S m a r t G r o w t h ’s
2 ON COMMON GROUND WINTER 2008
reating a range of housing opportunities and
choices is a major principle of Smart Growth,
as stated by the Smart Growth Network, a
In this issue of On Common Ground, we highlight
the many efforts nationwide to provide affordable
housing for working Americans. Several articles
coalition of more than 30 organizations including the focus on the many programs that have been
U.S. Environmental Protection Agency, Smart developed to meet the needs of people in specific
Growth America and the NATIONAL occupations, such as police officers, teachers and
ASSOCIATION OF REALTORS®. Other Smart resort workers. Other articles discuss tools, such as
Growth goals, such as greater mobility, reduced employer assisted housing and preservation of
traffic congestion and mixed-use walkable affordable rental housing, which can help moderate-
communities, can best be achieved when every income people with housing costs.
community has housing for all income levels. In addition to housing costs, transportation costs
The inclusion of “ workforce housing” is an put an additional burden on households. As described
especially critical element of a complete community. in this issue, Transit-Oriented Developments are an
Workforce housing is described as housing serving increasingly popular form of development that can
those who make between 60 to 120 percent of the lower consumers’ transportation costs. Building
median income in their local area, or perhaps even up mixed-income housing at transit locations is the key
to 200 percent in markets with high housing costs. to providing a valuable mix of affordable
These are the people on whom we rely for basic transportation and affordable housing. By looking
services in our communities, including education, law holistically at affordable housing, transportation and
enforcement, safety, retail services and health services. land use planning can lead us to Smart Growth
approaches to providing greater housing
opportunities for all Americans.
For more information on NAR and Smart Growth, go to www.realtor.org/smartgrowth.
For more information on NAR and Housing Opportunity, go to www.realtor.org/housingopportunity.
On Common Ground is published twice a year by the Government Affairs division of the NATIONAL
ASSOCIATION OF REALTORS® (NAR), and is distributed free of charge. The publication presents a wide
range of views on Smart Growth issues, with the goal of encouraging a dialogue among REALTORS®,
elected officials and other interested citizens. The opinions expressed in On Common Ground are those of
the authors and do not necessarily reflect the opinions or policy of the NATIONAL ASSOCIATION OF
REALTORS®, its members or affiliate organizations.
Joseph R. Molinaro Mike Lehrman
Manager, Smart Growth Programs Housing Opportunity Program
NATIONAL ASSOCIATION OF REALTORS® NATIONAL ASSOCIATION OF REALTORS®
500 New Jersey Avenue, NW 500 New Jersey Avenue, NW
Washington, DC 20001 Washington, DC 20001
For more copies of this issue or to be placed on our mailing list for future issues of On Common Ground,
please contact Ted Wright, NAR Government Affairs, at (202) 383-1206 or firstname.lastname@example.org.
WINTER 2008 ON COMMON GROUND 3
By David Goldberg
6 ON COMMON GROUND WINTER 2008
f there was an upside to the bursting of the for planning and design at New Urban Builders,
“housing bubble,” it was supposed to be that the Inc. in Chico, CA. “In a sense, we stole from the
end of the meteoric rise of home prices would at future market.”
least make homes more affordable in the red-hot Builders “stole” from that market, Anderson said,
metro areas that are the epicenter of the slump. by focusing on larger, more expensive homes, while
After all, the years-long run-up during the period of ignoring the large swath of households that would
anomalously low interest rates had torturous have been perfectly happy with a smaller house,
consequences for households supported by town house or condo they could afford—especially
teachers, firefighters and countless other modestly in locations that offered shorter commutes. “A lot of
paying jobs. The commute to areas where they people were stretching to get into big houses they
could “qualify” for a more affordable home got didn’t really want, thinking that it would be easier
longer and longer, and budgets were stretched to sell it later to someone else who didn’t really want
thinner and thinner. it,” Anderson quipped.
Today, we hear story after story about high-
production homebuilders and other developers
bleeding red ink as new subdivisions go begging.
With builders slashing prices to lure buyers, sellers
of existing homes are watching their hoped-for
asking prices recede. Bad news for sellers, but
perhaps good news for first-time homebuyers.
But then there’s that other set of headlines: The
foreclosure crisis among high-risk mortgages is
leading major lenders to pull in their horns and
ratchet up qualification requirements or leave the
business altogether. At the same time, mortgage
rates for Adjustable Rate Mortgages are on the rise.
All this is making it tougher and more expensive for
less-affluent buyers to get into their own homes.
“There is an affordability problem, and I’m
guessing that it has gotten worse recently and will
continue to get worse in the next few years,” said
Kermit Baker, who serves as chief economic analyst
at the American Institute of Architects and the Joint
Center for Housing Studies at Harvard. “The
marginal buyer was getting in with adjustable rate
mortgages more than fixed. Many of those are gone,
and rates are going up.” At the same time, he noted,
“The concessions by builders are affecting a certain
piece of the market, but you don’t see widespread
lowering of prices. People selling their own homes
will wait for the market to recover.”
There isn’t a single housing market, of course.
Market conditions are by their nature highly
localized. In some areas the time on the market and
price can be heavily influenced by just a small
number of large projects. “You could pick out 15 or “It’s fair to say we are
20 metro areas where there was massive
overbuilding,” Baker said, “but the issues are in the entering a fundamental
areas where the subdivisions are, but not in the rest
of the metro area. The area where we’re seeing turning point in how
concessions is in the new home market, where there
is inventory overhang.”
households are making
Where have those buyers gone? “Buyers are on
strike now because many who would be looking for
a move-up house already exercised that option
when rates were low and prices for the first house
and responding to
were high,” said R. John Anderson, vice president changing conditions.”
WINTER 2008 ON COMMON GROUND 7
“We’re seeing changes in lifestyles and
a growing preference for being close
to jobs and activities.”
Since the 1970s, the median size of newly built housing costs anymore. You have to talk about
houses has grown by roughly 45 percent, reaching housing and transportation, because it is getting so
2,300 square feet early this year, according to the expensive.” In high-mileage Atlanta, for example,
U.S. Census Bureau. This occurred even as the combined cost of housing and transportation
households were shrinking. In 2006, the share of accounts for 61 percent of the typical household
single-person households edged past the proportion budget, higher than any other region save the San
of households with children; both hovering near 31 Francisco Bay area. But with one in seven
percent. Wages, meanwhile, have stayed flat in households nationally paying more than half of its
recent years. income for housing, according to the Joint Center,
There are signs the building industry has begun Atlanta is far from alone.
to take notice. Saddled with a surplus of larger To accommodate the new economic and
houses that are a drag on the bottom line, high- demographic realities, Baker said, “There will
production builders such as KB Home and Centex continue to be a trend toward more of a mix of
have announced that they will build smaller, more housing types and uses in areas closer to jobs. And
affordable homes aimed at first-time buyers. more changes are ahead now that sustainable
Already in the second quarter of this year, the design and green building are coming into play as
average size had slipped to 2,241 square feet, and people become concerned about climate change
market observers believe the trend will continue. and energy independence.” Recognizing the
There are a number of signs that the slumping growth in a more “urban” market, at least four of the
sales in exurban subdivisions and shrinking house big, national homebuilders—KB Home, Centex, K.
sizes are bellwethers of something more than a Hovnanian and Toll Brothers—have created
temporary market “correction,” Baker said. “It’s fair divisions focused on building attached and other
to say we are entering a fundamental turning point housing in mixed-use settings.
in how households are making housing decisions But will all these changes help more people find
and responding to changing conditions. an affordable place to live? Tammie Hoy, executive
“The affordability issue is something more director of Low Country Housing Trust in
pressing in the last couple of years. We’re also Charleston, SC, thinks they will, if they are managed
seeing changes in lifestyles and a growing well. “The best way to promote affordability is to
preference for being close to jobs and activities. maximize land, because that’s the biggest cost on
Homebuyers were disillusioned with buying houses the coast. We promote higher density, mixed use
15 to 20 miles from what they needed or wanted to communities because that’s more efficient in terms
do, and now higher fuel costs underscore that and of land and infrastructure. If it’s well done it can
you’re paying more for transportation.” reduce the cost and make a nicer neighborhood.”
Egbert Perry, CEO of The Integral Group, an Building a denser mix of housing types requires
Atlanta developer, agreed. “You can’t just talk about a transition from viewing housing as a commodity
8 ON COMMON GROUND WINTER 2008
to building distinct places, said Anderson. And that presents a greater design challenge than carving out
makes the design both of individual homes and of uniform lots and offering a few similarly sized house
neighborhoods all the more critical, he added. plans. Closely grouped houses have to be arranged
At the level of the individual home, this means to allow for private space, as well as usable, shared
“recognizing that one size really doesn’t fit open space. Buildings of all sizes and types must be
everyone,” he added. This can mean, for example, built with similar design detail to protect the
building houses as small as 1,000 square feet and property values and cohesion of the neighborhood.
avoiding house plans that have the garage Meeting the changing demand and economic
incorporated, and making a detached garage an circumstances will require that not only developers
option rather than a standard feature. This makes change their way of doing business, but that
the house cheaper, but it also increases flexibility for government does as well. Local governments have
the buyers, he said. “Once the garage is detached, played a role in promoting the building of higher-
we don’t really care whether you buy a garage or end subdivisions over more affordable homes, some
not. You can do it now or later, build it bigger and developers said. Most jurisdictions zone their land
put an apartment over it; or skip it and build a into single uses at low densities. Many also have
carport.” The smaller a house is, the more the put up a growing number of regulatory barriers to
available space needs to be used flexibly and more-affordable housing, imposing requirements
efficiently—a bigger design challenge than for larger lots, bigger houses and restrictions on
building a separate room for each function, but also multifamily housing. When interest rates were low
a big money-saver. and barriers to building affordable homes high,
Similar considerations operate at the builders cranked out the large, single-family houses
neighborhood level as well, Anderson said. Buyers that are now waiting for buyers.
looking at a particular neighborhood should have a In the Bay Area and Central Valley of California,
variety of options, from small to large houses or from where Anderson works, building the more
attached to stand-alone. “People decide they want to affordable, compact configurations can require a
be in the neighborhood and they decide which dozen or more special allowances, he said. At times
house is a better fit or more affordable.” Again, this his firm has negotiated a special zoning overlay
known as a form-based code, which regulates the
form and placement of buildings so that the overall
Building a denser mix design has a “high-quality” feel, whether the units
of housing types are costly or more affordable.
Government can help make homes more
requires a transition affordable in others ways as well. To help meet the
powerful demand for “workforce” housing for the
from viewing housing technology workers making $50,000-$80,000 a year,
Anderson is working with local jurisdictions to
as a commodity to develop smaller one- and two-bedroom
condominium flats. In Chico, the city offers second
building distinct places. mortgages to help cover costs. Employers are
getting into the act, too. In Silicon Valley, some
companies are offering their employees an
Employer-Assisted Housing plan to help pay for a
downpayment or closing costs.
Though well behind northern California in terms
of house prices—like every other region—the
Charleston area is seeing similar changes, Hoy
said. “Developers are finally starting to think of
working families as a niche market,” she added.
“It’s a whole new set of customers for developers
who think of it that way. But everyone—developers
and local governments alike—is having to go to
school on how to build for it successfully.”
David A. Goldberg is the communications director for
Smart Growth America, a nationwide coalition based in
Washington, D.C. that advocates for land-use policy reform.
In 2002, Mr. Goldberg was awarded a Loeb Fellowship at
Harvard University where he studied urban policy.
