A Rational Way to Weigh Affordable Housing, Not That We Want to Be Rational
Want to live next to Klyde Warren Park? Get rich.
Jennifer Brandon Elliott
Aha! Answers exist, after all. The argument against requiring a high-dollar apartment developer to include affordable apartments in his or her project is always that doing so will tank the whole deal and cause the developer to abandon America and live out his or her years on a desert island, weeping.
Weep no more. There’s an algorithm for it.
Last August, a high-end apartment developer threw a big melt-down, hissy-fit temper tantrum at Dallas City Hall. A city plan commissioner and a City Council member had proposed asking the developer to consider a small number of sorta, barely, a-little-bit-affordable units in its deal.
The reason the plan commissioner and the council member thought the developer might agree to think about it was that the developer was asking for special permission to build twice the number of apartments that the law allowed on its land. The concept is increasingly common in other cities: You want us to let you bust the limits on density? OK, how about you give us back some lower-income rental units?
The affordable level the pair were asking for was what is called “80 percent AMFI” or 80 percent of median family income. In Dallas that’s just below market rate — too expensive for poor people. But you would have thought they were asking Trammell Crow Co. to include a small leper colony.
Oh, the injustice! Oh, the red-shirted communism of it all! And why didn’t the plan commissioner, Paul Ridley, and council member Philip Kingston understand? Surely they must know that even a modest number of reduced rent apartments would absolutely annihilate the economic viability of the Trammell Crow project on premium land next to the Klyde Warren deck park downtown?
Ridley and Kingston, who are hardly radicals, argued that the small amount of added cost involved in offering a few reduced rent units would be greatly offset by the enormous gift of profitability the City Council was about to grant Trammell Crow Co. By a simple vote, the council would let Trammell Crow build twice the number of apartments that other owners with the same zoning would be allowed to build on the same land.
This kind of negotiated zoning, sometimes called “inclusionary zoning,” is viewed in many cities as a win-win: The developer gets to make more money; the city is able to promote income diversity, and the whole transaction takes place in the private sector without expensive public overhead.
But you know how this ended. A majority of the Dallas City Council sided with the developer. Based on economic assertions roughly equivalent to an animal bone divination, the council voted to give the developer everything it asked for and not to ask for a single thing in return. Remarks even were made to the effect that the majority were deeply embarrassed that a few of their number had spoken with impertinence. But, you know, that’s just Dallas. The old Dallas, anyway.
So now, Thomas Simpson, a planning associate at Building Community Workshop, has sent me a link to an online algorithm called the “Inclusionary Calculator,” devised and published by a nonprofit community development group called Capital Impact Partners in Arlington, Virginia.
It’s kind of a typical online, plug-in calculator, except that it allows you to play with a lot more variables than most online calculators. It comes with a warning that local versions of it will only be as good as the underlying local research. In other words, somebody has to tell the calculator about land values, ambient rental rates, construction costs and all that stuff.
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But here’s the payoff: Let’s say Dallas took this calculator and hired a really good consultant to plug in all the underlying values. Now all of a sudden, the city could see precisely where and when and how the inclusion of affordable units would affect the economic viability of any project.
In the demonstration I watched online, the model showed that the city absolutely could tank a project by requiring that 10 percent of units be offered at rents low enough for people at 60 percent AMFI. But, wait. Plug in a few more values.
Raise the AMFI to 80 percent, making the units less affordable. That means less of a haircut on rents for the landlord. Now the project moves back into viability, though still at a level of viability reduced from the level without any affordable requirement. But, wait. We’re not done plugging in.
It's an elegant little calculator that does way better at answering questions about inclusionary zoning than you can do by scattering animal bones in the dirt and howling at the eclipse.
Capital Impact Partners
Allow the developer to increase the density of the project by a mere 10 percent, and, aha! We’re back into solid black ink, even with the affordable units included. And if you allowed the developer to double the density? Oh, c’mon. Who would ever allow that?
Uh, us? Yes. And without asking for a thing in return.
I know, I know. I’m going to get some blowback here from people who will tell me that no one rich will ever walk the same sidewalk, let alone enter the same lobby and actually dwell under the same roof with non-rich persons. First of all, they do it in other cities all over the country. Secondly, this is Dallas, after all: Most of those high-nosed fancy two-shoes going into that lobby were living with poor people five years ago, because they were still living with their relatives. They’ll get over the shock of it all somehow.
Just go fiddle around with the thing or watch the video. It’s cool.
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