owners which tended to be more mission driven, sometimes these older projects, churches were involved.

Brandon Weiss (00:30:49):

So in thinking about how do we address these issues? One thing I think about is well, who is the actual provider on the ground?

Christian Rodriguez (00:30:56):

Just to put a fine point on this…

Brandon Weiss (00:30:58):

There are multiple parties here, right? There’s the government, there can be an investor, there’s still a choice of what kind of developer, even if you have a private investor, you can have a for-profit, a non-profit developer. And I argue, given some of that past data we’d be wise to in… for example, in Low-Income Housing Tax Credit program, more frequently be partnering with non-profit developers to avoid some of these problems on the back end.

Christian Rodriguez (00:31:19):

We have an affordable housing crisis in the United States. Since the late 1980s, the primary way that we built affordable housing now is through the Low-Income Housing Tax Credit program. There are about a hundred thousand affordable housing units built with the Low-Income Housing Tax Credits annually. That’s a big number on the supply side, but we’re not keeping up supply with demand. And beginning in 2020, the LIHTC affordability requirements will begin to expire.

Christian Rodriguez (00:31:47):

Back to my conversation with Brandon. So you said that in 2020, there’s a big deadline coming up in regards to compliance periods, do you know approximately like how many households, like how many units are in exposure right now for change?

Brandon Weiss (00:32:02):

2020 is the year in which 30-year restrictions will start to fall off given the first projects that had that 30-year requirements started in 1990. It’s not just that it’s all going to happen in 2020, it’s going to be in successive waves. Every year approximately at this point, 100,000 new units are developed by the program, and so we’ll likely to see going forward in future years different, depending on the year that the unit was put into market that class of units basically having the rent restrictions expire.

Brandon Weiss (00:32:35):

And so I guess I just want to be clear about that, that some people might say, “Well what’s the problem with that? Like a deal is a deal, sure, you negotiated for 30 years of affordability, so why is it a problem? That now fast forward 30 years, and the rent restrictions are falling off, that’s actually what everyone expected.” And I would say that’s one way of looking at it. It raises the question though, “Is that the best way of structuring our programs? Is that what we want to have happen both from the perspective of displacement -  this uproots the families that are in residence at the time of exploration as well as just expenditure of government resources, scarce resources?”

Brandon Weiss (00:33:11):

That we’ve say put $10 million into this development that at the end of the day there’s no more public value out of that $10 million, and any remaining value with that asset is going to go to a private developer. Housing’s a consumable good, so they’ll have to invest more money, and it’s not to say that the asset at the end of 30 years is worth what it was, but it does make me wonder, are there other better ways of structuring our subsidy programs such that at the end of some term if there even is a term, some of that equity or some of that value resides in the public good?

Lauren Harper (00:33:45):

There are so many moving parts to this conversation about affordable housing. In addition to the issues about how to deploy subsidy to incentivize the timely production of quality affordable housing that will be cared for and maintained over time, while at the same time ensuring long-term affordability, there’s also the question of where to locate affordable housing in cities in metropolitan regions that are often divided between low-income neighborhoods of concentrated poverty versus the highly affluent neighborhoods.

Lauren Harper (00:34:11):

There are a few new tools in the affordable housing toolbox that Karen DuBois-Walton discussed that I found interesting.

Karen DuBois-Walton (00:34:16):

So when we approach any of our redevelopments or our community investments, we try to do it with the psywar [??], how are we going to replace the affordable housing that needs to be there with this higher quality housing, mixed income housing, that we want to have. And how are we really supporting the neighborhood’s needs by attracting and bringing in the other kinds of things that make a community vibrant and viable.

Karen DuBois-Walton (00:34:38):

And that often means that we need some services; it often means that we need some commercial and retail, because our families need all the things that any family and any neighborhood need. So they need accessible places to go shopping. And to get their non-personal care things taken care of, and they need dry cleaners and they need banks. I mean our communities need all of the things that any community needs.

Karen DuBois-Walton (00:35:04):

So when we’re doing a redevelopment, we will often include commercial space and then we try to think about how that space becomes both an economic generator for the community and a wealth creator for the families. So we are interested in things that particularly meet a need, we’ve brought in convenience stores and places that were a traditional food desert. We’ve brought in healthcare providers in places that didn’t have the easy access and demonstrated poorer health outcomes.