WINTER 2008 ON COMMON GROUND
Shared equity home ownership
addresses affordable housing needs
By Judy Newman
10 ON COMMON GROUND WINTER 2008
ancy Rowand and her 18-month-old twin equity housing, a trend that, in the past few years,
daughter and son were welcoming the has taken on the momentum of a bullet train.
holidays in their tiny Washington, D.C. Though their numbers still make up only a
apartment on Christmas Eve, 1977. small percentage nationwide, more and more
But their joy faded quickly when Rowand people are embracing shared equity arrangements
received a startling, hand-delivered “gift:” an to become homeowners.
eviction notice. Shared equity, also called permanently
New owners of the eight-building, 96-unit affordable home ownership or third sector housing,
complex—built in the 1940s to house military or is a step between the traditional American housing
military support staff—wanted to tear down the alternatives of either buying or renting; of private
600-square-foot, one-bedroom apartments between home ownership or ownership by a government
Georgetown and American universities or convert agency or nonprofit organization.
them to condominiums. In shared equity arrangements, a homeowner
Rowand and her neighbors, a diverse group of generally receives some type of subsidy from a
moderate-income people, were not about to let that government agency or nonprofit group, reducing
happen without a fight. They formed a committee, the purchase and payment costs. In return, the
hired lawyers and appealed to the city for help. “We homeowner shares the rise in the home’s value with
had a rally and chanted, ‘we shall not be moved,’”
Southern Lights in Boulder, Colorado
And they won. In 1979, the Beecher Cooperative
was created, 63 units in six buildings, for an initial
buy-in cost of $1,000 per household plus a co-op
fee to cover a blanket mortgage on the property.
Nearly 30 years later, the Beecher Cooperative is
still going strong. In 1986, members bought out the
limited partnership that co-owned their buildings,
raising $2.5 million through individual share loans
averaging $30,000 from the National Cooperative
Bank. Today, households pay $550 to $800 a month
in mortgage and co-op fees,
Rowand said, a lot less than the
area’s market-rate, one-bedroom
rents of about $1,400.
“We’re very much of an
anomaly,” Rowand said. “We
really have a beautiful situation
in an area of Washington, D.C.
that’s very pricey, wooded and
Three types of
The Beecher bunch might not
have foreseen it at the time, but it
was part of what has become a
growing trend toward shared gaining ground.
WINTER 2008 ON COMMON GROUND 11
that organization. There are income guidelines for and reduce their home-buying costs while
purchasers and often, rules on use of the property, investors could participate in “a new asset class,”
shared governance, and caps on appreciation. the report suggested.
A study on shared equity home ownership by Also in April, a Business Week article said one
John Emmeus Davis for the National Housing type of shared equity mortgage already is
Institute (NHI) in 2006 concluded that “after becoming more prevalent: parents contributing to
waiting in the wings for many years, third sector their child’s home downpayment and claiming a
housing is now reaching a broader audience and comparable share of the appreciation when the
winning wider support.” Davis estimated there home is sold.
could be anywhere between 500,000 and 800,000 But the concept of shared equity is not without its
shared equity units around the country. But that bumps, ranging from how long covenants should
number will likely explode over the next decade. As stay in effect to how much equity the homeowner
housing costs have soared, more and more cities should receive. And it is not for everyone. Shared
have adopted inclusionary housing requirements equity homeowners won’t get rich on their real
and set up housing trust funds. estate investment. At the Beecher Cooperative,
Meanwhile, an expanding range of alternatives units are now valued at $90,000; condos in the two
is being explored as the call for affordable home buildings that did not join the co-op were recently
ownership grows louder. Shared equity mortgages, selling for $250,000. But that’s the crux of the
in which homeowners share the increased value program: to keep home ownership affordable.
of their property with investors, are touted in an Most commonly, three types of shared equity
April 2007 report co-authored by New York housing are gaining ground, the NHI study said:
University economics professor Andrew Caplin in limited equity co-ops, such as the Beecher
partnership with the Fannie Mae Foundation. Cooperative, deed-restricted housing and
Homeowners would gain a new source of financing community land trusts.
In Boulder, Colo., four families moved into two
Deed-restricted houses, new duplexes in July in Southern Lights, a deed-
restricted housing project initiated by the Boulder
town houses and Area REALTOR® Association.
With the help of Boulder’s Affordable Housing
condominiums are Alliance—a nonprofit group that already had
built other deed-restricted units nearby—and the
the fastest growing city’s land contribution, the REALTORS® raised
$75,000 and worked side-by-side with the
form of shared equity homeowners-to-be, hammering, painting and
landscaping the property.
City’s Edge in South Burlington, Vermont
Elmwood in St. Albans, Vermont
12 ON COMMON GROUND WINTER 2008
Southern Lights in Boulder, Colorado
REALTORS® worked side-by-side with the
homeowners-to-be, hammering, painting and
landscaping the property.
The Victorian-style duplexes were sold to shared equity home ownership, the NHI study
families earning 80 percent of the median income said, primarily because so many communities are
or less, about $57,000 for a three-person household. now using regulatory incentives and inclusionary
“Architecturally, they do not resemble affordable mandates, requiring that some or all new housing
housing that you may be used to seeing,” said developments include affordable units.
Kenneth Hotard, senior vice president for public Community land trusts also are sprouting
affairs with the Boulder Area REALTOR® nationwide, from Burlington, Vt. to Irvine, Calif.
Association (BARA). Traditionally, the land trust owns the land and
Two of the units are 1,504 square feet, with four leases it to the owner of the home that sits on the
bedrooms and two baths; they sold for $200,000. land. With condominiums, there’s no land to lease,
The other two, at 1,227 square feet, with three so a covenant fulfills a similar purpose.
bedrooms and two baths, sold for $175,000. The Burlington Community Land Trust, one of the
“Market rate would be at least twice that much,” oldest community land trusts in the U.S., was
Hotard said, noting that Boulder’s median home founded in 1984. Renamed the Champlain Housing
sale price is $560,000. Trust when it merged with the nonprofit Lake
City rules specify that when the current Champlain Housing Development Corporation in
homeowners sell their duplexes, the price cannot 2006, it is also one of the largest, encompassing
appreciate more than 1 to 3.5 percent a year. nearly 400 single-family homes and condominiums,
Boulder also has inclusionary zoning rules more than 1,400 rental units and six co-ops with 115
requiring 20 percent of all housing built to be homes in a three-county area of northwest Vermont.
permanently affordable. But a problem has Eighty employees run the land trust, which also sees
emerged, Hotard said: there’s not enough housing its mission as revitalizing declining neighborhoods,
for middle-income people. not just with housing but also stores and offices.
“We’re basically driving the middle class out,” “We really are a large-scale community develop-
he said. BARA plans to work with the city to create ment organization,” said Kirsten DeLuca, homeland
incentives to build more middle-income homes. and technical assistance program manager.
Deed-restricted houses, town houses and Champlain serves households below the area’s
condominiums are the fastest growing form of median income and provides a subsidy that lowers
WINTER 2008 ON COMMON GROUND 13
the cost to the buyer, then limits the appreciation Neighbors who paid full price don’t get angry,
the homeowner can receive to 25 percent when the DeLuca said. “If you can afford to buy a market-
home is later sold. rate home on your own, that’s a better investment.
For example, on a home priced at $200,000, You’ll get 100 percent of the appreciation.”
Champlain may provide a $50,000 subsidy. When People get involved with the land trust because
the owners decide to sell, a fair market appraisal is they’re “entirely priced out of the market,” DeLuca
conducted. If the home is then worth $240,000, the said. “We’re talking nurses, teachers, firemen;
owners will get $10,000 of the $40,000 middle-class and working-class folks cannot afford
appreciation. They sell the home back to the land to buy property in our area. We have a critical
trust for the amount they initially paid—$150,000— affordable housing crisis and that’s what you’re
plus $10,000, for a total of $160,000. The land trust seeing in many parts of the country,” she said. “If
keeps the housing affordable by providing the next folks want to afford a home, for many people, this is
buyer with a $70,000 subsidy, holding the their only option.”
mortgage down to $170,000, DeLuca said. The Champlain Housing Trust is seen as a
Potential homebuyers not only can buy units built model for the nation and serves as a mentor to land
by Champlain, they can also find a home they like trusts organizing elsewhere, including City First
but can’t afford in another location and ask to make Homes, incorporated in Washington, D.C. in
it part of the land trust, with a subsidy from the October. Its goal: creating 1,000 units of
organization to help cover the fair market value cost. “permanently affordable workforce housing”
within three years.
“If folks want to own a
home, for many people,
this is their only option
[the land trust].”
14 ON COMMON GROUND WINTER 2008
“It has become increasingly clear that workforce
housing was a challenge that was facing D.C. for
which there were no large-scale solutions,” said
David Wilkinson, executive director of City First
Enterprises, nonprofit parent of City First Homes.
City First is using a $10-million city grant
coupled with $65 million in private financing,
whose investors will receive federal New Markets
tax credits. The homes will target families at 80
percent of D.C.’s median income, currently at
$94,500 for a family of four.
Average home prices are nearly $450,000,
Wilkinson said. “A teacher in D.C. in 2000 could
buy one of every three homes. Now, it’s closer to
one in 10. Real estate rates have risen much more
quickly than incomes in D.C. so the city is facing
potential shortages of teachers and health care
workers and others.”
City First plans to work with developers to build
town homes, single-family homes, condominiums
and cooperatives in mixed-income developments
throughout the District of Columbia, Wilkinson
said. City First will help finance the affordable
housing part of the development which will be
passed along as a 3 percent second mortgage for
For example, on a $300,000 home, the buyer
would take out a $225,000 conventional mortgage.
The remaining $75,000 would come from City First
as a second mortgage, with 3.1 percent interest.
When the buyer later sells the unit, the buyer takes
25 percent of the appreciation.
“We are told by home ownership counselors and
other real estate market experts across the city that
demand will be very high for this. It will
significantly increase the affordability of units,”
Wilkinson said. Developers like the idea because it
expands the number of potential buyers for their
units, he added.
Irvine, Calif. is another community establishing
a new land trust. Approved by the city in 2006, its
goal is to create 9,700 units by 2025—10 percent of
Irvine’s housing stock.
Shared equity housing is “a vision that is
neither impractical nor remote,” the NHI study
said, calling for more resources and research into
such programs. Public and private support are
growing, the study noted, adding, “There are
encouraging signs that third sector housing has Shared equity housing is
a vision that is neither
Judy Newman is a business reporter for the Wisconsin
State Journal newspaper in Madison, Wis. impractical nor remote.
WINTER 2008 ON COMMON GROUND 15
Housing in the
16 ON COMMON GROUND WINTER 2008
By Mike Lehrman
n his work entitled “The World is Flat,” Thomas Friedman explained how
astounding advances in technological collaboration combined with the global
spread of capitalism have fundamentally altered the way businesses operate.
In a growing global economy, companies are now facing more fierce competition
for business and resources both locally and around the world. This competition
extends to recruiting and retaining a productive workforce.
As the business landscape continually evolved, the median home price in
the United States increased from $126,000 in 1997 to $228,900 in July of 2007,
an increase of more than 80 percent. As business practices have changed at
an ever increasing rate, so have demands on space in America’s urban areas,
and housing prices have risen dramatically as a result. Skilled workers are
now in higher demand at a time when the price of owning a home is the
highest in history.
Employers have begun to recognize that in order to remain competitive in
the changing business landscape of the 21st century, they must attract and
retain skilled employees. One way that businesses have increased their
recruitment and retained more employees is by enacting various housing
Employer Assisted Housing (EAH) is a term that describes an employer
benefit program that helps employees attain housing in both the rental and
home ownership markets. A financial EAH program can take many different
forms, but is most commonly administered as downpayment assistance,
rental/mortgage assistance, shared equity, forgivable loans, matched savings
or upfront grants.
