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Are We There Yet? Affordable Housing Yields Revenues

Editor's Note: This excerpt from Are We There Yet? makes an economic case for affordable housing, providing specific examples of the type and amount of revenue affordable housing can deliver to local governments and to local businesses. Yet, despite the revenue generating possibilities, producing enough affordable housing to keep pace with demand continues to be a challenge. This has led to the formation of numerous collaborative efforts across the country focused on developing the financial tools and the political will to increase the production of affordable housing, particularly in high-access neighborhoods well served by transit. 

A 2012 study by the National Association of Home Builders shows that affordable housing not only helps people in need, it also pumps millions of dollars into the economy and creates hundreds of jobs. The study, by NAHB senior economist Elliot Eisenberg, looked at the impact of building new apartments using low-income housing tax credits in Denver’s 10-county metropolitan statistical area, primarily along transit corridors.

Eisenberg concluded that in the first year this development provided 732 jobs, resulting in $57.6 million in local income as well as $5 million in taxes and other revenues for local government. He also found that the “annually recurring impact,” once the new apartments are occupied and residents are paying taxes, would be $16.7 in local income, $2.3 million in taxes and revenues for government, and 192 local jobs — impacts that are the result of the new apartments being occupied and residents paying taxes and otherwise participating in the local economy year after year.

If You Lived Here You
Would Be Home By Now

The popular Walk Score website, where you can calculate the walkability of any address, now also helps you find apartments based on your commute time. Enter the address of your workplace, choose how much time you are willing to spend commuting and whether you want to drive, walk or bike, take the bus or train, and Walk Score finds apartments that optimize your commute.

Walk Score also helps you find an apartment within walking distance of the subway stop or express bus station nearest your office. And the “Walkers’ Paradise” feature allows you to find apartments in the most walkable neighborhoods. The website also notes that:

  • The longer your commute, the more likely you are to be overweight, have high cholesterol and suffer from neck and back pain. (Source: Gallup-Healthways Well-Being Index.)
  • Car ownership costs are the second largest household expense, with the average household spending more on their cars than on food and health care. (Source: Department of Labor’s Bureau of Labor Statistics.)
  • People who live in walkable neighborhoods are happier, healthier and more likely to volunteer and to entertain friends at home. (Source: University of New Hampshire.)

Eisenberg admits that even he was surprised by the size of the total economic impact, which he estimated to be about $200 million over 10 years. He told a meeting of the Denver Home Builders Association that “This type of housing not only provides enormous benefits to residents but it is an ongoing economic stimulus in terms of jobs and local income for the surrounding community as well. Many people think these renters don’t contribute to the economy. After all, they don’t have much money, or they wouldn’t be living in tax-credit properties. The flip side is they spend almost every dollar they earn . . . on food and services, health care, educating their kids and so on. For the city that creates a tremendous source of tax revenues. And all their money is spent locally.”


Even before the Great Recession, cities were behind the eight ball when it came to building affordable housing. Now, at the moment that so many contracts on subsidized housing units are expiring, the recession has further reduced their resources, and Congress has cut back on federal affordable housing programs as well. The largest source of funding for affordable housing has been the “low-income housing tax credit” (LIHTC), which provides dollar-for-dollar reductions in investors’ federal income tax as an incentive to get private sector investment in affordable housing, which must remain affordable for 30 years – a program signed into law by President Ronald Reagan as part of the 1986 Tax Reform Act.

Top 5 regions that are growing in opportunity areasAll but 16 states have added transit proximity to their scoring criteria when they rank the projects that have applied for tax credits — acknowledging that these locations also lower transportation costs.

The problem in this economy, according to a 2009 study by Harvard’s Joint Center for Housing, is that as a result of the credit market meltdown, the corporate investors on whom the program relied — primarily large national banks and Fannie Mae and Freddie Mac — have swung from profitability to loss, with the result that they can no longer use tax credits. “As a result, demand has plummeted and the price of LIHTCs has fallen,” write the study’s authors, “creating funding gaps in projects that had received tax credit allocations in 2007 and 2008 but had not yet sold them. Thousands of projects and tens of thousands of units that would have otherwise been bought or rehabilitated stalled.”

Cities are also trying to entice developers to build affordable housing by providing a variety of other incentives such as property tax abatements, fee waivers, density bonuses and parking reductions. Many cities have considered “inclusionary zoning,” which requires developers to set aside a percentage of units as affordable housing in otherwise market-rate projects — a strategy pioneered by Montgomery County, Maryland, the sixth wealthiest county in the U.S.

