How should Arlington preserve and create affordable homes?

The high cost of housing in Arlington is a double-edged sword. Not only is there a severe shortage of market-rate homes that are affordable to low-income households, but the amount that the county must pay to preserve an existing affordable home continues to grow. The county's affordable housing program can't keep up with demand and needs to be rethought.

Since establishing an Affordable Housing Master Plan in 2015, Arlington County has only met half its goal for growing affordable housing stock. In 2017, the county produced 276 committed affordable units — while losing 335 units of market-rate affordable housing.

Although community members and political leaders agree that housing unaffordability is one of the most significant challenges facing the county, there is a real debate about the amount of money that should be invested and the strategies that officials should use to get the best results.

A new report from the Northern Virginia Affordable Housing Alliance (NVAHA) provides analysis for jurisdictions that want to preserve affordable housing through more cost-effective methods. Here’s what Arlington could learn from its findings.

Consider who “affordable housing” serves

When everyone in Arlington feels the strain of high housing costs, it can be difficult to separate the middle-income family seeking a home or apartment in their ideal neighborhood from low-income workers, who rely on food banks and second jobs to survive with high rents.

Many routine service-sector jobs pay below 50% median income even for a single-person household, including bank tellers, medical billing clerks, EMTs, and security guards. Although area incomes have increased by approximately 42% since 2000, the cost of housing has doubled.

Affordable housing is measured through a household’s percentage of the “area median income” (AMI), based on the household size. For example, a four-person household would be at 30% AMI if it made $35,150 per year and 80% AMI if it made $77,450.

The NVAHA report shows that while both of these households are low-income and are qualified for committed affordable housing, families at 30% AMI face a much more significant challenge than those at 80% AMI. In fact, there are “98 rental units affordable and available for every 100 households” at 80% AMI.

The much more significant challenges is with families at 50% AMI or lower. Only 17% of Arlington’s CAFs are affordable to families below 50% AMI and “across the Washington, DC region, there are only 49 rental units affordable and available for every 100 households earning 50% of AMI or less,” according to this National Low Income Housing Coalition report.

Unfortunately, current policies like the Low-Income Housing Tax Credit make it most advantageous for developers to focus on units available to households at 60% AMI.

Show me the capital

With the need so high, it is no surprise that Northern Virginia communities are struggling to fund projects that preserve affordable housing. Given rapidly increasing home values and rents, the County has given up on market-rate affordable units to provide any appreciable supply of the housing needed for Arlington’s low-income families.

Committed affordable units, either negotiated with for-profit developers in exchange for increased density, or through “mission-driven” non-profit developers and property managers, are widely considered as the only near-term way to provide affordable housing.

But the cost to provide affordable units through either route is quickly becoming unsustainable for Arlington County budgets. In 2017, Arlington allocated $30 million through its Affordable Housing Investment Fund, which created 171 new CAFs and preserved 280 more.

Arlington’s Affordable Housing Investment Fund is a revolving loan program that receives federal and local support, in addition to developer contributions and loan repayment. Arlington gave $13.7 million from its general fund in FY2017. The benefit of AHIF is that it can leverage private investment.

But the amount of credit available is still not enough to compete with for-profit developers in Arlington’s competitive housing market. The NVAHA report recommends “explor[ing] the possibility of a regional quick-strike acquisition funds and/or lines of credit” to help mission-driven developers take advantage of opportunities to preserve affordable housing.

Make a bigger impact by thinking small?

One aspect of the NVAHA report is to emphasize the importance of small-scale rental properties, particularly those fewer than 20 units. Nationwide, these make up half of the low-cost rental stock.

Smaller-scale properties can more easily fit into “lower-density, higher-opportunity neighborhoods” and help spread affordable housing through the county. But they are often overlooked by affordable housing advocates because they lack economies of scale.

Garden apartments, small-scale buildings without elevators, have been a key source for Arlington’s market rate affordable housing. In recent years, developers have taken advantage of the low-density zoning for many properties and redeveloped them as townhouses, seeking to compete in the lucrative single-family home market rather than the low-income rental market.

Arlington County sought to address this issue by establishing Housing Conservation Districts. The details of these districts are still being worked out by county staff, but essentially they take away the ability of property owners in the newly created district to redevelop the garden apartment into a townhome.

Instead, the district allows the property owner can redevelop their building into a much denser building, as long as a certain amount of affordable housing is included. The final draft of the policy governing these districts is expected within the year.

Exchange higher density for more affordable housing

Land use policies and zoning play a large role in encouraging the development of affordable housing. In some areas, the zoned density of land is lower than developers need to make a multi-family building profitable. So in exchange for higher density, policies require the developer to include affordable housing.

However, the NVAHA report indicates that density would need to be two-six times above current levels for this to be an effective strategy for building significant amounts of affordable housing. The benefit is that a change in zoning costs the County nothing (except a longer site-plan process that may draw opposition from neighbors). The drawback of this arrangement is that the affordable units are usually guaranteed for only 30 or 60 years.

The NVAHA report notes that strict zoning land use regulations can impede the preservation of affordable housing on multiple fronts, as can onerous policies like high parking requirements.

What other lessons could Arlington take from this report?