Karen DuBois-Walton (00:35:33):

And finding partners that want to work on these things with us has been essential. We’re also looking at cooperative models where perhaps our residents will have some ownership in the business that comes in. So a cooperative model potentially for a coffee shop or something along those lines, we’re interested in as well. But our space could be used for any number of different things depending on what the community need is.

Karen DuBois-Walton (00:35:56):

So in some places we’re exploring early childcare because that’s a need and it’s also the kind of barrier that may keep mom or dad from being able to get back into the workforce in the way that they would desire to. So those kinds of things have been important.

Lauren Harper (00:36:10):

A second pathway into mixed income communities is through inclusionary zoning. As we’ve learned from analysis of recent census data, Americans are increasingly segregated into neighborhoods by wealth and income, both of which are highly correlated with race given our history. Both mixed income developments with the varying levels of affordability and market rate and inclusionary zoning policies aim to create less segregated living opportunities across the income distribution.

Lauren Harper (00:36:35):

We asked Karen about her experiences building mixed income developments in higher rent areas of New Haven, Connecticut, and how this might progress given the recent market rate building boom in the city.

Karen DuBois-Walton (00:36:45):

When I was working still in City Hall, there was a real lack of residential in the downtown neighborhood and it was one of the visions of the mayor at that time, John DeStefano, as part of a strategy of revitalizing downtown was to bring people back to living downtown. And I can remember when working in City Hall, this discussion about a lot in the middle of downtown that people would refer to as the Shartenberg lot, and not being a New Haven native, I didn’t initially know what that reference was but it was a department store that used to be in the heart of downtown that people talked about with the same sort of fond memories that people talked about the early days of Elm Haven Housing Development and other places.

Karen DuBois-Walton (00:37:30):

And the department store had not been there for many years and what I just knew as an empty lot was this place that had been called the Shartenberg, and people had bought their Easter outfits and done their Christmas shopping there. So that became one of the parcels that the mayor was very focused on figuring out how to develop into housing.

Karen DuBois-Walton (00:37:51):

And so that deal began to take shape at around the same time that I began working at the housing authority. At that point, there weren’t developers necessarily knocking down the door to come in. And so the kinds of deals that were struck at that point included things like getting the land for below market value. And so in negotiating in that position, the city was in a good place to be able to dictate a number of things because they were giving a significant benefit to this developer. And one of the things that was clear was this was going to be a beautiful building full of amenities, luxury style apartments. It really had the opportunity to create something different downtown.

Karen DuBois-Walton (00:38:27):

And it was very clear from the city’s perspective that there was no way that was going to be built without affordable units in it as well. So the Housing Authority became the means by which a number of those units got developed. So they have also… have some workforce housing that was subsidized by some other state dollars that came in, but we put in capital into that deal and also provided project-based vouchers, so long-term voucher subsidy that enabled the project to pencil out in terms of their budget proforma, it offered us 20 units in there that are our subsidized units.

Karen DuBois-Walton (00:39:01):

So families off of our wait list had the opportunity to lease in a building with people that are paying a high-end market rate rent. The units are no different than any of the other units, they have the use of the same pool that everybody else has, and have this opportunity to live downtown in a development that they would have been priced out of otherwise.

Karen DuBois-Walton (00:39:21):

And so we’re really proud of that partnership on what is now called 360 State Street. It’s the kind of thing that we think we can do in a lot of the market rate developments that are coming on downtown. It’s a form of including affordability and that goes beyond what inclusionary zoning might be.

Karen DuBois-Walton (00:39:38):

So I think there’s a way in which we can think about a number of different ways of getting to that end. Fast forward to today, there’s not a need because of the hotness of the market right now, there’s not a need to offer developers the kind of deal that needed to be offered to get 360 State. So the challenge becomes when people are coming and really not needing zoning relief and not needing tax abatements and not needing free land from the city and they’re coming ready to do this, what is the way to sort of hang some other requirements on it?

Karen DuBois-Walton (00:40:07):

And that’s where the discussion of inclusionary zoning comes as a way of requiring that you want to be in this hot market and we want our folks who require affordable housing to have an opportunity to live in those developments as well.

Lauren Harper (00:40:19):

This is where it gets tricky. Without a need for public subsidy from the city to get a deal done, the city doesn’t have any bargaining chips to use in exchange for a small percentage of affordable units in new market rate developments. That’s where inclusionary zoning policies come in, which create policies that govern all development in the city and build in affordability requirements or incentives.