Montgomery County has built more than 10,000 affordable housing units mixed in with market-rate projects since 1974. But critics of inclusionary zoning contend that it is an “indirect tax on developers.” Massachusetts’ Chapter 40B, which requires a set-aside of affordable units in all apartment and condo projects in that state, only narrowly survived a ballot initiative to repeal it in 2010.

In the absence of an inclusionary housing policy, affordable housing usually ends up getting negotiated on a project-by-project basis, which often leads to proposed projects becoming a protracted battle between residents, developers and other local interests.

Sometimes, however, the results are good: The Development Commission in Portland, Oregon, used a developer agreement to convince the major landowner in the popular downtown-adjacent Pearl District to build affordable housing in return for public improvements that increased the value of his property. In return for these public investments, the landowner built 7,500 housing units for families with a mix of incomes that mirrored the city’s population as a whole: 33 percent upper income, 20 percent middle income, 20 percent moderate income, 13 percent low income, and 14 percent very low income.

Zoning codes are also being rewritten to promote diverse housing choices and prices that suit the needs and budgets of singles, seniors, families with children, couples without children, and large extended families. California, for example, requires that local jurisdictions grant density bonuses of 20 to 35 percent for projects that include a percentage of affordable units and — depending on the level of affordability — developers are also offered parking reductions, which reduces the cost of development and increases the profitability.


The severity of the affordable housing shortage has also prompted government agencies to partner with charitable foundations, private investors and community developers to create financial resources that can be used to produce and preserve affordable housing near transit and provide other important amenities. Funds have been created in the San Francisco Bay Area, the City of Denver and in Washington, D.C, and funds or other types of financial tools are being considered in the Twin Cities, Phoenix, Chicago, Seattle, Salt Lake City, Atlanta and Los Angeles.

In the San Francisco Bay Area, the $50 million Transit-Oriented Affordable Housing Fund (TOAH Fund) was created to provide flexible financing that allows non-profit and for-profit developers to purchase and/or develop property near public transportation throughout the nine-county region. The Great Communities Collaborative — a group of regional and national nonprofits and philanthropic organizations that includes Reconnecting America — sponsored the work that went into creating the fund with the goal of promoting the development of permanently affordable housing, including supportive housing (housing and services), as well as critical neighborhood services and amenities including childcare, social services, fresh food markets and retail.

The revolving loan fund is anticipated to allow developers to build on 20 to 30 acres of land and construct up to 4,000 units of affordable housing. It was jumpstarted by the Metropolitan Transportation Commission, the metropolitan planning organization for the nine-county region, with a $10 million investment. Other TOAH investors include Morgan Stanley and Citi Community Capital, the Ford Foundation, the San Francisco Foundation and Living Cities, a collaborative of national funders; and capital from a consortium of six community development finance institutions (CDFIs). One of the six CDFI consortium members — the Low Income Investment Fund — is the fund manager.

Continuing concerns about affordability — and the recognition that it is best to build this affordable housing in communities that are “complete” — are also prompting people to join forces by creating “equity collaboratives” that focus on the production and the preservation of affordable housing and on providing lower-income people with greater access to economic opportunity in regions that have or are building transit systems. The Great Communities Collaborative in the Bay Area was one of the first, and other collaboratives have started up in the Twin Cities, Denver, New York, Seattle and Los Angeles.

Denver’s newly formed “Mile High Connects” equity collaborative is being supported by the Ford Foundation along with several local foundations and local banks to make the case for building affordable housing near the new $6.7 billion transit system. The Central Corridor Funders Collaborative in the Twin Cities is working on a range of strategies to get the most out of the light rail line now under construction between downtown Minneapolis and downtown St. Paul, including ensuring that small businesses along the line aren’t hit hard by the transit construction.

The “community compact” negotiated by the Baltimore Neighborhood Collaborative over a $1.6 billion light rail project has become a national model for bringing communities together to articulate what — in addition to affordable housing — residents want from their public investment in transportation. This includes jobs and job training, community revitalization and economic development, progressive environmental initiatives, and protection against involuntary displacement. The collaborative is buying and stabilizing vacant properties in “livable communities where people can find jobs, go to school, and live safe, healthy lives.”

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