Let's Make the Affordable Housing Bonuses Extremely Popular

(Awesometown, an affordable housing project by Post Green Homes and NKCDC)

The Kenney administration and City Council have been working toward finalizing details of a compromise plan to fund affordable housing, as an alternative to the 1% construction tax that passed Council back in June, which the administration opposed. The compromise plan has two main parts—about $50 million from expiring tax abatements, and about $20 million from the newly-revamped zoning bonuses that allow greater density in housing projects that either include some below-market-rate units or make an in-lieu payment into the Housing Trust Fund. 

That second part is an amended version of the Mixed-Income Housing bill that Councilmember Maria Quinones-Sanchez introduced earlier on, which would have mandated the inclusion of below-market-rate units in all projects over a certain threshold, while allowing greater density and units to cross-subsidize the affordable ones within the same building.

That was bargained down to a voluntary bonus system in the end, but the terms Council landed on when they passed the bill in June seemed pretty sufficient to make the bonus program fairly popular, and thus generate some more new units and new money for the Housing Trust Fund.

Over the summer, the Kenney administration was reviewing their options on the construction tax, but that was a separate bill from the zoning bonus bill. They were also letting the zoning bonus bill go unsigned at the same time, and it was unclear why, since the bonus bill had passed unanimously and didn't seem to generate much controversy once the mandatory provisions were amended.

In asking around about the bill to gauge the reception among home builders, the sense I got was that the zoning bonus was going to be well-used, and several people were already planning on using it for upcoming projects, mostly via the in-lieu fee option, at that point set at 1-2% of estimated construction cost.

But then at the beginning of the fall legislative session, the Kenney administration had persuaded Councilmembers that the in-lieu fee option had been made too attractive, and they moved to amend the bill to raise the cost of accessing zoning bonuses through the fee. They preferred to incentivize direct creation of the units rather than generate more Housing Trust Fund revenue.

Jake Blumgart at PlanPhilly interviewed several home builders about the amendments and heard unanimously, from people building in all different kinds of neighborhoods, that the most recent amendments would make the bonuses unuseable.

Now, some healthy skepticism is always warranted when evaluating the claims of self-interested industries, but Council and the administration can't afford to get this wrong. They're out there saying that this particular zoning bonus program is going to generate $20 million a year for the Housing Trust Fund, so it actually needs to do that. 

If there's any question as to whether people are going to use this bonus or not, then they need to keep turning the dial in the other direction until more people start saying they'll use it. 

There's always been a bit of an odd internal tension with this bill about whether the emphasis was to get builders to create below-market-rate units, or should be more about raising money for the Housing Trust Fund. Now that the Kenney administration has come out with a high revenue goal for this strategy, though, it's clear that the political emphasis has shifted toward raising revenue—even as the administration has been lobbying in parallel for changes that would result in less revenue for the Fund by making the bonuses less popular.

It looks like Council made some amendments again on Thursday that slightly reduced the disincentives to using the bonus, and we're still waiting to get a sense of whether it's now considered useable again. If the goal is getting a lot more Housing Trust Fund money and a lot more housing built though, this whole negotiating framework where we're trying to find the exact edge between usefulness and uselessness is a silly way to go about things.

If we want widespread uptake, there has to be no question that people are definitely going to use it, and it's a case where we should be starting out by asking builders what they'll definitely use, and then doing that. This isn't applicable as a general principle all the time, but in this particular case there's very little downside since the pay-for—additional density—is a benefit, not a cost, for the city treasury. 

A world where we're collecting somewhat less in-lieu fee revenue per project than is theoretically possible, but a much larger volume of projects are making use of the bonuses overall, is a world with a much better-capitalized Housing Trust Fund than where we'll probably end up in this round of legislating.

And if the concern in the administration is that the option to build the housing on-site is much less attractive relative to the in-lieu fee, there's a simple fix for that: rather than making the in-lieu fee more expensive and less useable in relation, we can make the density bonuses even more appealing

Back when the debate was over mandatory inclusionary zoning, the Building Industry Association put out an analysis comparing different scenarios with different height and unit bonuses, and they basically showed their math on some scenarios that would make building below-market-rate units more profitable for builders than the status quo

So if we're worried about the relative useage of the different options, rather than leveling everything down and risking lower uptake, we could instead be making the on-site option even more enticing.

More residential density is always good for supporting commercial corridors and affordability, so the "trade-off" here, such as it is, involves doing a good thing in order to get more of another good thing. This is one of several areas where we need elected and appointed officials concerned with housing availability and affordability to start thinking a lot bigger if we're going to start putting a dent in our below-market housing deficit. 

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