Affordable/Attainable Housing: A Dialogue

Glossary of Terms to Affordable Housing

Inclusionary Zoning:

• Inclusionary zoning is a local government requirement for homebuilders and developers to construct a certain percentage of units in every new market-rate development that will be at a determined "affordable" level for people identified as having low or moderate incomes. Communities typically will enact inclusionary zoning with several stated goals in mind, including establishing a larger housing stock, creating more affordable homeownership opportunities and integrating instead of concentrating affordable units throughout a jurisdiction.
  
  
• Many groups, the building community especially, have serious concerns regarding this approach. Where communities have established a policy it has, in some cases, driven development to other localities not participating in the policy. Where communities have not provided adequate incentives, the policy has seen significant resistance. It remains one of the more contentious issues in the affordable housing debate.

Impact fees & Housing Affordability:

• The main reason municipalities impose impact fees on development is to shift to the developer, the owner of the land converted to development, or the consumers of the housing or other land use the costs of the public infrastructure that the development requires. By forcing the developer and its customers to assume or share in the costs of infrastructure, impact fees may reduce more efficient use of the infrastructure. Further, by requiring the developer and its customers to pay to mitigate the negative effects a development may have on a neighborhood, such as increased traffic congestion, noise, and environmental degradation, impact fees again may encourage efficiency by making the developer and its customers internalize the full costs of the harms that the development causes.
  
  Impact fees also may serve to increase housing supply by enabling growth. In areas that are growing so rapidly that the government cannot provide public facilities fast enough, exactions enable growth that might otherwise be stalled by growth control measures. Moreover, impact fees may serve to reduce uncertainty about the risks of future growth, thereby enabling more growth by decreasing existing residents' incentives to use growth control or management devices to avoid those risks.
  
  
• Levying impact fees may have a deleterious effect on the production of affordable housing. The fees may render the production of affordable housing not economical. Additionally, some communities use the fees and or exactions as a tool to discourage the production of affordable housing.

Building Codes & Housing:

• Many changes in code administration have taken effect over the last decade. These changes have been highly successful (anecdotally) and are worth reviewing here. These recent policy solutions and experiments, however, have been almost all based on anecdotal evidence.

The consolidation of model building codes, as well as the increased (albeit optional) flexibility included in their instructions, represents a dramatic step forward in code creating from even the three to four model regional codes available just a few years ago. Code adoption also has moved forward: as more states and cities are adopting the model codes with little amendment, many have taken efforts to examine their code regulation process for the first time in 6 months (especially for rehabilitation and renovation), and local press is paying particular attention to these adoption decisions. For example, Phoenix is the only major municipality to adopt the NFPA (National Fire Protection Association) 5000 model code in a region that has heavily invested in the ICC (International Code Council) codes.

The effect of code content on new, potentially cost-saving technological innovations has also been much discussed in the last decade. "Performance-based" standards-those that require only final, measured goals for a building rather than prescribing the materials, means, and methods of reaching that performance-are more commonly accepted in code hearings. These standards remain somewhat ineffective, but their inclusion speaks volumes about changed perceptions. The ICC's National Evaluation Service (NES) sponsored a workshop in December 2003 on implementing alternative materials provisions in the code and suggested mechanisms for their implementation (such as placing some regulatory weight behind ICC NES' technical evaluation). Numerous federal initiatives also have taken on the task of looking at regulatory effects on innovation, including Building America, ENERGY STAR, and especially the U.S. Department of Housing and Urban Development's Partnership for Advancing Technology in Housing.

Code Enforcement, however, is likely the regulatory process witnessing the most experimentation. Cities are adopting expedited processes (such as "one-stop shops") for most building regulatory submissions and approvals, as well as collaborations between cities serving similar housing markets. In Arizona's Maricopa County (one of the nation's five fastest growing counties), building officials from multiple cities have formed the Regional Plan Review Group, whose mission is uniform residential plan review and inspection policies among the participating jurisdictions. This group also has devised mechanisms for a homebuilder to submit plans in one jurisdiction for approval in all.

In an effort to become more "business friendly," as Peter May describes it, Many jurisdictions are implementing new incentive programs for future approvals (such as holding regular meetings with builders) and making their current processes more transparent (for example, training builders on inspector requirements and even publishing inspector checklists). Some municipalities are toying with third-party or self-certification methods to compensate for their lack of resources, as well as to show good faith with builders (although most production builders already are contracting with third-party inspectors for litigation purposes). Numerous cities are adopting advanced information technologies for submissions, reviews, and even inspections (such as those described in the NCSBCS (National Conference of States on Building Codes and Standards) " streamlining" initiatives). These technologies also provide the best opportunity for gathering data about specific builders and their regulatory records, variances between building officials and cities, and ultimately, a much better understanding of the procedures by which building codes serve as barriers. Colleagues at Arizona State University, for example, currently are working with the Regional Plan Review Group to establish inspection report standards and reporting mechanism from which this data can be gathered and assessed.

Effects of Land use Regulation:

Effective governance of residential development and housing markets poses difficult challenges for land regulators. In theory, excessive land restrictions limit the buildable supply, tilting construction toward lower densities and larger, more expensive homes. Often, local prerogative and regional need conflict, and policymakers must make tradeoffs carefully. When higher income incumbents control the political processes by which local planning and zoning decisions are made, regions can become less affordable as prices increase. Housing assistance programs meant to benefit lower income households could be frustrated by limits on density and other restrictions on the number and size of new units.

