Affordable Housing Strategies
- Housing and transportation are most household's two largest expenditure categories, and are a major financial burden for many lower-income households.
- Affordability refers to households' ability to purchase essential goods and services, and so depends on their ability to control costs, for example, to reduce housing and transport expenditures so more money is available for food, healthcare and education.
- affordability applies primarily to lower-income households that have difficulty purchasing basic goods.
- the ability to save money increases affordability and economic security.
- Households often make trade-offs between housing and transport costs, so it is important to consider them together: a cheap house is not truly affordable if its isolated location leads to high transportation costs, and a more costly house may be most affordable overall if located in an accessible, multi-modal neighborhood where transport costs are minimized.
- In the past, housing experts often defined affordability as households spending less than 30 percent of their budget on housing, including rents or mortgages, property taxes, maintenance and repairs, and basic utilities, but the newer approach defines affordability as households spending less than 45 percent of their budget on housing and transportation combined.
- affordable housing options should be flexible and responsive to changing needs.
- Maintain Older Housing
On average, houses depreciate 1-3 percent annually, which is good news for affordability in communities with an abundant supply of older but still functional houses. In such areas, providing affordable housing may involve helping low-income households repair and weatherize their homes to keep them safe and reduce utility bills. This may require subsidies or low-interest loans.
- Government Subsidized Housing
Governments can sponsor and subsidize development of social housing to meet specific needs, such as seniors, people with disabilities, and low incomes.
often the only way to serve unmet housing needs, and governments are often able to coordinate and mobilize resources unavailable to private developers, but it tends to have relatively high costs due to the complexity of government administration, and can generally serve only a small portion of total affordable housing demands.
Increasing rent subsidies in a market with limited affordable housing supply may favor some groups (those that qualify for the subsidy) to the detriment of others, and can contribute to rent inflation. Only if increased subsidies are implemented with policies that increase housing supply can all lower-income households benefit.
- Urban Fringe Development
Public policies can encourage development on inexpensive urban-fringe land. Using mass production building techniques, developers can produce large numbers of relatively cheap housing, but sprawled development tends to have high infrastructure development costs and imposes high future transportation costs on residents and communities.
Such housing can be a curse to lower-income households, if after moving to an automobile-dependent area they experience an economic shock, such as reduced incomes, a vehicle failure or crash, or fuel price spikes. This explains why sprawled areas tend to have higher foreclosure rates than more central, multi-modal locations: improving transport options increases economic resilience.
- Affordable Housing Mandates ("Inclusionary Zoning")
Inclusionary zoning requires developers to sell or rent a portion (typically 10-20 percent) of the units they build at below-market prices. Like Robin Hood, it forces higher-income households to cross-subsidize their lower-income neighbors. If required of all development in an area these costs are partly capitalized into land values, minimizing the burden on individual developers. However, this strategy is only successful if new housing demand is very strong, if not, developers build fewer units, particularly moderate priced units, which can result in less total affordable housing supply.
- Reduce Infill Development Costs
Allow and support owners of existing urban properties to increase density, for example, by converting a garage or basement into a rentable suite, adding a story, or replacing single-family with multi-family housing. Since wood-frame construction tends to be cheapest, and elevators add significant costs, the most affordable housing tends to be low-rise (two- to five-story) townhouses and multi-family, although mid-rise (five- to ten-story), and high-rise (more than ten story) buildings may be relatively affordable where land prices are very high. The Missing Middle refers to a variety of low-rise housing types that are particularly suitable for urban infill.
This development strategy typically involves policy reforms that allow smaller parcel sizes and subdivisions, support condominium and cooperative ownership structures, allow higher densities and building heights, reduce minimum parking requirements, and streamline the building approval process.
This tends to be the most cost effective overall, because it minimizes infrastructure and future transport costs, including residents' vehicle expenses, and indirect costs such as road and parking infrastructure requirements, congestion, accidents and pollution. By providing more affordable transport options that residents can use if needed, such as if they lose their job or their car breaks down, this strategy increases economic security.
- Affordability analysis should be comprehensive, taking into account total housing costs (including utilities, taxes and maintenance) and transportation costs, considering both short- and long-run impacts.
- No single strategy can meet all affordable housing needs, most communities need a combination.
- Some lower-income households need help repairing and maintaining their homes.
- Government sponsored and subsidized housing is important to serve people with special needs, but can only address a small portion of total affordable housing demands.
- Urban fringe development can provide cheap housing but tends to have high infrastructure and future transportation costs, and so is only truly affordable if planned and located to maximize accessibility and transport options.
- Inclusionary zoning may provide a modest amount of affordable housing where demand is very strong, but should otherwise be avoided to prevent spoiling the market for new housing construction.
- Removing unjustified restrictions and costs for urban infill is generally the most cost-efficient and beneficial option overall, but is challenging due to local opposition, and because its benefits are widely dispersed and so has fewer advocates. Our challenge is to promote, Yes In My Backyard!