We barely knew ye!

Sunday, the Obama Administration announced new plans for HUD stimulus dollars, shifting focus away from promoting home ownership under all circumstances to encouraging renting.

The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.

Paul Krugman documented the issues with the idea of pushing home ownership as a matter of policy last year, while also noting the multiple subsidies for homeowners that renters do not benefit from.

Within this national change in policy, DC is dealing with affordable housing on a local basis.  Greater Greater Washington noted this week of the final step in the implementation of DC’s inclusionary zoning law:

Under the program, new residential developments of 10 units or more must to set aside 8-10 percent of the new housing for families making between 50 and 80 percent of area median income (AMI). For a family of four, that’s a household income of $51,000 to $82,000.

To compensate developers, they are allowed to build about 20% more housing. In some zones, like neighborhood commercial corridors, that means higher lot occupancy, letting the building cover a bit more of the total lot. In row house neighborhoods, IZ allows projects to build more, slightly narrower townhouses than regular zoning requires (though the same size as many existing townhouses). And in districts with taller buildings, it lets developers add a bit of additional height. IZ won’t apply in the low-density residential zones, or in two historic districts (Georgetown Waterfront and Historic Anacostia) where the IZ changes would have forced buildings that didn’t fit with the existing historic neighborhood character.

The problem, however, is that the issue of affordable housing is far bigger than any IZ ordinance – indeed, greater than the entire jurisdiction of DC.  Ryan Avent has an excellent post (worth a full read) on the larger issues of affordable housing in DC and other cities.  Avent succinctly raises all of the key issues working against affordable housing in DC – supply, NIMBYism, provision of schools and services, personal preferences, jurisdictional boundaries, etc. First, Avent quickly addresses the need for affordable housing:

A second thought is the District is not going to succeed in increasing its housing supply by the optimal amount or in lobbying other places to make optimal policy changes, and so it’s going to be hard to keep DC housing affordable. Given that, what are the implications and what are the correct policy options? One potential implication is that a growing number of people will be priced out of the city. This could be bad for a lot of reasons. A diverse set of incomes could make cities better places to be or more economically resilient, for instance. Reduced access to dynamic economies among lower-income households could reduce economic mobility or increase the cost of various social programs or both. And so on.

The policy takeaway is this:

If we conclude that some other policy measure for making housing affordable is necessary, then what should that policy be? At the local level, I think the best things cities can do are permit the development of lower-end housing options (which meet certain standards, of course). Basement apartments, carriage houses, sublets — all of these things allow lower income people to live in economically vibrant and otherwise desirable places. It’s not ideal to live in the cramped apartment facing the blank wall of the adjacent building, and so it’s relatively cheap, and that cheapness means access and opportunity. Another good local policy is the creation of excellent transit options. If people can quickly and easily move around most of the metropolitan area without using a car, then lower income households are more likely to find affordable housing within reach of good jobs.

At the national level, policies should obviously encourage density and discourage nimbyism. Beyond that, I think a large and broad program of rental housing vouchers isn’t a bad idea. If vouchers should be extended to include households well above the poverty, in recognition of the challenge of providing workforce housing in expensive metropolitan areas, and because such an extension might reduce the stigma of taking advantage of those vouchers.

This conveniently meshes with the broad outlines of Obama’s HUD proposal (at least in part) with local action.  What’s not on this list, of course, is IZ.  Ultimately, IZ is sort of a stopgap that isn’t nearly as effective as we’d like it to be.  Such issues can be compounded in DC, where the height limit prevents large-scale density bonuses for developers looking to cash in.

More broadly, it represents the problems with such regulatory approaches to urban problems and the unintended consequences they can have.  A few weeks ago, I noted a great article from San Francisco (You’re not an environmentalist if you’re also a NIMBY) about issues with development regulations, and how well-intentioned regulations often have the opposite effects:

While Worthington and Arreguín may indeed support dense development, the requirements they’re advocating would probably kill most of it, according to the Strategic Economics report. The study concluded that even in a robust housing market, the 20 percent affordable housing requirements and a green building standard would make 75-foot-tall and 180-foot-tall buildings barely feasible for developers. By contrast, the study indicated that the city could spur downtown development by reducing the affordable housing requirement to 10 percent and by not adopting the green building standard at all.

Again, with DC’s height limit, IZ might be mostly stick with little carrot.  However, as Ryan Avent notes, IZ alone won’t do the job.  Loosing restrictions on rentals – granny flats, accessory dwelling units, english basements, etc  – would all be good starts.