Lauren Harper (00:40:39):

The New Haven City Affordable Housing Task Force stops short of recommending an actual requirement for market rate developers to include some percentage of affordability in market rate buildings that would apply to development in the city. Christian, did you have a chance to speak with Brandon about his views on inclusionary zoning policies?

Christian Rodriguez (00:40:55):

Yes, we did. Let’s listen into Kate Cooney and Brandon Weiss talking about this issue.

Kate Cooney (00:40:59):

So inclusionary zoning is a sort of hot topic in the city here where we live, the city of New Haven and there’s some concern that requiring developers, especially at the current moment when we do, we are experienced the kind of renaissance of interest, but from market rate developers developing market rate housing that asking them or requiring them to have 10%, 20% of the units that they’re building, be some category of affordable, would tip the incentive in such a way that they might go away.

Kate Cooney (00:41:39):

What’s your perspective on inclusionary zoning? How do you seen it work?

Brandon Weiss (00:41:44):

I am a big fan of inclusionary zoning in part because the number of tools we have to address the incredible housing affordability challenges we see are few, and many of them require large outlays of money or a tax provision that still costs the government and withholding from collecting taxes, large amounts of money.

Brandon Weiss (00:42:07):

And given the politics of our country, the federal level also often at the state and local level, those resources aren’t always dependable and it fluctuates how much is available. So using a land use tool like inclusionary zoning, that doesn’t necessarily cost a jurisdiction a lot of money and yet results in some amount of generation of affordable housing, can be very helpful.

Brandon Weiss (00:42:31):

So, as you said, your typical inclusionary zoning ordinance says, “If you want to build a new rental structure or a new for sale structure in an area that falls under the ordinance, you’ve got to set aside a certain number of units that are rent restricted for low-income households and then there’s policy questions about how deeply affordable you set that.”

Brandon Weiss (00:42:52):

You’re right, that the concern that’s raised by the development community is, “Hey, you’re going to put us out of business.” And we don’t want that, we do want development. This is a debate that’s going on in Kansas City right now; it’s a debate that’s going on elsewhere.

Brandon Weiss (00:43:07):

And typically where a jurisdiction starts with respect to inclusionary zoning is commissioning what’s often called the Nexus study, which studies that exact question. It studies a couple of things. One thing it studies is, is there some relationship, some reasonable relationship between the impact of this development and what we’re asking the developer to provide.

Brandon Weiss (00:43:30):

So it’s got to have some fairness factor there and for various legal reasons, that’s often important. But there’s also a feasibility component that asks, “Well, aside from just is this sort of reasonable will you kill development?” If you impose… some people refer to as a tax, it’s not really a tax, but if a developer’s, some portion of these new units are rent restricted then that’s going to affect their bottom line and maybe it will prevent them from building.

Brandon Weiss (00:43:59):

That’s the purpose of a feasibility study is that it looks at that and says, “Well, what are the costs of construction? What is an inclusionary requirement, if any, that could be borne by development?” And they’re typically done very surgically, right? These aren’t policies or studies that need to be done for the city as a whole. You can look at sub-markets within the city. And Los Angeles recently did something really interesting in this area; it wasn’t an inclusionary zoning ordinance, but they passed a linkage fee and it imposes a fee per square foot on new development.

Brandon Weiss (00:44:34):

In that case, both residential and commercial. The proceeds of which will go into an affordable housing trust fund to be used for development in the city. They did a very extensive study, the result of which is a map that’s actually part of the law, it’s part of the ordinance, that breaks down the city by sub-market and imposes differing fees on development depending on where it is in the city. If it’s in a very hot market, the fee will be higher. If it’s in an area where that’s seen a lot of disinvestment, we’re trying to entice development, maybe there’s no fee or a very low fee.

Brandon Weiss (00:45:06):

So I think the moral of that is that our land use policies can be agile, they can be nimble, they don’t need to be one-size-fits-all. So similarly with respect to inclusionary zoning, we don’t need to just rely on gut instinct and fear and paranoia of, “Oh, this is going to kill the renaissance of development in New Haven.” We can start by saying, “Well, let’s study that. Let’s see what development can bear, not just in the city as a whole, but by sub-market and then let’s have that public policy conversation with that data in hand.”