The empirical literature on the effects of regulation on housing prices varies widely in quality of research method and strength of result. A number of credible papers seem to bear out theoretical expectations. When local regulators effectively withdraw land from buildable supplies-whether under the rubric of "zoning," "growth management," or other regulation---the land factor and the finished product can become pricier. Caps on development, restrictive zoning limits on allowable densities, urban growth boundaries, and long permit-processing delays have all been associated with increased housing prices. The literature fails, however, to establish a strong, direct causal effect, if only because variations in both observed regulation and methodological precision frustrate sweeping generalizations. A substantial number of land use and growth control studies show little or not effect on price, implying that sometimes, local regulation is symbolic, ineffectual, or only weakly enforced.

Housing prices in the United States are significantly higher in some regions-notably coastal California, New York City, Hawaii, and New England-than they are elsewhere. Quigley and Rosenthal have collected and analyzed the pertinent studies that explore the possibility that these outcomes are partly attributable to government land use regulations, such as large-lot zoning and growth controls. As the authors repeatedly emphasize, these inquiries are methodologically challenging. In particular, a well-designed regulatory program may make a community more environmentally attractive to consumers. If it does, the upward movement in prices that follows adoption of a regulation may be partly or entirely attributable to a jump in demand, not to constraints on supply.

Most observers bring ideological baggage to the technical questions that Quigley and Rosenthal address. Environmentalists, community preservationists, and other devotees of increased land use regulation are predisposed to favor the demand-side story. Homebuilders and fans of unfettered markets, by contrast, naturally warm to the supply-side interpretation. I should reveal at the outset that I come to this issue with strong predispositions. My first year-round job was with the staff of Lyndon Johnson's President's Committee on Urban Housing, popularly called the Kaiser Committee. Much of my work in that capacity addressed the issue of effects of technological and legal barriers on the cost of housing. The Committee's published volumes reflected the view, which I shared then and still embrace now, that supply constraints indeed can significantly harm housing consumers (President's Committee on Urban Housing, 1968). The Kaiser Committee had few careful academic studies to draw on. I note that the earliest study that Quigley and Rosenthal include in their appendix dates from 1969, while the Committee completed its work in 1968. Events since 1968 are striking: academic studies have proliferated but, in general, so have barriers to housing production. In 1968, no one would have dreamed that density on some San Francisco Bay Area hillsides would soon be limited to one house per 100 acres, or that county at the rural fringe of Greater Chicago would ban, in some locations, lots of less than 10 acres.

Environmental Regulations & the Housing Markets:

• The same wetland regulations limit development in vernal pool complexes in Orange County, California, and in rural Nebraska prairie pothole areas. The effect on affordability of housing costs, however, can differ profoundly. Such effects may be negligible or nonexistent in Nebraska because of the availability of other developable land but substantial in the high demand, low-availability-of-land situation in Orange County. On the other hand, in a high-cost, high-demand market, the incremental contribution of environmental regulation to higher costs may be so minor compared with other factors driving cost increases that the effect on the affordable segment of the market is minimal. Thus, context matters.
  
  
  • Three kinds of land-related costs are related to environmental regulation, with differing effects on housing development and availability.
    
    
    1. Land scarcity (affected by regulations dealing with wetlands, coastal zone protection, flood plain and hazard protection, and habitat, among others.)
       
       
    2. Site preparation (affected by regulations dealing with storm water controls, erosion and sediment, and assessment for hazardous substances, among others.)
       
       
    3. Operating costs (affected by regulations dealing with water and sewer, storm water management, and solid waste management requirements, among others).
       
       These costs have different impacts on affordability in different places. In situations in which impacts occur, communities need to focus on identifying offsets that can address the affordability issue itself.
       
       For example, where environmental restrictions reduce the amount of land available for development, and this reduction threatens to reduce the availability of affordable housing, offsetting these effects by changing legal subdivision and other requirements that affect housing density is feasible. The same number of housing units can be produced on less land if the relevant zoning and subdivision requirements are adjusted to allow higher density and smaller parcel size. We already see these kinds of offsets for environmental purposes in a variety of settings. They occur in the context of private land trusts for ranchers in the western United States, where cluster development enables the protection of large open space areas for ranching (and habitat and other values) (Muto, 1999). They also occur publicly in connection with agricultural zoning and other rules that provide for clustering of development and smaller parcel sizes (sometimes setting small maximum parcel sizes). Transferable development rights programs also provide a version of this offset approach: schemes endeavoring to maintain, or even increase, the developable land supply even as land availability is constrained by environmental protection limitations.

Regulatory Barriers:

The summary session highlights the political economy of regulatory barriers that face reform advocates. Local governments that promote regulatory barriers are, in fact, often responding to the perceived desires of their electorate. No level of government is in a position or willing to take on this powerful local dynamic. What state government wants to get involved in local land use disputes?

Federal influence is dilute, as authority for localities to regulate land use is mostly defined and controlled by states. To an extent, some argue that federal programs, such as the Community Development Block Grant program and HOME, can be used as leverage to coerce localities into reducing regulatory barriers. But, if the locality is using regulatory barriers already to discourage the development of affordable housing, federal programs that promote affordable housing might not be a high priority in the first place.

Land Trusts:

• Community land trusts control housing costs by permanently limiting costs and "locking in" subsidies so that they benefit one homeowner after another and do not need to be repeated each time a home is sold.
  
  
• Some will argue that the long term holding of land and the organizational infrastructure necessary to monitor the program is a drain on a community. Additionally, since profit taking is regulated some argue that lower income persons are not treated fairly.

For more information refer to http://www.answers.com

Information sources: April 8, 2006 event. Pamphlet issued by Policy Development and Research (PD&R)- Cityscape. Also see Studies in Assisted Housing, HUD USER Cityscape (www.huduser.org/periodicals/cityscpe/vol8num2/)

###