Development

Affordable housing has a lot of support. But how do we get there?

Cherry neighborhood representatives hold signs in favor of affordable housing at a 2015 zoning meeting. From left: Troy Drawz with Charlotte Housing Authority, Perdensal Springs, Donna Green and Maurice Robinson.
Cherry neighborhood representatives hold signs in favor of affordable housing at a 2015 zoning meeting. From left: Troy Drawz with Charlotte Housing Authority, Perdensal Springs, Donna Green and Maurice Robinson. rlahser@charlotteobserver.com

With rent and home prices rising while median incomes head the other way in Charlotte, a broad consensus has emerged over the past year that local governments need to do more to promote affordable housing.

What people don’t agree on: Who should pay for it? And what would remedies actually look like?

“Housing affordability is top of the mind in Charlotte. We’re talking about it a lot,” said Collin Brown, a land use attorney. He was moderating a panel Wednesday put on to address the issue by the Real Estate & Building Industry Coalition.

According to an estimate from the federal Department of Housing and Urban Development, Charlotte will need about 34,000 more affordable housing units over the next several decades.

The problem has worsened over the past few years: According to the Charlotte-Mecklenburg Planning Commission, median incomes in the city fell from $56,120 in 2007 to $53,919 in 2015 (adjusted for inflation). At the same time, median-inflation adjusted rent rose more than 10 percent, and the price of for-sale housing jumped 26 percent.

As a result, almost half of all Charlotte renters fall into the “cost-burdened” category, meaning they spend more than 30 percent of their income on rent.

The Keith Lamont Scott shooting in September – and the ensuing days of protests, sometimes violent – further exposed racial and economic fault lines in Charlotte. At a Charlotte City Council meeting after the shooting, angry residents pointed to gentrification and displacement as driving forces behind community anger.

“The gentrification process is how we were removed from there,” said Brandon Miller, the executive director of the Youth Educational Society and a Charlotte native. “What we’re looking at now, that’s the effect.”

The aftermath of the protests led City Council to pledge that it would build or preserve 5,000 affordable housing units over the next three years. It still isn’t clear though how the community will get there – or if that would be enough to make a dent in the problem.

The proposed measures to tackle Charlotte’s affordable housing challenge run the gamut from pure market-based approaches to more regulation-heavy tactics that would require developers to include affordable units in each new project. Here’s a look at some of the main ideas in Charlotte now:

Deregulating the housing market

At one end of the spectrum, many developers contend that easing regulations – especially around zoning, what can be built where and the time and expense of getting permits – can make housing less expensive. That was the contention of Wendell Cox, a consultant who spoke at the REBIC forum.

“The things that you need to do to make sure you don’t make the affordable housing worse are things that increase the cost of housing,” said Cox. Unlike many urban planners who favor dense, compact developments and abhor sprawl in all forms, Cox is an advocate for building less dense, cheaper houses in the suburbs.

“One of the reasons we’re so rich in this country is because we have cheap housing on the fringe of our cities,” said Cox.

Developers generally favor loosening the regulations around what they can build and how they can build it, which they say would lower the cost to build, and the eventual cost to consumers.

“Every regulation adds to cost,” said John Porter of Charter Properties.

Requiring new affordable units

On the other hand, there are regulations known as “mandatory inclusionary zoning,” which require developers to set aside a certain percentage of units in every new development as affordable to people at a specific income level. One of the most common questions I get from readers is why Charlotte doesn’t require affordable units in new developments.

Although some local elected officials and housing advocates would like to see Charlotte mandate affordable housing, North Carolina state law doesn’t allow local jurisdictions to set such requirements.

Ted Fillette is an affordable housing advocate and member of OneMECK, which published a plan last week to boost affordable housing. He said the city could have added many more affordable housing units during the current apartment-building boom if developers were required to set some aside.

“The community cannot take advantage of this massive growth in market rate housing to address the problem at all” without programs to mandate affordable housing requirements, said Fillette.

Developers would likely fight hard against efforts to bring mandatory inclusionary zoning to the state, which they contend drives up prices by forcing developers to subsidize some tenants.

Retired Bank of America CEO Hugh McColl said last year that he would like to see affordable housing requirements made into a city ordinance, though he quipped that he knew his real estate friends “will shoot me.”

Using public land

There’s one category of land, however, where local governments can require affordable units: Land they already own. The city of Charlotte, Mecklenburg County and Charlotte-Mecklenburg Schools all own tracts in desirable areas that developers are interested in buying and building on. And as a condition of the sale, local governments can mandate that a certain percentage of all the units developed be reserved for lower-income tenants.

“It seems to me we don’t want to squander the public land,” said Fillette.

That’s the approach the county is taking with the Brooklyn Village redevelopment in Second Ward. The developer has promised to include 107 units of “workforce housing” mixed in throughout the project, 10 percent of the total. The units will be set aside for people making 80 percent of the area’s median income (think nurses, firefighters, teachers).

But this approach isn’t always easy. CMS, for example, is being prodded to sell off excess land by Mecklenburg County to help cover the school system’s budget. That means CMS is looking for top dollar, as in Sedgefield, where CMS tried to sell 3.7 acres for townhouses to Pulte Homes for $3.85 million. That would have been market rate housing – and there’s no incentive for CMS to seek less money by selling to a developer interested in building affordable housing.

“All the key players need to work together,” said Fillette. That means, for example, the county would have to be OK with CMS selling or leasing excess land for less money in order to facilitate more affordable housing.

Raising more city bond money

Charlotte’s main vehicle to subsidize the building of new affordable housing units is the city’s Housing Trust Fund. For the next two years, it’s funded by $15 million worth of voter-approved bonds – an amount most experts say isn’t enough.

“I think we’re going to see Charlotte burn through those housing trust fund bond requests faster than we’ve ever seen before,” said Dionne Nelson, CEO of affordable housing developer Laurel Street Partners.

Fillette said the $15 million is “obviously very inadequate,” while Porter said “$15 million isn’t nearly enough.”

The Housing Trust Fund, established in 2001, is meant to help finance housing units affordable to people making 60 percent or less than the area’s median income. That’s about $40,200. Since its inception, the fund has invested $93 million and financed 5,542 affordable housing units.

One possible solution discussed at Wednesday’s panels: Ask voters to approve more bond money for the funds next time they’re on the ballot. Nelson said affordable housing developers and advocates should also look to find investors willing to accept a lower rate of return – say, 12 percent instead of 20 percent – to make affordable housing easier to build.

“It’s not rocket science,” said Nelson. “Why can’t we raise a fund that delivers a 10, 12, 15 percent return? I can do that deal all day.”

Staff writer Deon Roberts contributed.

Ely Portillo: 704-358-5041, @ESPortillo

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