According to the Society of Human Resource Managers (SHRM) annual
benefits survey, the number of employers who offer their employees
WINTER 2008 ON COMMON GROUND 17
downpayment assistance has increased greatly in Act,” originally proposed in 2005, provides a
the past seven years. In 2000, only 3 percent of all federal tax credit to companies for a portion of the
employers offered a downpayment assistance expenses that they incur by offering a housing
benefit program. In 2007, that number increased benefit to their employees. Furthermore, this
significantly to 11 percent of all employers. legislation treats housing assistance benefits of up
Rental and mortgage assistance programs have to $10,000 as nontaxable income for the employee.
experienced similar increases during the same Lastly, the legislation creates a competitive
period. In 2000, only 6 percent of all employers grant program whereby nonprofit organizations
offered rental assistance. In 2007, that number that assist in the administration of EAH programs
increased to 19 percent, dropping slightly from the can apply for federal grants to fund their efforts.
high of 22 percent in 2006. Mortgage assistance Many times nonprofit organizations offer free
programs doubled during this time period as well, credit counseling services to employees who
increasing from 6 percent to 12 percent. participate in an EAH program.
Employers in the most competitive fields with Enacting such a bill would create a large
highly skilled workers have turned to these tools as incentive for employers to offer EAH benefit
a way of increasing recruitment efforts and programs to their employees. Despite having
retaining employees for a longer period of time, numerous cosponsors, the legislation did not make
thus increasing productivity and limiting costs. it to the Senate floor for a vote, but future prospects
Employers have found that offering a benefit like a for the bill remain promising.
forgivable loan can greatly increase retention rates, As policymakers have become more aware of the
as employees have a financial incentive to remain increasing value of EAH programs, so also have
with the company until the full balance of the loan federal regulators. In August of 2007, the Office of
is forgiven. These programs have the potential to the Comptroller of the Currency released a report
improve the bottom line of employers who face entitled “Understanding Employer-Assisted
high turnover rates and engage in competitive Mortgage Programs: A Primer for National Banks.”
employee recruitment. The study was released as a response to the
SHRM Benefits Survey, 2000-2007 Employers have found
that offering a benefit
Yes/No Yes No Yes No Yes No like a forgivable loan
can greatly increase
2002 7% 94% 5% 95% 4% 96% retention rates.
2003 12% 88% 15% 86% 9% 91%
2004 12% 88% 19% 81% 8% 92%
2005 13% 87% 21% 79% 9% 91%
2006 12% 89% 22% 78% 11% 89%
2007 12% 88% 19% 81% 11% 88%
As the popularity of EAH expands, it is
beginning to be recognized among policymakers as
an important tool which helps to expand home
ownership and revitalize communities. Despite
this, currently there is no federal incentive for
companies to offer employees a housing benefit.
Companies do not receive any tax incentive for
offering this kind of benefit program, and unlike
health, dental or life insurance benefits, employees
must pay tax on all housing related benefits that
Senator Hillary Clinton (D-NY) introduced a bill
in April of 2007 that would change this portion of
the tax code. “The Housing America’s Workforce
18 ON COMMON GROUND WINTER 2008
REALTORS® have taken important
roles to promote EAH programs.
increasing popularity of EAH programs, and was When Lane heard about the Home From Work™
intended to explain to bankers their responsibility program, she thought it was a great fit for her efforts
when issuing a loan to a homebuyer who is in Las Vegas, and she traveled to Denver in late
participating in an EAH benefit program provided 2006 to participate in an NAR sponsored Home
by their employer. From Work™ training session. Lane recognized
In addition to politicians and federal regulators, “bringing the employer into partnership with
REALTORS® have also taken a leadership role by nonprofits and lenders creates another source to
promoting EAH in their own communities. In 2006, help potential homeowners achieve the dream of
the NATIONAL ASSOCIATION OF REALTORS® home ownership.” She adds, “the program is about
(NAR) launched Home From Work™, an outreach building goodwill by educating the employers and
and educational campaign that teaches educating the public.”
REALTORS® how to assist employers in creating Lane has successfully achieved that goal,
their own EAH program for their employees. working with the city councils of Henderson and
Home From Work™ encourages REALTORS® to Las Vegas along with a statewide title company to
get involved with lenders and nonprofit groups in organize eight-hour HUD approved homebuyer
their communities to help promote employer educational courses for employees who are
assisted housing and increase home ownership interested in home ownership. Lane is currently
opportunities. Dawn Lane, a REALTOR® from Las working with these employers to construct an EAH
Vegas, Nev., has done just that. financial benefit program that meets their
In 2002, Lane founded the HOPE program individual business needs.
(Housing Opportunities, Programs, and Education). Policymakers, regulators, nonprofits, lenders
The HOPE program is a partnership between and REALTORS® have taken important roles to
REALTORS®, local lenders and nonprofits to supply promote EAH programs as viable ways for
HUD-approved home ownership education and employers to improve their bottom line while
funding to prospective homeowners. Since 2002 the remaining competitive in the market and
HOPE program has helped prospective homeowners promoting home ownership and vibrant
find funding from nonprofits and affordable communities. EAH employee benefit programs are
financing to achieve the dream of home ownership. a growing trend among companies and can be a
To date, Lane and the HOPE program have helped valuable tool to help employers recruit and retain a
more than 300 families become homeowners, and highly skilled workforce in an ever changing
have never lost one to foreclosure. business environment.
Mike Lehrman is an associate in the Housing Opportunity
Program of the NATIONAL ASSOCIATION OF REALTORS®.
WINTER 2008 ON COMMON GROUND 19
REALTOR® Housing Foundations
are providing innovative solutions
for affordable housing
By Brad Broberg
WINTER 2008 ON COMMON GROUND 21
oyce Patton froze in disbelief. Then she mortgage-ready was eligible to win a free house if
hugged her children. Then she cried. Joy, not they had not already bought one.
sorrow, triggered her tears. Her name had just Talk about affordable housing! All people had to
been drawn as the winner of a new home. do was show up for the annual drawing—and cross
Six months later, Patton is still pinching herself. their fingers.
“I never win things,” said the Charlotte, N.C. “I’ve never seen lives change in one moment
resident. “Every time I walk in the house, I smile.” like that,” said Rodney Tucker, executive director of
Patton’s good fortune was no accident. She earned the Charlotte HOF. “It was very exciting to see.”
a chance to put her name in the hat for a 1,500- Of course, giving away a home a year—or 10 or
square-foot home by completing a first-time 100—won’t solve the country’s affordable housing
homebuyer education program—all made possible by crunch anytime soon. But it did build some buzz about
the Housing Opportunity Foundation (HOF) of the the buyer education program and provide a creative
Charlotte Regional REALTOR® Association (CRRA).
Between 2003 and 2007, the CRRA Housing
Opportunity Foundation teamed up with local
builders to give away five homes to promote a
buyer education program it co-sponsored with the
Charlotte Housing Partnership. Each year,
everyone who completed the program and became
Providing a range of
housing choices at all
price levels is a principle
of Smart Growth.
example of how state and local REALTOR®
associations are striving to make housing
more affordable for more people.
Across the country, local REALTORS®
and state REALTOR® associations have
established REALTOR® Housing
Foundations. The Foundations are
identifying, developing and promoting
ways to expand affordable housing in
their communities. Today, approximately
300 state and local associations sponsor
programs of their own through their
foundations to assist buyers, renters and
builders of affordable housing.
It’s not just the “right thing to do.”
Providing a range of housing choices at all
price levels is also a principle of Smart
Growth that allows people to live in the
same community where they work,
taming sprawl and curbing the congestion
created by mass commutes.
Beyond that, a healthy supply of
affordable housing creates a more dynamic
market for REALTORS®.
Joyce Patton, winner of a new home through
the first-time, homebuyer education program.
22 ON COMMON GROUND WINTER 2008
“At the end of the day, if people aren’t moving support a wide range of affordable housing initiatives
into the first home and building equity, there’s and organizations in their communities—with more
never going to be a second home,” said Monica and more emphasis on increased production of
Rodriguez with the California Association of workforce housing.
REALTORS® (CAR). “We’re helping people grab How big is the problem? Nearly one-third of
the first rung of that ladder.” Americans worry they will never be able to afford a
The CAR recognized early on the growing chasm home and nearly 60 percent are concerned that the
between incomes and housing prices—and not just for high cost of housing is hurting their local economy,
the poor, said Toby Bradley, former president of the according to a 2006 survey by the NAR’s Housing
CAR. “Much of the workforce, even the middle class, Opportunity Program.
cannot afford housing,” she said. “The statistics are While individual markets vary widely, the average
bad all over the country.” monthly mortgage and interest payment climbed from
Bradley began pushing $840 in 2003 to $1,132 in 2006. Other costs associated
the issue to the front burner with home ownership also have risen steeply. The
in 2000. Three years later— Energy Information Administration estimates that
during her term as between 2005 and 2006, the average price of
president of CAR—the electricity rose 12 percent, natural gas rose 28 percent
association launched its and heating oil rose 25 percent. Meanwhile, annual
Housing Affordability Fund. state and local property taxes climbed from an
“The market—supply and average of $969 per person in 2002 to $1,121 in 2004,
demand—wasn’t taking according to the U.S. Census Bureau.
care of the problem,” she The lack of affordable housing also is hurting
said. “We needed to become renters. According to the 2006 Housing
more proactive.” Opportunity Program survey, more than two-thirds
Over the years, the CAR’s of Americans believe that families in their
Housing Affordability Fund community have difficulty paying their rent
has awarded $1.8 million compared to 7 percent who thought so in 2005.
to local REALTOR® State and local associations are using many
Associations in California, different models to attack the problem. The New
which have used it to Jersey Association of REALTORS® (NJAR) Housing
Opportunity Foundation awards some
money to local associations to support
various projects of their choosing, but
most goes to New Jersey Community
Capital (NJCC), a nonprofit
corporation that finances the creation
and preservation of housing and
commercial real estate.
Since 2004, the NJAR Housing
Opportunity Fund has given more
than $200,000 to NJCC, including
$57,900 in 2007. The money helps
support a program that supplies
pre-development financing for
affordable housing—both homes and
apartments—developed by nonprofit
and community organizations.
Examples include redevelopment
Pleasantville, New Jersey of the F. Berg Hat Manufacturing Co.
in Orange. When completed, the
converted factory will include a mix of
Nearly one-third of Americans 35 market-rate and affordable housing
units. Other projects supported by the
worry they will never be able Housing Opportunity Fund include
the development of 10 apartments in
to afford a home. Montclair and two single-family
homes in Pleasantville.
WINTER 2008 ON COMMON GROUND 23
Although $200,000 is a relative drop in the Grants from the CAR Housing Affordability
bucket, the money provides pre-development Fund have helped local associations support a
financing that many organizations are unable to variety of strategies to achieve that goal, including
obtain from more traditional sources. “Partnering housing trusts. The Marin Association of
with New Jersey Community Capital enables us to REALTORS® received $150,000 to support the
leverage our contribution to make a much larger Marin Workforce Housing Trust (MWHT), which
impact on the supply of affordable housing provides low-interest loans to housing developers
throughout the state,” said Teresa Tilton, director of that construct homes and apartments affordable to
political affairs and member services for NJAR. lower- and moderate-income families.
The NJAR also strives to make an impact by According to the MWHT, the median price of a
showing its members examples of successful single-family home in Marin County is $899,000
affordable housing initiatives. Every year, the NJAR forcing many local workers—teachers, nurses,
joins with the New York and Pennsylvania police officers, clerks—to commute long distances
associations to hold the Triple Play Convention in
Atlantic City. And every year, the Housing
Opportunity Fund sponsors a bus tour of “We care about affordable
redevelopment projects in Atlantic City—many of
which include affordable housing. housing and helping all
“It’s a way to show our members the new face of
affordable housing and give them ideas that they
members of the community
can take back to their communities,” said Tilton.
Member donations account for much of the
get into a house.”
money REALTOR® associations use to support
affordable housing initiatives. Other major sources
include fund-raising events, a slice of association
dues and—where state law allows—interest from
earnest money in escrow accounts.
