Needed: Revision of Inclusionary Zoning Ownership Program

Below is testimony from Manna given before the Zoning Commission on November 19, 2013 re: the Zoning Rewrite, focusing on the ownership side of the District’s Inclusionary Zoning (IZ) program. This program requires developers to set-aside 8-10% of a development’s units as affordable (currently split between 50% and 80% Area Median Income units). IZ ownership units have permanent resale restrictions, which require all owners to sell to someone else in their income category for the life of the unit. 

 

Good evening, Zoning Commissioners, and thank you for this opportunity to testify and for the many hours you have put into serving the residents of Washington, DC. My name is Sarah, and I am the Director of Advocacy and Outreach at Manna, Inc. I would like to speak tonight about the ownership side of Inclusionary Zoning regulations, which are similar to Affordable Dwelling Units with long-term resale restrictions that have been integrated into marker-rate condo buildings across NW DC. I am not speaking about rental units; Manna supports including affordable rental units into market-rate buildings and believes rental units can and should target even lower income levels. The ownership side could serve more DC residents and lower income families, but only after certain regulatory and administrative issues are addressed.

In regards to ownership, the economics involved in mixing a smaller percentage of affordable units into a market-rate building need to be taken seriously. DC, along with other high-priced markets across the US, has some serious regulatory and administrative issues that need to be addressed. And DC should look to changes that other cities with longer-running Inclusionary Housing programs have made and continue to grapple with. I will speak about the findings of a study that Manna did on Inclusionary Housing programs in comparable cities like Boston, San Francisco and San Jose. I will submit the study along with my testimony, and I hope the Commission will take seriously the findings and the experiences of affordable owners here and elsewhere.

Rising condo fees threaten to and have economically forced out affordable owners living in market-rate buildings. Boston covered fee increases in one building for a short period of time and San Francisco is grappling with how to help owners facing fee hikes; these issues are also being faced by surrounding jurisdictions like Montgomery County. Currently, condo fees are the only uncapped housing expense for affordable buyers. If we want to continue to integrate affordable units into market-rate buildings, then the District needs to cap or somehow reduce the potential increases of condominium fees, and include this information in all condo documents.

In the interest of creating larger units for families and economically-viable living situations, we believe the District should keep in mind seeing up a robust in-lieu fees system for off-site construction. With on-site development, unit sizes are determined by the make-up of market-rate units in a given development, and are typically studios, one-bedrooms and a fewer number of two-bedroom units. If the District wants to provide longer term ownership opportunities for families or individuals/couples planning to have children, then it should consider available avenues to build larger units.

Finally, the economics and administration of long-term or permanently restricted ownership units need to be evaluated. Other jurisdictions are spending a lot of money buying back units that affordable owners cannot find a buyer for and then renting them out. Other jurisdictions are allowing owners to sell to higher income buyers after 6 months of not being able to find an income-eligible buyer. During the resale restricted period, if an affordable owner is able to find a buyer in their income category, after taking off realtor and closing costs, the owner could leave the sale without enough to purchase elsewhere. This is especially the case for affordable owners in DC who have already used a Home Purchase Assistance loan. Particularly with smaller units, we are setting up a system where affordable owners are funneled back into an affordable rental or out of the District entirely. San Jose’s recapture program ensures both a future funding source for its affordable housing programs as well as the ability for affordable owners to have access to the appreciation of their homes and more easily move into the open market if they need to sell.

In order to make the ownership side of Inclusionary Zoning work and benefit lower income folks in the District, we need to not ignore issues and we need to be creative. We need to create a system that supports affordable housing in the future and allows lower-income families to grow.

 

We need to bridge the growing wealth gap! And homeownership opportunities with access to equity appreciation is one way to do that.

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