Nearly 150 HAND members, partners and friends joined us last week for the launch of GenerationHAND! This standing room only event brought out affordable housing and community development practitioners from nearly every sector within the industry and clearly showed that the appetite for professional development and leadership training is strong among our practitioners who are “on the rise.” What was also equally clear was that our current leaders are just as excited to share their hard-earned knowledge on the inner workings of our industry, and are vested in helping to cultivate a strong slate of leaders for today and tomorrow.
The expert panel answered questions from the audience and the moderator with keen insight and perspectives based on their respective functions. Composed of for-profit and nonprofit leaders the panel was composed of presidents/CEOs, architects, bankers, real estate experts, developers and syndicators. Together they provided tangible and solid advice on ways to shape your future.
Did you miss the event? Keep your eyes open for when we announce the next event later in the year.
For a full listing of the panelists and GenerationHAND background, click here. If you are interested in being apart of GenerationHAND, please email Heather Raspberry.
The federal budget cuts known as sequestration reduced overall discretionary spending and placed budget caps on total defense and non-defense spending. Introduced as part of the Budget Control Act of 2011, these across-the-board spending cuts were put into place as of March 1, 2013. Legislation passed in 2013 lifted the spending caps through fiscal year 2015 but the caps will return in fiscal year 2016 unless Congress acts.
While the impacts of sequestration were widespread, the greater Washington DC area was particularly hard hit by the cuts because of our economy’s dependence on the federal government. Federal government employment in the region has declined steadily since the end of 2011. Federal procurement spending—which had escalated over the past three decades—declined for three consecutive years before upticking slightly in 2014. Procurement spending supports many professional and business service jobs in the region, and that sector has taken a hit. As a result of job losses in the government and professional and business services sector, average wages have declined across the region as we have traded higher wage jobs for lower wage jobs during the recovery.
The effects of sequestration are not likely temporary. Sequestration has fundamental reset the regional economy. According to estimate from the George Mason University Center for Regional Analysis, the federal government’s portion of the region’s economy will decline from about 40 percent today to just 29 percent by 2019.
The regional economy will need to diversify moving forward. Local jurisdictionsacross the region are planning for how to attract new businesses to a new regional economy. The Metropolitan Washington Council of Governments has just launched an initiative on regional economic competitiveness. Thus, there is recognition that things are changing in the region. Moving forward, the region will see higher growth in the health, leisure and hospitality and other services sectors.
These jobs will come with lower wages than what we’ve become used to when the federal government and professional and business service sectors were the primary drivers of job growth.
What are the implications for the region’s housing market?
Despite some selected positive indicators around the region’s for-sale housing market in early 2015, there is growing evidence of a general slowdown in the market in response to slower overall regional job growth. And the lower wages and household incomes associated with economic restructuring in the region are evident in the housing market activity data broken down by price point; the fastest selling, most in-demand homes have been among lower priced homes. We will likely see a slowdown in price appreciation across the region in the coming year, and inventories of lower-priced homes will continue to be limited.
While changes at the federal level will make access to homeownership easier for many, demand for rental housing will continue to be strong in the region in the new economy. As a result of the economic restructuring brought on by sequestration, there will be a greater need to serve households lower down the income spectrum, as well as to serve larger households, including families that may be renters by necessity.
The Washington DC region has been very effective at producing high end rental housing. More than half of all building permits issued in the region last year were for units in multifamily buildings and the rents in those new building have topped over $2,000—or more—for a one-bedroom unit. The rapid increase in rental supply at the higher end was not coupled with similar increases in production at the lower end of the housing market. According to a recent report from the DC Fiscal Policy Institute, since 2002, the District of Columbia lost nearly half of all units renting for less than $800 per month. The study authors concluded that there is virtually no market-rate housing in the city affordable to low-income households; all housing renting for below $800 per month is subsidized housing.
There is some evidence, however, that the market is beginning to respond to the demand for lower-cost rental housing. Or that there will be a slowdown, at the very least, in targeting new construction at the very high end of the market. A recent Washington Post article documented discounts, free rent, and other incentives owners of new multifamily buildings have had to offer to potential renters to get them to sign a lease. An oversupply of rental housing across the region—from DC to Tysons to Rockville—suggests that builders have overbuilt for the high-end market, a population whose growth has slowed as a result of the new economic reality in the region. Greater demand for more moderately-priced rental homes may lead to more diverse construction, including more homes affordable to renters further down the income spectrum. High land costs, however, may mean that the majority of this new construction will occur outside the region’s urban core.
