Along with the Housing Commission and several other groups, the Alliance for Housing Solutions recommended that Arlington County defer decisions about changes to income targeting for homeownership units under the Columbia Pike Neighborhoods Form Based Code (N-FBC) and include those decisions in the five-year update to the Affordable Housing Master Plan.
“In order to be responsive to public input and concerns related to increasing the AMI, staff is recommending an indefinite deferral of this item.””
County staff responded the same day the letter was delivered: “In order to be responsive to public input and concerns related to increasing the AMI, staff is recommending an indefinite deferral of this item. Based on additional guidance from the County Board, staff will revisit tools to enable homeownership opportunities along Columbia Pike. Staff will work with community stakeholders when exploring these ownership tools and strategies.”
Read the full letter AHS submitted on October 15, 2020:
Dear Chair Garvey and Members of the County Board:
We are writing on behalf of the Alliance for Housing Solutions and the undersigned supporters to address the proposed update of the income targeting for homeownership units under the Columbia Pike Neighborhoods Form Based Code (N-FBC). We recommend that the County Board defer action on the proposal so that some key flaws in the policy can be addressed, preferably as part of the pending five-year update of the Affordable Housing Master Plan.
We appreciate the staff’s work on this proposal and their willingness to listen, make adjustments and add to their analysis and presentation as it has moved forward. We compliment them for their continued outreach to interested and concerned groups despite being difficult to carry out a public engagement process in the current environment. Staff appropriately adjusted their proposal based on this community input earlier in the year. Unfortunately, this adjustment did not resolve our concerns and we still have significant apprehensions about potential negative impacts of this policy as it is currently written.
All development projects under the N-FBC are required to set aside between 20% and 35% of the net new units for affordable housing. The affordable housing units in most cases must be affordable to households earning up to 60 percent of area median income (AMI).
Staff is proposing to change the AMI targeting only for homeownership (condominium) units to a range up to 80% AMI and up to 100% AMI. The justification includes:
Limited pool of eligible purchasers: Experience has shown that it is very difficult to qualify for a mortgage at 60% AMI. It is difficult for a household earning less than 60% of AMI to afford to rent in Arlington, much less afford to buy a home.
Difficult for lower income households to manage the ongoing costs of ownership such as rising condo fees, taxes, maintenance, repairs, etc.
Affordable Housing Master Plan Goal 1.2.1 recommends encouraging the production of 80% to 120% Area Median Income (AMI) units through land use and zoning policy.
We outline below our reasons for recommending deferral of this proposal and several possible alternative policy options that could be considered in the future.
The N-FBC is Not a Homeownership Program
Many of the arguments used in support of the current proposal would make sense if we were considering a typical homeownership program for the County. AHS generally agrees that the 60% of AMI level in the current plan is too low for programs aimed at increasing affordability of homeownership for many of the reasons outlined by staff.
However, we do not view this policy purely through the lens of a typical homeownership program. It is more appropriate to consider this policy in the context of a density bonus program that requires significant contribution in order to earn the additional density. An increase in the AMI is equivalent to an increase in the sales price of an affordable unit, and therefore is a reduction in the value of the required developer contribution.
With the proposed program sales prices rising closer to where the market already serves, the level of effort on the developer’s part is reduced significantly. The proposal therefore changes a property owner’s redevelopment incentive in a way that can “tip the scale” toward redevelopment for some of the Pike’s most vulnerable market-rate affordable properties. If a developer creates a rental housing property using the N-FBC, these units would at least in part be replaced through the project’s committed rental affordable housing contribution. But for homeownership projects this policy could actually create an incentive for a developer to displace lower-income renters in favor of higher income owners.
And while we understand staff’s analysis that making condo projects work in the more recent past has been much harder and as a result these projects have been relatively rare, that may not continue to be the case going forward. We do not believe that the current environment, with the extreme risk of displacement resulting from housing insecurity in the midst of the COVID crisis, is an appropriate time to be taking this chance.
