Chapter 4The Power in Preservation
Preserving existing affordable homes is a critical component in meeting the Washington region’s affordability challenge. Yes, we need more homes for families across the entire income spectrum; however, adding more supply won’t help as many lower income families if we do not also preserve the homes that many already occupy. If a family is displaced from a currently affordable unit, they will likely need one to replace it.
Preservation can also be a cost-effective strategy in high-cost areas like the Washington region where many residents are at risk of losing their homes. There are areas throughout the region with affordable properties that are in good condition where repair or renovation makes more financial sense than tearing existing units down and building anew. Funds not spent on redeveloping an existing property can then be used elsewhere to build new homes. In other cases, redeveloping older affordable housing properties that are in disrepair can be an effective approach to retaining affordability on the site, however policies must be in place at the local level for these preservation strategies to work.
Preservation has two main components:
- Preserving existing affordable homes (“committed affordable”) that have rent and income restrictions. These include Public Housing Authority (PHA) units as well as units owned and operated by developers, both for- and non-profit. Most of the affordable homes owned by the private sector are “committed affordable” because of below-market government loans and grants. A subset of these homes are affordable on the basis of land use covenants – inclusionary or incentive-based zoning rules. By 2030, it is estimated that about 80,000 of these “committed affordable” homes in the region will need some form of intervention in order to preserve their affordability – meaning cash reinvestment or by other means (Urban Institute; 2019).
- Preserving homes that are affordable but have no rent or income restrictions, otherwise known as naturally occurring affordable housing (NOAH). It is estimated that about 144,000 NOAH units in the region will need some form of preservation intervention by 2030 to remain affordable (Urban Institute; 2019). NOAH is a critical piece to the overall housing stock and is often facing an array of market pressures that put them at risk of losing affordability in a high-cost region like Washington.
Homes most at risk of being lost to rising costs include:
- Market affordable homes, or NOAH units – rents can go up at any time
- Homes with expiring affordability requirements
- Public housing units in disrepair
Solutions:
Local governments and organizations across the region are preserving affordable homes using a variety of strategies, some of which include:
- Loans and grants to buy and renovate market affordable homes (NOAH) that lock in their affordability for a set number of years.
- Loans and grants to extend existing affordability requirements of “committed affordable” homes.
- Local tax incentives such as PILOTs (payment in-lieu of taxes).
- Federal funds to renovate public housing communities.
- Leveraging the value of land near transit and growth areas through public-private-partnerships to redevelop deteriorating affordable housing into mixed-income communities with affordable unit replacement agreements and policies.
Several examples below illustrate how local governments are using many of the above strategies:
The District of Columbia: The Housing Preservation Strike Force and resulting Housing Preservation Fund seeks to preserve approximately 7,300 rental homes by 2025. These include 4,700 existing dedicated affordable units with income restrictions that will expire by 2025 and the repair of approximately 2,600 District of Columbia Housing Authority (DCHA) rental homes. Seeded by $10 million/year investments, the Fund attempts to leverage an additional $20 million/year investments from other sources. These funds provide short-term bridge acquisition and pre-development financing to eligible borrowers. Properties targeted for fund investments are occupied by working families where at least 50% of the units are currently affordable at the 80% of the median family income (MFI) level. The Preservation Strike Force expanded its scope in 2021 to consider newer policy areas that include the COVID-19 eviction crisis, rent control, involving other parts of the District’s housing finance ecosystem, involving the legal system in stabilizing the rental housing market and considering how the Comprehensive Plan can strengthen the rental market, including the affordable home portion of it.
Montgomery County: In 2020 completed a county-wide Montgomery County Preservation Study that examined its supply of 113,500 multifamily units affordable to families earning up to 80% of the AMI. This supply of affordable rental homes is both income/deed-restricted (about 20% of the total) and market rate or Naturally Occurring Affordable Housing (NOAH) that comprise the remainder - about 80% of the total. In addition to identifying the supply of affordable homes, it also triaged the supply based on its degree of “at risk of being lost”. At risk factors include subsidy expiration, ownership type, age and size of building, proximity of transit, and rent and income trends. Based on these factors, the study identified 1,400 income restricted rental homes and 11,000 NOAH homes for more immediate attention.
The study looked at a wide range of preservation strategies that include the following - devising an overall strategy and outreach to the properties, consideration of land use and planning tools, strengthening tenants’ rights, exploring a range of capital financing tools – including expanding the County’s Housing Initiative Fund and Operating subsidy and cost reduction – including expanding rental agreement through the use of the Payment In Lieu of Taxes (PILOT) provision. As with other preservation strategies, the most effective approach will involve a combination of finance, land use and policy tools as well as assistance from the full spectrum of both private for- and non-profit partners.
- The Lindley in Montgomery County is another example of leveraging the value of land to preserve affordable homes through redevelopment. This public-private-philanthropic partnership resulted in 200 high-quality mixed-income apartments close to rail transit. Eighty of the units are below market-rate for a 99-year period. This development was built on the site of an old 68-unit garden apartment community that was nearing the end of its affordability period and in need of major renovations.
Alexandria and Arlington: Focus most of their preservation efforts on extending affordability of existing income restricted units and ‘converting’ market affordable units or naturally occurring affordable housing (NOAH’s) to income-restricted affordable homes. The arrival of Amazon intensified the preservation efforts of both jurisdictions – and looking at a wider range of tools to accomplish their objectives. Arlington completed a survey of market affordable units in 2017 and identified approximately 5,600 apartment homes in nearly 400 separate developments, most with rents affordable up the 80% AMI level. It later created a Housing Conservation District (HCD) that encompassed most of the 5,600 units as way to target land use and finance tools to help ensure their preservation. Alexandria identified approximately 6,500 rental units for its preservation strategies that also include both finance and land use tools. Its 6,500 rental units identified for preservation include both income restricted units with soon-to-expire affordability restrictions and market affordable units with no income or rent restrictions; these units are affordable at the 60% AMI range.
An example described below illustrates how adding units to an existing affordable property can be an effective way to both preserve affordable units and also increase the overall housing supply. A combination of land use/zoning and financing tools can achieve this outcome.
- The Wesley Housing Development Corporation/Bozzuto partnership that created Union on Queen in Arlington is but one example of this form of preservation. The original property contained 50 affordable garden homes in 5 buildings that was ‘converted’ into a total of 193 apartments in a mix of original buildings that were renovated (2 of the 5; 20 affordable homes) and a new apartment building (that replaced 3 of the 5 buildings). The new apartment building contains 56 affordable homes and 117 market rate homes. The 76 affordable homes on the site will have low rents for 60 years.
There are a wide range of preservation activities and strategies currently being implemented in the Washington Region. Some localities have been pursuing preservation for many years, while others are just starting initiatives, or are looking to begin in the coming years. This will continue to be a critical piece to the overall housing picture in the region. As more communities develop preservation policies, creating a standardized approach to tracking and monitoring the preserved affordable housing stock will be a key step in building momentum as a collective region.