Downtown Housing 2 – Affordability

Transportation Savings.  Healthy downtowns and new mixed-use centers bring basic shops and services within walking distance of the people who live there.  They also offer great restaurants, theaters, and urban amenities.  If you need to travel farther, centers offer better transit service that connects directly to more places and runs more frequently. 

Driving takes a large bite out of household budgets.

Place, density, travel & household budgets.

Downtown residents drive less and can live with no car at all.  Consequently, downtowns offer a more affordable lifestyle for many households.  The Bureau of Transportation Statistics estimates that walking and using transit saves families tens of thousands of dollars each year in car costs, leaving more household income for housing or other needs. 

While close-in locations may demand higher rents, much less of a household’s income is spent on transportation than other locations.  Low land costs have fueled a “drive ‘til you qualify” boom at the fringe of each region’s commute shed, but savings when buying or renting are quickly lost to auto-dependent errands and long commutes.  When family time is factored, these locations are even less affordable.

Families who live here spend less on transportation.

Downtown housing and transit.

Other locations, even other urban locations, are less affordable than downtowns and urban centers, when transportation costs are considered.  Research conducted in the Chicago, LA, and San Francisco regions shows that households in high-density urban centers drive one-fourth as much as typical urban neighborhoods and one-twelfth as much as most suburban locations, with commensurate costs savings in auto related expenses.

Location has a lot to do with whether people with low- and moderate-incomes can make ends meet, and whether workers, like teachers, plumbers, and cashiers, can afford to live in the communities that they serve.   

Deep Affordability.  While most housing can be delivered through the workings of the market, housing for low-income families and individuals can rarely be constructed without government support.  Yet downtowns give exceptional locations for deeply affordable housing because of low transportation costs, access to jobs, and availability of many social services.   In addition, a broad range of housing types and household incomes are appropriate to downtowns but are much more difficult to attain within neighborhoods where housing is more homogeneous.

As rents that can be afforded by low-income households are insufficient to finance new construction, policy tools are needed to maintain and create deeply affordable housing in mixed-use transit-rich locations.  Most affordable housing initiatives offer direct financial support for housing in the form of grants, incentives, inclusionary requirements, and housing vouchers.  Such programs are generally “place-neutral,” and make large investments in places that make it hard to get to work.  This is especially true for housing vouchers, such as “Section 8 vouchers,” which can often only be used where rents are lowest (like troubled neighborhoods and less accessible locations), especially since vouchers continue to decline in value.

Affordable housing projects as neighborhood asset.

A well designed affordable housing project.

“Inclusionary housing” reserves a portion of new housing units for low- and moderate-income households, but project make inclusion of very low-income households rare.  Inclusionary housing integrates persons of different incomes (except the very poor), thereby avoiding the stigma and social pathologies associated with high poverty enclaves.  But inclusionary requirements generally target “workforce” (moderate-income) housing and deliver few if any deeply affordable (low-income) units.

“Housing trust funds” offer another alternative.  Developers can pay fees to a housing trust fund, which are pooled.  With grants leveraged with these fees, affordable housing developers can make deeply affordable projects pencil.  Housing trust funds can also be funded by developer fees paid in lieu of providing “inclusionary units” on-site.  Increases in property tax revenues from new development can also be diverted toward affordable housing through the use of “tax increment financing.” 

Housing authorities often invest in projects where land costs are low, which may build more units but leaves future tenants saddled with a location from which getting to jobs and services is harder and more expensive.  In some places, however, programs and investments recognize the merits of mixed-use and transit-rich locations.  In Seattle, Chicago, and other cities, municipal governments require that lenders offer “location efficient mortgages.”  These mortgages factor that a larger part of a household’s income is available for mortgage payments where household transportation costs are lower.   This allows households with lower incomes to qualify more easily; households with more income can leverage a more home. 

The Federal government is also providing leadership on this front.  The Sustainable Communities Initiative is being administered by the Department of Housing and Urban Development and, in partnership with the Department of Transportation, is providing new incentives for development in pedestrian- and transit-oriented locations.  Whether the Federal government can do more than give grants is still to be seen, however.

Deeply affordable housing with excellent access to downtown.

Low-income housing with groundfloor social services.

Supportive services play a vital role in helping many low-income people gain and maintain economic self-sufficiency.  Supportive services often include job skill programs, job placement assistance, childcare for working parents, and treatment for substance abuse.  Housing with supportive services have been shown to be a good investment.  In their absence, emergency room visits rise, and police and courts become more involved.  Associated costs can be enourmous, as documented in the New Yorker’s article, “Million Dollar Murray.” 

In Portland, Oregon, and other places, homeless are placed in  “housing first,” where a stable environment and supportive services can turn lives around.  In addition, community-serving organizations are often concentrated in downtowns which means that supportive services can often be delivered more efficiently than if programs and facilities were dispersed or hard to get to.

Continue reading: “Downtown Housing Part 3: Diversity.”