By Guest Columnist DAN IMMERGLUCK, a professor in the Urban Studies Institute at Georgia State University
In the book, City on the Verge, author Mark Pendergrast points out some of the challenges that the Atlanta BeltLine and the rest of Atlanta face in terms of housing affordability. He argues, for example, that the City should adopt mandatory inclusionary zoning, with a sliding scale to address the truly impoverished, as soon as possible in order to address the problem of declining affordability.
I agree, but I would go somewhat further and argue that, for projects such as the BeltLine to represent responsible and equitable urban redevelopment, they need well-funded, muscular affordability measures that anticipate rising land values and housing costs and put in place a variety of tools to address this easily anticipated outcome. These strong affordability preservation and inclusion tools should be put in place before other aspects of the project are started.
Instead, in the case of the BeltLine, for the first 10 years of the project, affordability was treated as a subordinate issue that could be handled through modest, weakly funded efforts, as a kind of after-thought. The result has been that the market tumult that the BeltLine has stoked has made it much more difficult – and much more expensive – to address affordability problems at this point.
In the BeltLine’s case, there was ample warning (see here and here), going back to 2007, that the project was causing major speculative increases in land and housing prices. In fact, the foreclosure crisis put a brake on these trends for a few years, providing BeltLine leadership with ample time to push a reset button on its affordability planning.
Unfortunately, this did not happen in any major way. It was not until late 2016, roughly five years after speculation and rapid increases in land values resumed, that the leadership of the BeltLine took any steps to ramp up affordability measures.
More recently, there have been very large post-crisis increases in housing prices within a half-mile of the BeltLine (see here and here). These increases are also reflected in rapidly rising rents in the same areas.
At this point, though, what can be done to increase affordable housing options near the BeltLine and across the city? In various places, I have made a number of recommendations, which I break into nearer- and longer-term efforts.
In the short term, examples of measures that should be taken to preserve affordability include:
The City of Atlanta, and its county partners (Fulton and DeKalb) should increase the homestead exemption for owner-occupied properties. While this may appear to be poorly targeted (and I do argue for more targeted efforts below), an increase in the exemption will disproportionately benefit owners of $75,000 or $100,000 homes compared to those who own homes valued at, say, $500,000 or above.
- The City should speed up the process of reclaiming vacant housing for reuse by buyers who commit to providing long-term, affordable rental housing. Other properties should be land-banked for later use for affordable housing. In City on the Verge, Pendergrast suggested a faster implementation of the Judicial In Rem program to help in that effort. This and other efforts to address vacant properties need to be accelerated.
- The City should allocate most of its $40 million affordable housing bond program toward rental housing that is affordable to households with incomes below 50 percent of the area median income (which is equivalent to about $35,000 per year for a family of four). There is far less need for funding for higher-income families, especially those with incomes above 80 percent of area median income. Unfortunately, such programs favor products like down-payment assistance for outright house purchases, because those dollars are easier to get out the door.
As Pendergrast suggested in City on the Verge, the City should pass a citywide mandatory inclusionary zoning ordinance that addresses the needs of the most impoverished.
Meaningful set-aside requirements must target households below 50 percent of area median income. They should also provide additional incentives for owners targeting tenants below 30 percent area median income. The current proposal in the Atlanta City Council covers only the BeltLine and nearby neighborhoods; it should be expanded to include the entire city. Otherwise, developers will seek to avoid the requirements by simply building just outside the inclusionary overlay zone.
Public and private capital sources should be mobilized toward funding the preservation of existing, low-cost rental housing. This may involve the pooling of social impact finance and public sources aimed at rehabilitating unsubsidized units, featuring attractive financing offered in exchange for long-term affordability commitments from landlords.
The City should authorize and float an additional $250 million affordable housing bond. The existing $40 million is woefully inadequate. Long-term affordable rental subsidy will conservatively cost in excess of $50,000 per unit, or more. (Subsidy for down-payment assistance would be cheaper per unit, but much less effective at helping those who need housing assistance the most.) At such costs, $40 million will only generate about 800 units initially (with future recoupment of funds generating more units, but in later years).
Conservatively, the City is losing on the order of 1,000 units of affordable rental housing units per year due to “natural” attrition. Thus, a much larger bond program is needed. For a fast-growing, hot-market city like Atlanta, affordable housing must be viewed as part of the basic infrastructure of the city, just as is public transportation.
In the longer-term, other key steps need to be taken to increase housing affordability, providing for a more inclusive Atlanta over the long run:
The property tax structure in the city (and counties) should be revised to treat affordable rental housing more fairly. Property owners who commit to keeping their rents affordable, or a portion of their rents affordable, over a substantial period of time, should receive lower property tax assessments. Currently, Georgia law makes providing such differential treatment, or tax abatements, quite cumbersome and it is not well designed for smaller, lower-value properties. Instead, existing tax abatement programs have been used to subsidize expensive luxury rentals and high-end mixed-use developments.
- Similarly, lower-income homeowners should receive property tax reductions (e.g., higher exemptions) and “circuit breakers” that limit increases over time. While some programs exist for senior citizens (which likely need to be marketed and serviced more aggressively), there are no such programs for younger low-income homeowners. Many other states (e.g., Michigan, Arizona, Colorado, Montana) offer property tax breaks for lower-income homeowners and renters.
There are also other measures that could be taken to preserve diversity in Atlanta over the long-term. Banking land for affordable housing, improving tenant protections, and legal aid for low-income renters, for instance, are on a longer list. The measures above are just some of the things that local and state leaders could do to provide for a more inclusive Atlanta and BeltLine.
Note to readers: Dan Immergluck’s research concerns housing and housing policy, neighborhood change, urban poverty and racial dynamics, financial markets, and community and economic development. He has consulted to the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the Federal Reserve Bank of Atlanta. He has testified before Congress and the Federal Reserve Board. He has served as a visiting scholar at the Federal Reserve Bank of Atlanta and as a senior fellow at the Center for Community Progress in Washington, D.C.