Affordable Housing Case Studies: Massachusetts & Maryland

The Bay State Old Line State Affordable Housing Case Studies: Massachusetts & Maryland Martin A. Bierbaum, Ph.D.-J.D. Growth & Infrastructure Conference Bradenton, Florida November 2014

Guiding Questions How do demographic & economic factors in Massachusetts & Maryland affecting affordable housing compare? How do Massachusetts & Maryland politics/governance structures affecting affordable housing compare? How do Massachusetts & Maryland housing stocks compare? How do Massachusetts & Maryland s affordable housing/ inclusionary zoning experiences compare; and what lessons might be drawn? What have been the major challenges to those initiatives? To what extent were the challenges overcome? What have been the impacts? What lesson might be drawn? 2

Massachusetts 3

Massachusetts: Social Context Population 6,692,824 (14 th largest) Land Area 10,555 square miles (7 th smallest) Population Density 840 /square mile (3 rd most dense) Median Household Income -- $65,401 (6 th most wealthy) Demographics 83.7% White; 10% Hispanic/Latino; 8% African- American with 84% African-Americans & 64% Hispanic/Latino living in just 10 municipalities Population Growth 2000 2010 = 3.9% as compared to 10% nationally Tax Burden 5.0% Income; 6.25% Sales; 8.8% Corp. Inc. (11 th ) Governance 351 Municipalities (10 cities)/town Meetings/Weak Counties/Regional Advisory Planning Organizations Economy Financial/Insurance Services; Higher Education; Biotechnical & Healthcare; Tourism; Food Production. Poverty Rate 11.9%; Unemployment 5.8%; Homeless 17,501. Homeowners 64%/Renters 36%. 4

Triple Decker Cambridge, Massachusetts -- circa 1870-1920 5

Maryland 6

Maryland: Social Context Population -- 5,928,814 (19 th largest) Land Area 12,406.68 square miles (9 th smallest) Population Density -- 596/square mile ( 5 th most dense) Median Household Income -- $69,272 (#1 most wealthy) Demographics 54.7% Non-Hispanic White; 30% African-American; 6.2% Hispanic/Latino; 6% Asian Population Growth 2000-2010 6% compared to 10% nationally Tax Burden 2-6.75% Income Tax; county piggy back 1.25-3.2%; Sales Tax 6%; Property Tax Rates Vary Ranked 5 th highest in U.S. Governance -- 23 counties plus Baltimore which is a city & county. 157 municipalities, many have unincorporated areas served by counties. Economy Government Administration, Health & Bio-medical, Defense, Aerospace, Cyber-security, Logistics, Food Production. Poverty Rate 10.1%; Unemployment 6.4%; Homeless 9,454; Homeowners 69%/Renters 31%. 7

Kent lands in Gaithersburg, Md. circa 1990 T 8

Similarities between Massachusetts & Maryland Relatively Small Land Area High Population Density 21 st Century Economies Relatively affluent Service Sector-oriented Highly regulated Highly taxed Low-Income, Minority Populations Concentrated in Small Number of Jurisdictions Differences between Massachusetts & Maryland Maryland is less densely populated, more wealthy, more recession-proof, and is home to more African-America residents than Massachusetts Massachusetts is more jurisdictionally fragmented than Maryland Massachusetts 351 municipal jurisdictions; 14 county jurisdictions (weak); 18 regional planning agencies Maryland is less jurisdictionally fragmented than Massachusetts Maryland -- 24 county jurisdictions (strong); 157 municipal jurisdictions with unincorporated municipal areas served by counties 9

Massachusetts Housing Stock Among the oldest housing stocks in U.S. Predominant Settlement Pattern -- New England town Single-family detached 52%; Single-family detached 4%; 2-4 unit structures (23%) High-cost maintenance age + energy costs (oil) 64% homeowners; 36% renters Typical municipal zoning = one unit/acre on septic systems Adaptive re-use of former industrial to residential uses 10

Adaptive Re-use -- Boott Cotton Mills, Lowell, Massachusetts -- constructed in 1835, renovations began in 1980s, opened in 2002 11

Maryland s Housing Stock Relatively new housing stock 57% of Maryland s Housing built since 1970 Promoting Smart Growth/New Urbanism with mixed success (1990s) PFAs RLAs Single-family detached 51%; Single-family attached 21%; 2-4 family 5.1% 69.7% homeowners; 30.3% renters D.C. Suburbs/Baltimore-D.C. Corridor -- Strong Housing Market BRAC pressures 9 Counties 28,992 dwelling unit shortfall 12

A Changing Housing Market 1995- present Massachusetts 1995-2005 dramatic rise in home prices, peaking in Fall 2005 2006-2009 20% drop in home prices 2009-2010 Foreclosure activity peaked; #30 -- 1 in 1,273 homes 2010-2012 Home prices began to approach new highs (83%) 2011-2014 Growing consumer confidence; reduced unemployment; low mortgage rates; renewed interest in rentals Maryland 1995 2005 dramatic rise in home prices, exceeding national averages, 2006-2009 housing prices peaked in 2006-Q4 & then decline 2009-2010 Foreclosure activity peaked; #31 -- 1 in 1,358 homes 2010 2012 Home prices are double 1995 prices, but below 2006 peak 2011--2014 9 quarters of consistent increases Q2 2014 Growing consumer confidence; reduced unemployment; low mortgage rates; renewed interest in rentals 13

