By Michael A. Spotts, President
Contributing authors to blog post: Eric Feldman and Deana Rhodeside, Rhodeside & Harwell
Earlier this month, ULI Washington released a new report on Increasing Housing Supply and Attainability: Improving Rules & Engagement to Build More Housing. Neighborhood Fundamentals was a proud contributor to this report, along with Rhodeside & Harwell and other members of the region’s ULI Housing Impact Task Force.
This research process started with a fundamental premise: the sustainability of metropolitan Washington, D.C.’s economic health relies on an adequate supply of housing that workers can afford. Without a range of housing types, sizes, and price points, the region is unlikely to continue to attract and retain the employment base necessary to support continued economic growth. To improve the region’s ability to provide sufficient housing choices, the ULI Washington Housing Impact Task Force examined two critical and related components of a healthy development climate: navigating the local regulatory and approval process and gaining community acceptance of a development. The resulting report explores the ways in which both issues impact supply and affordability and identifies recommendations to produce housing that is attainable across a range of housing types, income levels, and regional locations. This research focused on the urban core of the Washington metropolitan region, defined as the jurisdictions served by Washington Metropolitan Area Transit Authority rail lines. To gain more detailed insight into the specifics of local regulatory frameworks and community engagement issues, the task force conducted an in-depth analysis of the District of Columbia; Arlington County, Virginia; and Montgomery County, Maryland.
Defining the need: a lack of housing production has contributed to high cost burdens
Analysis of Moody’s data by Adam Ducker, Managing Director; RCLCO Real Estate Advisors for ULI Washington Regionalism Initiative
In reviewing existing data and analysis on the region’s housing market and economic conditions, the task force found that the region’s sustained economic growth has not translated to broad-based housing attainability. As the region’s population and jobs base has grown, particularly among high-income households, housing supply has not kept pace. As homeownership has become more costly relative to income, competition for rental housing has increased. In this tight market, 80 percent of renters and 73 percent of owners earning below 80 percent of area median income (AMI) spending more than 30 percent of their income on housing.[i] Nearly half of all renters (47.9 percent) were housing-cost burdened.
How can we build a more attainable housing supply?
Creating a development framework that enables the creation of more attainable housing requires significant action across each segment of the development community: local elected and appointed officials, planners, housing departments, and developers, or a combination thereof. To guide implementation, the task force identified several core principles to improve community engagement and the region’s entitlement and approval processes:
Housing supply growth is crucial to improving affordability.
What is built, where, and for whom, are critically important to ensuring that the housing market equitably serves the region’s residents.
The regulations and process by which we plan and implement development contributes to the high cost of housing and must be fundamentally improved.
Establishing respect, trust, and open communication among all stakeholders engaged in the development process is necessary to achieve both local and regional housing production and preservation goals.
Enacting clear and consistent policies, procedures, and regulations to guide the development process is essential to accomplishing housing attainability goals.
Through surveys, roundtable discussions, and practitioner interviews, the research team identified nine recommendation categories with nearly 100 potential actions that can improve the region’s rules and engagement. Of these, six specific challenges emerged as most crucial to address:
1. Create a Shared Regional and Local Vision
Housing attainability is a regional issue that can be solved only through the cumulative impact of local development decisions. Bridging this gap in geographic scale requires the development of a shared vision for how the region and its constituent communities should grow. In the absence of clear regional and local visions that are defined ahead of time, the vision for each community is debated and revisited on a project-by-project basis as new development is proposed, thus creating inefficiencies for development processes, community engagement, and the ability to meet regional housing needs. This vision gap can be filled by setting regional goals and defining community expectations ahead of time, providing a clear and consistent framework for formulating and evaluating new development proposals.
Establish a regional vision and targets for housing.
Prepare timely and detailed area plans that provide clear and specific guidance for development and housing, based on agreed upon community assumptions.
“Codify the consensus” reached during planning processes by updating zoning and establishing specific guidance on developer requirements and contributions.
2. Build Trust through Engagement Processes
A constructive and open dialogue about housing starts with trust—both trust in the process and mutual trust among its key participants: developers, local government, and the community. Trust breaks down when people feel excluded or disrespected, and when the rules and assumptions of the development process are unclear or inconsistent. Trust is limited when a large subset of a community feels that it cannot participate meaningfully or that the process makes it too difficult to participate at all. Recommendations for building trust include:
Make community engagement more inclusive and equitable by welcoming a broad range of perspectives on development, particularly from underrepresented voices.
Ensure that more people are able to, and encouraged to, participate by providing alternatives to traditional public participation venues
Ensure transparency and respect by clearly defining expectations, assumptions, ground rules for community engagement, while improving communication.
Set realistic expectations regarding the time and cost required to conduct meaningful engagement.
3. Conduct Early, Meaningful, and Informed Engagement
The community dialogue about housing can be improved when all community stakeholders share an understanding of the costs, benefits, and—most important—the tradeoffs associated with planning and development decisions. This requires strategies for addressing issues related to housing attainability proactively, rather than reactively, and fostering community decision-making that is informed by the regional context. Trust is compromised when key community stakeholders are engaged too late and feel that their input does not matter. In contrast, informed, transparent, and direct communication—accompanied by a willingness to listen and a demonstrated understanding of community concerns—can go a long way toward building the necessary trust.