The Colorado Association of REALTORS® relies
on escrow interest to fund its Housing Opportunity
Foundation. With an annual budget of between
$300,000 and $500,000, it awards grants to housing
organizations that help first-time homebuyers, the
homeless and victims of natural disasters and
The foundation also helps families in danger of
losing their homes. Last year, it gave the Colorado
Division of Housing $30,000 to help launch a new
Foreclosure Prevention Call Center. The center—
the first of its kind in the country—connects
homeowners involved in foreclosures with
counselors who help them find options to eviction.
As the rising cost of housing has priced more and
more people out of the market, the term affordable
housing—often stigmatized as low-income
housing—is being replaced by the term workforce
housing to better reflect that it isn’t just “poor”
families who can’t afford to buy a home. In
California, for example, only 14 percent of the
state’s households can afford a median priced
home, according to the CAR.
“We certainly can’t solve the problem on our own
or address the problem in a comprehensive
fashion,” said Rodriguez. “But we want to show we
are at the table, and we care about affordable
housing and helping all members of the community
get into a house.”
24 ON COMMON GROUND WINTER 2008
The fund helps low- to moderate-income
families qualify for a conventional loan.
from surrounding counties. As a result, traffic In Charlotte, the Home Giveaway Program
clogs the roads, workers lose time with their generated plenty of publicity, but the CRRA
families and employers struggle to hire and retain Housing Opportunity Foundation is not a one-trick
quality employees. pony. Among other activities, the foundation also
Given Marin County’s location—it’s directly conducts a Workforce Housing Certificate Program
across the Golden Gate Bridge from San that helps REALTORS® learn how to work with first-
Francisco—the high price of housing is not time homebuyers. The program includes
unexpected. But housing costs are also a problem participation in Home from Work™.
three hours away in sparsely populated Calaveras Developed by the NAR, Home from Work™
County, where demand from retirees and people teaches REALTORS® to work with employers to
buying vacation homes is pricing the local develop housing benefit plans that offer buyer
workforce out of the market as well. education, downpayment assistance, loan
“You’d be hard-pressed to find a house here for guarantee programs and other forms of
less than $350,000—even a small one,” said Tim assistance to their workers.
Muetterties, a local REALTOR® and current chair of That’s just the sort of hand up that gives working
the board of trustees of the CAR Housing men and women like Joyce Patton a shot at home
Opportunity Fund. ownership. As it turns out, the luck of the draw was
Compared to Marin County, that may sound like all Patton needed. Yet the single mother of three—
a bargain, but incomes in Calaveras County are who went back to college to study electrical
about one-third as much as incomes in the Bay Area engineering and now designs distribution systems
and many members of the workforce end up leaving for the local power company—was on track to buy a
to find more affordable housing. “The American home on her own thanks to the financing options
Dream is to own a home, and if you can’t find a and access to downpayment assistance she gained
place you can afford, you’re going to move through the buyer education program.
someplace where you can,” said Muetterties. “I feel like I should carry cards with information
To stem the tide, the Calaveras County [about the program] to pass around to people,”
Association of REALTORS® established a Housing she said.
Assistance Fund, receiving a $19,000 grant from the Brad Broberg is a Seattle-based freelance writer
CAR Housing Opportunity Fund and raising specializing in business and development issues. His
$19,000 on its own to get the program started. The work appears regularly in the Puget Sound Business
fund helps low- to moderate-income families qualify Journal and the Seattle Daily Journal of Commerce.
for a conventional loan by providing downpayment
assistance or buying down the interest rate.
WINTER 2008 ON COMMON GROUND 25
nce the site of Denver’s historic Elitch gardens and
amusement park, Highlands’ Garden Village in Colorado
might just be one of the best examples of recent transit-
oriented development and Smart Growth around.
The approximately $105 million project created by Jonathan
Rose Companies boasts a bus line just 10 minutes from downtown;
75,000 square feet of retail space; schools; a theater; a carousel;
140,000 square feet of open space—and every bit of it is tastefully
entwined with dozens of lofts, multi-family residences, town homes,
single-family houses, senior residences and carriage houses.
26 ON COMMON GROUND WINTER 2008
Oriented By Amanda Kramer
Affordable choices: Connecting
communities to the workplace
Jonathan Rose Developer Chuck Perry said the project, which
was completed in 2007, has been a rousing success. And for a site
that may have been considered “underutilized” a few years ago,
Perry said, the Highlands’ area in Denver is now basking in the
light of its successful marriage of transportation lines and life—
the key to transit-oriented development, or “TOD.”
“These (TODs) are the wave of the future,” said Perry. “We
need to be continually working to create dense, mixed-use,
WINTER 2008 ON COMMON GROUND 27
WINTER 2008 ON COMMON GROUND 27
TODs address affordable housing
What Perry is saying—and what he’s helping to
build—isn’t far off the mark.
According to the Center for Housing Policies’
most recent report, “A Heavy Load: The Combined
Housing and Transportation Burdens of Working
Families,” a growing number of cities across the
United States are identifying a lack of affordable
housing, an increase in commute times and traffic
congestion as high-priority issues. In fact, the study
suggests that it’s critical for cities or regions
throughout the United States to constantly consider
both a housing and transportation policy—together.
Mariia Zimmerman, vice president of policy for
Reconnecting America, spends much of her time
studying the impacts and policies surrounding
current transportation-oriented development and
how her organization can improve federal policy’s
investment in the trend.
Zimmerman, whose national nonprofit
organization works to integrate transportation
systems and the communities those systems serve,
said the benefits of living in a TOD can be far-
reaching—and all touch on the issues identified in
the Center’s study.
“If you’re looking at one development versus a
TOD community, there’s much more benefit if it’s
part of a whole community strategy,” Zimmerman
said. “We see households who live near transit own
a half a car less and spend less on transit. There are
other benefits if you’re in a vibrant, mixed-income,
walkable neighborhood—you’re getting more
exercise, there’s nice engaging open space …
you’re creating great places.”
“For the developer, the positives are that there’s
more of a price premium for the TOD units—even
with the higher cost it takes to do many of these
projects. I think at its most basic element that’s
what’s appealing for development,” Zimmerman
continued. “The retail mixed-use side is still hard
for the developer and may have slower immediate
return, but the unit can maintain itself over the
Zimmerman said Reconnecting America has
looked at the issue of incorporating mixed-income
housing into TOD communities.
“With a lot of urban markets there’s concern
about gentrification and displacement,” she said.
“There’s a growing interest in seeing if there are
ways we can create mixed-income TODs so we
have units available for people with a range of
ON COMMON GROUND WINTER 2008
incomes, working families as well as some low- $519,” Perry said. “I believe that the key to effective
income households.” TOD is going to be to ensure there are mixed-
Perry said he finds the issue of mixed-income income communities and they create a sense of
housing critical to the future of TODs. He said his place and a sense of community.”
company considered and incorporated varying Perry said another older, but still thriving, TOD
housing costs into the Highlands’ project. his company worked on was the Denver Dry Goods
“The reactions have been very positive particularly Building renovation and renewal. Adjacent to a
here—and what people really recognized is that light rail line and completed in phases from 1993 to
we’ve created a sense of space, very pedestrian- 1999, the downtown historic department store was
friendly. It’s an inter-generational community and redeveloped into housing, offices and retail stores
the most significant thing is that you can stand at the using a handful of “green,” or environmentally
bottom of a picture (of the development) and see friendly, features and attention to detail. Perry said
town houses for $300,000 or apartments that rent for other developers had simply suggested the space
“These (TODs) are the wave of the future.”
Highlands’ Garden Village in Colorado
WINTER 2008 ON COMMON GROUND 29
Dry Goods building renovation in Denver, Colorado
The future of TODs
The key to effective Currently, Zimmerman said Reconnecting
TOD is going to be America is just beginning to research current
trends in TOD and its future.
to ensure there are “I can’t say where it is right now,” Zimmerman
said. “Anecdotally, what we’re hearing is it does
mixed-income depend on the market. In the Twin Cities, some
people are putting plans for TODs on hold. In the
communities. D.C. area; Charlotte, North Carolina; and the Bay
area and the L.A. area in California, we’re hearing
be used as retail, but his company felt the project that the market is healthy in terms of sales and
would fare better and serve more if the TOD model prices—from all income levels. It actually appears
were used on the 350,000-square-foot space. to be holding its own.”
Perry said aside from focusing on mixed-income Whether waxing or waning, though,
projects, he also strives to plan TODs that are as transportation planner Katherine Perez said it’s
gentle to the environment as possible. For the Dry simply smart to realize that TOD could and should
Goods renovation, Perry said his company play an important role in future development
contracted with an organization to create an energy across the country.
model for the building and incorporated a set of Perez, who currently serves as vice president of
energy-saving features like rebuilding historic development for Forest City Development in
windows with double-paned glass, using low VOC California and is often on the “front end” of
paints and glues, and installing a cooling system development projects, said there are a number of
that uses evaporative techniques. All are features to issues inherent to TODs that are important for
maintain a home’s affordability into the future. developers and real estate professionals to
30 ON COMMON GROUND WINTER 2008
understand. TOD planning that addresses the need design—the best kind of land use and transit
for live/work environments and affordable housing pairing, they understand the value of transit.”
options must be a priority. Perez said that as for the future of TOD,
“The real estate market is really going through developers across the United States may want to
some tough times,” Perez said. “What cities and pay attention to overseas models.
residents and community folks should be doing “They’re in Hong Kong, Singapore, Tokyo,” Perez
right now—if they have a corridor and a busline— commented. “They’ve marshaled sustainability—
is planning these TODs.” and comparatively, affordability—and they’re good
Perez said some TOD markets are mature while at that. They’ve marshaled technology, and on the
some are not there yet. transit side they make it very efficient. If you miss a
“New York and Boston are mature, and Portland train there’s another in 30 seconds.”
is sort of the gold standard of TOD,” Perez Perez said models for the best in TODs can be
remarked. “They really do the best kind of urban found outside the country—where the fear of
density and entrepreneurship often inherent to this
type of development is nowhere to be found.
TOD could and “We’ve got a lot to learn from overseas partners
should play an and colleagues—how we take good ideas and not be
afraid to cherry pick them, and how to be ambitious
important role in with this stuff,” Perez said. “We’re not there yet, but
we will get there, in my lifetime, for sure.”
future development. Amanda Kramer is a freelance writer from Evansville, Wis.
Portland, Oregon WINTER 2008 ON COMMON GROUND 31
Communities are attempting
to ensure affordable rentals
32 ON COMMON GROUND WINTER 2008
Dream … By Steve Wright
of Affordable Rental Housing
WINTER 2008 ON COMMON GROUND 3
f home ownership is the American Dream, then
lack of affordable rental housing is the
For a huge percentage of Americans—those who
are part of the increasing low-wage workforce,
elderly, disabled, entry-level professionals, even
mid-level wage earners in expensive big cities—
renting makes more sense than home ownership.
While the need for affordable rental housing has
never been greater, the uphill battle to preserve
existing affordable housing has never been steeper.
A number of factors—an endless maze of U.S.
Housing and Urban Development (HUD)
regulations, the lure of market-rate rent earnings,
high land values, perplexing local building codes—
threaten to diminish an affordable rental housing
inventory that already fails to meet the rising
demand for it.
The John D. and Catherine T. MacArthur A number of factors
Foundation is supporting a 10-year, $75 million
initiative to preserve and improve affordable rental threaten to diminish
housing across the country.
The foundation’s “Window of Opportunity: an affordable rental
Preserving Affordable Rental Housing” goal is to
directly support the preservation and improvement
of 100,000 affordable rental homes and to
significantly improve the regulatory and funding from which to successfully maintain, manage
environment for preservation through policy and operate properties that are affordable to
reforms at local, state and federal levels. low- and moderate-income renters.
