Don’t count on taller buildings to create cheaper housing

December 13, 2013

Creation of more below-market-rate housing is one of several reasons for reconsidering building height limits in certain parts of the District. It’s a worthy goal. But without other regulatory and fiscal measures, allowing taller buildings and higher density will not necessarily increase the city’s affordable-housing stock.

Developing housing for sale or rent at below-market rates always requires economic subsidies, which can take many forms and come from various public- or private-sector sources. Although raising height limits potentially can expand housing in the aggregate and slow demand-induced price inflation, it will not inherently yield subsidies or subsidized dwelling units.

Additional public strategies are needed to ensure that increasing height and density will augment affordable housing. And the most fiscally and politically feasible strategy is conditional zoning, in which a developer is allowed greater density in exchange for agreeing to provide below-market units. This must be coupled with affordable-housing investment incentives and other kinds of subsidy.

For conditional zoning to be workable and equitable for a given project, the value or cost of the land underlying that project must continue to be based on the density allowed by the site’s preexisting zoning. That’s because allowing additional height and density dedicated uniquely to affordable housing creates, in effect, a land cost subsidy for the affordable units. All of the base land cost is allocated entirely to the housing development’s market-rate units.

Without that approach, conditional zoning can be ineffective and unfair. Requiring below-market units in a market-rate housing project, with no offsetting land-cost or other cost reductions, means that the project’s market-rate buyers or tenants subsidize the affordable units, which cost just as much to develop as the market-rate units. That’s why land-cost subsidy alone is often insufficient to make units affordable for many low- and moderate-income families.


Affordable housing (Roger K. Lewis)

To further reduce purchase prices and rental rates, other forms of subsidy are available, such as real estate tax abatement and long-term mortgage financing at below-market interest rates, obtained through federal, state and municipal housing finance programs. Federal tax policy also indirectly provides subsidy by granting private-sector investors substantial tax credits for helping finance affordable-housing projects.

Developing affordable-housing units today, and in the foreseeable future, depends on cobbling together multiple forms of subsidy drawn from diverse sources. Conditional zoning is one important source. But given the number of households needing a decent and affordable place to live, zoning-related incentives can never be the only source.

Like other cities, counties and states, the District faces an additional challenge beyond expanding affordable-housing production: ensuring that the existing supply doesn’t diminish. Since the 1980s, the inventory of subsidized housing affordable to America’s low- and moderate-income households has been steadily shrinking, not growing. That is another reason to revisit D.C. building height limits and relevant public policies affecting housing affordability.

Roger K. Lewis is a practicing architect and a professor emeritus of architecture at the University of Maryland.

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