Affordable Housing: A Look at Programs in two of North Carolina’s Fastest Growing Cities

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houseSummer 2014 saw increased attention paid to the issue of housing affordability in America with reports by Harvard’s Joint Center for Housing Studies, the National Low Income Housing Coalition (NLIHC) and the New York Times highlighting the squeeze low and middle income households face from ever-increasing housing costs and sluggish wage growth. This coincided with the unveiling of New York City Mayor Bill De Blasio’s ambitious and critically acclaimed Housing New York plan in May, calling for a $41 billion investment to supply 200,000 new and preserved affordable housing units across New York City’s Five Boroughs. The plan achieves these goals through an aggressive inclusionary zoning program and other policies to address housing inequality in one of the nation’s most expensive cities. This renewed attention to the issue of housing affordability prompts a review of inclusionary zoning as a tool to promote affordable housing and an assessment of current programs in development in two of North Carolina’s largest and fastest growing cities, Charlotte and Raleigh. 

Affordable Housing: Where are we now?

As highlighted in NLIHC’s Out of Reach 2014, an annual report addressing housing affordability in America, anemic housing supply growth that followed in the aftermath of the 2008 Credit Crisis has contributed to increased housing costs at the same time wage growth has lagged. This, coupled with tighter lending standards, has left fewer and fewer low and middle income individuals eligible for a mortgage, further increasing demand for rental housing and precipitating an increase in the cost to rent. The continued trend of dwindling federal dollars available to fund affordable housing programs has prompted many communities to explore local regulatory tools to address the crisis.

Inclusionary Zoning

Voluntary inclusionary zoning (IZ) is one of several tools that North Carolina cities and towns have at their disposal to address the availability of affordable housing. Previous blog posts have provided a primer on inclusionary zoning, with a more detailed publication available from the School of Government covering intricacies of the tool. In its basic form, IZ is a zoning tool that incentivizes or requires real estate developers to set aside a portion of units in development to low and middle income individuals. Programs vary significantly in level of complexity across the U.S. and can range from mandatory to incentive-based. The remainder of this blog post will focus on the genesis and current state of inclusionary zoning programs in Charlotte and Raleigh, the state’s largest and fastest growing cities, each facing their own affordable housing challenges.

Charlotte

In 1999 the City of Charlotte Planning Department established a stakeholder group to assess Charlotte’s affordable housing needs and a strategy to address the community’s worsening housing gap. After much research and community outreach, in 2007 recommendations were outlined in the city’s Housing Charlotte Plan to identify five affordable housing solutions for consideration, one of which was an incentives-based inclusionary housing policy. In June of 2011 City Council adopted an action plan to research eleven regulatory and incentives-based tools addressing affordable housing in the city, ultimately focusing on incentive-based inclusionary zoning. After further refinement, in 2013 the City of Charlotte adopted its Voluntary Mixed Income Housing Development Program to promote housing diversity through private sector development of affordable housing. The voluntary program targets Census block groups within single and multi-family zoning districts that are at or above city-wide median home value. Within these target areas, the incentives-based program permits developers to build up to 3 dwellings per unit area (DUA) above base density in specified single family districts, and 2-3 DUA above base density across multifamily districts. Additional conditions require that affordable units be mixed throughout development and that exterior design not vary between affordable and market-rate units. City planning continues to refine the program, exploring means of better promoting its use through expedited permitting and the reduction or elimination of developer fees. It is early days for Charlotte’s inclusionary housing program; however, its adoption is well timed to benefit future development as the city prepares for significant continued growth.

Raleigh

While policy and action items within Raleigh’s 2030 Comprehensive Plan call for promotion of mixed income neighborhoods, expansion of the city’s affordable rental program, and increased zoning for mixed income development, no specific inclusionary zoning policy has been included in the city’s recently adopted Unified Development Ordinance (UDO). Historically, tools used by the city to address affordable housing have consisted primarily of low cost financing options utilizing federal, state and local funding, as well as prevention-based programs to educate and assist low income target populations for affordable housing. In the fall of 2012, the City of Raleigh engaged the Triangle District Council of the Urban Land Institute to explore and discuss the economic and market considerations of adopting an inclusionary zoning program. The Council convened a Technical Assistance Panel of market experts including developers, attorneys, city officials, and academics to provide a set of recommendations for how the city should move forward on the topic. Ultimately, the panel identified a number of economic issues that raised questions about the viability of an inclusionary zoning program and debate on the topic is ongoing. More recently, in July of 2014 Raleigh officials participated in an affordable housing panel with representatives from Durham and Chapel Hill, where inclusionary programs are in place, to revisit the topic and assess options for moving forward.

Moving Forward

As cities throughout North Carolina continue to face tremendous growth, implementation of inclusionary zoning programs will play an important role in maintaining housing affordability and preventing the housing inequality issues that New York City and other large urban centers now face. While the ultimate success of inclusionary programs in Charlotte and implementation of programs in Raleigh is still unknown, progress for their implementation remains a priority.

Tanner Dudley is a Master of City and Regional Planning candidate at UNC-Chapel Hill and a Fellow with the Development Finance Initiative.

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