“Harvard University’s Joint Center for Housing • Transactions. Current housing programs and
Studies reports that over the past 10 years, two regulations are fragmented, cumbersome,
existing units were lost for every affordable rental often unpredictable and inconsistently applied.
newly built,” said Debra Schwartz, director of Transactions that would transfer properties to
Program-Related Investments for the MacArthur new owners committed to preserving
Foundation. “Without concerted action, our nation’s affordability and providing good long-term
stock of affordable rental housing is projected to fall by stewardship are difficult, costly and slow.
another million units or more in the decade ahead.” In the Chicago region, the MacArthur
“It is expected that by the end of 2007, more than Foundation is breaking barriers by funding the
$3.5 billion in new long-term subsidy and financing Preservation Compact, an Urban Land Institute
will have been invested in ‘Window of Opportunity’ project that will save at least 75,000 existing
projects at an average cost of roughly $80,000 per affordable homes in Cook County by the year 2020.
home,” she added. “This is significantly less than The compact is working to create more
the cost to build a new affordable rental unit responsive and flexible financing from investors,
anywhere in the country today.” expedited approvals or tax incentives from the
Schwartz, sharing observations she and MacArthur public sector and creative development strategies
colleague Erika Poethig delivered at a HUD both from for-profit and nonprofit developers.
symposium, identified three barriers to affordable One recent victory involved the Lorrington
housing preservation that must be overcome: Apartments in Chicago’s Logan Square
• Properties. Current resources, incentives and neighborhood, which has been affordable since
requirements tied to affordable rental 1985. The building owner’s Section 8 contract was
properties do not adequately encourage or expiring, and he was ready to sell.
require owners to preserve long-term With housing costs steadily rising in the popular
affordability or to sell to other owners neighborhood, the classic building’s 54 units could
committed to that objective. have easily been sold to a for-profit condo
• Ownership. Current policies also limit the conversion developer.
ability of owners to recapitalize, earn sufficient But a combination of public, private and
cash flow and build a sustainable capital base nonprofit agencies preserved them as affordable.
34 ON COMMON GROUND WINTER 2008
The nation’s largest nonprofit developer housing tax credits and bonds, $63 million in loans
bought, rehabilitated and now manages and $39 million in tax-increment financing.
the building—with a contract ensuring Additional money will come from the Illinois
affordable rental prices through 2027. Housing Development Authority, the Federal Home
A case study provided by the Loan Bank and private investors and lenders.
Preservation Compact explains that the Without such aggressive programs, the nation’s
pre-development financing was provided lack of affordable rental housing will continue to
by a nonprofit lender specializing in create dire consequences, according to Sheila
emerging markets. Crucial financing was Crowley, president of the National Low Income
provided by both the state of Illinois Housing Coalition.
through tax credits and a housing trust
fund and the city of Chicago via bonds
and Community Development Block
The city of Chicago will
In August, Chicago Mayor Richard
Daley announced that the city will help
help create nearly 2,700
create nearly 2,700 affordable rental units affordable rental units
for low- and moderate-income households in 29
developments in neighborhoods across the city. for low- and moderate-
The city’s $277 million contribution to the
multiyear project includes $175 million low-income income households.
Block grant-funded development in San Antonio, Texas
WINTER 2008 ON COMMON GROUN
A national housing trust fund
would be a tool for reinvesting in
affordable housing preservation.
“Communities are incomplete,” she said. “People housing. HUD needs to preserve the stock it has to
who do jobs that the community needs—hospital remain competitive in the market. At the end of the
aids, cashiers—these folks must work more than day, the problem is budgetary—(the federal)
one job and are left with fewer hours for family time. domestic discretionary budget is low.”
There are health and education consequences.” Crowley also called on HUD to provide help to
“Kids who are in families who don’t have maintain the aging housing stock that was created
affordable housing move from school to school,” with its dollars.
she added. “With these increased rates of school “The federal government needs to put more
mobility—churning through school system to money into this. A national housing trust fund
school system—they don’t learn and are trying to would be a tool for reinvesting in affordable
catch up. Teachers in the classroom must devote housing preservation,” Crowley said.
extra time to them, which has a negative effect on Recently, in additional efforts to preserve
the quality of schools.” affordable housing, the House passed the
Crowley said for owners who want to get out of “National Affordable Housing Trust Fund Act of
HUD’s rule, there should be incentives to 2007,” which will create a national fund to be used
encourage them to sell to nonprofits that will to produce, rehabilitate and preserve affordable
maintain the apartments as affordable rentals. housing. The funds could also be used for home
“If you have a property that is in a declining ownership assistance including downpayment and
neighborhood, you tolerate it,” she said of HUD closing costs.
hurdles. “But if the neighborhood is improving, The obstacles preventing affordable rental
then you’re motivated to get out of affordable housing preservation could be further removed by:
36 ON COMMON GROUND WINTER 2008
More affordable rental housing can be
preserved by providing tax relief to owners
of aging, low-income housing portfolios.
states and counties matching the dollars that come air, congest the roads, lower productivity and
from HUD, affordable developers creating good increase absenteeism.
community relations programs that erase • There is a negative impact on community life
neighborhood opposition and some sort of because people don’t identify with either their
incentive or device that would assist developers in work community or their home community and
overcoming regulatory barriers at the local level. are on the freeway when they could be coaching
Denise Muha, executive director of the National Little League or volunteering at the hospital.
Leased Housing Association, said a lack of • The incidence of substandard housing
affordable housing rentals can result in problems increases as tenants don’t have decent choices,
ranging from an insufficient amount of service so they accept whatever dwelling they can find.
workers to keep an economy going to dangerous • Overcrowding results in both apartments and
situations where 10 or more people are crammed houses. When housing is unaffordable, two
into a tiny housing unit. families will double-up to rent housing.
“Owners’ decisions to renew the contracts or • Illegal conversions—usually garages, but any
terminate their low-income use are generally structures not intended to be housing—create
market based, but can be attributed to something an unsafe supply of rental housing to meet
we call ‘HUD fatigue,’” which Muha defined as demand in the underground economy.
owners “just getting tired of dealing with the HUD • Employers cannot find workers to fill essential,
layers of rules and changing policies and recently but lower paying, jobs.
HUD’s inability to pay its bills—specifically, • Many young families leave the area and most
subsidy on Section 8 contracts. Many owners have others can’t afford to move in, so an expensive
waited one or more months for their funds, leaving area’s population becomes older very quickly.
them late in paying mortgages, etc.” School population declines and perfectly good
Muha said more affordable rental housing can schools close for lack of students.
be preserved by providing tax relief to owners of As National Church Residences continues to
aging Section 8 (low-income housing) portfolios in expand beyond its traditional portfolio of affordable
exchange for selling the properties to new owners housing for elderly and disabled people and tackles
that will recapitalize them to remain affordable for more diversified projects for all ages and
years to come. populations, Senior Vice President of Acquisitions
She notes that current tax laws act as a and Development Michelle Norris sees a need for
disincentive for investors in certain properties to more flexibility from HUD.
consent to a sale to a new entity that would “HUD headquarters must help steer the deal
rehabilitate and extend the life of affordable through the complicated old regulations that seem
apartment complexes. to want to trip up every deal and expedite the
“It is shameful that in the richest country in the timing. Preservation often takes longer to do than
world, a worker earning two times the minimum new construction, which means we aren’t reaching
wage is living in substandard housing or doing as many communities as we should quickly
without sufficient food, medicine, etc. to pay the enough.” Norris said.
rent,” Muha said. “Americans have lost interest and “Preservation is complicated, often frustrating
as a result, so has our federal government, in and hard to execute with excellence,” she
ensuring that our citizens have a decent and safe continued. “However, when it is done right, it is
place to live. Until housing becomes a priority on the absolutely the right thing to do. It is more
national agenda, there will be families and elderly economical than building new, it is inherently
and disabled folks living in substandard housing.” green, it allows residents to stay in their
Julie Bornstein, president of the Campaign for communities and it creates partnership and great
Affordable Housing, can easily tick off a list of the pride in all who are involved in saving the housing.”
consequences of not preserving a healthy inventory
Steve Wright frequently writes about Smart Growth
of safe, well-located and affordable housing: and sustainable communities. He and his wife live in
• Workers are pushed farther away from jobs and a restored historic home in the heart of Miami’s Little
must endure long commutes that pollute the Havana. Contact him at: email@example.com.
WINTER 2008 ON COMMON GROUND 37
BUILDING STRONG By Christine Sexton
38 ON COMMON GROUND WINTER 2008
Housing options for those who protect, serve and teach
Builders develop Barrington Village
in Raleigh, North Carolina
WINTER 2008 ON COMMON GROUND 39
simple act of Christmas charity has become executive director of the San Diego Association of
the inspiration for an innovative effort to REALTORS® (SDAR) and the driving force behind
help those who help everyone else. the group’s new program, Everyday Heroes,
Years ago, Tim Mercurio was a Cincinnati administered by the recently developed SDAR
policeman who one Christmas Eve decided to bring Ambassador Foundation.
home a woman and her two kids caught shoplifting The goal of Everyday Heroes is to provide
instead of put in jail. This random act of kindness education and financial preparation, as well as buy
resonated with one of the kids, who years later as down mortgage loan interest rates, for up to 10
part of a school project, wrote a letter to the qualifying San Diego Police Department officers by
policeman, identifying him as a hero. the end of 2007. It’s part of a trend across the
The incident left a lasting impression on Mike nation where REALTORS® are helping to provide
Mercurio, the son of the kindly policeman. “I never workforce housing to those who serve, protect,
looked at him the same again,” said Mercurio, the teach and care for Americans.
“I saw the challenges my dad had. I can only
imagine the challenges these men and women
have,” Mercurio said of San Diego police officers.
The first phase of the program will assist police
officers, but Mercurio envisions that after the
Ambassadors Foundation receives its tax free
REALTORS® are helping
to provide workforce
housing to those who
serve, protect, teach and
care for Americans.
40 ON COMMON GROUND WINTER 2008
designation from the federal government, it can
blossom further, extending to firefighters and other They really need to live
municipal employees who may not be able to afford
homes in the zip codes where they work. in the cities they are so
“They really need to live in the cities they are so
vested in serving,” Mercurio said. vested in serving.
The Everyday Heroes program is funded in part
by the Ambassadors for Cities grant program, which
is funded by the NATIONAL ASSOCIATION OF
REALTORS® in partnership with the United States
Conference of Mayors. Funding for Everyday
Heroes comes from other sources as well, including
a recent golf outing that raised $25,000 and an
upcoming benefit dinner.
Those who have an interest in vying for the
officers’ business, such as REALTORS® and
mortgage bankers, also have to contribute to the
program, by paying a $49 fee and registering for the
ABCs course, or Ambassador Buyer Certification,
which helps them help first-time homebuyers.
To qualify for the program police officers must
have served on the force between two and five
years and must also be a first time homeowner.
Prequalified officers will be offered access to Eure helped develop the Hertford Pointe
educational programs and be given information complex, which boasts 24 apartments. The units
about other organizations and programs in the city have two bedrooms, two baths, a living room, an
that promote home ownership. updated kitchen, a dining area and laundry room.
Teachers, too, are often held out as heroes, and They rent for $500 per month and profits will be used
similar to police officers, can be locked out of to pay off the $2.2 million interest-free loan issued by
affordable housing in the communities where they State Employees Credit Union Foundation, the
work. In Hertford County, N.C., young teachers charitable arm of Eure’s credit union.
fresh out of college cannot find affordable rental The school system donated the land, the town
units in the county. At times, the lack of available and county extended utility lines, and private
rental housing meant the county couldn’t hire businesses donated money. Hertford County
enough teachers. James Eure, senior vice president School District Executive Director Betty Pugh had
of the State Employees Credit Union and president an easier time recruiting teachers this year, and she
of the Partners for Hertford County Public Schools, knows that the Hertford Pointe apartment complex
helped broker a deal that changed all that. is the reason.
