Posted in March 2013

Existing Housing Stock TO Green Affordable Housing and BACK TO the Open Market

In the area where I live, communities are growing more conscience and concerned about energy conservation and efficiency. Some local governments are making important investments in the housing stock by offering incentives for homeowners to get energy audits and retrofit their homes for energy efficiency. Nonetheless, many homeowners remain wary of the process. It takes a homeowner with an unusual knowledge of green building practices, an unusual commitment to the environment, and/or unusual faith in technologies to dive right in and “green” their home.

Relying on homeowners to take the initiative cannot be the only strategy for “greening” the existing housing stock, so here’s an idea. Transfer some existing housing into affordable housing and retrofit them for energy efficiency at the same time. The affordability restrictions don’t have to remain forever. Ideally, they wouldn’t. The “greened” housing could cycle back into the market and municipalities can focus on “greening” additional properties. The key is retrofit them while they’re in your control.

I was inspired by Boulder, CO. Boulder has growth restrictions which have caused the price of housing to rise faster that it might have otherwise. So, Boulder adopted inclusionary zoning policies to ensure that low, moderate, and middle income folks can afford to live in the city. What’s unique is that Boulder allows developers to fulfill their affordable housing requirements by renovating existing homes and selling them to a qualifying family or turning them into affordable rental properties. They didn’t want to contradict their growth restrictions.

With Boulder, Co and Burlington, VT as my inspiration, here are some details of my policy idea (notable details, like logical incentive structures for every step are not totally worked out yet, but bear with me… they will probably be different for each community anyway):

  1. Establish a community land trust or something that would serve the same function. The community land trust should be flexible, with graduated goals for the amount of housing in the trust. Homes in the trust don’t have to stay there forever, in fact my idea will only work if homes cycle out of the trust while new homes are acquired.
  2. Establish some affordable housing development requirement.
  3. Now, give developers some options: develop affordable housing, donate housing to the land trust, and/or renovate housing already in the  land trust. Cash would be the less fancy, but sometimes more efficienct option. (You can add all kinds of nuances like, if the developer’s planned development is already “green” beyond code requirements, you can acknowledge the intrinsic affordability of  “greenness” and count that toward meeting the affordable housing development requirement!)
  4. Renovations must be “green” and adhere to strict minimum building performance requirements.
  5. Give residents of land trust homes incentives to make additional green improvements. Give them a list of qualifying improvements and the requirements for the work, then demonstrate the value you place on those improvements by giving them more equity stake in the house. (This step has some important educational value.)
  6. Once a trust property has been “greened” to your high standard, it is more affordable to live in (it’s more energy efficient, more durable, and offers a healthier indoor environment) and more valuable, so let it be sold out of the trust.
  7. Acquire a new property in it’s place and let it be “greened!”
  8. Keep the cycle going! After all, you have an unusual knowledge of green building practices, an unusual commitment to the environment, and/or unusual faith in technologies! You gotta be the one to invest in this process. Experience in “green” homes is probably the only thing that will convince your average homeowner/buyer to go “green”.

There are the basics. To clarify (in case it wasn’t obvious), the “you” I am speaking to are communities as wholes (all you invested citizens),  local governments, and their partners that might be able implement some fashion of this idea.

Ensure affordable housing and “green” your community’s housing stock AT THE SAME TIME! What do you think?

Housing Trust Funds

Nearly every state, including Virginia, has at least one housing trust fund. There are 471 city-based housing trust funds (2 in Virginia) and 57 county based funds (3 in Virginia). The National Housing Trust Fund, established in 2008, is still awaiting funding. The Virginia General Assembly established the Virginia Housing Trust Fund last year, allocating 7 million dollars from the the general fund to the housing trust fund. This spring, the Virginia Department of Housing and Community Development (DHCD) and the Virginia Housing Development Authority (VHDA) will accept the initial round of applications for funding through the Virginia Housing Trust Fund. They will be looking for shovel-ready demonstration projects to make the case for future contributions to the Fund. With the state’s initial funding round imminent and more Virginia municipalities considering local housing trust funds as a tool for dedicating money to affordable housing, I have been reading the scholarly analysis of housing trust fund mechanics.

Unfortunately, the scholarly analysis of housing trust funds is sparse. Since the 80’s fewer than a dozen scholars have published studies regarding the establishment, operations and outcomes of housing trust funds. Mary Brooks, director of the Housing Trust Fund Project at the Center for Community Change is certainly the leading authority. Brooks and her team keep tabs on each housing trust fund established in the US and offer a catalog of resources for communities that may want to establish their own housing trust funds. Brooks has also published general information on housing trust funds in scholarly journals (1995, Affordable Housing and Community Development), but her work does not explicitly analyze or evaluate the effectiveness of housing trust funds.

A number of authors have evaluated state housing trust funds, especially as these funds are established as part of an effort to augment decreased federal fund for affordable housing initiatives. Publications by Corianne Payton Scally, and one by Kristin Larson make up the most recent and relevant scholarly literature available. Here’s a summary of their conclusions:

  • housing trust funds, which are typically funded through real estate transaction fees, are easier to fund in places with high rates of development (Scally 2012, Housing Studies; Larson 1993 Housing Studies)
  • favorable political climate and a recognized community need for affordable housing help the process along (Scally 2012, Housing Studies; Basolo and Scally 2008, Housing Policy Debate)

So, why so little research regarding housing trust funds? A housing trust fund is not much more than an account were funds for affordable housing are protected from being reverted back to a general fund or “raided” for purposes unrelated to the development or preservation of affordable housing. The policy that raises the money that goes into the fund and the policy that governs how the money is spent is what’s interesting. The thing is, those affordable housing policies can exist and have existed without at housing trust fund. More than anything else, a housing trust fund it a formal way for a community to say they are planning to raise or dedicate money to develop and preserve affordable housing.

The most popular ways to raise money for housing trust funds seem to be developer fees, impact fees, linkage fees, and in-lieu [of developing affordable housing required by inculsionary zoning] fees.  Other ways include redevelopment taxes, transient occupancy taxes, property taxes, document recording fees, demolition taxes etc.  Many funds combine sources.

The most important consideration for any community should be to determine the most efficient and justifiable way to raise and transfer funds to affordable housing. That is, communities should raise revenues based on evidence of negative impacts on housing affordability or they are likely to encounter well reasoned political and legal opposition. Check out this example in California. Once a policy is in place to raise revenues, communities should make every effort allocate that money as efficiently as possible. Easier said than done, right?

The nuances of policy efficiency are the subject of extensive economic theorizing and testing. I’m planning to devote much of my future reading (and blogging) to the economics of affordable housings policy. Although the best solutions are likely to be unique and creatively tailored to the communities where they are adopted, I ought be be able to identify some economic mantras to keep us focused. In the mean time, the Vermont Housing and Conservation Trust Fund offers lots of food for thought.