Last year, in addition to targeting the higher end of the market, developers of multifamily rental properties also targeted aggressively single Millennials. Family-sized units have been notoriously hard to come by in the region. But there will be growing demand for larger, multifamily units in the region in the years ahead. As members of the region’s Millennial population age—and marry and have children—some may seek to remain in high-density more urban environments where they will need rental or multifamily housing with two or three bedrooms. At the same time, the region’s population will continue to become more racially and ethnically diverse. Since non-white households tend to be larger, there will be additional needs for larger multifamily rental housing. And even as the economy continues to recovery and wages slowly start to rise, many workers will still be looking for housing where they can split rent, which means additional demand for two and three bedroom units.
The region’s new economy means shifting housing demand. The market will respond to some aspects of changing housing demand, but as the DC Fiscal Policy Institute and other local jurisdictions have shown, new supply has not been able to outpace losses in market-rate affordable housing. In order to ensure that workers in the new regional economy can find housing they can afford, we will need continued subsidies to meet housing needs for the lowest-income workers and land use and regulatory strategies to incentivize the production of housing affordable all along the income spectrum and for households of different sizes and types.
The Housing Association of Nonprofit Developers is proud to share our newest program offering: Generation HAND, an emerging leader initiative designed to support the unique needs of practitioners who are on the rise within the affordable housing and community development industry. The goal of this initiative is to provide needed tools and guidance to our developing leaders as they pursue successful careers in the public and private sector.
The program will launch with an informative and in-depth panel discussion followed by a dynamic networking event for participants. The panel discussion will include seasoned professionals representing the various segments of HAND’s membership – Real Estate Development, Philanthropy, Finance, Government, Professional Firms, etc. Topics will include tips for professional success, personal anecdotes, industry trends, best practices, lessons learned and more!
We hope you will join us for this landmark event. By having a range of perspectives represented by leading industry experts who understand the inner workings of the field, a real opportunity for a well-rounded experience for all attending will occur. These kinds of interactions allow the next generation of real estate professionals to learn from this generation of leaders…and vice versa.
As a result of strong demand and relatively high wages, the Washington DC region is one of the most expensive areas in the country. Recent arrivals have driven up rents dramatically in the District of Columbia over the past decade, as the increase in the number of renter households has far outpaced overall population growth. A report by GOVERNING magazine reports that only the city of Portland is gentrifying faster than DC. Rents in some of the region’s suburban neighborhoods rival those in the District’s in-demand neighborhoods. According to the Census Bureau’s American Community Survey, in 2013, the median rent in Arlington County was over $1,800 and the median rent in Fairfax County was not far behind at $1,764.
The Washington DC region has become increasingly unaffordable to many of the workers who serve the community. There can be repercussions for persistent high housing costs and a lack of a sufficient supply of affordable housing. Recent reports have demonstrated that more young workers are deciding to pick up and move from high cost cities to places with more affordable housing. Insufficient housing that is affordable to the workforce puts at risk the sustainability of the economy as the region has increasing difficulty attracting and retaining workers.
One key reason rental affordability remains a challenge in the region is that we are not building enough overall housing. Indeed, recent research and commentary have suggested that limited housing development has propped up housing costs in high cost cities. A plethora of reasons—including high land costs, local zoning and land use regulations, NIMBYism, and insufficient federal and state resources—contribute to the difficulty of producing enough affordable rental housing in places like the Washington DC region.
The region’s growing population and shortage of available land in desirable locations means that it is difficult to build housing that is priced at levels affordable to low- and moderate-income households. As federal subsidies for affordable rental housing continue to fall short of the need, the role of local governments in the development and preservation of affordable housing has become increasingly important. High cost regions—like the Washington DC metro area—need to be particularly innovative and strategic to find ways to evolved considerably.
Are there lessons to be learned from other high-cost markets around the country? Below are seven approaches that have been adopted by some high-cost jurisdictions to increase the supply of affordable housing. Some of the policies described below also have been implemented by some jurisdictions in the Washington DC region, but there may additional guidance from other cities and counties about how to design programs to make them more effective.
1. Tie affordability requirements to increased density
To accommodate the demand for housing in the growing Washington DC region, it is becoming increasingly important to allow for the construction of more housing, in taller, denser developments. Many of the regions suburbs—including much of Arlington, Bethesda, and Tysons Corner—already have already become more “urban” than “suburban” and this trend will continue over the coming decades. In many places around the region, height and other zoning restrictions could be relaxed to expand housing supply, and these development incentives should be linked to the provision of affordable housing. “Inclusionary upzoning,” which links affordability requirements to increased density, is a policy used in jurisdictions across the Washington DC region, including Arlington and Fairfax counties, and other high cost markets have adopted policies that aggressively push for the development of affordable housing as market of re-zonings, including New York, Los Angeles, and San Francisco.
