Moving the Finish Line:
Why reaching 10% affordable units through inclusionary zoning won’t work
By Aram Hollman
Of Arlington’s approximately 20,000 housing units, roughly 1,100 (5.5%) are affordable, a term with precise legal meaning. This varies by locality, and sets percentages of Area Media Income as qualifiers for affordable housing eligibility. As long as less than 10% of Arlington’s housing stock is affordable, developers can build “40B” projects (named after a Massachusetts state law). 40B presumes that a community is engaged in “snob” zoning, is attempting to keep housing prices high, and allows the developer to ignore a great many zoning restrictions. Once 10% of a town’s units meet the affordable definition, developers cannot do this, and towns can exercise control over what is built.
Arlington’s inclusionary Zoning Bylaw requires that in projects of 6 or more units, at least 15% of the units be affordable. For 40B projects, developers must make 25% of the units affordable.
However, not only is our Bylaw failing to work, it cannot work. The math precludes it.
Here’s a visual explanation of why this is so:
For those of you who’d like the figures behind the pictures:
Right now, if 10% of Arlington’s 20,000 units were affordable, that would mean 2,000 affordable units. We have only 1,100 affordable. So, we need another 900 affordable units to reach 10%. But for-profit developers don’t want to build affordable units, and will build only the minimum number required by the bylaw, approximately 1 unit in 6. (Not only that, but they increase the price of the other 5 of 6 units to meet their profit targets.)
At 15% affordable, building 900 affordable units requires building a total of 6,000 units, of which 900 are affordable and 5,100 are at market rate. For reference, Arlington is almost fully built out, according to both our Master Plan and the former chair of our Finance Committee, and construction is slow: only between 1,000 and 2,000 total units have been built in the last 20 years.
But, suppose we found the room and built these units? Would that solve our problem? No.
In building 6,000 more units, Arlington’s housing stock has now increased from 20,000 units to 26,000. Yes, we have increased the number of affordable units from 1,100 to 2,000, as we planned. However, with 26,000 units, we now need to have 2,600 of them be affordable, not 2,000! We still need another 600 affordable units!
At 15% affordable, to build 600 affordable units requires building another 4,000 units total. After building these, we now have 30,000 units in town (26,000 plus 4,000), of which 2,600 (the original 1,100, plus 900, plus 600) are affordable.
We have now increased the town’s housing stock by 50%, from 20,000 to 30,000. But again, with more units, we need more affordable units: 3,000, not the 2,600 we have.
This goes on for several iterations, with the number of additional affordable units required decreasing each time. By the time we’re done, meaning we have 10% affordable units, we will have built another 18,000 units of housing, almost doubling the town’s total housing stock, in order to build the required 2,700 affordable units. Now, 3,800 (10%) of Arlington’s 38,000 housing units are affordable.
This is clearly absurd. Arlington is not going to double its housing stock. We lack the space for the housing, the space for the additional schools required, and other necessary infrastructure.
What if we required a higher percentage? If you do the math with a spreadsheet, here are the results for requiring that 1 in 5 (20%) and higher proportions of what’s built be affordable. Conveniently ignore the fact that we will not find developers to build under these conditions unless they made the price of housing so high that it would defeat the purpose - affordability.
Clearly, building more housing which is primarily market rate is not a feasible way to achieve 10% affordability, even if all the projects meet the 40B minimum of 25% affordable units. Even the 1,000 units that we’d have to build if all units were affordable are about how many units Arlington has built over the last 20 years. And that still would not be enough. The inclusionary bylaw applies only to projects of 6 or more units. Thus, the vast majority of Arlington’s housing structures, of anywhere from 1 to 5 units, would be entirely exempt. And again, all of this ignores the simple fact that Arlington is already built out. Unless we are going to build lots of skyscrapers, schools, utilities infrastructure, and wider streets, all of which have their own limits, this won’t happen.
Beyond that, new housing is significantly more expensive to purchase than older housing. So replacement of existing housing increases housing prices. The current proposal to eliminate single-family zoning would be a boon to developers: buy a place for $800,000, knock it down and put up a duplex, with each unit going for $800,000 and up. Revenue for developer: $1.6 million. Profit: substantial.
Since we cannot build our way into affordability, we need alternatives. Here are a few to consider:
Buy and convert existing housing units to affordable units. If we did this with 1,000 units, Arlington would achieve the 10% affordable goal. To fund that would require significant additional money. One possible source would be a transfer tax on housing sales in Arlington, paid by the seller. At 200 house sales per year, a 1% transfer tax would buy 2 houses per year. CPA money, an affordable housing trust, and other sources of money could increase that. By no means a magic bullet, it would be a start.
Work with non-profit developers, some of whom already have a track record of creating substantial affordable housing in Arlington.
Actively seek additional state and federal funds for affordable housing.
Consider what legislation would be needed to allow Arlington to make a first bid on properties as they come on the market.
Consider what legislation would be needed to allow Arlington to offer a tax break to property owners who sell their property to Arlington at below fair-market value for conversion into affordable housing. A rough parallel would be the state tax breaks given to property owners who sign away the development rights to open space parcels.
Arlington is becoming a gated community, where the gate is high housing costs. There’s no single solution to this affordability problem, but a combination of approaches will get us closer than our current inclusionary zoning pathway.