WINTER 2008 ON COMMON GROUND 41
“We’ve just about filled all of our positions,” said Municipal employees and teachers are not the
Pugh, who has asked the teachers living at Herford only people struggling with affordable housing
Pointe to comment on apartment living. New options. For 13 years, Wilma Stuart Hall has
teacher Nathaniel Glossen works at the Hertford worked for the North Carolina General Assembly
County High School. In an e-mail to Pugh, Glossen as support staff in the committee charged with
said he walks to and from work in six minutes and legislative research.
that living near his peers also helped make his Hall, whose parents owned the house she was
transition as a new teacher in a new town easier. raised in, never thought she’d be a renter. But after
“Having so many people nearby that are in the getting divorced and running into some credit
same boat as I am has definitely made my problems, she found herself renting. “I fell into that
transition as a first year teacher much easier,” trap,” she said, adding that she eventually was able to
Glossen wrote. “As far as Hertford Pointe’s ability to clean up her credit and save toward a down payment.
help the county retain teachers, all I can say is that The dream of home ownership still eluded her,
it would be very difficult to find another setting though, because the North Carolina state employee
with as much initial community support! Thank couldn’t afford the house she wanted; the median
you for everything!” home cost in Raleigh is more than $223,000.
Eure said 21 of the 24 units at Hertford Pointe “I was always told to buy the neighborhood and
are rented to teachers who came from out of state not the house,” she said. “I don’t want to go to any
and are new to the school system. “When you’re neighborhood. I want a safe place to live.”
coming from Michigan, you really need a place to Hall’s “safe place” is Barrington Village, a
live, where you can just sign a contract and move community in southeast Raleigh developed by
in,” he said. North Carolina based Builders of Hope, a nonprofit
organization that partners with local businesses,
humanitarian organizations and local government
entities to create opportunities for working families
who cannot afford to purchase homes.
Builders of Hope not only offers access to
affordable homes, it provides an opportunity for
homeowners to go green. That’s because
Barrington Village is comprised completely of
recycled homes, or 60s and 70s era housing that is
being demolished because new homeowners want
larger more upscale homes on the lots. The homes,
said Builders of Hope Founder and Executive
Director Nancy Murray, would have wound up as
debris in a landfill had they not been donated.
Murray’s 501 (c)(3) organization works with
local builders to find donated homes. A mover helps
her relocate the houses. She sets them on new
foundations and then works on refurbishing,
plumbing and wiring the homes. Barrington Village
was established on land in southeast Raleigh that
Murray owns. The homes were sold at below market
rates to buyers who earn less than $65,000—the
median income in Raleigh for a family of two.
Barrington Village is replete with landscaping,
lantern post street lights and also is designed to
have a community center. It’s about 15 minutes
Municipal employees and from downtown Raleigh and perfect for Hall,
because its close to the Capitol.
teachers are not the only Hall is working closely with the contractors on
some of the finer refurbishing details of her
people struggling with Barrington Village home, such as interior and
exterior paint colors. She also is going to take down
affordable housing options. a wall in her house, remodeling the space.
“I’m going to get that walk-in closet, which is
tremendous,” she said.
42 ON COMMON GROUND WINTER 2008
Barrington Village is replete with landscaping,
lantern post street lights and also is designed
to have a community center.
After success with Barrington Village in Wake
County, Murray is working on developing her second
workforce housing community in neighboring Nash
County. As with Barrington Village, the community
will be made from recycled homes.
Murray is taking this project one step further,
though, trying to place an emphasis on making
these 40- and 50-year-old homes more energy
efficient and healthier but keep the improvements
affordable. To that end she has asked North
Carolina State University to assist in her efforts.
Murray says it’s logical to make the homes more
energy efficient because high electricity, water and
gas bills can undermine a family that already is
living on workforce wages.
“It is an often occurrence that these lower income Volunteer Day at Barrington Village
families are faced with the decision of paying an
electric bill, or putting gas in the car,” Murray said.
“It’s a worthwhile pursuit to help these families
overcome the hurdle of high utility bills that too often
contribute to the epidemic of foreclosure.”
Christine Jordan Sexton is a Tallahassee-based
freelance reporter who has done correspondent work
for the Associated Press, the New York Times, Florida
Medical Business and a variety of trade magazines,
including Florida Lawyer and National Underwriter.
Barrington Village in Raleigh, North Carolina
WINTER 2008 ON COMMON GROUND 43
l e p
ip s e ry
S l o of
44 ON COMMON GROUND WINTER 2008
Resort areas are searching for creative
solutions to employee housing concerns
By John Van Gieson
WINTER 2008 ON COMMON GROUND 45
rom Maui to Martha’s Vineyard to the slopes “The problem is really caused by the second-
of Aspen and Vail, resort areas across the home market in the town of Mammoth Lakes, and
country are struggling with the issue of in the last 10 years it has skyrocketed, which
affordable housing for their workers. The housing essentially squeezed our middle class workforce
crunch, fueled by escalating housing prices in into a situation where there was a big housing
resort areas, affects both seasonal workers seeking shortage,” said Pam Hennarty, housing director for
temporary apartments and year-round residents, the town of Mammoth Lakes, a popular ski resort in
California’s Eastern Sierra
The booming market for
high-end homes is raising
the price of all housing in
resort areas and forcing
many workers to move
further away in search of a
home they can afford. In the
Rockies, they call it
“down valley syndrome”—
the resorts are on the high
end of the valley so the
workers move down valley in
search of affordable housing,
leading to longer commutes
in hazardous winter weather.
The problem is, housing
officials say, higher housing
prices follow the workers
down the valley.
In Nantucket, a summer
resort island 30 miles off
the southern coast of
Nantucket, Massachusetts affordable housing for island employees. Massachusetts, the average
home sells for about
$2 million and the median
The booming market income is $81,900. “Workers seeking affordable
housing, some of whom were born and raised on
for high-end homes is the island, take a look at those price tags and say,
‘You know, I’ll never be able to afford a house here,
raising the price of all so I’m leaving,’” said Aaron Marcavitch, executive
director of the Nantucket Housing Office.
housing in resort areas. Dennis Gazaille, owner of the Marine Home
Center, a popular multi-purpose Nantucket store,
many of them local government employees, who actually provides an air ferry for about one-third of
can’t find a home they can afford. his workers, who commute to their jobs from the
“We’re way behind the eight ball,” said Tom mainland. “I need workers or I can’t open my store
McCabe, executive director of the Aspen/Pitkin in the morning,” he said. “In addition to flying 35
County Housing Authority in Colorado. people a day, we also have apartment rental units
When it comes to worker housing, resort areas that accommodate 30 workers. You do what you
are a victim of their own success. They are have to do.”
attractive communities typically located in scenic- Resort communities are implementing a wide
mountain and coastal settings, and high-end variety of potential solutions to the resort housing
homebuyers want a piece of the action, if only part- crunch—although few are as creative as Air
time. Housing officials grappling with the problem Gazaille. The range of affordable housing options
in Rocky Mountain ski resorts say a booming in resort areas includes:
second-home market is devastating the affordable • Passing inclusionary housing ordinances
housing market in the towns they serve. requiring developers to provide a certain
46 ON COMMON GROUND WINTER 2008
percentage of affordable units as a condition
for building market-rate homes, condos and
apartments. In Maui, for example, developers
Resort communities are
are required to provide up to one affordable implementing a wide
unit for every two market-rate units.
• Linking the production of affordable housing variety of potential
to new construction in other ways. The town of
Vail, Colo., uses a formula providing for a solutions to the resort
certain square footage of affordable housing
with different standards for different kinds of
projects. REALTORS® oppose the Vail
ordinance, saying it imposes unfair burdens • Requiring resorts to pay housing subsidies to
on the expansion of real estate offices. their lower-income workers. The city of Dana
• Levying transfer taxes on the sale of expensive Point, Calif., has required the new St. Regis
homes with the revenue paying for affordable Emerald Point Resort to pay workers’ housing
housing programs. Aspen approved a subsidies averaging $210 a month.
1 percent transfer tax in 1990, which raises • Encouraging resorts such as ski areas to
$11 million a year for worker housing. provide affordable housing for their seasonal
Developers rebelled, however, and Colorado workers. Mammoth Mountain ski area advises
voters passed a constitutional amendment in job applicants on its Web site that “Our current
1992 that bans transfer taxes in other inventory of more than 600 beds offers a wide
communities. Aspen was grandfathered in. variety of comfortable and inexpensive
Local officials in Nantucket and Martha’s housing within the town of Mammoth Lakes.”
Vineyard are asking the Massachusetts Resort communities have turned to many
Legislature to increase their transfer taxes on different options in their struggle to provide
expensive homes to raise several million affordable housing for local and seasonal workers,
dollars for worker housing programs. but housing advocates say they still have a long
• Reserving all or part of the revenue from other way to go.
taxes and fees to pay for affordable housing. In “I would say it’s pretty bad,” said Jo-Anne Ridao,
2006, Honolulu voters passed a referendum the housing commissioner for Hawaii’s Maui
requiring the city to dedicate 1 percent of sales County. “We know that there are a lot of families
tax revenue to affordable housing. that are housing two or three generations in a house
• Rounding up state and federal grants and because they can’t afford to buy a house.”
other funds to pay for affordable housing. The In Aspen, where the median sales price for a
town of Mammoth Lakes has procured $14 home is $5.2 million, McCabe said local workers
million in state and federal grants to help pay seeking affordable housing “are all up against the
for $47 million in development and loan wall. I would believe that this year we’re not going
programs that will provide for more than 250 to have the workers we need. I really believe it
worker housing units. translates into service cutbacks somewhere.”
WINTER 2008 ON COMMON GROUND 47
Local officials at Hilton Head, a barrier island development, with 300 units earmarked for
resort community in South Carolina, have been affordable worker housing, in the Resort District.
talking about scrapping their affordable housing Disney and the chamber formed a political
plan, which has produced 61 worker housing units. committee called Save Our Anaheim Resort (SOAR)
As often happens with affordable housing that successfully circulated petitions putting a
ordinances, buyers had to accept deed restrictions referendum to overturn the proposed project on the
limiting their ability to sell their homes. Due to ballot next June. Not to be outdone, the Council
protests from the residents, the town of Hilton majority has instructed staff to draft a referendum
Head has eased the deed restrictions and is that would require voter approval before Disney can
considering doing away with them altogether. build another theme park in Anaheim.
Compounding the problem of providing affordable “They tried to make this a resort housing issue,
housing to workers in resort areas is resistance by but it’s really not a resort housing issue,” said
developers, business owners and residents to the SOAR Spokeswoman Annette McCluskey. She said
solutions implemented by local government officials. the condo project would be built on a 26-acre site
A Canadian condominium developer filed suit in occupied by two mobile home parks that were
Hawaii to overturn Maui’s inclusionary housing grandfathered in when the Resort District was
ordinance after local officials denied its appeal of created. “There would not be a net gain in
affordable housing requirements on two proposed affordable housing.”
