Affordable Housing and Growth Controls Not Mutually Exclusive

Providing affordable housing and encouraging growth in town centers have been interwoven goals of Vermont’s land use policy since the 1970s. “Affordable housing and growth controls do not have to be mutually exclusive,” states Beth Humstone of the Vermont Forum on Sprawl. Vermont’s approach has been to provide assistance to programs supporting smart growth activities rather than prohibit development; an approach that has yielded positive results throughout the state.

Vermont’s Experience

The Green Mountain State has undertaken a number of initiatives to promote managed growth in tandem with the development of affordable housing. In 1987, the state created the Vermont Housing and Conservation Board to provide financial assistance for land conservation, historic preservation, and affordable housing under the auspices of a single organization.

According to Humstone, the Board has focused its affordable housing resources on redevelopment or rehabilitation of existing buildings first and on new construction second. “They prefer rehabilitation of existing housing rather than new construction,” she said. “If they fund a new construction project, they strongly encourage this type of development in areas with existing services and transportation.” In its Consolidated Plan, Vermont also prioritizes distribution of federal funds through the Community Development Block Grant (CDBG) program to locally designated downtowns, village centers, and other growth centers.

In 1988, the Vermont Legislature enacted “Act 250” to encourage appropriate development of communities throughout the state by local governments and to require regional and state planning. The Act also requires that local governments plan for increasing demands for housing; especially housing for those with limited incomes. The Act includes specific provisions for housing for low- and moderate-income Vermonters and requires that the goal be met in municipal plans.

Other Incentives

Vermont also provides other incentives to developers in designated downtowns for the use of existing buildings. To assist in rehabilitation, the state has developed separate code standards for existing buildings under the guidance of the Vermont Department of Labor and Industry. In addition, approximately 21 cities enforce their own local codes.

In designated downtowns, the state offers tax credits for up to 50% of the cost of elevators, lifts, or sprinkler systems to encourage the reuse of upper floors for housing and commercial purposes. Vermont offers a 10% add-on to the federal rehabilitation tax credit of 20%, thus providing property owners in the 13 designated downtowns with a total tax credit of 30%. A 5% state add-on to the federal tax credit is available within designated village centers, and there is also a 25% state tax credit in designated downtowns for the rehabilitation of older buildings that don’t qualify for the federal rehabilitation tax credit.

At the same time, the state has increased the number of housing units requiring an environmental review. Act 250 requires developers to complete an environmental review of a development proposal if 10 or more units are involved. This requirement applies to both rehabilitation and new construction of mixed income and mixed use/mixed income projects only. For developments in designated downtowns, the threshold increases with the size of the city. For example, the law does not become effective in Burlington unless the development is for 100 units or more.

Growth Management Does Not Result In Higher Prices

Housing prices in Vermont’s cities have increased over time and vacancy rates are currently very low, making it difficult to find affordable housing in those locations. Humstone contends that market forces have had a greater impact on price increases than growth management techniques. A recent housing market study conducted by the Vermont Forum on Sprawl indicated that 62% of recent movers are looking for homes in Vermont growth centers. Finding such housing can be difficult, however, given current market prices and low vacancy rates. As a result, the percentage of respondents relocating in these areas has been much lower.

According to Humstone, in spite of the higher housing costs often found in downtown areas, urban neighborhoods, and village centers, rural housing is not immune to rising costs. She says that the need for additional infrastructure and other municipal service demands add to the cost of providing housing in rural areas. Unlike the existing roads, sewer lines, and other public infrastructure elements that are readily available in most developed areas, in rural locations, the developer must often supply these enhancements. In addition, rural towns must eventually bear the burden of additional costs for longer school bus routes, additional police patrols, and road upgrades in remote locations. Humstone suggests that if new development locates in existing settled areas, the need for additional infrastructure is reduced, and other costs can be more readily absorbed.

Continuing Obstacles

“NIMBYism and lengthy permit appeals continue to be one of our biggest obstacles to creating affordable housing in Vermont,” Humstone says. “Those who support smart growth have been able to fight the notion that smart growth is another word for exclusionary zoning.” Apparently, there are many in Vermont who agree with her position. Nine diverse organizations have formed the Vermont Smart Growth Collaborative, which endorses housing projects that meet a set of smart growth criteria. Recently, four out of seven housing projects that were endorsed were affordable housing projects. By undertaking the review and endorsement process, they hope to reduce the influence of those who oppose development because of NIMBYism.