Kate Cooney (00:45:36):

And are there consultancies that provide that service or do you have to be lucky enough to know that group of economists at that one university that in your city that do that well?

Brandon Weiss (00:45:47):

These are new policies. So inclusionary zoning dates back to the ’70s. Lincoln Land Institute’s done some good work researching sort of the prevalence of inclusionary zoning, and they lump that with things like in lieu fees. So some policies allow for not just a developer to provide hard units onsite, but if they’d prefer, some policies allow them to pay a fee instead of providing the unit. I should say that there are other ways to also make these policies more amenable to the development community such as density bonuses, allow them to build higher than they otherwise would be allowed to, giving them allowances with respect to parking certain tax abatements.

Brandon Weiss (00:46:27):

So it can be a sort of robust package. These proposals, these ordinances have been around for many decades and as a result, consultancies, experts have grown up around. There is an industry now and many very highly qualified consultants that can be commissioned to do a Nexus study. I think there’s a group BAE Economics that did the study out in Los Angeles, I’m sure there are others.

Brandon Weiss (00:46:52):

They do all sorts of different studies based on what it is the jurisdiction wants to do, whether it’s just an inclusionary ordinance or if they’re looking at linkage fee or impact fee, whatever it may be. I’m sure you could probably find others nearby that would be willing to do that sort of analysis out here.

Lauren Harper (00:47:07):

That’s really fascinating to learn how the Nexus studies that inform inclusionary zoning policies have gotten so sophisticated, down to the micro region, and give way to sliding scale fees, requirements and incentives for different neighborhoods in the same city. Makes sense, right?

Christian Rodriguez (00:47:21):

That’s great because in any given location, there’s obviously going to be a lot of sub-markets and they can be very different, especially now with the growth of big data and having the ability to work with large amounts of information. This is a trend that’s going to be stronger in the coming years. So there’s this huge potential that we can hyper segment within these local markets and it can help strengthen the business case that we don’t have to just rely on, like let’s say gut.

Christian Rodriguez (00:47:46):

So it’s clear that we have sophisticated ways to apply inclusionary zoning policies that can allay some of the fears of politicians and maintain the development activity that is foundational for a city to grow. But you know, Lauren, Brandon really stressed that given the size of the crisis we need all the tools.

Brandon Weiss (00:48:02):

To address the affordable housing crisis, I’m a big proponent of the idea that there isn’t just a one-size-fits-all answer. That what you need is a toolkit of options that you can deploy based on local market conditions. More resources is a general theme though that would only be helpful. Matthew Desmond made the issue of evictions very famous and his book Evicted.

Brandon Weiss (00:48:27):

He’s proposed a universal voucher for extremely low-income households that would take an increase in resources but not a ridiculous increase. One that would easily be feasible if there was political will. I think vouchers are a great tool. They’re an efficient tool, they allow for households to have some choice on the market. Although of course there are another set of policy issues around vouchers with respect to utilization and high opportunity areas with respect to jurisdictions still being able to discriminate against Section 8 voucher holders in many places in the country, although there’s a tide that’s changing on that.

Brandon Weiss (00:49:04):

But I would say one tool in the toolkit would be a larger voucher program that addressed some of these other issues of utilization.

Kate Cooney (00:49:15):

What is the difference between Matthew Desmond’s proposal for a universal voucher and the Section 8 voucher?

Kate Cooney (00:49:20):

That it’s an entitlement rather than rationed?

Brandon Weiss (00:49:25):

Exactly, right. So right now if you look at the data, approximately one in four households is actually eligible for our housing programs, receives any assistance given lack of resources. So you’ll hear these stories frequently of jurisdictions that have had their Section 8 wait list closed for a decade, and they open it up and received 10,000 applications for 200 vouchers, none of which are actually presently available.

Brandon Weiss (00:49:53):

It’s to put your name on the wait list to maybe get one of those. And so Matthew Desmond’s proposal is right, to make it so that if you’re in that extremely low-income band, and extremely low-income is typically defined as making no more than 30% of a median income, then as of right, you would have access to a voucher. So it wouldn’t actually change the mechanism what the voucher is, it would just expand who has access.

Brandon Weiss (00:50:18):

So I think that would be one tool. I actually don’t think that vouchers solve all our problems, I think that what are sometimes referred to the supply side programs still add something, programs where the government incentivizes the development of housing, not unlike Low-Income Housing Tax Credit projects or what public housing was.