2. Make use of public land for affordable housing
Reducing the land costs of a residential project can be a valuable way to foster housing affordability for lower-income residents in high cost areas. Across the country and in the Washington, DC region, local jurisdictions are taking a broad view of public land development opportunities, exploring the potential for affordable housing on not just vacant publicly held sites but also under-utilized parking lots, sites where no-longer-needed public facilities are located, and—increasingly—as part of the development of new public facilities such as community centers, libraries, fire stations, and police stations.
3. Establish commercial linkage fees to fund affordable housing development
Commercial linkage fees are a form of impact fee assessed on new commercial developments or major employers based on the need for housing generated by new and expanding businesses. Revenues generated by the fee can be used to help fund the development of affordable housing opportunities within the locality. A variety of methods can be used to determine appropriate linkage fees; many jurisdictions have adopted as Jobs-Housing Nexus Analysis approach.
Seattle is debating the suitability and specific design features of a commercial linkage fee policy, which advocates claim could produce five to 10 times the amount of affordable housing the city gets under its current incentive program. In Boulder, Colo., city leaders are considering a commercial linkage fee—on top of their existing capital facilities impact fee—to mitigate the upward pressure on home prices and rents resulting from strong job growth. It is estimated that the fee could bring in between two and three million dollars a year for affordable housing in the city of Boulder.
4. Require mixed-income developments near transit
In many cases, investments in transit and other infrastructure catalyze increases in the values of properties that are well-located near the new amenities. While this growth can be positive for the overall neighborhood, it can also threaten the continued availability and opportunities for the construction of new affordable housing, especially for families with very low incomes.
Chicago recently amended its affordable housing ordinance to provide incentives to developers that build more than half of a project’s required affordable housing units in transit-served locations. The new incentives would result in a greater number of mixed-income properties near transit and would benefit lower-income households, who are more likely than higher-income households to use transit.
5. Revise and/or streamline the development review and re-zoning process
A recent report by the Urban Land Institute and Enterprise Community Partners offers a set of recommendations for how to make the development review process more efficient to make it easier and less costly to produce below market rate housing. Some of the key recommendations related to the development review process include coordinating steps in the review process, creating clarity in the public engagement process, and making explicit the incentives associated with affordable housing provision.
In Los Angeles, the Planning Department is rewriting the city’s 70-year old zoning code to better reflect the community’s needs and the market realities developers face. The goal is to create clearer standards and more focused community plans that will help expand the supply of affordable housing in the city
6. Review and revise parking requirements
Minimum parking standards can make it more difficult to build affordable housing by increasing the overall cost of the development and by reducing the amount of housing that can be built on site. To help ensure that parking requirements do not impeded new affordable housing construction, local jurisdictions can revise parking standards for all new development or reduce or waive standards for certain types of housing (i.e. affordable or housing for older adults, or units located near public transit) on a discretionary basis. Short of making changes to parking requirements, jurisdictions could consider studying the current parking policies and local parking demand to better understand residents’ parking needs, particularly in developments located near transit.
The city of San Diego conducted a parking study in 2011 that analyzed local parking needs, reviewed best practices from other places around the country and made recommendations for how to modify the city’s parking requirements. Key considerations from the report include differentiating parking requirements based on building type and with consideration of access to transit and walkability of the neighborhoods.
7. Experiment with new building types
As housing needs grow and change, there are opportunities to encourage experimentation around building types. Many high-cost jurisdictions have adopted accessory dwelling unit (ADU) ordinances, which outline the requirements for creating small housing units set aside either within or attached to a single-family home or located on the same lot.
Portland, Oregon is just one example of an ADU ordinance that has successfully create smaller, less expensive housing units throughout the city. Other jurisdictions have explored zoning changes that would allow for the construction of so-called “tiny houses,” which have gained popularity in recent years.
In San Francisco, one way that has been suggested to spur affordable housing development is to provide developers with an opportunity to experiment with different housing models, including co-housing and other shared housing models. While not allowed under typical zoning regulations, the experimental projects can offer some evidence about the viability of new housing models to expand affordable housing options.
Watch the Video Response:
Next month: Federal Spending and the Effects of Sequestration on the Regional Housing Market
What’s working in emerging neighborhoods around the country? Find out from the people making it happen. Community-based organizations from every corner of the country will converge in Washington, DC on March 4-6to showcase the effectiveness, resolve and passion of those working daily to improve lives in America’s most challenged neighborhoods.