South Maui condo projects. Honua’ula, a proposed 1,400-unit development
In Anaheim, Calif., home of the Disneyland with 700 affordable units for workers located on
Resorts, the local chamber of commerce and Disney Maui’s south shore, has run into vehement
are at war with local officials and housing advocates opposition from Save Makena, a local environmental
over a zoning change allowing the construction of a group. Save Makena has turned out dozens of
large development, including affordable housing, in protesters to fight the development at Maui County
the Resort District adjacent to Disney and reserved Council Land Use Committee meetings.
for tourism-related businesses. In Vail, Colo., REALTORS® oppose a local
Orange County, where Anaheim is located, has affordable housing law that requires high-density,
been identified by the NATIONAL ASSOCIATION mixed-use developers to set aside 20 percent of the
OF REALTORS® as the third most expensive housing units for worker housing, but requires real estate
market in the country. Worker housing advocates say offices to provide 2.5 bedrooms of affordable housing
the Anaheim area needs 27,000 additional affordable per 1,000 square feet of real estate office construction.
housing units to provide housing for low-wage “Right now it’s impossible to build new real
workers at Disney and other places. estate offices in the town of Vail,” said Asher
The city council set off a firestorm earlier this Maslan, president of the Vail Board of REALTORS®.
year when it voted 3-2 to allow a 1,500-unit “The goal is to have 100 percent of Vail employees
Resort communities have turned to many different
options in their struggle to provide affordable
housing for local and seasonal workers.
48 ON COMMON GROUND WINTER 2008
living within the town of Vail by 2014. It might be a costs $700 to $1,000 a square foot and has gone as
noble cause, but we believe it’s impossible to high as $3,200.
achieve because in lieu of creating affordable Whatever the future holds for these resorts, one
housing, you can also pay the town $369 per square thing is certain. Affordable housing must be a
foot” to buy land outside of town for affordable priority. The resorts are a beautiful place to work,
housing projects. but how do you afford to live there?
Maslan said the penalty has little impact on John Van Gieson is a freelance writer based in Tallahassee,
developers because construction in Vail typically Fla. He owns and runs Van Gieson Media Relations, Inc.
A PALETTE OF AFFORDABLE HOUSING
Lukia Costello, a photographer in Buffalo,
N.Y., is part of an exciting new program for
artists: She lives and works in an old factory
converted to live/work lofts for artists.
Costello used to live in a cramped
apartment in the suburbs where she was
constantly banging into things when she was
working on her photographs. Her move to
Buffalo Artist Lofts was a dream come true.
“I have more than enough space now,”
Costello said. “It’s like a New York City loft
apartment, 950 square feet, 14-foot ceilings,
the front wall is all windows with a nice view. I
have the space to work and the space to think.
Wherever I look I can see my work on the walls,
and it’s inspiring.”
Costello, who works part-time teaching
Microsoft Office to make ends meet while she Buffalo Artists Lofts in Buffalo, New York. Photo provided
pursues a career as an artist, pays $474 a by Lukia Costello Photography—www.lukiacostello.com.
month for her loft.
Buffalo Artists Lofts was developed by Artspace Project, a Artspace projects is low-income housing credits. “We sell tax
Minneapolis, Minn., nonprofit dedicated to renovating old credits to companies that use them to reduce their tax
buildings to provide live/work spaces for artists. Artspace has burden,” he said.
developed 20 projects around the country and has 16 others in Other funding sources include foundations, historic
various stages of development, said Roy Close, director of preservation tax breaks and credits, community development,
resource development. local government and private fundraising in the community.
The organization has developed work/live projects for artists “It’s an established fact that these kinds of projects can
in cities as large as Chicago and as small as Fergus Falls, really have a dramatic economic benefit in certain kinds of
Minn., population 14,000. Artspace typically renovates old neighborhoods,” Close said.
factories and warehouses near the city center. The Buffalo The Tashiro-Kaplan Artists Lofts project, featuring 40,000
building was constructed in 1911 as an electric car factory and square feet of live/work lofts, studios and businesses, was
housed a printing company for many years. developed in a seedy area of Seattle.
The Minneapolis City Council created Artspace in 1978 as “When I started this project I knew we needed long-term
a referral service for artists seeking affordable housing. It went affordable housing for artists and the creative community,”
nonprofit a year later and decided in 1987 that its real mission said Cathryn Vandenbrink, Artspace regional director in
was to develop affordable housing projects where artists could Seattle. “What I didn’t realize was a need there for affordable
live and work. The organization works in partnership with local commercial space as well. It is a very tough neighborhood and
agencies or organizations that seek its help. this project has brought a feeling of safety to residents of the
“We get a lot of calls, generally from civic agencies, neighborhood that has spread on the surrounding streets.”
redevelopment groups or economic development groups,” “It has just been unbelievable, the activity that has come
Close said. “We send in a consulting team and recommend that from this little corner of the neighborhood that used to be
the local organization commission a market survey to see if a empty and barren,” she said.
sufficient number of artists are interested. Projects typically Another benefit of the Artspace projects is that they create a
take three to five years.” community of artists who learn from each other. “I like the
Projects can be expensive, running into the $15 million to community of other artists,” Costello said. “I find it very inspiring.”
$25 million range. Close said the first source of funding for
WINTER 2008 ON COMMON GROUND 49
50 ON COMMON GROUND WINTER 2008
Tax credits create
By Heidi Johnson-Wright
n the never-ending search to preserve and
create more affordable housing, developers
and nonprofits are finding ways to use more
than the traditional Low-Income Housing Tax
Credits (LIHTC) to get deals done.
Since 1986, the federal LIHTC program has
provided financing opportunities for developers
to build units for low-income renters.
In return for building affordable housing,
investors receive a credit against their federal
income tax liability. The program leverages
roughly $6 billion in annual investments that
produce more than 125,000 affordable
apartments each year.
The federal government allocates LIHTC to
each state based on population, with the current
allocation at approximately $2 per person. Each
state’s housing finance agency sets priorities,
then holds an annual competitive process to
award the credits to the projects that best meet
Investors use the tax credits to reduce federal
tax liability. They often receive additional
benefits of meeting local regulatory requirements
and community development goals.
WINTER 2008 ON COMMON GROUND 51
Low-income tax credits typically cover about were only about 40 percent to 50 percent occupied
half of an affordable rental building’s total and many of the tenants were not paying rent,”
financing. The other half usually comes from city Friedman said. “The owner of the 115-unit building
and county portions of U.S. Department of Housing had renovated the property in 1995, but was facing
and Urban Development HOME or Community increasing pressure from the city of St. Louis, the
Development Block Grant money, plus state or police department and community leaders to make
local bond money and housing trust funds. further changes.”
With construction costs and land prices soaring, The building had not fulfilled its affordable
developers of affordable rental housing are housing tax credit requirement of 15 years as low-
constantly pressed to make the numbers work. income housing before being allowed to charge
In St. Louis, the Friedman Group, Ltd. and market rate. If affordable rates had not continued,
Dublin Capital, lobbied policymakers, layered the owner would have faced procedures to
financing and launched an uphill yet successful recapture the Low-Income Housing Tax Credits he
battle to clean up and preserve a rapidly had used to finance the project.
deteriorating 115-unit affordable rental building. The question for the owner was how to proceed in
Eric Friedman, president of the Friedman Group solving the problem. At that point, Friedman Group,
and the St. Louis Association of REALTORS® Ltd. and Dublin Capital were asked to step in and
Commercial Division REALTOR® of the Year, provide expertise and solutions. The two firms and
created a case study on the salvation of the Winston owner decided to search for a buyer/developer who
Churchill Apartments. would be able to rehab the building and continue
“An ongoing problem for the property was crime, providing affordable housing.
which amounted to more than 300 police calls each Friedman, who has experience in affordable
year. In addition to safety problems, the apartments housing, historic renovation and traditional
development, teamed with Dublin Capital to secure:
housing assistance credits through a nonprofit
Low-income tax credits corporation, tax exempt bonds, city lien forgiveness,
plus federal and state LIHTC. The project was
typically cover about half structured to also benefit from federal historic tax
of an affordable rental credits plus state of Missouri historic tax credits.
Friedman and Dublin contracted for a market
building’s total financing. study and appraisal and assembled a development
team including a general contractor, architect and
local legal counsel. Friedman
Winston Churchill in St. Louis, Missouri. and Dublin also assembled a
Photo provided by Lisa Mandel. group to provide the debt and
equity needed to purchase the
property plus additional land
for adequate parking.
“Since the Winston Churchill
House had Section 8 tenants,
the development chose to find
alternative housing for the
residents during the gut rehab
and pay the difference in rent.
Friedman Group, working with
a local project manager, assisted
in relocating the qualified
tenants,” explained Friedman,
who also maintained a strong
community relations campaign
with the city alderman and
mayor’s office, a Congressman’s
office, the police department,
community religious groups
and neighborhood associations.
52 ON COMMON GROUND WINTER 2008
In less than two years, the Friedman and Dublin
team worked its magic and a new developer—
Eagle Point, a Maine firm with strong ties to St.
Louis—was in place. The $12 million dollar
rehabilitation construction is well under way with
completion expected by year end and residents
moving back into an exquisitely-restored historic
building by early 2008.
Encouraged by the National Trust for Historic
Preservation, some areas are using historic tax
credits as a way of preserving affordable housing.
Mercy Housing in Savannah received the Trust’s
prestigious National Preservation Honor Award for
creating 70 units of affordable housing in buildings
that were historic, but rapidly deteriorating.
According to the trust, Heritage Corner was
originally constructed as housing for low-income
workers in the early 1900s in what is now known as
Savannah’s Cuyler-Brownsville Historic District—
one of the city’s oldest and poorest neighborhoods.
Before Mercy Housing’s purchase and restoration,
Heritage Corner families struggled with blight
and overcrowding. Galen Terrace in Washington, D.C.
“Heritage Row, a continuous block of buildings
constructed in 1912, was also in need of
considerable rehabilitation to make them
habitable,” a Trust press release states. “Where
Areas are using
apartments once were unheated and raw sewage historic tax credits as
often ran through courtyards, residents now enjoy
comfortable homes with modern conveniences, a way of preserving
playgrounds, a community garden—and even a
new branch library.” affordable housing.
Using historic tax credits, Denver-based Mercy
Housing retained original materials and features The Trust says the legislation would:
wherever possible and added new materials that • Lessen the rule that lowers tax benefits dollar-
blend with the area’s character. for-dollar according to the amount of credit
The National Trust for Historic Preservation— taken when using the historic rehab credit.
working with leading preservation organizations, • Increase the rehab credit rate to 40 percent for
developers, the financing community and tax credit smaller projects in which the qualified
users—has crafted the Community Restoration and rehabilitation expenditures do not exceed
Revitalization Act. $2 million. This would target the incentive to
The legislation, with sponsorship in the U.S. “main street”-type developments in which
House and Senate, “is a package of amendments rehab credit costs are currently prohibitive.
that would further the mission of the Historic • Permit the 10 percent credit to be claimed
Rehabilitation Tax Credit by spurring greater with respect to residential rental property. It
investment in smaller commercial projects and Main is currently prohibited for projects that
Street-type properties in older neighborhoods— include dwellings.
particularly where there is a critical need for housing • Change the definition of “older building” from
and neighborhood reinvestment,” according to a “built before 1936” to any property “50 years
briefing released by the Trust. old or older.”
The idea is to make it easier to combine the rehab • Ease the rules governing nonprofit deals so
credit with the traditional Low-Income Housing Tax that more community-oriented projects may
Credit to create projects that save historic structures move forward.
while creating affordable rental units. • Boost, by 130 percent, the qualified rehabil-
itation expenditures on which the rehab credit
WINTER 2008 ON COMMON GROUND 53
To further assist with gap financing, Ohio
created a housing trust fund. To generate
dollars for the trust fund, the state doubled
the fee people pay for recording all official
documents with the County Recorders.
Conrad Egan, president and CEO of the
National Housing Conference (NHC),
praised the federal tax credit program administered
by states for its “overall efficiency, economy of
delivery and longtime sustainability.”