Brandon Weiss (00:50:40):

Not everyone can use a voucher easily. A good number of people who access housing subsidies are elderly or disabled, might need additional supportive services on site. There’s also been a big movement recently, the sort of housing first movement for the chronically homeless, that rather than use the old model of requiring homeless individuals if they face mental health issues or substance abuse issues, to solve all of that before getting a unit of housing. Instead, the housing first model flips that on its head and says, “No, actually housing is a precondition to wellness. So let’s give them housing and then provide wraparound services on site that allows them to access them more easily.” Can’t do that very easily with a voucher.

Brandon Weiss (00:51:27):

Tight housing markets where there’s very low vacancies. Again, questions about whether you can use a voucher, and until we’ve won the source of income discrimination battles with respect to being able to use your voucher and not allowing landlords to discriminate against you, again, problems of accessing vouchers. So for those reasons and others, I think also having in the toolkit programs that subsidize the development of units is important as well.

Brandon Weiss (00:51:52):

So that’s with respect to just sort of voucher versus hard unit. As far as being nimble and not just having a one-size-fits-all solution, you also have to look at the market. This sort of gets back full circle to the Opportunity Zone conversation, housings and economic good, it takes capital but it’s not just unbridled capital and how we deploy that surgically and intelligently depends in part on what’s happening on the ground. And there’s different models going on simultaneously in these different neighborhoods.

Brandon Weiss (00:52:23):

There’s other tools that depending on the neighborhood, things like community land trusts, where the community ends up owning the fee title. So the property ground leasing it often to a low-income home buyer selling them the structure. So it allows them to have some equity appreciation, but allows the community to maintain control, long-term control, of the land is another policy that can be very important, particularly in gentrifying areas. Because then you can impose some affordability restrictions that even in the face of rising rents will stay in place.

Brandon Weiss (00:52:56):

Rent control is quite controversial, seeing new life again. Rent control typically being laws that just limit what rents landlords can charge to tenants, was big in the ’70s, sort of tapered off in at least in places where it hadn’t already been passed and was massively limited.

Brandon Weiss (00:53:14):

There’s new interest in rent control. Rent control is one of these policies that people who tend to be on the conservative side of the spectrum say, “Well, this is just going to hurt those you intend to help, you’re going to raise the cost of housing for others, it’s going to lead to deterioration of the stock as owners don’t maintain, if they have no incentive because you’re capping rents and other problems. What about the wealthy 20-something in New York City who’s been in a rent control unit that’s been passed down?”

Brandon Weiss (00:53:43):

And there’s like any public policy and any substantive domain, there’s a set of issues and problems to be confronted, but there have been proposals for more, again, nuanced, nimble, rent control proposals that actually do allow a return or a reasonable return to the owner coupled with other policies with respect to enforcement around conditions, maybe not applying to new construction, so as not to limit new construction.

Brandon Weiss (00:54:08):

It’s a conversation that’s starting to be had again, right? As well maybe, rent control 1.0, maybe there’s some concerns about that but maybe there’s a more nuanced version that really all it’s saying is that, “Yeah, we want to allow for this balance of the private sector to have incentives to maintain the stock while at the same time realizing that housing is not a typical economic good.” It’s a particular type of good that has such specific importance.

Brandon Weiss (00:54:36):

All the things that are wrapped up in housing - security, citizenship concerns, ability to obtain employment, and really what it means to be a member of modern society in America. Housing is so critical, we can’t just leave it to purely market forces.

Kate Cooney (00:54:54):

So in rent control 2.0, is it an opt-in with some benefits for the landlord? Is that one version of what you’re seeing?

Brandon Weiss (00:55:04):

Well, I mean that’s an interesting idea and I think these conversations are very new, right? So we were just starting to see these campaigns again. I haven’t heard the opt-in version as I’ve heard in inclusionary zoning, right? There’s definitely many inclusionary zoning ordinances that are optional that come with benefits. If you do set aside 20% of units, then you can access these benefits.

Brandon Weiss (00:55:24):

With rent control, I think it’s more an awareness of the critiques of rent control, that we don’t want to pass a law that’s just going to starve out units of housing from reinvestment. All housing needs recapitalization every so often, and isn’t going to have these negative effects. But rather than just getting rid of rent control as a concept, thinking, “Okay, what can we do to make it a more nuanced policy that doesn’t lead to those outcomes such as things like, well, can we exempt new construction? Can we allow for some reasonable return on investment to owners?”

