On April 15, 2021, Arlington County is holding a Housing Commission Tools and Trends Subcommittee meeting as part of its 5-year review of the Affordable Housing Master Plan. The topic of that meeting is affordable ownership options. Earlier today, Neighborhood Fundamentals’ Michael A. Spotts offered the following comments on the topic in his capacity as private citizen and Arlington resident.
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Hello,
I hope all is well. I am an Arlington resident, affordable housing practitioner, former Vice-Chair of the Affordable Housing Master Plan Working Group, and a member of the Affordable Homeownership Working Group that was convened several years ago. I am writing to offer comments for consideration on affordable ownership housing. Since passage of the AHMP in 2015, there has been minimal progress toward meaningfully expanding affordable ownership options for low- and moderate-income households. The importance of this is underscored by the other topic on today’s meeting agenda – Affirmatively Furthering Fair Housing. Given historical barriers to homeownership faced by African-American and other minority households, an affirmative approach to expanding homeownership options is critical to the goal of achieving fair housing.
A discussion of the comprehensive steps needed to expand affordable homeownership is outside the scope of a single comment letter, but at a high-level the County should consider the following principles/concepts in its evaluation of policy:
Permanent affordability – Given the rapidly escalating cost of ownership in Arlington, any deeply subsidized units (including units produced by the Affordable Dwelling Unit or density bonuses) should carry long-term use restrictions that adopt a shared equity/appreciation approach and require resale to a subsequent affordable purchaser in most circumstanced. This is a best practice employed by the highly successful MPDU program in Montgomery County, MD and Fairfax County’s Affordable Dwelling Unit program. This would guarantee that the “first rung” of the ladder to homeownership created by these units will be durable over time and across market trajectories. Though there are fairness concerns associated with limiting homeownership’s “upside potential,” particularly in the context of groups that have been victims of historic discriminatory practices, careful policy design can address these challenges and allow for relatively robust wealth building opportunities while focusing unit targeting on households that would otherwise have no access to homeownership. This can be complemented by shallower subsidies – often in the form of downpayment assistance – that allow for greater upside and are administered with AFFH principles in mind.
Preservation – Much of the existing affordably-priced homeownership stock is in condominium properties. These properties represent a critical option for low-income purchasers, but property management issues and investor purchases can put such properties under threat. A comprehensive homeownership strategy should focus on expanding the toolkit to provide technical and financial assistance to ensure the long term physical and financial viability of these properties.
Supply – Affordable homeownership will not be achievable at scale under our current land use paradigm. Given market dynamics, there is no scalable, long-term solution that preserves even a modest level of affordability AND single-family exclusivity in such neighborhoods. The County’s study of Missing Middle housing is critical to advancing affordable homeownership, but time is of the essence given the accelerating trend of tear downs and redevelopments. Though more diverse housing types are no guarantee of affordability, they are a necessary first step. Missing middle zoning changes can be made in such a way that “build in” affordability – Portland’s Residential Infill Project to allow missing middle types includes an inclusionary requirement that a portion of the units be affordable. While missing middle discussions largely focus on forms of attached single-family building types (for example, duplexes through six-plexes), the County should also explore the possibility of reducing or abolishing minimum lot sizes to allow for smaller single-family detached or “cottage cluster” development patterns that provide a lower cost, fee-simple (no condo fee) option.
Housing Stability – Existing homeowners have generally had the benefit of appreciating property values, but may still face challenges. First, increased assessments can put strain on those on fixed-incomes or with lower-incomes. While those assessments reflect increased wealth, the County should work to promote stability for those with lower annual incomes by making sure deferral (rather than abatement/forgiveness) programs are appropriately calibrated and sufficiently generous. The County can also explore creative tax policies that could expand affordability more broadly (for example, forgiving the deferred portion of a low-income homeowners taxes at point-of-sale if the subsequent purchaser is a low-income homebuyer). Second, the county’s prescriptive land use and zoning policies have a disparate impact on low-income homeowners. The cost of remedying non-conforming elements in homes (many of which were built before passage of modern regulations) creates a functional “tax” on property improvements and creates a disincentive for more modest improvements (when a sale/tear-down/redevelopment may provide more upside). Relaxing policies unrelated to health and safety can remove barriers/perverse incentives. Finally, though most real estate development practitioners act responsibly, the strength of the Arlington market can lead to predatory acquisition practices. Predatory purchasers use all-cash offers and harassing tactics, target low-income and/or elderly homeowners, and try to convince those without full market knowledge to sell significantly below the value of their property. The County can combat this practice through educational efforts, reporting hotlines, and other “know your home’s value” initiatives. This will be particularly important in the context of potential Missing Middle zoning changes.
Creativity – Arlington’s policymaking model tends to be prescriptive. Challenging problems require flexibility, trial and (inevitably) some error. The County should maximize flexibility to enable developer and programmatic creativity, avoid “over-planning” (for example, regulating every detail of allowable missing middle typologies), and administer short-term “pilot” programs that test innovative concepts. The normal multi-year process of planning, debating, and passing policy changes is unsuitable to current market dynamics and stifles innovation.
Thank you for the opportunity to share these comments. These observations are based on my research of best practices in affordable housing and community development practice from around the country. I am happy to share additional information and examples.
Sincerely,
Michael A. Spotts