Strategies for Tackling the Affordable Rental Void Part One: Policies That Make a Difference
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Photo by Tierra Mallorca on Unsplash [/caption]
News Commentary by Viki Sonntag
This year, both the city and the county will be reviewing their housing development strategies as part of updating their Comprehensive Plans. By state law, local governments must account for the housing needs of households at all income levels as well as develop policies to prevent displacement. Of course, the city and county can’t solve the housing crisis alone but they can set the direction of future growth. To make steady progress on housing everyone who needs a safe and secure place to live requires locally rooted strategies focusing on the people most impacted by the lack of housing.
The first step in crafting actionable strategies is to understand what the needs are. In the Comprehensive Plans, “housing units,” or fully equipped homes or apartments, are used to measure housing needs. As part of the mandated planning process, the State’s Department of Commerce has set out how many units must be built by income level to meet current and projected needs.
Of the 4,119 housing units needed in Jefferson County over the next twenty years, 70% or 2,900 units fall into the affordable housing income brackets of at or below 80% AMI (Area Median Income refers to the midpoint of an area’s income distribution, meaning half of the households in the area earn above this amount and half earn below it). In Port Townsend, the affordable housing need is even higher - 85%, equivalent to a whopping 1,400 affordable units of the 1,648 total.
Unfortunately, despite good intentions, our current Comp Plan policies fall woefully short of providing actionable solutions toward meeting the need for affordable housing. Hopefully, we can own up to the limitations of our current approach to housing development and begin to do things differently. I strongly believe that it is inclusive community-driven policies that will make the difference.
Why Rentals Matter
Policies that just target building more homes will not solve the housing crisis, especially with respect to current needs. Who owns the housing and what resources people can bring to bear on their housing choices matters, too. Whether you are a homeowner or a renter greatly affects your housing security.
It is low-income renters who are being driven out of our community. Owning your home greatly depends on your access to resources, and access to resources depends on previous generations of housing policy that favored homeownership over renting as a means of building wealth.
In Jefferson County, it is rental households with below 50% AMI that are at greatest risk for displacement from the housing shortage. From 2016 to 2022, the population of rental households below 50% AMI was cut in half, and that of rental households between 50% and 80% AMI dropped by a quarter. All owner households and those renter households above 80% AMI have seen population increases (American Community Survey data).
Nationally, homeowner assistance in the form of federally backed loans, tax deductions and investments in single-family neighborhood development is estimated to be six times the amount of rental assistance. Only one out of four people who qualify for rental assistance actually receive it.
Homeowner deductions are hidden in the tax code, where rent assistance programs are direct expenditures, requiring annual spending approvals, and are stigmatized as handouts and welfare. Consequently, through unequal support for homeownership and longstanding underinvestment in affordable rental housing, we’ve developed a two-tier housing system shaped by policy.
The lack of affordable rentals also keeps people homeless. As it is, most people exiting homelessness have a hard time securing a rental, much less buying a house. A lack of resources – references, financial history, and savings to pay upfront costs of rental housing – presents formidable barriers. Meanwhile, the number of available rentals is shrinking as rentals are converted to homeownership opportunities and mainly sold to people coming from outside the county. As converting rentals to homeownership does not represent a net unit gain, we’ve lost 748 rental units in Jefferson County between 2012 and 2022.
Not surprisingly, unequal access to housing resources intersects with race. People of the Global Majority are disproportionately renters. In Jefferson County, only 10% of Black households own their homes and Indigenous people are disproportionately represented in our homeless population at over three times their percentage in the general population.
So what strategies are there for filling the affordable rental void? Those strategies for keeping members of our community from being displaced? The strategies for providing a safe and secure place to live regardless of income? Before considering strategies that will make a difference, let’s take a look at why the current market-driven strategies are a dead end.
Why Market-Driven Solutions Fail to Deliver
The standard affordable housing strategies rely heavily on market incentives. Think tax credits for large-scale development. Government-subsidized affordable units cost more to build than standard units due to complex funding mechanisms, stricter design and construction methods, limitations on land selection, and higher administrative costs. The big kicker is that development loans for affordable housing carry a hefty 20% plus interest charge. The result is that only large-scale developers can afford to make affordable housing, and small community-based builders are shut out.
Another favored tactic of local jurisdictions is inclusionary zoning (IZ) policies that give private developers a density bonus in exchange for a specified number of below-market-rate units but never enough proportional to the need. The plans for Evans Vista, for example, call for only 25% of its units to be affordable (this is in comparison to 85% of all new housing units in Port Townsend over the next 20 years needing to be affordable per the state mandate).
According to the evidence, IZ policies will likely result in lower housing production and increased housing prices and rents for those not lucky enough to get one of the subsidized units. Developers would rather forego incentives than take on affordable units, which is why the multi-family tax exemption (MFTE) program for Rainier Street in Port Townsend has failed to produce even one housing project.
The current wave of zoning reforms focused on middle housing (smaller units in denser neighborhoods) creates incentives to add to and diversify the housing stock. Still, at best, more market-rate homes only slow the rate of rental and home price increases, and even middle-income households will struggle to afford these.
We already know that market strategies are insufficient to address the housing needs of those at the bottom half of the income spectrum. If they worked, we would not be in the fix we are now, digging ourselves ever deeper into the rental housing hole. The truth is that when we rely on the market to provide low-income housing, the community suffers. Housing inequality, where some people have too much housing and others not enough or none at all, is an inherent feature of market-rate housing development.
Policies That Make a Difference
The affordable rental gap is why we need our Comprehensive Plans to promote a mix of innovative community-driven housing strategies that guarantee equitable access to affordable housing, prioritize increasing local capacity to finance and build low-income housing, provide permanent affordability, create alternatives to conventional financing, and establish community control and management. In Part 2 of this series, we will look at what housing strategies along these policy lines might make a real difference.
Viki Sonntag has a PhD in economics. She is a Port Townsend Planning Commissioner and a member of the Joint City/County Housing Fund Board responsible for developing the 5-Year Homeless and Affordable Housing Plan. The views (and research) provided in this article are her own.