Brandon Weiss (00:56:01):

So I think that’s where the conversation is, it’s what can we do to balance these interests? And I should say that’s sort of the conversation everywhere, Opportunity Zones, LIHTC, inclusionary zoning, rent control. They come under these different labels and names, but really everyone’s trying to do the same thing, which is figure out this complicated blend of housing, which is a market good and implicates all sorts of private sector considerations.

Brandon Weiss (00:56:27):

There’s great landlords, there’s mom and pop owners who bought a home and are now renting it and it’s an asset they have, while trying to prevent the things like a gentrification displacement and evictions that we’ve been seeing as well.

Lauren Harper (00:56:43):

That’s a great overview of the different tools available for trying to address the crisis of affordable housing. A seven million unit gap, just at the low end is a pretty daunting gap. So did you ask him the million dollar question head on?

Christian Rodriguez (00:56:55):

You mean what does he think about opportunity zones? I did. And it is interesting because affordable housing is a big need for low-income Americans. However, the Opportunity Zone program doesn’t appear to line up that well with creating supply. There are a couple of reasons for this. First, it’s not very compatible with LIHTC. Since LIHTC already ceded 99.9% ownership to the LIHTC investors leaving no room for a side-by-side equity investment of an Opportunity Zone fund.

Christian Rodriguez (00:57:24):

And second, due to the fact that the Opportunity Zone investor will be comparison shopping for the equity investment with the highest potential for growth, without a lot of other subsidy, affordable housing is not typically an equity investment that will yield a big return. Here’s Brandon’s take on what we might see.

Kate Cooney (00:57:41):

There’s been a lot of discussion about the possibility of pairing the Opportunity Zone program with a LIHTC deal or a LIHTC capital structure. The 99.9 ownership for the LIHTC investor seems to be preventing that possibility of another group coming in with equity, given there’s not much left there. But there was recently a suggestion that I was reading about having the LIHTC investor be the same thing as the OZ fund, and having that investor essentially take both kinds of credits. What are your thoughts about that idea for merging the two programs?

Brandon Weiss (00:58:32):

Yeah, it’s interesting. My general thought is that it could be a good thing, it could get more equity into these deals if it makes it more attractive to investors. The recent Tax Reform Act sent some shockwaves through the LIHTC industry because in lowering rates it made investing in these LIHTC deals actually less attractive to investors, which people feared it would dramatically limit the amount of equity coming into them.

Brandon Weiss (00:58:57):

So here now, if you have a function that not only delivers tax credits to the investor, but also allows them to defer gains, and if there’s equity growth, not pay taxes on those. If they hold for 10 years, there is a nice parallelism between Opportunity Zones in LIHTC and the time periods to hold to receive the most lucrative benefits lineup well.

Brandon Weiss (00:59:17):

So from that perspective I would say if you’re a big fan of the Low-Income Housing Tax Credit program and want to see as much equity as possible go into it. That would be interesting to explore and could help increase the sort of fluidity of that market. I would say it doesn’t address any of the other sorts of things we’re talking about, but if you just purely love LIHTC as it is, then that would be an interesting thing to pursue.

Lauren Harper (00:59:39):

I can see the potential value there - for Opportunity Zone investment to come in and shore up a market for LIHTC credits that is shrinking due to the reduction of corporate income tax liabilities under the new tax reform legislation. There’s another issue here too though. Back to site location of affordable housing -  given that Opportunity Zone investments must be cited in the low-income census tracks that comprise the zone.

Lauren Harper (01:00:01):

Both Brandon and Karen weighed in on this. Brandon takes us all the way back to the Fair Housing Act to contextualize his response

Brandon Weiss (01:00:07):

Fair Housing Act passed in 1968, in the wake of Dr. Martin Luther King Jr.’s assassination a week beforehand. It was quite controversial; it’s interesting that it was like the last major piece of civil rights legislation of that era, more so than the Voting Rights Act, more so than public accommodations laws. Literally where people live in neighborhoods and communities is the last issue to come up and the hardest to be successful on.

Brandon Weiss (01:00:35):

The Fair Housing Act, if you read it, the bulk of it, the meat of it, is a litany of prohibitions, saying that you can’t discriminate in renting, you can’t discriminate in sales, you can’t discriminate in brokering, redlining is banned, things like blockbusting, these sorts of past nefarious practices. That’s what almost all of it is about, and then enforcement procedures.

