How Cities Balance Urban Development and Affordability

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“The recovery of the housing market in many cities is the very definition of a double-edged sword.”

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Earlier this year, President Obama named a mayor to be the new Secretary of the Department of Housing and Urban Development. It’s no surprise that former San Antonio Mayor, Julián Castro was appointed to this position – the selection reflects the unique understanding local officials have about the central role housing plays in the health of communities.

Our analysis of mayoral State of the City addresses makes this even clearer. Almost two-thirds (65%) of speeches in our sample “covered” housing and over one-fifth (22%) devoted “significant coverage” to the topic.

Housing is one of only a few issues that everyone can quickly relate to in a visceral way – it impacts where our children go to school, how we get to work, what we do for fun and can also be viewed as a social statement.

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At the core of housing, though, is cost. And this is reflected in our data. The issue of affordable housing was discussed in 41 of the 100 speeches we analyzed. With half of renters spending more than 30% of their income on housing and 28% of renters spending more than half of their income, it’s not surprising that city leaders are giving voice to the growing impacts of this issue on their neighborhoods.

The scarcity of affordable housing is made more difficult by reductions in federal resources aiding cities, such as the Community Development Block Grant (CDBG) and the HOME Investment Partnership Fund (HOME). Since fiscal year 2010, CDBG has been cut by 24%, while HOME has been cut by 45%. These reductions have significantly reduced the ability of cities to support the development and rehabilitation of affordable housing.

The recovery of the housing market in many cities is the very definition of a double-edged sword. To capitalize on undervalued properties, developers in many cities are building higher-end projects. Rising home prices are helping to replenish the tax base while cities still feel the lingering effects of the great recession, but this also exacerbates the affordable housing crisis, discouraging or outright preventing first-time homebuyers and placing upward pressure on rents.

These trends are being felt across the country. For example, in Norfolk, Va., Mayor Paul Fraim proudly noted the city’s building permit activity was again at pre-recession levels. Norfolk’s median home prices and their assessed values were up, said the mayor, while distressed sales were down.

The development of luxury condominiums and retail were touted as signs of progress and economic recovery in cities from Fort Wayne, Ind., to Lenexa, Kan. Mayors in cities such as Euclid, Ohio, Jersey City, N.J., Ferndale, Mich. and Lansing, Mich. all heralded the growth in home prices. Many of these cities were some of the hardest hit during the market crash and the price gains come even as cities continue to deal with remaining blight.

Lansing, Mich. is working with Michigan State University to help strategically direct their blight removal and spur economic development. Mayor Stephanie Rawlings-Blake of Baltimore, Md., continues to drive the Vacants to Value program, while expanding the city’s Apartment Tax Credit to promote the construction of new apartments.

How Cities Are Addressing Affordability

With cities facing so many interconnected issues surrounding housing, local leaders have stepped up, creating a climate of creative leadership to address longstanding structural issues.

In Valparaiso, Ind., the city is investing in more transit-oriented development to meet changing demographics and affordability needs. Recognizing that both young professionals and empty-nesters are drawn to the city for its social and economic opportunities, Mayor Costas called on the city to “boldly but responsibly” create more critical mass and sustainability to ensure their downtown is positioned to thrive in the decades to come.

More broadly, cities are at the forefront of addressing the nation’s growing income disparity – which has clear implications for housing affordability. San Diego and Seattle are leading efforts to address housing affordability by no longer focusing on subsidies alone.

In San Diego, Mayor Falconer called on the city council to place a measure before voters to raise the minimum wage. “Lower-income workers are more likely to spend their additional wages on basics like food, housing and transportation,” said the mayor. “That is good for businesses. It is good for San Diego. And it is good for all of us. Let’s reduce the need for subsidized housing. Let’s start paying people enough to be able to afford the rents and mortgages in our city.”

Seattle has already moved forward with this approach. Earlier this year, Mayor Murray signed new legislation that raises the city’s minimum wage to $11 by April 1, 2015 and to $15 by January 1, 2017.

While affordable housing remains a challenge, bold experiments happening in cities offer insights on how to ensure all residents have equitable access to all that our cities have to offer.

This post is the second blog in NLC’s State of the Cities project. In a future post, we’ll continue discussing the impact of housing as it relates to improving the delivery of services to vulnerable populations.

 Elisha_blogAbout the Author: Elisha Harig-Blaine is the Principal Associate for Housing (Veterans and Special Needs) at NLC. Follow Elisha on Twitter at @HarigBlaine.