Scholarships are available to HAND members — $100 for 3-day registration and $50 for 1-day registration. Contact Heather Raspberry to receive scholarship funds. Take advantage of the $225 early bird rate through February 6. Use the discount code BB&T to take an additional $25 off conference registration. BB&T is the founding sponsor of the People & Places Community Conference. Register now.
By Dr. Lisa A. Sturtevant Vice President of Research National Housing Conference
As we begin 2015, what are some of important indicators of the health of the local housing market and the need for affordable housing? Several key economic and demographic trends suggest slower growth in housing sales and price growth, continued rising demand for rental housing, and rising affordability challenges for many.
Job Growth in the Washington DC Region Has Slowed
After fast growth in 2010 and 2011, the pace of job growth in the Washington DC region has slowed considerably (see figure 1) in recent months.
Figure 1:
Over the past 18 months, annual average job growth in the region has totaled about 17,000 jobs; in 2011 and 2012, the region added over 41,000 jobs on an annual basis. The slowdown in job growth has been driven by losses in the Federal government (see figure 2) and professional and business services (see figure 3) sector, the region’s two largest and among the highest-wage sectors.
Figure 2:
Figure 3:
Job growth has been stronger in lower-wage sectors, (see figure 4) including the leisure and hospitality and construction sectors. The region’s employment growth will be tied increasingly to growth in sectors that have traditionally included lower-wage workers.
Figure 4:
Home Prices are Still Increasing Across the Region, Although Both Home Sales and Price Growth Have Slowed
In November 2014, the average sale price in the Washington DC region was up just 1.4 percent (see figure 5) compared to November 2013. Prices were flat in the District of Columbia, down three percent in Suburban Maryland and up four percent in Northern Virginia.
Figure 5:
This slowdown in price growth follows double digit price appreciation in many parts of the region in late 2012 and early 2013. At the same time price growth has moderated, sales activity has slowed and inventories are rising. These trends point to a cooling for-sale market in 2015.
Rents Continue to Rise and Rental Vacancy Rates Remain Historically Low
Between 2000 and 2013, median rents in the Washington DC region have nearly doubled (see figure 6), and in 2013 the median monthly rent for the region was $1,481. Median rents remain much higher in close-in suburban jurisdictions, particularly Arlington County ($1,820 per month), Fairfax County ($1,764 per month), and the city of Alexandria ($1,592).
Figure 6:
Rental vacancy rates edged up very slightly in 2013 although the regional rental vacancy rate remains below historical averages (see figure 7) . Steadily rising rents and low vacancy rates reflect the strong demand for rental housing in the region, which will continue into 2015.
Figure 7:
Housing Affordability Remains a Significant Challenge.
While the median household income in the Washington DC region is high relative to most places across the country, there are thousands of individuals and families with modest incomes and stagnant wages.
Low- and moderate-income households often struggle to find affordable housing in the region. Twenty percent of working households (see figure 8) —or nearly 190,000 households that earn up to 120 percent of the area median income—spend more than half of their income each month on housing.
Figure 8:
In DC and Montgomery County (see figure 9) , more than a quarter of all renters—including many higher-income renters—are severely cost burdened.
Figure 9:
And in our region, the typical elementary school teacher, police officer, or nurse (LPN) cannot afford to buy the typical home (see figure 10).
Figure 10:
Many others cannot afford the typical rent for a one-bedroom apartment (see figure 11) . When households spend a disproportionate share of their income on housing, it leaves less for other necessities, such as food, child care, transportation and health care. It also leaves less for non-discretionary spending—the type of spending that can contribute to local economies.
Demographic and Economic Trends Point to Growing Needs for Affordable Housing
As a result of the changing structure of the Washington DC area economy, along with the aging of the Baby Boom population (see figure 12), the increasing racial and ethnic diversity—particularly in our suburbs (see figure 13), and the projected household growth among Millennials, there will be a growing need throughout the region for smaller homes, more multi-family housing, and more rental housing options.
Figure 12:
Figure 13:
Different parts of the population will be competing for the same types of more affordable housing in accessible locations, which will continue to drive up costs if supply does not keep up with demand.
Affordable housing needs will vary around the region and even with jurisdictions. And while it is important that local counties and cities develop housing strategies that are responsive to their local needs, it is just as important that jurisdictions throughout the region work together to ensure there is a sufficient supply of housing to meet the needs of a changing population.