But he said affordable housing is too much of a
“lasagna deal,” with several layers of financing
Hazel Hill residents in Fredericksburg, Virginia required in addition to tax credits to make an
affordable rental project’s numbers work.
can be claimed for buildings located in certain Egan said it would be easier for affordable
disinvested neighborhoods, difficult to develop rentals to be created if all the layers of funding
areas and census tracts with high poverty rates. were done in one cycle, so developers would not be
• Remove the recapture clause—requiring the carrying land costs and hamstringed from breaking
payback of tax credits upon conversion of a tax ground until several different agencies approve
credit property into a condo development—to their projects.
broaden the tax credit’s use to condominium “Nothing drives developers crazy like a lack of
developments and in so doing, provide new predictability,” he said.
support for the revitalization of urban Egan also promotes a holistic approach to
neighborhoods nationwide. affordable housing, such as those detailed in
While many are trying to make historic tax “Increasing the Availability of Affordable Homes—
credits more available for affordable housing A Handbook of High-Impact State and Local
preservation, the state of Ohio is among the leaders Solutions,” prepared by the Center for Housing
in setting aside conventional Low-Income Housing Policy (CHP).
Tax Credits for the restoration and preservation of The publication details how Fairfax County, Va.,
existing units. recently approved a plan to rezone an area near a
Ohio is one of eight states that reserves 25 mass transit stop to increase density substantially
percent or more of its LIHTC for preservation. To
make sure preservation really works on older
properties, the state requires extensive
“We set aside a
rehabilitation work to bring the existing up to
modern code, to boost energy efficiency and to
quarter of our tax
upgrade to minimum accessibility standards of the
Americans with Disabilities Act.
credit allocation for
“We are making a number of efforts to preserve preservation of existing
affordable housing,” said Kevin Clark, the Housing
Credit Allocation manager for the Ohio Housing affordable housing.”
Finance Agency. “We set aside a quarter of our tax
credit allocation for preservation of existing Heritage Corner development in Savannah, Georgia
affordable housing—most for preserving a Section 8
building, or properties financed by HUD, some
created with rural development funds and also older
tax credit properties, deals that had to be affordable
for 15 years but now could go market rate.”
The state of Ohio also now requires projects that
receive tax credits—family, senior, disabled and
permanent supportive housing for the homeless—
to remain affordable for 30 years. The demand for
low-income housing remains so high that the state
is still only capable of funding about one out of
every four applications each year.
54 ON COMMON GROUND WINTER 2008
on land formerly occupied by an older,
low-density subdivision of 65 homes
plus five acres previously used for
The new MetroWest development
will have about 2,250 condominiums,
apartments and town houses; up to
300,000 square feet of office space; and,
up to 190,000 square feet of retail space.
“During negotiations over the
proposed MetroWest development,
Fairfax County secured a promise from
Pulte Homes, the developer, that
approximately 5 percent of the homes
would be affordable—almost double
the number required under current
Fairfax County provisions for
developments of this density,” the CHP
NHC’s Egan said higher-density
zoning with boosted Floor Area Ratios
(FAR) for development can create room
for affordable housing on even a pricey
Monte Cristo Hotel in Everett, Washington
piece of land, quipping “God isn’t making
any more land, but he is using FAR.”
In the Pacific Northwest, Bob Peterson—
Manager of the Tax Credit Division of Washington The rehabilitated hotel has
State Housing Finance Commission—is
particularly proud of the historic Monte Cristo a mix of studios and one-
Hotel in Everett, Wash.
The hotel, which once set vacant and neglected and two-bedroom units.
for more than two decades, was converted to
affordable housing 15 years ago and is still going • Encourage more Green Building practices.
strong. One hundred percent of its 68 units are • Create some form of inclusionary zoning that
rented to people earning no more than 60 percent generates housing units.
of the Area Gross Adjusted Income, the standard • Streamline zoning, permitting and other
LIHTC requirement. development processes to control spiraling costs.
The rehabilitated hotel has a mix of studios and • Ask For-Profit and Nonprofit to work together
one- and two-bedroom units. Because Washington more.
requires tax credit recipients to maintain • Push for better results from programs and
affordability for 40 years, the Monte Cristo’s units services that work with special needs housing
will be available to low-income renters for at least such as those serving disabled, homeless, farm
another quarter century. worker and offender re-entry populations.
Even with success stories such as the Monte • Add another layer of subsidy to the Tax Credit
Cristo, Peterson still said the supply of affordable program to develop Workforce Housing.
housing is not keeping pace with the demand. To “Housing needs differ not only from state-to-
increase opportunities and make low-income state but also within counties,” Peterson said.
housing more efficient and in-line with Smart “More flexibility should be given to local
Growth principles, he would: communities to ‘fill’ in their housing gaps using
• Make all layers of housing subsidies work these current resources. It would be nice to have
seamlessly together. incentive-based programs vs. legislating the
• Encourage mixed-income developments. development of affordable housing.”
• Encourage more urban density and land Heidi Johnson-Wright frequently writes about
efficiency. Smart Growth and sustainable communities. She
• Build more affordable housing around public and her husband live in a restored historic home in
transit. the heart of Miami’s Little Havana. Contact her at:
WINTER 2008 ON COMMON GROUND 55
Compiled by Mike Lehrman, NAR Housing Opportunity Program
in the states
CALIFORNIA COLORADO FLORIDA
The Rosslyn Hotel in downtown Los Cityview, an organization The Westshore Community Develop-
Angeles has been purchased by two dedicated to financing and ment Corporation is developing 57
area development firms, Buxbaum developing affordable housing affordable town homes on 3.7 acres
Group and the Amerland Group. The projects, has made a $4 million of land in Tampa, granted by
historic hotel will be converted into an donation to the Affordable Hillsborough County. The cor-
affordable workforce housing Housing Fund of the city of poration is utilizing a community
development over the next two years. Boulder. The donation will be land trust model to keep the homes
The structure was acquired for $24.5 used to help fund the Peloton, affordable. Generally, with a
million and the conversion costs a $150 million residential community land trust model, a
estimate is $20 million. The development addressing the nonprofit group retains ownership of
partnership, bolstered by $28.5 million growing affordable housing the land under the homes and deed
in tax-exempt bonds issued by the needs of the city of Boulder. restrictions place limits on the resale
California Statewide Communities The contribution will help price. This keeps the homes more
Development Authority, plans to make finance 38 units in the Peloton, affordable. At a price tag of only
85 percent of the 300 units in the adding to Boulder’s pool of $100,000, the homes in the
planned development affordable to affordable housing. These Westshore development are just that,
households earning between 35 units will sell for as little as especially considering that the
percent and 60 percent of the Los $88,000, while the market rate average home price in Tampa in
Angeles area’s median income. units in the development are 2006 was $250,000.
According to Jeremy Turner, director of priced from $300,000 to
construction management for the $900,000. The $4-million
Amerland group, this ratio is contribution to Boulder’s
“extremely rare.” Most affordable Affordable Housing Fund
housing developments in this area represents the largest single
boast 20 percent of the units as contribution in the history of
affordable and the remaining 80 the fund.
percent are sold at market rate. The
Rosslyn Hotel conversion will be
completed by late 2009.
56 ON COMMON GROUND WINTER 2008
KANSAS MARYLAND NEW YORK
The Manhattan Association of The Maryland Association of Financed in part by contributions
REALTORS® and the Junction City REALTORS® is partnering with by Brad Pitt made to the nonprofit
Board of REALTORS® have the Baltimore Homeownership Global Green, developers at Full
partnered to offer free housing Preservation Coalition and Prince Spectrum have created the
counseling services to soldiers Georges County Coalition for Kalahari, a state-of-the-art mixed
stationed at Fort Riley in Homeownership preservation to income green condominium
Manhattan. Since 2006, Army strengthen home ownership and development. The Kalahari is
officers stationed at Fort Riley have promote neighborhood stability to located on 116th St. in Harlem and
been responsible for training prevent foreclosures in Maryland. offers affordable condominium
soldiers who will work with and As part of the partnership, the units to families earning as little as
educate local Iraqi and Afghani Maryland Association of $56,000. The Kalahari boasts
security forces. The program REALTORS® will provide joint advanced features in green
started when the Fort Riley housing training sessions for REALTORS® building, including solar panels
services department approached and housing counselors to and a rooftop garden. Nearly half
the two local REALTOR® educate them about helping of the 249 condominiums in the
associations and requested consumers avoid predatory development are designated for
homebuying assistance and lending and prevent foreclosures. affordable housing. Full Spectrum
education for the men and women In addition, the Maryland has initiated similar projects in
stationed at Fort Riley. As a result, Association of REALTORS® has New Orleans and Jackson, Miss.
the boards partnered to create a agreed to sponsor scholarships for
free homebuying information housing counselors in the
packet designed specifically for the Baltimore area to complete
soldiers, as well as one-on-one NeighborWorks® training on
consultation at no charge. foreclosure prevention.
WINTER 2008 ON COMMON GROUND 57
in the states (continued)
OHIO OREGON PENNSYLVANIA
On October 7, 2007, the Columbus The Portland Metropolitan The city of Allentown recently
Board of REALTORS® hosted and Association of REALTORS® has completed the construction of
sponsored the Super Sunday launched an affordable housing Overlook Park, an $87 million
Affordable Housing Open House. educational campaign for its public housing development
This annual event showcases members along with a brand new with 269 affordable rental units
affordable priced homes ($125,000 consumer Web site designed to assist and 53 affordable home
and under) available in Central prospective homebuyers attain ownership units. Overlook Park
Ohio and gives consumers the housing downpayment assistance has been a welcome addition to
opportunity to receive free and affordable financing options. The the Allentown community, as
consultation services with real educational campaign will certify hundreds of residents were
estate professionals. Along with REALTORS® to work specifically in displaced from their homes
advertising the event in local media, the affordable housing market and when a dilapidated public
the board supplies gifts and prizes to connect them directly to prospective housing development was
consumers that participate in the homeowners through the consumer recently demolished. Overlook
Open House fair. Web site. The certification program, Park has more than 400 families
entitled Homeownership Oppor- on a wait list to move into the
tunities Certification, will teach units, as the newly completed
REALTORS® about the eligibility development boasts attractive
standards for financial products that designs and affordable prices.
may help first timer homebuyers,
information on state and local
downpayment assistance programs
and local consumer home ownership
and credit counseling resources
available to consumers at no cost. The
consumer Web site, www.hownw.com,
will launch during home ownership
month, June 2008.
58 ON COMMON GROUND WINTER 2008
SOUTH DAKOTA TEXAS WISCONSIN
The nonprofit Evangelical The Texas State Affordable The Wisconsin REALTORS®
Lutheran Good Samaritan Housing Corporation has Association helped organize
Society recently broke ground announced a new financing and sponsor a coalition of
on the new $5.2 million product available to individuals housing stakeholders for a
Creekside Apartments complex and families that earn less than 80 workforce housing symposium
in Sioux Falls. The complex, percent of area median family on September 13, 2007 in
designed to provide affordable income. The Home Sweet Texas Madison. The symposium
one-bedroom apartments to area Loan Program couples low fixed- highlighted the ways public
seniors who meet federal rate mortgage rates with and private organizations can
income requirements, will be downpayment assistance grants. benefit from offering employer
completed in the fall of 2008. Eligible participants in the assisted housing benefits to
The development, funded by a program can obtain a 30-year, local employees. As a result of
grant from the Department of fixed-rate mortgage at rates as the program, the Wisconsin
Housing and Urban Devel- low as 6.15 percent and obtain up Association of REALTORS®
opment, will meet a serious to 5 percent of the purchase price has agreed to sponsor regional
need in the Sioux Falls area. of the home for downpayment and Home From Work™ training
Information taken from the U.S. closing costs. More information courses for REALTORS®
census shows that the can be found at www.tsahc.org. throughout the state of
population of elderly individuals Wisconsin to help promote
in the Sioux Falls area increased employer assisted housing.
by 14 percent during the 1990s.
Further increases are expected
in the upcoming 2010 census.
WINTER 2008 ON COMMON GROUND 59