A common reaction to the increasing cost of housing is to try to remove housing from private market forces. This makes sense: No matter what you believe the causes of the housing crisis to be, it is true that developers are self-interested and want to build the most expensive housing they can sell. A common suggestion is that we should try reforms that are popular internationally. The legal and political systems in the United States favor reforms that can be accomplished via zoning, though, one of the areas of law in which cities have the most power.
Inclusionary zoning is one such reform that Cambridge and Somerville have tried. It requires a percentage of units in developments to be affordable to people at a variety of income levels. These units must be mixed with the market-rate units in the building and include multiple bedroom options.
That means the market-rate units in the building subsidize the affordable units, so the former must fetch high prices for the project to be viable. This condition is harder to achieve when cities use the required percentage of affordable units as a thermostat to control housing production, turning the rate of construction up or down based on the percentage used – with current rates around 20 percent all but assuring most projects are not viable. An important aspect of IZ is that it benefits from increasing the size of the pie: Bigger buildings have more units, and therefore more affordable units. Unfortunately, this reform has not produced downward pressure on rents, though it has given a select group of people a place to live.
Another option is 100 percent affordable developments, for which developers cobble together a collection of city and state funding, federal tax credits and loans from community-minded banks. Cities offer such developers incentives that ease height and density restrictions. Unfortunately, new affordable housing is expensive to build – up to $1 million a unit in Boston. A lot of people believe that if developers wanted, they could construct buildings in which all the units were less expensive. If this were true, we would see it more often; all-affordable buildings are among the most in-demand products. Were it possible to require that only affordable apartments could be built, Cambridge and Somerville would likely already be doing it. Another practice is for the city to buy existing apartments, a good idea but still expensive because the city must pay market rate for these buildings.
These reforms are popular because they require minimal state capacity to implement. Little money needs to be spent up front, and the city can plan for it and see results immediately. In Massachusetts, passing a law restricting what can be built is one of the few ways cities can control the built environment. It makes sense that they’d want to use this to promote affordable housing, even if it doesn’t work as intended most of the time.
The reform I am most excited to see is that of mixed-income social housing. The best way for governments to fund affordable housing sustainably is to not have to fund it at all – by including a range of incomes in the development, the buildings can pay for themselves. They get the benefits of government housing, including low interest rates on government debt, less red tape and low-to-no taxes, and the benefits of private development in that it does not require subsidies to be constructed.
The city has a path to sustainably produce as much housing as it wants on its own, and to offer homes for people of all income levels, on its own terms – but it must be planned properly. Advocates need to be disciplined and not demand that many or all units be affordable: For the program not to bleed a hole in the city budget, it must function without direct subsidies for construction. The government should then be able to use this advantage to outcompete private enterprise in the housing market, forcing holders of existing housing to lower rents and even foreclose on their properties, selling at lower rates.
Nicholas Marchuk is a local author and engineer. His work is available at major retailers and on his website, nicholasmarchuk.com. Comments and questions can be directed to his contact form and may be responded to in this publication.
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