As We Begin 2015…
The Washington DC region’s economy and housing markets will continue to be in a period of transition. Despite slower job growth and declining prices, housing affordability will remain a key challenge, largely as a result of slow-growing wages and economic restructuring. Access to homeownership will theoretically be opened up as a result of a change to FHFA’s downpayment policy which allow for mortgages with as little as a three percent downpayment.
However, potential homebuyers still face steep prices in many parts of the region. For example, less than 16 percent of percent of homes sold in November 2014 (including single-family, townhouses and condominiums) were priced below $200,000 which is a price that could be affordable to a household earning about $50,000. On the rental side, supply to the higher end of the market has been robust in many neighborhoods, but there remains a significant shortage of housing that is affordable to households with low incomes. It will be important to continue to seek ways to expand supply to meeting needs for more affordable housing.
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Next Month: New Construction: Where, What Types and For Whom?
The George Mason University Center for Regional Analysis (CRA) has released a new update from its Census series that traces patterns of migration and population growth in the Washington metro area relative to employment growth. The report, entitled, “Characteristics of Population Change and Migration in Washington Metro Area (WMA) and Other Major U.S. Metro Areas, 2011-2012,” illustrates that, in spite of slower employment growth in 2012, the Washington metro area continued to experience rapid population growth. The report further documents how the Washington metro area still outpaced other major metros in terms of attracting young, educated migrants during 2012.
Dantes Partners offers a variety of services to the Washington, D.C. affordable housing community. The company’s success is driven both by its technical expertise and its ability to extract value in even the most complex transactions. Such was the case with a slate of affordable housing properties the Dantes Partners recently worked on in order to create affordable homes for a variety of people in need, ranging from seniors to renters with low-incomes to professionals looking to purchase a home.
With partner Roadside Development, Dantes Partners is currently constructing a 90-unit senior housing development within a mixed-use property, which includes direct access to a new Giant grocery store and public transportation. As developer/owner Dantes Partners identified and closed the acquisition financing and the structured financing. The company also used a wide array of additional funding tools to make this development a reality, including LIHTC, soft debt from the Department of Housing and Community Development, and tax exempt bonds from DC Housing Finance Agency.
Notably, Dantes Partners recently won D.C.’s solicitations for proposals for the acquisition and development of a 36-unit for-sale multifamily property. Originally abandoned, the building was in need of substantial renovation. By using private equity and conventional debt, Dantes Partners has transformed the building into a green, transit-oriented, affordable and workforce condominium community.
Since its founding, Dantes Partners and its Managing Principal and Founder Buwa Binitie have closed more than $225 million of unconventional real estate transactions and created more than 700 workforce and affordable housing units.
Buwa Binitie (pictured above), Managing Principal and founder of Dantes Partners, noted “We have been successful in adding value beyond the numbers to these properties.”
The company has found that its HAND membership is invaluable, specifically the HAND-sponsored trainings and insights into market dynamics.
HAND is pleased to spotlight Dantes Partners, who certainly contribute to our organization’s COLLABORATION, INNOVATION, and TRANSFORMATION!
The Housing Opportunities Commission (HOC) and Montgomery Housing Partnership (MHP) are pleased to present “A Dialogue on the Housing Program of the City of Vienna, Austria” with Wolfgang Förster, Chief of Housing Research, City of Vienna, Austria on Tuesday, November 12, 2013 from 2:00 PM – 3:30 PM at Bethesda North Marriott Hotel and Conference Center, 5701 Marinelli Road, Bethesda, MD 20852. Please click here to view the flyer with additional information.
The George Mason University Center for Regional Analysis (CRA) is pleased to announce the release of a new working paper entitled, “Outlook for the I-95 Corridor in Fairfax and Prince William Counties.” This paper examines the current situation in the corridor, documents forecasted land use, transportation, and economic growth patterns, and identifies critical issues for consideration by local and regional policymakers.The paper can be downloaded by clicking here.
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Omni Shoreham Hotel Room Block: For attendees looking to secure overnight accommodations on May 25th, HAND has secured a rate starting at $189 for conference attendees. There are a limited amount of rooms available, so visit this link todayto reserve your room. May 10th is the last day to secure a room at the discounted rate.
Cancellations & Changes: If you wish to cancel or change your registration for the Annual Meeting & Housing Expo, please send a request in writing to annualmeeting@handhousing.org. All cancellation requests made prior to April 27th will receive a 50% refund. For cancellation requests made after April 27th, no refund will be provided.
Door Prizes: Are you interested in donating a door prize to this year’s Annual Meeting? Email annualmeeting@handhousing.org to coordinate with our team.