In addition to this non-governmental effort, Vermont is in the midst of a permit reform debate for both state and local permitting. Although there are wide differences of opinion on the best way to proceed, most agree that the current appeals process needs to be streamlined.

Different Ways to Achieve Smart Growth

Vermont’s approach has been to encourage development that meets smart growth principles and goals, rather than simply prohibit development out of hand. Humstone contends that state investments can have a major influence on the direction growth takes in Vermont. She contends that other states can direct resources to designated growth areas, and by so doing, can see positive, tangible results in their communities. Other states can also provide tax credits for development in designated areas, reform building codes to promote rehabilitation of existing buildings, and examine ways to consolidate the zoning appeals process. Humstone suggests that, rather than creating prohibitions, providing incentives has been a more effective way to control growth, while at the same time promoting the production and availability of affordable housing.

For more information, contact Beth Humstone at ehumstone@vtsprawl.org.

Density Bonuses in Berkeley, California

Increasing housing costs in the San Francisco Bay area are creating growing pressures in communities throughout the area. Among the most desirable neighborhoods in the Bay Area is Berkeley which faces tremendous pressure to increase densities as a means of increasing the affordable housing stock. Yet the city and its developers face many obstacles to new development, including an already fully developed community, complex ordinances, and an often long project approval processes. One example is the Neighborhood Preservation Ordinance which requires a use permit and a public hearing for any new housing construction. While this hearing process allows interested citizens a role in the development process, it also requires developers to obtain City permission for any development activity. In most communities, certain construction activities can be undertaken “by right” if the development is permitted in the zoning ordinance.

Minimizing Obstacles to Create More Units

According to Stephen Barton, Housing Director for the City of Berkeley, “The multifamily development process is different in Berkeley, since within most multifamily-zoned residential districts there are no limits imposed on the number of units per acre allowed.” The zoning law contains performance standards for floor area ratios, maximum heights, parking and set-backs that the city feels meet the spirit of the law without establishing specific unit limits. Since the performance standards limit the number of units that can be developed on a site, the City has additional flexibility with respect to the maximum number of units allowed on a given site.

To help generate more affordable housing units, the City provides incentives through its density bonus program, as required by California law. A density bonus allows a developer to construct a building beyond the intensity allowed by zoning. A common incentive program used to encourage developers to build affordable ownership and rental housing, the density bonus allows the City to adjust performance standards to increase the number of units permitted by at least 25 percent and can be offered to a developer if the proposed development meets certain thresholds.

The base number of units is the number normally allowed within the existing envelope of the zoning ordinance. Then, if at least 10 percent of the units in the development are made affordable on a long-term basis to those with very low-income (less than 50 percent of area median) or 20 percent of the units are affordable to those defined as low-income (less than 60 percent of area median family income) or if 50 percent of the units are reserved for the elderly, then the City provides a density bonus. Most developments participating in the program choose to set aside 10 percent for very low-income families.

As long as a developer meets the qualifications for the density bonus, the City can waive the relevant zoning requirements in order to provide the additional units; a far more streamlined approach than that required for securing a variance.

If the 25 percent density bonus still falls short of making the project economically viable, the City can allow additional bonus units. And while the density bonus units can be market rate, the developer must provide detailed financial information showing that the additional incentives are necessary for the project to be feasible. The City has the flexibility to waive other development requirements, such as parking, open space, height limits, and set backs if these requirements have too great an impact on the project’s economic viability.

Barton states that two-thirds of the new units built in the last 10 years would have not been feasible without density bonuses.

Challenges

Still, not everyone in Berkeley supports the flexibility that these City ordinances offer to planners and developers. Some citizens oppose the increased density, concerned that such actions may adversely affect their neighborhoods, traffic, and parking. Recently, a group of citizens tried to pass a referendum to stop the City from allowing development exceeding a certain height. The group was unsuccessful, as Berkeley voters defeated the measure by a four-to-one margin. A common compliant among builders is the often long and costly review process the City must undertake for each project submitted under the density bonus initiatives. Developers do, however, have the option of constructing housing that does not qualify for the density bonus, thus avoiding the additional financial scrutiny that the “additional incentives” aspect of the density bonus invokes. To streamline the process, the City has instituted a number of reforms to the development process. Berkeley has established a one-stop permit center, and will assemble various stakeholder groups to discuss both the City’s and the developer’s needs at the outset of the application process.

