I have been getting some grief over my “namby pamby”, non-edgy, bland Soapbox content lately. They have been that way, of course, purposefully. Since I do not have much of a “filter”, I have to be careful. Mary-are you reading this carefully so we can send this out to the good ECA folks please?

Anyway, this is my intent to provide some edge, but in a “politically correct” manner. Which brings into focus, what is politically correct these days? That is a subject for a different Soapbox, and perhaps written by someone else!

I want to talk to you about the lack of houses being built. Of course, doing fire rebuilds has something to do with that, but when you have a grand total of 1 housing unit built in Windsor in the past year, building houses does seem to be a topic worth discussion. Last year Deb Fudge and Dominic Foppoli from the Windsor Town Council took Mark Soiland and I to lunch to ask developers why is that? I will provide this disclaimer-I am writing this without any input from “real experts” like Larry Florin from Burbank Housing, but this is an “opinion” piece, and I have an opinion-so there!

At today’s Construction Coalition meeting, the venerable and wise, Keith Woods asked the question of our Windsor guests (Jessica Jones-Community Development Director, Kimberly Jordan-Planner, and Aaron Nousaine-Urban Economics consultant) as to the ideology that Municipalities seem to have around the topic of “affordable housing”, which is:

“why do municipalities always look to increase inclusionary housing in lieu fees in trying to promote construction of affordable housing?”

Please allow me to explain the context of Keith’s question. Simplistically, most cities say they want to see more housing built in their city. They do not just want “Mcmansions” to be built, but they want to see “affordable housing” built as well. One could swap out the word “affordable” and replace it with the more accurate word- “subsidized”. The real question Keith was asking was who should be subsidizing the City stated desire for more housing for lower income residents?

The lack of logic in the actions taken by most cities, is that they provide developers with a requirement to build (as part of their proposed development) a certain percentage of housing that could be deemed “affordable” by a complex set of criteria that is based upon, loosely, the cost of housing, the prevalent average income of people in the community, and the size and scope of the proposed housing project. But basically, the “requirement to build” those less expensive units, can be avoided by the developer by paying what is known as an “in lieu” fee and the developer can then simply pay a certain amount and build all market rate housing in his/her development. Ostensibly, the “in lieu fee” is then collected by the municipality, and goes into a fund to build, or subsidize, more affordable housing.

Most, if not all, developers, usually opt to pay the in-lieu fee rather than to build the lower cost units. Why? Because they can pass that cost on to the other buyers of the more expensive units in the proposed subdivision. Result? Housing costs go up, and no “affordable housing” is actually built.

The developer that chooses to build the “affordable units” can opt to do so, but I am told they are building and selling them at a loss to themselves. The in-lieu fee is a lesser cost to them then to build the unit and sell it, and that is why they generally choose to pay the in-lieu fee.

So, municipalities are trying to figure out how to get developers to build more affordable units. Their default method to accomplish this? They simply raise the cost of the in-lieu fee option until the developer, in their mind, is forced to build rather than buy their way out of building those units.

So how is that working?

NOT.

In essence, whether the developer builds the units at a loss, or pays the in lieu fee, the “game” to the developer is how much can the other buyers absorb and/or how thin does the developer and his/her investors wish to cut their margin to. When the buyers can’t afford subsidizing the affordable units in the project, and/or the developer and investors reach their choke point, the project does not move forward.

Cities are overflowing with projects that are entitled, but not moving forward with construction. Cities keep spending money on consultants to ask them why. Cities reach out to ECA, NCBE and others and ask them why developers are not moving forward. The answer is simple-the cost of building is higher than they can sell the units for, and so they go get the entitlement, then try to “spin” the proposed development to some other developer from out of the area that might be dumb enough to buy it and move forward with construction.

What a country!

Here is a concept for those municipalities that keep saying we need more affordable housing-find someone other than the developer and/or buyer to subsidize the “loser” less expensive units you are demanding the builder build.

But here is the question-who should subsidize those less expensive units?

I have been advocating for years that the municipalities should, if they really want more affordable housing, do the subsidizing themselves. Why do they not do that? Because building more housing actually does not pay off for the municipality. With more housing, comes the need for more road capacity, more sewer capacity, more water capacity, more parks, more schools, more police, and more fire. The City losses money on that deal.

What is the community benefit to having more housing, and more “affordable housing” specifically? One could argue that with more housing availability, a City could be more attractive to a business expanding or relocating there because their workers have a place to live. Wow. What a concept. If businesses expand, or are attracted to locate to a community, those businesses contribute tax revenue and the increased commerce turns over several times in the local economy to make the community healthier than having fewer and fewer people pay higher and higher costs for services they expect from their community.

So-in a nutshell, Cities need to promote growth. How? They need to come up with a way to subsidize the housing costs themselves, or find a way to combine those costs out of the City piggy bank in combination with a small cost to all of the citizens in the community-not just lay the cost on the developer or the house buyer of the particular proposed project.

There you go.  I hope this is no more “namby pamby’ enough for you.

That’s All Folks

John