Brandon Weiss (01:00:57):

But there is one provision that isn’t in that sort of defensive mode, but is more looking prospectively which is this Affirmatively Furthering Fair Housing provision as it’s come to be known, which is a provision that basically requires federal agencies or other entities that receive federal financing from the federal government. So it often states localities that receive block grant money and great bulk of them do, it requires that they affirmatively further fair housing.

Brandon Weiss (01:01:26):

And so beyond just prohibiting private developers, private owners and landlords, government entities from discriminating, they have to be taking steps to affirmatively further fair housing. The question is, what does that mean? People didn’t really know for many, many years because it was essentially dead letter law.

Brandon Weiss (01:01:46):

So up through, even in the Clinton administration, there was a process of analysis of impediments where local jurisdictions had to submit some reporting, but there wasn’t much oversight or enforcement and many jurisdictions just flat out ignored it. Starting with the Obama administration, it was really the first time that they implemented, and I should say that there’s a couple of exceptions to that with the analysis of impediments, I don’t want to say nothing was done, there’s litigation in Westchester County and others.

Brandon Weiss (01:02:13):

But for the most part it wasn’t a very robust regime. With the Obama administration, they worked for many years to put together a much more robust regime with respect to formally furthering fair housing. They developed a mapping tool that went out to local jurisdictions and provided data to help jurisdictions get a better handle on local racial segregation patterns to study the issues.

Brandon Weiss (01:02:39):

Basically required them to do an assessment of fair housing in their jurisdiction, submitted to HUD, HUD would take a close look at them and find them not sufficient if they didn’t meet HUD requirements, didn’t actually require specific policies to redress racial segregation, but required a very thorough sort of planning process in stating what your goals would be and how you would redress whatever issues you find from doing this analysis with the data that has given you.

Brandon Weiss (01:03:10):

So that came into being towards the end of the Obama administration, and then I guess sadly if you look at these things from the perspective I come from, the Trump administration came into power and basically gutted what the Obama administration had been trying to do. First, they postponed when these fair housing assessments would be due, they then, in the face of litigation, pulled the tools that were critical and sort of essential to this process.

Brandon Weiss (01:03:41):

There’s now been subsequent litigation around what they’ve been doing, but the upshot is that the Trump administration has basically stalled the bulk of what the Obama administration had been trying to do around affirmatively furthering fair housing.

Kate Cooney (01:03:54):

I just want to follow up on that part of our conversation. So essentially, the point is that certain members of our society have not had the kind of mobility in the housing market that others of us have had. So Affirmatively Furthering Fair Housing raises this issue of access to higher opportunity neighborhoods versus neighborhoods that have been divested in every dimension.

Kate Cooney (01:04:21):

And so my understanding was that a kind of movement with LIHTC and HUD had been about really considering the location of where affordable housing was being built, and making attempts to either -  by creating a higher rent for Section 8, for higher priced housing markets or by creating some other requirements around where LIHTC gets built – that there was a real attention to this idea that we shouldn’t be concentrating affordable housing in already distressed low-income neighborhoods, that it’s important to break out of those patterns.

Kate Cooney (01:05:02):

And yet, the Opportunity Zones focus on those same neighborhoods. And part of the, at least early conversation about the promise was that they could be a vehicle for creating more affordable housing. And what came to mind for me is wait a second, that’s the kind of reversing the trend that many have been pushing for to move subsidized housing out of these concentrated areas of low-income households and create a much more mixed income kind of experience for everybody.

Brandon Weiss (01:05:33):

That’s absolutely something that was big in the Affirmatively Furthering Fair Housing conversation that was going on under the Obama administration. Jurisdictions can do that on their own, so California for example passed significant amendments to their QAP, their Qualified Allocation Plan, which sets forth priorities for where they’re going to distribute or who’s going to receive awards of Low-Income Housing Tax Credits. And they sort of imported a whole high opportunity consideration into their QAP. Other jurisdictions have done the same, and realizing that, “Hey, we’re doing no good if we’re just turning out 100,000 units a year or whatever it may be in a given year, but not being deliberate with respect to where we’re placing those units.”

