Affordability Efficiency

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a proposed concept for evaluating how efficiently a given housing program or funding achieves affordability benefit. It addresses questions such as, how can we rigorously evaluate past programs, or choose between proposed programs, for housing affordability? 

Generally, there are varied types of programs, which may create different types of housing, of different costs in subsidy or resident costs; which may be regulated-affordable for different lengths of time; and there are benefits such as housing vouchers or rent support which don't directly create housing. Could we define 'affordability achieved' metrics that could be used to systematically compare the outcomes of these programs, compared to their costs? 
 

Background

[originally posted as comment by Tim McCormick in Portland Neighbors Welcome's Facebook group, on a posting of article about Seattle's housing reforms and particularly the Mandatory Affordable Housing (MHA) component [Durning 2020]. From that article:  ]

Alan Durning in Sightline
 "The principle at the center of R.1 [recommendation later termed “mandatory housing affordability” - MHA], the axle on which the whole proposal turned, was the promise of equal value exchange. That’s an eye-glazing term, but it’s a simple idea: the city, by granting upzones to landowners in certain neighborhoods, would effectively give them new wealth. Their properties would be worth more money. The R.1 requirements, as proposed by HALA, would be designed to reclaim a large share of these windfalls for the public purpose of providing additional affordable rental homes in every part of the city. Inserting housing for low- and moderate-income households in well-off neighborhoods is one of the best antipoverty strategies around. By granting upzones, the city could more or less mint new money and, through its affordable housing requirements, it could spend the new money on subsidized homes, exactly where they would do the most good.

Note, though, that if the city imposed requirements that cost builders more money than the upzones had granted them, they would be less likely to build at all. The effect would be to slow homebuilding, exacerbating the city’s housing shortage, driving up rents, pushing more low-income households out of the city, and undermining the program’s entire goal. Less homebuilding would also mean fewer reduced-rent homes: a lose-lose."
 

Tim:
Consider the "value exchange" idea there, taken from incentive zoning, and how it's not really done in the Deeper Affordability Bonus DAB (proposed for for Portland's RIP - Residential Infill Program. See [Andersen 2020]). 

Alan Durning in Sightline
 

"In the case of DAB, it seems the bonuses granted would *never* offset the additional requirement costs, and so would not rationally be used by a for-profit developer. The bonuses would only allow additional units to be added with a subsidy, which might often be lower than the subsidy needed to create a unit some other way, and so could be appealing to a non-profit developer or issuer of subsidies.

"In this sense, Portland's proposed DAB is not fulfilling the usual idea of incentive zoning or density bonuses, because it doesn't generate designated-affordable housing as part of for-profit development. This tends to much limit the scale of its possible impact. (possibly, there isn't a way to do it with smaller buildings like these)."

 

Proposal 

[Tim's comment, continued]:

"On the other hand, by letting us quantify those subsidy amounts needed to get the additional affordable units, it helps suggest a broader excellent idea: we might award public housing subsidy dollars based on which usage is most efficient in homes created per dollar. (or perhaps not strictly 'homes', but one or multiple, more sophisticated metrics based on new bedrooms, square footage, location amenities, degree to which the housing would not otherwise have been created, and level of affordability). Call it the Affordability Efficiency of spending.

"If we carefully rated projects/programs by Affordability Efficiency, it might help avoid silliness like a housing bond target equating both new and acquired homes as homes 'created'. We could meaningfully compare the impact of, say, housing vouchers or rent assistance to that of creating or acquiring housing. We might also empirically test, to refine the metrics, how people actually value different factors like home size, location, shared vs private facilities, parking, or rent stability.

"We'd make affordable housing policy so optimal! Nah, we wouldn't, there'd still be all kinds of waste and boondoggle, it just would be easier to analyze and demonstrate how, and maybe gently steer it better long term."

 

Example applications

[from further comments on the thread noted above]: 

"I'm not convinced it would be impossible to get a density/affordability bonus, in the usual sense, into Portland's Residential Infill Program. Austin's "Affordability Unlocked" code provision for, 1/2 affordable sixplexes, evidently believes this can work. Following Alan Durning's 1/3 concept, in Portland we'd predict it feasible to require one affordable unit if a triplex projects were allowed three additional units.

"Thinking more broadly, a city might facilitate this also with other levers it has beyond just zoning allowances. This is why I and HousingWiki and and others prefer to use the term "Inclusionary Housing" rather than Inclusionary Zoning for this sort of policy.

"For example, a city might automatically offer subsidies for additional units if they're designated affordable -- perhaps, after having concluded from Affordability Efficiency analysis that this is a very cost-effective way to generate housing with housing bond money. Or a city might offer a property tax exemption for some time, or waive SDC development fees, in exchange for affordable units, based on a similar cost-effectiveness analysis."

 

References