Overall, Barton states, “While some oppose the Planning Department’s actions, most support the density bonus program and its approval process.”

Accessory Dwelling Units Help Expand Affordable Housing

In 1994, Washington State passed legislation mandating that cities of 20,000 or more accommodate accessory dwelling units (ADUs) in single-family neighborhoods. According to Max Bigby, a housing planner for A Regional Coalition for Housing (ARCH) in East King County, the Seattle metropolitan area has added 300 ADUs in the eight years since the law went into effect. ARCH promotes ADUs as part of an overall solution to addressing the region’s shortage of affordable housing.

As provided in the King County, Washington 2000 Comprehensive Plan, ADUs are expected to improve access to affordable housing, on-site housing for workers and caretakers, housing for extended family members, and rental income for landowners. Complete with kitchen, bathroom, and sleeping facilities, ADUs are located inside, attached to, or detached from the primary home, and provide homeowners with additional sources of income or housing for extended family members. In many communities, zoning laws exclude ADUs from single-family neighborhoods. However, some local governments allow ADUs based on their potential to expand the supply of affordable housing while promoting infill development.

ADUs still fulfill their traditional roles, generating extra income to cover rising taxes or providing living quarters for an elderly person’s caretaker. When housing needs change—children leave home or the homeowner becomes widowed—homeowners may move into the ADU and rent out the rest of the house. “That’s why ADUs are flexible assets,” Bigby explains. “They evolve and adapt to the owner’s needs over time.”

Some Restrictions Remain

Affordable housing advocates, like ARCH, promote ADUs’ benefits and their potential to expand the supply of affordable rental units. Often, ADUs do not require public rental or construction subsidies, resulting in lower overall building costs. ADUs typically cost 25 to 40 percent less to build than a comparably sized unit on a separate lot. Because of the lower costs, ADUs generally rent for less than a traditional unit, so they can provide an affordable housing alternative in many communities. Advocates also point out that ADUs complement smart growth policies by expanding housing within developed areas without changing the character of the neighborhood.

While restrictions against ADUs in single-family neighborhoods have lessened in the Seattle area, some restrictions remain. The homeowner must live in the house and all ADUs must comply with zoning setback and building envelope requirements. Rather than cause problems, as some opponents feared, ADUs generally encourage better housing maintenance, since homeowners can apply some of the rental income to upkeep, asserts ARCH’s Max Bigby.

ADU Zoning in North Carolina

The City of Cary, North Carolina, located near Research Triangle Institute and the Raleigh-Durham International Airport, is facing an affordable housing shortage due to rapid growth in the region during the 1980s and 90s. In 1999, the City commissioned a study to examine its Unified Land Development Ordinance and provide recommendations for revisions. The study recommended that the City take measures to increase densities in targeted growth areas that had existing infrastructure. One suggestion was to revise the City's ADU ordinance to increase flexibility and encourage the development of ADUs. As Shawn McNamara, senior planner for affordable housing in Cary explains, "The current ordinance requires the ADU to be attached to the main house and only allows members of one's family to live in the accessory unit. We needed the extra flexibility to encourage the use of this type of housing in developing areas, both to steer growth to areas, served by existing infrastructure and to provide additional affordable housing opportunities."

Under the proposed ordinance revision, ADUs would only be allowed as part of new Planned Developments or as part of the Town Center redevelopment. The city would continue to place restrictions on maximum dwelling unit sizes, but would not restrict who could live in the accessory unit. Additionally, the City proposes that all parking, design, and access requirements must be met for all its ADUs. Because the ordinance is directed toward providing accessory units as an integral part of its development plan, City officials stated that opposition to the effort was minimal. The City has debated these and other changes to the Development ordinance for months and staff hopes to take recommendations to the City Council in April 2003. "This new flexibility will allow us to create new ADUs in the next few years and hopefully make better use of this affordable housing option," said McNamara.

For information on ADUs in Cary, contact Shawn McNamara, Senior Planner (Housing), Cary Planning Department, (919) 469-4086.

For additional information about the ARCH program, contact Max Bigby, Housing Planner, ARCH, (425) 861-3677.