Brandon Weiss (01:06:15):

So one thing I’ve been interested in my research is looking at, many of these units in jurisdictions often end up in areas where there’s not even a shortage of housing at similar price levels. Another argument, aside from just the other sorts of opportunity that might come with placing subsidized housing in more affluent areas are just, “Well we should be putting these units where there’s actually a need for affordable housing.”

Brandon Weiss (01:06:38):

So I think there’s a strong argument to be made for that, and I think that even notwithstanding the retrenchment from the federal government around Affirmatively Furthering Fair Housing, it’s something that state and local jurisdictions should be looking at in the Qualified Allocation Plans. At the local level planners when giving recommendations on what projects to support too often it filters up in a process through local government and the mayor signs off on it, and then it goes to the state.

Brandon Weiss (01:07:02):

They should be considering issues of opportunity, expanding where low-income residents can live. I guess one countervailing consideration as well that came up in that conversation is, well, we also don’t want to repeat mistakes of disinvesting in communities, in the way that, for example, practices like redlining did. So in this sort of fervor to support and get behind high opportunity investment, let’s have a balanced policy.

Brandon Weiss (01:07:34):

And so some people said, “Well, what if people don’t want to move out of their neighborhoods? What if they just want to live in… You know, why don’t people come to us? Why don’t people invest in our neighborhood? We like it here, we just want to have some access to capital.” And I think where I come down on that is there should be true opportunity in choice and the ability to live in high opportunity areas while at the same time not turning our back on lower income disinvested areas and ideally allowing local residents to play a significant role in choosing where federal subsidized resources will go.

Christian Rodriguez (01:08:06):

This really brings us full circle. Perhaps Opportunity Zones won’t see a lot of affordable housing under the Opportunity Zone program, but the investments they do bring can be supplemented with other investments that do anchor affordability in the neighborhood, so that gentrification does not also mean displacement.

Lauren Harper (01:08:24):

That is a point that Karen made exactly. Let’s listen.

Karen DuBois-Walton (01:08:26):

It’s one of the things we’re keeping an eye on around the new Opportunity Zone designations because while I think using Opportunity Zone as a way to leverage money to develop housing is probably challenging and it’s probably not exactly what the Opportunity Zone is going to do well, or a project is going to be attracted to Opportunity Zone investors.

Karen DuBois-Walton (01:08:48):

I think the fact that it’s Opportunity Zone, is this opportunity to do a larger scale kind of community investment is something that we should be looking at ways to partner with affordable housing development that would be financed through one of the more traditional like the Low-Income Housing Tax Credit program that we’ve spoken about.

Karen DuBois-Walton (01:09:06):

So we’re interested in that kind of thing where you could have an Opportunity Zone designated area use that to leverage, so the commercial development, retail development, and then partner that with some other investment that will bring the affordable housing in.

Lauren Harper (01:09:20):

I think we will leave it there.

Christian Rodriguez (01:09:21):

A big thank you to Karen DuBois-Walton, President of Elm City Communities in New Haven, and Brandon Weiss, Visiting Professor at Yale Law School. Stay tuned for our next episode with Dan Bitner on Community Land Trusts. Dan’s got a great episode exploring Community Land Trusts as a tool for anchoring affordability in neighborhoods.

Lauren Harper (01:09:39):

For all our listeners, I hope you’ve gathered a basic understanding of affordable housing and what is going on in the space today. Thank you for tuning in. Until next time, this has been CitySCOPE podcast, from the Inclusive Economic Development Lab at the Yale School of Management.

[Music]

Lauren Harper (18:49):

This podcast was recorded in studios at the Yale School of Management, the Yale Broadcast Studio and the Poorvu Center for Teaching and Learning.

Liam Grace-Flood (18:56):

Created by Kate Cooney and the students of the Spring 2019 Inclusive Economic Development Lab class.

Kate Cooney (19:03):

Special thanks to everyone at the Yale SOM studio and Media Control Center: Froilan Cruz, Abraham Texidor, Donny Bristol, Enoc Reyes, and Jessica Rogers.

Kate Cooney (19:12):

And at the Poorvu Center for Teaching and Learning: Brian Pauze and John Harford.

Paul Bashir (19:18):

Audio engineering and production by Ryan McEvoy and Kate Cooney.

Kate Cooney (19:22):

Music from the album, Elm City Trees, composed and performed by the artist, K. Dub. For more information and show notes, visit our website at IEDL.yale.edu.

Camilo Monge (19:36):

Thank you for listening.

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