Vacant Land … or Affordable Housing

A vacant lot. An obsolete building. A sea of empty parking spaces. If they’re surplus public property, they’re stuck on the bench when they could be going to bat for affordable housing.

The game plan goes like this.

A local jurisdiction reviews its real estate, decides what’s disposable and designates affordable housing as a priority use for any surplus property. Suitable sites for development are made available at little or no cost on the condition that developers reduce prices for a certain number of dwellings. The discounted land plus low income housing tax credits and other financing mechanisms subsidize the affordable units.

The idea is not entirely new and it’s not always easy to hit a home run. But with many of the nation’s cities facing what Department of Housing and Urban Development Secretary Julian Castro calls an affordable housing crisis, the strategy is weaving its way into a growing number of affordable housing plans.

“There’s a reason you’re seeing more cities look at their public land carefully,” said Robert Hickey, co-author of a National Housing Conference/Urban Land Institute report on public land and affordable housing in the Washington, D.C. area.

“Land for development is scarce and expensive in many places. Allocating public land helps build in some affordability that otherwise would be difficult to get.”

The strategy starts with two musts: a determination that affordable housing is the best use for surplus land and a supply of desirable sites.

“Not all properties are appealing,” Hickey said. “Some are publicly owned because no one wants them.”

Letting go of desirable land to support affordable housing is no small tradeoff for a local jurisdiction. The same traits that make a location good for people with low and moderate incomes — walkability, job opportunities, transit services — make it a valuable municipal asset that if sold at market value would generate a windfall.

Community objection is another reason to think twice. The best locations for affordable housing are often in areas that already are very dense. Instead of additional housing, the community might prefer a park.

There’s no question, though, that the shortage of affordable housing in many parts of the country is a real problem with real consequences for people with low or moderate incomes.

The rule of thumb is that housing should cost no more than 30 percent of household income, but 11.8 million households in the United States spent more than half their income on rent in 2015. The number will climb to 13.1 million over the next decade, according to a study by the Harvard University Joint Center for Housing Studies.

“Too many families earning less than $50,000 per year are having to make tradeoffs between putting a roof over their heads and food on the table,” said Chris Herbert, the center’s managing director. “These negative trends are poised to go from bad to worse as the most burdened populations — minorities and the elderly — grow.”

But boosting the supply of affordable housing is just one of many needs — roads, schools, transit — competing for limited tax dollars. That’s why allocating public land makes more and more sense to more and more localities.

“It’s a resource they can use to support affordable housing without a direct cash outlay,” Hickey said.

San Francisco, New York City and King County, Wash., are among a number of municipalities around the country that have adopted policies promoting the use of public land for affordable housing, but some of the best examples of such policies in action are in the Washington, D.C. area.

All of the forces that drive a locality into an affordable housing crunch — a strong economy, growing population and rising costs for dwindling land — are especially acute in metropolitan Washington, D.C.

Take Arlington County, Va., for example. “If we didn’t do anything, we could quickly be down to zero housing that’s affordable to people who are making 60 percent of the average median income,” said Jay Fisette, a member of the Arlington County Board.

Colocation — sharing land for multiple uses — is an especially creative way to use public land to support affordable housing. Arlington County teamed up with the Arlington Partnership for Affordable Housing (APAH), a nonprofit corporation, to build a community center and affordable housing on the same county property atop a shared parking garage.

Completed in 2014, the Arlington Mill Residences is a four-story apartment building in which all 122 units are priced for households earning less than 60 percent of the area median income. A one-bedroom unit rents for $533 to $1,148 a month.

The site would have fetched an estimated $8.5 million or more on the open market, but APAH paid the county just $1.55 million for a 75-year ground lease. The savings cut costs by more than $50,000 per unit and were critical to the feasibility of the project.

Infill development like the Arlington Mill project — the community center and apartments replace a closed Safeway store the county acquired in 1996 — is one of many smart growth principles Arlington County has applied over the years to prevent sprawl and promote sustainable development.

But smart growth can have an unintended consequence. One of smart growth’s tenets is to provide housing for a wide range of incomes, yet the popularity of smart growth neighborhoods — compact and walkable with easy access to jobs, shopping and transit — can push prices out of reach of low- and moderate-income households.