Massachusetts Inclusionary Zoning Chapter 40 B Sections. 20-23 (1969) as administered by the Massachusetts Department of Housing and Community Development (DHCD) allows developers of affordable housing to sidestep local zoning or other locally adopted regulations. Target Population: 80% of area median income Applies to any municipality that has less than 10% affordable housing stated policy goal Allows developers more units per/acre through streamlined process when building a new development if at least 25% (20% low-income rentals) of the new units have long-term affordability restrictions Eligibility criteria: low-income set-aside; employ government housing programs; include long-term affordability restrictions. Chapter 40 R (2004) -- Smart Growth/Mixed-use Provisions (state cash incentive payments to local jurisdictions for smart growth consistent projects) Chapter 40S (2005) Support to offset additional School Expense (state cash incentive payments to local jurisdictions to offset increased educational costs) 14

Massachusetts Challenges Local Land-use regulations Loss of community character Limited opportunities for large-scale residential development Residency requirements (70%) Environmental regulations Resistance to increased service demands High cost of construction & maintenance Market Conditions -- Housing bubble & foreclosures Monitoring & evaluation (Developer profit restrictions) 2010 Campaign to Protect the Affordable Housing Law (58% against repeal; 42% in favor of repeal) 15

Massachusetts Inclusionary Zoning Impacts 56,000-60,000 dwelling units in more than 1,000 developments over 45 years 51/351 certified municipalities (exceeding 10% threshold); and substantial number now approaching that threshold 101/351 have DCHD affordable housing plans Chapters 40R, 40S added financial incentives to offset increased local expense Additional State Housing Policy Initiatives Compact Neighborhoods policies & programs Inter-agency working groups Prioritize family & individuals with disabilities facilities Accelerate anti-discrimination activities Increased attention to barriers to MTO Streamline information/application processes Devise & implement strategies & resources for supportive services 18

Montgomery County Maryland is located on the western border of the nation s capital. The county has evolved into a bustling county with pockets of existing cities, towns and urban districts. The affluent communities of Bethesda, Chevy Chase, Gaithersburg, Germantown, Potomac, Rockville, and Silver Spring are all located within the boundaries of Montgomery County. 19

Maryland (Montgomery County) Inclusionary Zoning Program Montgomery County s Moderately Priced Dwelling Unit (MPDU) program (1974) Developers applying for subdivision /site plan approval, or building permits for 50 or more dwelling units at one location are required to set aside 15% of units as MPDUs In exchange, developers receive density bonuses beyond what existing zoning permits Never challenged in court, but amended to require between 12.5% --15% MPDUs in new developments of 20 units for period of 30 years for homeownership and 99 years for rentals Eligible households typically earn between $30,000 and $81,000 to rent and between $35,000 and $81,000 for purchase Amended law requires that 40% of newly developed units be offered for sale to the Housing Opportunities Commission 20

Maryland (Montgomery County) Challenges As suburbs build-out, future affordable housing opportunities/production decrease As housing sales and rental prices rise reflecting increasing construction costs and growing demand, income eligibility requirements, sales and rental price controls require adjustments Importance of addressing homeowner equity led to establishment of an equity trust Environmental and/or neighborhood impacts result in pressures to reduce minimum eligibility project size and the reduction/elimination of MPDU requirements. Flexibility has been viewed as essential in achieving a balance among community impact, affordable units, and reasonable developer profits High-rise developments involve special requirements in light of their fixed costs Goal of de-concentrating moderate income population at times conflict with goal of maximizing the production of affordable housing units in the face of other challenges 21

Montgomery County Recent market - rate town house units sell for approximately $460,000 interspersed with affordable units selling for $156,900 or about 34% of the market price. to households making about 70% of the regional median household income or approximately $50,000/year. 22

Maryland (Montgomery County) Inclusionary Zoning Impacts Since the program started three decades ago, Montgomery County one of the nation s 20 wealthiest counties has produced nearly 14,029 affordable dwelling units by 2013 or about 7% of all units constructed per year Montgomery County s approach has been emulated by over 100 local jurisdictions, acknowledged as a national model Montgomery County averaged about 250 affordable units/year with a waiting list of approximately 1,200 households/year Production tends to mirror market conditions so that in 2007 production dropped to 77 units, but in 2013 returned to 554 units Additional State/Montgomery County Housing Initiatives Increase production & preservation of affordable rental housing Support sustainable homeownership Expand high-performance, healthy home purchases & improvements Expand housing choice for all people, ages with special needs, circumstances or concerns Coordinate & leverage public and private sector financial resources; foster collaboration, locally, regionally, nationally Increase well-located housing opportunities in sustainable communities with access to transportation, jobs, quality schools & human services Support housing & sustainable development plans of local communities Support housing & housing related investments that foster local sustainable economic development, local job creation & neighborhood revitalization 23

Lesson Learned Both Massachusetts and Maryland demonstrate that Inclusionary Zoning can be an effective planning tool adding to the production of affordable housing, capable of overcoming numerous challenges, but remaining market sensitive and only affecting a relatively narrow housing market strata by providing shallow developer incentives through regulatory relief. 24