Subsidies Should be Reserved for Lowest Incomes
Much of the disagreement over this proposal seems to stem from differences in interpretation of the intent of the Affordable Housing Master Plan. Although the AHMP seeks to incentivize ownership units between 80 to 120% AMI, our understanding of this goal is that the County should be encouraging the creation of naturally affordable units at that level using land use and zoning tools, rather than via income-restricted units, which is essentially what these units will be.
“Subsidies using the County’s limited resources … should be reserved for those most in need of assistance.””
Subsidies using the County’s limited resources, including affordable housing contributions through this program, should be reserved for those most in need of assistance.
Possible Solutions
With the upcoming review of the Affordable Housing Master Plan, and no clear justification for this policy change to move forward at this time, as well as the significant community concern over the impacts of the proposal, AHS believes the County Board should recommend that this proposed change be reconsidered within the AHMP review process. Some options to consider during a broader review of homeownership policies include:
Consider Limiting Homeownership Units to 80% of AMI: The current proposal allows for homeownership ADUs as high as 100% of AMI, after being adjusted downward from the original proposals that would have allowed some units up to 120% of AMI. It has not been clearly shown why the 80% AMI level, which is consistent with other County homeownership programs, is not a more appropriate cap for the homeownership units in the N-FBC. Setting the income target at this level would expand the eligibility to buyers who could more readily qualify for financing, a key purpose of the proposed changes. By reducing the difference between the level of effort required to achieve the current AMI threshold, this approach could lessen any potential negative impacts from a change in redevelopment incentives.
Use a Sliding Scale: A common feature of housing programs that have variation in the income levels they serve is that they are often done as a sliding scale, meaning that when they serve lower incomes there are fewer units required, and when they serve higher incomes there are more units required, so that the total value of each option is roughly equivalent. For example, in Atlanta’s inclusionary zoning policy they require either 10% of the units for incomes at or below 60% of Area Median Income (AMI) or 15% of the units for incomes at or below 80% of AMI. The County could use this approach and make up for the higher AMI levels by requiring more affordable units if developers choose to serve the higher income levels. A similar sliding scale approach is already in use within the N-FBC for certain projects West of George Mason Drive.*
Implement the Higher Income Range Only for the Largest Affordable Contributions: Staff has argued that some development scenarios within the N-FBC involve cases where there are few existing units on-site and therefore the calculation of net new units used in determining the affordable housing contribution approaches a prohibitively large share of a project (e.g. 30%). As a result, these are seen as projects that risk being developed by-right rather than utilizing the incentives of the N-FBC. To account for these scenarios, rather than applying an expanded AMI range to all units, the higher incomes could be reserved only for those cases where the overall affordable housing contribution exceeds a certain threshold.
For example, if a homeownership project’s overall required affordable units (ADUs) are 20% or less of the project’s total units then all ADUs would have to be affordable at the lower income level (either 60% or 80% of AMI). If a homeownership project’s overall required ADUs is greater than 20% of a project then a range of affordability would be allowed. Any units exceeding the 20% threshold could be affordable at 80-100% AMI. (Please note that the 20% threshold used is for illustrative purposes only.)
We hope you take these concerns and the concerns of other Arlington stakeholders seriously as you consider action on this proposal. We strongly recommend that the current proposal be deferred until the issues we and others have identified have been resolved.
Thank you for your consideration,
Mary Margaret Whipple, AHS Chair
Michelle Winters, AHS Executive Director
AHC, Inc.
Arlington Food Assistance Center
Enterprise Community Partners, Mid-Atlantic
Susan English
David Leibson
Kathleen McSweeney
Mary Hynes
*For projects west of George Mason Drive: An applicant may provide up to 33 percent of the required low and moderate income units at affordability levels of 60% to 80% of the AMI at a rate of two (2) units available at 60% – 80% of the AMI for every one (1) unit required at 60% of the AMI. (N-FBC 902.B.1.)