“Unless you are very intentional about (maintaining affordability), smart growth will, in fact, raise the prices,” Fisette said.

Arlington County’s need to continue providing affordable housing for young workers, seniors and others makes the sweet deal it gave APAH a good investment, Fisette said.

“You don’t want to have a community that prices people out at the early stages of their life or at the end of their life,” he said.

The success of the Arlington Mill project inspired the county to launch Public Land for Public Good. The initiative identified eight other publicly owned properties suitable for affordable housing and set the stage to perform planning studies for each site.

“Using public land for affordable housing is much harder to do if each project is sort of a separate idea,” Fisette said. “It’s easier if planning documents incorporate housing affordability into the planning.”

Montgomery County, Md., is an affordable housing pioneer. In 1974, it passed the country’s first inclusionary zoning law requiring most new housing developments to include a minimum percentage of units at affordable prices. In the late 1980s, it began taking inventory of public land and spearheading development of mixed-income housing — affordable, combined with market rate — on various county properties.

Now the county is making a concerted effort to colocate affordable housing with public facilities after participating in its first such project — a library and a senior apartment building called the Bonifant at Silver Spring.

Owned and operated by the nonprofit Montgomery Housing Partnership (MHP), the Bonifant at Silver Spring is 11 stories and contains 149 housing units. All but 10 units are priced for households with incomes between 30 and 60 percent of the area median, which works out to between $458 and $1,028 a month for a one-bedroom unit.

The 10 units that aren’t priced for limited-income households go for the market rate of $1,231, which adds a small but welcome cross-subsidy to the financial cocktail needed to price the rest of the units affordably.

“In general, affordable housing is not built with one funding source,” said Stephanie Roodman, senior project manager with the MHP. “It’s built with anywhere from three to 10 funding sources.”

One of the key subsidies for the Bonifant at Silver Spring is a deeply discounted ground lease from the county — $25,000 a year for 77 years for a total of $1.925 million.

A rundown apartment building with a history of code violations occupied most of the library and senior housing site before the county purchased it in 1999. The county later bought two adjacent parcels. The land is prime downtown real estate near transit. It’s an ideal location for senior housing, but the MHP never could have built affordable housing there if it paid full price for its half of the site.

“The county could have sold that land for $10 million to someone else,” Roodman said. “We were really lucky because we have a county that’s committed to affordable housing.”

The library opened last spring followed by the apartments this spring. Montgomery County now requires that all county agencies consider colocating affordable housing when constructing new facilities or redeveloping or disposing of any county land.

Not to be overshadowed by the financial benefits of colocation is the potential synergy of putting public facilities and affordable housing side by side. “You’d be crazy not to be excited about living right next to a library with all of its programs,” Roodman said.

Adopting a policy to use public land for affordable housing is one thing, but getting the desired result is another. In 2002, San Francisco required that surplus public land be transferred to the mayor’s office to support housing for the city’s low-income and homeless populations, but the action led to “less than a handful” of projects, said Michael Martin, project director of the public site development program.

The first problem was that the transfer process was left entirely to individual departments. There was a natural inclination under that scenario for departments to hang on to properties — just in case — and no real incentive to report them as surplus. Now a central office reviews each department’s holdings to ensure surplus property is transferred appropriately.

But a second problem lingers. Most city departments can transfer surplus property without requiring any financial return. However, so-called enterprise agencies that generate their own operating revenues like utilities and transit are legally bound to obtain market value.

That eliminates an important subsidy for affordable housing, yet the enterprise agencies own some of the city’s largest and best-situated surplus properties. Rather than throw up its hands, San Francisco is developing a model for supporting affordable housing while also getting market value for the properties.

Adding market rate housing to cross-subsidize a range of affordable housing is one possible tool. Another is tax increment financing, which captures revenue from rising property values.

“The thread that goes through this is that we’re taking a more active real estate management role,” Martin said. “The traditional government approach is we have these holdings, we’ll figure out what to do with them, if there’s nothing there now, there’ll be something later. But that era has passed. There just aren’t that many places left to build anymore.”

Brad Broberg is a Seattle-based freelance writer specializing in business and development issues. His work appears regularly in the Puget Sound Business Journal and the Seattle Daily Journal of Commerce.