Engage and educate the community well before a development project is publicly proposed
Build capacity and understanding to enable informed decision-making and an understanding of development-related costs, benefits, and tradeoffs.
Ensure transparent and consistent communication throughout the planning and development processes
4. Make Attainable Housing Easier to Build
Across the region, nearly three-quarters of land area is zoned for single-family housing, agriculture, or open space.[ii] These restrictions severely limit the amount of housing that can be built. In addition, “by-right” zoning inhibits the production of more naturally attainable housing types, such as two- to four-unit attached buildings, townhouses, small-lot single-family cottages, and walk-up apartments. The scarcity of such homes (and land where they can be built) concentrates demand and drives up costs, further eroding attainability. It is also important to acknowledge that even in the best of scenarios, new production is unlikely to be affordable to lower-income households. Therefore, addressing attainability challenges require both market-based reforms and policies to enable the creation and preservation of committed affordable housing. To enable a wider range of housing choices in more places, jurisdictions should:
Update comprehensive plans, zoning codes, and growth-related policies to accommodate projected economic and population growth.
Revise zoning codes to allow a wider range of building types by right, especially the most naturally affordable forms
Increase public and philanthropic subsidies for the production and preservation of committed affordable housing.
5. Improve the efficiency of the process for obtaining additional entitlements
In the face of strict by-right zoning, developers often seek additional entitlements through official protocols, such as the District of Columbia’s Planned Unit Development process, Arlington’s 4.1 Site Plan, and Montgomery County’s Optional Method. Through these processes, developer provide significant contributions to the community, such as committed affordable housing units. However, gaining approval also adds time and costs to a development, including legal fees, architecture and engineering soft costs, and land carrying costs. Approvals are often delayed by lengthy internal reviews and negotiations across multiple government agencies. Practitioners interviewed for this research estimated that the approval process could take more than two years and add $2 million to $2.5 million in costs, before accounting for direct fees and developer contributions. The added cost and risk can prevent projects from moving forward. For developments that do proceed, the result is higher housing costs. To create a more efficient process for granting additional entitlements, jurisdictions should:
Evaluate the cumulative costs imposed on development by approval processes.
Simplify and clarify development standards and submittal requirements.
Create clear standards related to the length of time for proposal review and issues subject to negotiation
Assign clear authority to a local government project manager for cross-agency coordination, mediation, and conflict resolution.
6. Reduce barriers to small- and mid-sized projects and developers.
Each regulation, fee, or delay imposed on development has a cost. Smaller projects and small-and mid-sized developers are less able to absorb incremental costs, delays, and risks. Since the difficulty of the entitlement process is generally not scaled to size of development, the cumulative impact of local policies is to decrease the diversity of development and the developer network. A more diverse developer network can support a healthier “development ecosystem” overall, enabling more marginal projects—such as those targeting middle or lower incomes or in lower-demand neighborhoods. As developers of different scales have different development profiles and return expectations, enabling their participation could also mitigate “boom and bust” cycles between neighborhoods and across market cycles. To fill gaps in the housing market, jurisdictions should:
Scale overall costs to the incremental impact on infrastructure and services and the level of regulatory relief being sought.
Closely examine ancillary policies (such as parking, setback, and height) and “stress test” existing regulations to identify de facto barriers that can preclude development.
Create “safe harbors” or expedited approvals for de minimis variations from baseline regulations unrelated to health and safety.
A Call to Action and a Shared Responsibility
Creating an environment in which more attainable housing can be produced is a shared responsibility. There is no single cause of the region’s affordability challenges, and there is no “silver bullet” that will fix the system. As such, dramatically improving the development process will require a thorough and systematic review of existing policies to address a large number of barriers. Such action will require trust, collaboration, and will from local officials, community leaders, developers, and the community at large. However, the challenges are not intractable, and this research has identified numerous opportunities to make incremental and iterative improvements to the process, with smaller changes aggregating to larger impacts over time.
For full details on our analysis and recommendations, read the full report: Increasing Housing Supply and Attainability: Improving Rules & Engagement to Build More Housing.
[i] Leah Hendey, Peter A. Tatian, Margery Austin Turner, Bhargavi Ganesh, Sarah Strochak, and Yipeng Su, “What HQ2 Could Mean for the Washington Region’s Housing Market, in 7 Charts,” Urban Institute, Washington, D.C., October 23, 2018, https://urbn.is/hq2.
[ii] : Tracy Hadden Loh, “Here’s How Much of the Washington Region Is Off-Limits to Growth,” Greater Greater Washington, December 17, 2018, https://ggwash.org/view/70211/zoning-for-incremental-growth-how-is-our-region-doing; Tracy Hadden Loh, “Where the Washington Region Is Zoned for Single-Family Homes: An Update,” Greater Greater Washington, December 18, 2018, https://ggwash.org/view/70232/washington-region-single-family-zoning-an-update.